(By Zhou Wei) On July 11, 2013, the Ministry of Public Security (the “MPS”) issued a piece of news on its official website that some senior executives of GlaxoSmithKline (China) Co., Ltd (the “GSK”) were being investigated for their involvement in serious unspecific economic crimes, demonstrating a scandal with GSK’s involvement in bribery in China. Utilizing currently disclosed information, this post is aimed at analyzing possible alleged criminal charges and criminal liabilities.
I. Bribery Crimes
According to the MPS’s news, in order to realize its own purposes, such as extending the distribution channel of medicines and raising medicine prices and so forth, GSK used different approaches, including direct bribery and the sponsoring of projects, primarily via making use of various channels like travel agencies in order to offer massive bribes to individual officials, several pharmaceutical profession associations, foundations, hospitals, and doctors during the past several years of its operations in China.
As for the relationship between GSK and individual officials, pharmaceutical profession associations, foundations, hospitals and doctors, GSK was found to clearly play the role of the briber. With regard to two chapters concerned with the crime of bribery in China’s Criminal Law, specifically: the Crime of Offering Bribes to Non-State Functionaries (Article 163 of Criminal Law), in Section 3 of the Crimes of Impairing the Order of Administering upon Companies and Enterprises under the Chapter 3 of the Crimes of Undermining the Socialist Market Economic Order, Bribery (Article 389 of Criminal Law), the Crime of Offering Bribes to a Unit (Article 393 of Criminal Law) and Units’ Bribery (Article 391 of Criminal Law) under the Chapter 8 of the Crimes of Embezzlement and Bribery.
One of the focuses of the GSK litigation is whether it constitutes an individual crime or what is known as a “unit” crime, referring to a work unit. On the one hand, from information released thus far, it is the individuals committing these crimes, including salesmen and senior executives implementing the bribery. On the other hand, according to media reports, GSK acquiesced and encouraged the bribery. GSK policy is such that a certain percentage of sales volume is used as relationship maintenance fees on consumers; moreover, senior executives in GSK utilized various excuses, such as hosting meetings, in order to help launder money in bribes. That is to say, salesmen and senior executives in GSK offered bribes in conformity to the will of GSK’s internal policies – thus, one can reasonably state they were sponsored by GSK. The intents of such bribery were to expand medicine sales channels, to raise medicine prices, and to obtain GSK’s benefits. In effect, all profits in such bribes were obtained by GSK. Based on the above reasoning, salesmen and senior executives offered bribes for the purposes of securing companies’ benefits, and were sponsored by GSK. In my opinion, this case almost certainly fits within the category of a “unit crime”. The reason behind the confusion between an individual crime and a unit crime in this case is that the salesmen obtaining business commissions dependent upon individual performance are thereby objectively concluded that the salesmen are seeking personal profits. In effect, the major factors differentiating an individual crime and a unit crime are the ownership of procured illegal profits and the source of bribery paid. With regard these two factors, in this case, it is the whole company, and not individuals, that obtained these “extra profits”. Moreover, the bribery paid was from GSK, thus supporting our understanding of this case as that of a unit crime, being consistent with the actual situation.
Coming to an understanding regarding that particular problem, we would like to introduce in some relative detail the crimes that have been involved in this case. The bribee in this case included state functionaries, non-state officials and units such as hospitals, pharmaceutical professional associations and foundations, etc. Pursuant to current Criminal law, behaviors that accepted money over a certain amount, or under certain statutory conditions, are committed as crimes. With regard to different criminal subjects and targets, Chinese Criminal Law stipulated various types of crimes. Among the crimes, if the bribee is an individual who is a non-state functionary, it is considered as Bribery Crime of Non-State functionaries. Where the bribee is an individual who is a state functionary, based on different criminal subjects, if a unit offered bribes, it is considered the crime of unit offering bribes; if an individual offers bribes, it is considered the crime of offering bribes. In the event that the bribee is a state organ, state-owned company, enterprise, institution or mass organization, whether the criminal subject is a unit or an individual, it constituted as the crime of offering bribes to a unit. Therefore, according to currently disclosed information, GSK is involved in such crimes as bribery crime of non-state functionaries, crime of unit offering bribes, and the crime of offering bribes to a unit.
