Couple Says GSK Cover-Up Sent Them to Prison

PHILADELPHIA (CN) – Husband-and-wife anti-fraud experts claim in a federal complaint that they wound up in a Chinese prison after GlaxoSmithKline hired them to discredit a whistleblower.

A top download for Courthouse News on Nov. 17, the lawsuit against GlaxoSmithKline comes just over a month after the drugmaker reached a $20 million settlement with the Securities and Exchange Commission. The SEC says GSK’s China-based subsidiaries boosted sales their sales numbers by millions of dollars between 2010 and 2013 by bringing public officials.

In their Nov. 15 complaint, husband-and-wife Peter Humphrey and Yu Yingzeng say this is precisely the issue that GSK labeled a “smear campaign” in 2013 when it hired them to investigate emails that disgruntled former employee Vivian Shi had been disseminating.

GSK knew that Shi was telling the truth, the complaint says, but it hired Humphrey and Yu’s investigations company ChinaWhys to “discredit the whistleblower and cover up their illegal scheme.”

“Plaintiffs’ work for defendants, conducted based on defendants’ false statements, led to plaintiff Humphrey and Yu’s arrest, conviction and imprisonment in China, and the destruction of their business,” the complaint states.

GSK spokeswoman Sarah Spencer has not returned a request for comment.

Ahead of their investigation, Humphrey and Yu note that GSK already faced intense scrutiny related to its 2012 settlement with the Justice Department that carried $3 billion in penalties and damages.

Importantly, this deal included a carve-out for any GSK products marketed “to foreign customers,” according to the complaint.

Humphrey and Yu say this carve-out existed because the Justice Department and the Securities and Exchange Commission had been investigating GSK’s pharmaceutical sales practices in China and other nations since 2010 under the Foreign Corrupt Practices Act.

Another piece of context that GSK knew when it hired its whistleblower investigation, according to the complaint, was that Shi “had powerful unidentified allies within the Communist Party elite in Shanghai and that it was therefore extremely dangerous to investigate her.”

Humphrey and Yu say they launched “a discreet information search on Shi … and [to assess] the potential risks that she could pose to GSK if she were hostile.”

Within a week of GSK receiving the results of this investigation, according to the complaint, the Wall Street Journal reported that GSK was investigating an anonymous whistleblower’s allegations of bribery in China.

That June 12, 2013, article described the tipster as alleging that “Glaxo regularly gave cash to its sales staff in China” between 2004 and 2010, and that some of the money went directly to doctors at Chinese hospitals in return for agreeing to prescribe drugs to patients.

“Some sales staff then submitted fraudulent expenses to account for the funds,” the article continued, according to the complaint.

Police raided multiple GSK China offices on June 27 and June 28, the complaint says.

Humphrey says he met with Mark Reilly, the general manager of GSK China, in early July.

Reilly allegedly told Humphrey that Shi had “read your report and she will be coming after you.”

Humphrey said he could advise Reilly only to hire a crisis-management service, and that Reilly “fled China” the next day.

With Reilly “safely back in Britain,” according to the complaint, Shi’s reprisals fell on Humphrey and Yu.

The couple says their Beijing home was raided along with ChinaWhys’ office in Shanghai on July 10.

“These raids provided a chilling indication of what Yu and Humphrey were about to endure at the hands of the Chinese authorities,” the complaint states. “The police placed Humphrey (age 57) and Yu (age 60) in handcuffs and took them to the police headquarters to be interrogated until past midnight.”

“This was ordered from above,” a police officer told Humphrey, according to the complaint. “This is related to GSK.”

Humphrey and Yu say their incarceration “deprived them of fresh air and sunlight for months at a time.”

After they were formally arrested on Aug. 16, 2013, according to the complaint, “the prosecution that followed was abusive and lacking in any due process.”

Police allegedly told the couple that, since “this was the first time Shanghai had arrested foreign investigators … the case would be used to make an example of the kind, regardless whether guilty or innocent.”

Humphrey and Yu say police and prosecutors forced them to deliver a taped apology for leniency, and that this was then broadcast nationwide as a confession.

By the time they were sentenced in August 2014 to prison — two and a half years and two years, respectively — Humphrey and Yu were “detained for 13 months without a trial.”

After suffering abysmal conditions, the couple were released from prison in June 2015 and deported out of China.

They say their son was denied access to the family’s assets during their incarceration.

During this ordeal, according to the complaint, GSK feigned surprise about the bribery scheme.

It even claimed that the investigation that it had hired ChinaWhys to conduct was unrelated to the whistleblower’s misconduct allegations.

“This misleading statement by GSK prolonged Humphrey and Yu’s incarceration, because British diplomats attempting to intervene of (sic) Humphrey and Yu’s behalf did not have accurate information about what had led to their arrest,” the complaint states.

A $492 million fine levied against GSK in September 2014 for its bribery activities in China was, according to the complaint, “the biggest such penalty ever imposed by a Chinese court.”

Reilly and four Chinese nationals were convicted as well, but with reprieves, meaning they will never serve their sentences, Humphrey and Yu say.

The couple notes that the mea culpa by GSK included an apology “for the harm caused to individuals who were illegally investigated by GSKCI.”

“This apology appears to be directed at Vivian Shi, the former employee GSK had directed ChinaWhys to investigate, and contradicts GSK’s other statements about ChinaWhys,” the complaint states.

Humphrey and Yu want punitive damages for conspiracy, emotional distress, fraud and violations of federal anti-racketeering law.

The couple is represented by Joan Gallagher with Gallagher & Turchi, and by the Manhattan law firm Boies, Schiller & Flexner.

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