On September 19, a close-door trial was held at Changsha Intermediate People’s Court of Hunan Province, hearing the crime of offering-bribery-to-non-government-officials committed by GlaxoSmithKline (China) Investment Co., Ltd. (hereinafter “GSKCI”) and its staff including Mark Reilly and his fellow colleagues, and the indicted crime of accepting-bribery-by-non-government-officials committed by GSKCI. The judgment was announced to public at the same day. GSKCI has been found guilty of offering bribery to non-government officials and fined a record RMB 3 billion in China. Mark Reilly and other individuals whom are found liable for the GSKCI crime were sentenced to 2-3 years imprisonment with a 2-4 years suspension. Considering the fund “transferred by GSKCI to over 700 travel agencies and consulting companies since 2007” as claimed before was around RMB 3 billion, the fine imposed on GSKCI literally equals the brides given out by GSKCI.
As per the judgment, GSKCI, for the purpose of promoting its medicine sales in seek for improper interests, offered huge amount of bribes in various forms to non-government officials who are medical staff of numerous medical institutions (mainly hospitals) around the country. The defendants Mark Reilly, ZHANG Guowei, LIANG Hong, HUANG Hong and ZHAO Hongyan, as senior managers of GSKCI whom are directly in charge, actively organizing, promoting and performing the “bribery sales”, are guilty of offering bribery to non-government officials as individuals, and GSKCI is guilty of the same crime as so-called “unit crime”.
Why was GSKCI found guilty of “unit crime” resulted from its staff’s criminal activities? The legal basis lies in that those crimes were conducted by individuals in the name of the company; moreover, the illegal gains were attributed to the company.
Committing the crime “in the name of the company” usually refers to such criminal offences collectively decided by decision-making executives of the company, or offences conducted by those individuals that are authorized by and representing the company. According to our experiences, in judicial practice, authorization of the company is likely to establish where the operator actually uses the official seals. Also, the occupational behaviors of the board members, the general managers or vice general managers of the company are oftentimes considered as performed on behalf of the company; and the department managers’ occupational behaviors are tend to be viewed as those with actual authorization of the company. Apart from the criminal procedure, AIC (Administration of Industry and Commerce), watchdog in charge of anti-bribery investigation and punishment, in practice even regards the occupational behaviors of common employees as “in the name of the company”. Therefore, it is not difficulty to satisfy the threshold for confirming the intent of the company in judicial practice and administrative investigations.
“Attribute the illegal gains to the company” usually means that the interests arising from the crimes are to be obtained by the company. The essential elements to establish the crime of offering bribery to non-government officials requires that the illegal benefits of the bribery must be gained by the company. In terms of GSKCI case, the company offers bribery in purpose of gaining a dominant position in the medicine market and acquiring huge economic interests therefrom. In case where a salesperson bribes doctors in order to accomplish his performance objectives creating a dilemma of whether the illegal gains shall attribute to the salesperson personally, or to the company he is employed? The judicial authorities, in favor of the suspects, oftentimes intends to identify such crime as a “unit crime” where punishments are lighter than that to individuals under China’s Criminal Law. On the other hand, however, multinational companies are confronted with high criminal risks of being implicated by their employees seeking unfair personal interests.
In case of “unit crimes”, the unit shall be fined for criminal liability, whereas the persons directly in charge and other persons with direct responsibility shall bear criminal liabilities. Here “persons directly in charge” refers to such persons playing the role of determining, approving, suggesting, conniving or directing the crime during its implementation, who are usually the responsible persons of the unit, including the legal representative; “other persons with direct responsibility” refers to such persons actually conducting the offence and playing a major role in unit crimes, which can either be the senior management personnel of the company, or the common employees of the company.
As shown in the GSKCI judgment, in purpose of increasing and expanding sales volume, the G4 members Mark Reilly, ZHANG Guowei and other defendants, as the top management of GSKCI, established a bribery network where medical representatives bribe doctors, district managers bribe major clients, regional managers bribe VIP clients, marketing department bribe experts, major client department bribe organizations around areas over the country. Furthermore, during the commercial bribery investigation by the AIC, G4 members framed a series of strategies to escape from the penalties such as destroying relevant evidences, delaying in submitting evidences, and even refusing to provide with evidences. To destroy the evidences, the company carried out a “desk clean” project. The GSKCI administration department was arranged to conduct regular patrols around certain “sensitive areas” of the offices and instruct the sales managers to destroy the electronic or paper materials in the computers or on the desks so as to hide or destroy bribery evidences. As top decision-makers and management of GSKCI, G4 members collectively decided to bribe the staff of medical institutions to promote sales in the form of reimbursement of lecture tuitions or dinning fees, and took illegal actions to conceal such offences afterwards. Accordingly, the court found such activities constitute “unit crime” of GSKCI as they were conducted in the name of GSKCI and the illegal gains were acquired by the company.
For multinational companies carrying out businesses in China, the GSKCI case sirens that the risks of multinational’s criminal liability is urgent, rather than something sheer bravado. Notwithstanding multinational companies are endeavoring to improve their compliance systems in China, how many have addressed their criminal risks and taken preventive measures thereto?
It is the time for multinational companies to take precautionary measures against company’s criminal risks. At least, in such fields with frequent indictment of crimes as commercial bribery, environmental pollution crimes, smuggling and tax-related crimes, the management of multinational companies shall be aware of the relevant risk points, legal consequences, and pertinent compliance measures, to protect the company and its management from criminal charges. However, we perceived that in some cases many companies do not pay due attention to criminal risks, leaving operators themselves to make decisions or take actions at their own discretion in these high-risk areas. The company is not aware of the danger while risks are accumulating until it was found guilty of criminal activities. All these are profound lessons to multinationals.