II. The Tax-related Crimes and other Crimes
According to MPS’s news, GSK also used falsely making out value-added-tax (“VAT”) invoices, and utilized travel agencies issuing fake invoices or falsely making out regular invoices to receive cashes.
Theoretically speaking, the above-mentioned actions of GSK are suspected of violating the Law on the Administration of Tax Collection and Measures for the Control of Invoices, suspected of using falsely making out VAT invoices for economic gains.
In my opinion, where employees of GSK used falsely making out VAT invoice, issued fake invoices or issued falsely making out regular invoices through travel agencies in order to achieve GSK’s goal of crimes, rather than to evade tax evasion or defraud tax funds, if GSK has also committed other crimes, it should be charged and punished by the more severe crime.
As reported by news media, some senior executives have kept the cash received from falsely making out invoices themselves, which would constitute as professional embezzlement if such allegations are proven to be true. As for senior executives who took advantage of their position and unlawfully accept business rebates in the forms of commissions from travel agencies, accepting bribery, and other such behaviors, they should also be charged with bribery crime of non-state functionaries.
Above mentioned information is just a preliminary analysis of the alleged crimes that GSK and its employees are suspected of. As more information is disclosed, the ruling for the case will become clearer.
III. Who would Bear the Criminal Responsibilities?
After analyzing the possible alleged crimes, an introduction to the criminal responsibilities of such alleged crimes will be undertaken.
As previously mentioned, this case should be recognized as a unit crime. Crimes committed by a unit, the same as impersonal crimes, means any company, enterprise, institution, State organ, or organization that commits an act that endangers the society shall bear criminal liability. China’s Criminal Law holds that the general punishment principle for unit crimes is mainly a double-penalty with the assistance of a single-penalty. In a double-penalty system, the unit shall be fined, and the persons who are directly in charge and the other persons who are directly responsible for the crime will also receive criminal punishment. All potential punishments include freedom-oriented punishments such as jail sentence, and property-oriented punishments such as monetary fines. For this case, GSK is suspected of committing Crime of Offering Bribes to Non-State Functionaries, Crime of Bribe Acceptance by a Unit, Crime of Offering Bribes to a Unit and crimes of falsely making out the VAT invoices, which should be punished by double penalty if found guilty. In other words, GSK should be fined, and individuals who are directly in charge and the other individuals who are directly responsible for the crime should be given criminal punishment, which consists of both freedom-oriented punishments and monetary fines. As for the amount of any fines imposed, the court shall determine it according to the circumstances of the crime, such as the amount of illegal gains and the amount of damage, and take into considerations the capabilities of the offenders to pay the fines. With regards to freedom-oriented punishments, crime of offering Bribes to Non-State functionaries may be sentenced up to ten years of imprisonment, and crime of Unit Offering bribes may be sentenced up to five years of imprisonment. Crime of offering bribes to a unit and crimes of falsely making out the added-value-taxes invoice may respectively be sentenced up to three years imprisonment and life imprisonment.
Upon the individual crimes that some senior executives may be involved in, if the executives are found guilty of professional embezzlement or Bribery Crime of Non-State Functionaries, the senior executives shall be sentenced to a fixed-term imprisonment of no more than five years or criminal detention; if the amount of the bribery is huge, the individual may be sentenced to more than five years of prison time and also have confiscation of individual’s property.
In addition, on the ground of aforesaid analysis that both the GSK and some senior executives are suspected of committing multiple crimes, if the final court found them guilty as such, GSK and the senior executives shall be punished according to the provisions of combined punishment for multiple crimes. Combined punishment for multiple crimes, it means that after the court hands out separate punishments for each individual crime committed, the court will determine the collective punishments as according to the principles and the rules of cumulative punishment. For this case, if fines are imposed for any of the crimes found committed by GSK, the punishment shall be executed for the total sum of all the fines. If the senior executives, the persons who are directly in charge and the other persons who are directly responsible for the crime are sentenced to several freedom-oriented punishments, the final punishments for them shall not exceed the total sum of the terms for all the crimes combined, but should also not be less than the longest term for the crimes, depending on the circumstances of the crimes. In the event of all freedom-oriented punishments are fixed-term imprisonments, the fixed-term imprisonment shall not exceed the maximum of 25 years.
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