The charges against GlaxoSmithKline’s investigators could unnerve more multinationals in China

July 14, 2014
July 14, 2014
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Peter Humphrey in a CCTV interview broadcast July 14.

Chinese prosecutors today formally charged the founders of ChinaWhys, a due-diligence firm hired by GlaxoSmithKline (GSK) to investigate an employee, with illegally trafficking in private information in China. It’s the first time foreigners have been charged with an illegal investigation in the country. The direction the case could go next is up for debate, but state media reports included pointed references to multinational clients of ChinaWhys, which is sure to make these companies uneasy.

In an interview that aired on China’s state broadcaster CCTV today, ChinaWhys founder Peter Humphrey both apologized for his actions, and specifically called out GSK for not giving him full details of Chinese bribery charges against the company when they hired him. “I think they used me,” he said in Chinese during the broadcast. He said he “definitely would have refused” to take the company on as a client, had executives told him the full extent of the allegations against it. The UK pharmaceutical company is the target of a bribery investigation in China which alleges it paid millions of dollars to doctors and hospitals to push its drugs. 

Humphrey, a British citizen and Yu Yingzeng, an American one, have been in police custody in China since last July on charges of violating China’s privacy laws after ChinaWhys was hired by GSK. ChinaWhys received an initial down payment of 100,000 yuan ($16,000) from GSK to investigate an unnamed former employee, who according to press reports is former government affairs head Vivian Shi, a well-connected pharmaceutical executive who has worked with multinational drug companies including Johnson & Johnson.

Humphrey and Yu used hidden photography and illegal payments to obtain personal information about Chinese citizens and companies, today’s media reports alleged, without identifying Shi. Between 2009 and 2013, ChinaWhys illegally obtained private information about nearly 1,000 firms and a “large number” of private individuals, a Xinhua news report (link in Chinese) said today.

China’s laws covering covering personal information and privacy are not centralized, although anything from phone and banking records to real estate information can be considered personal information.

Xinhua’s report specifically lingers on ChinaWhys’ clientele, describing them as “mainly large multinational companies in China,” which include banks, law firms, and manufacturing companies with businesses in the “US, Germany, Britain, France, Switzerland, Japan, and 16 other countries.” ChinaWhys gave each of its investigation a code name, the article says, including the “Mahler Plan” and the “Blackthorn Plan.”

Deciphering what, exactly, China considers in violation of privacy laws, has given many consultants sleepless nights after the ChinaWhys founders were arrested, and the news reports are unlikely to provide much solace.

Cathy Sizhao Yi contributed reporting to this article.

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