GSK GSK plc

By Christopher M. Matthews 

Two former corporate investigators sued GlaxoSmithKline PLC on Tuesday, alleging that the drugmaker hired them under false pretenses that led the pair to be imprisoned in China.

Peter Humphrey and his wife, Yu Yingzeng, alleged in federal court in Pennsylvania that when Glaxo hired the couple to investigate a whistleblower in China in 2013, the company lied and said the whistleblower's claims of widespread bribery at Glaxo's China unit were false. Operating on the assumption that the whistleblower was trying to smear the company, Mr. Humphrey and Ms. Yu sought to investigate the whistleblower for Glaxo, the pair said in court papers Tuesday.

Mr. Humphrey and Ms. Yu were convicted by a Shanghai court in August 2014 of illegally purchasing personal information on Chinese citizens in the course of their investigation, a twist in a case that sent shock waves through the foreign business community in China. The pair were imprisoned for nearly two years and have said the trial and their ultimate conviction were a sham.

The company on Tuesday said, "We do not believe this case has any merit and will vigorously defend the allegations."

Another Chinese court found Glaxo's China subsidiary guilty of bribery in September 2014 and fined the company nearly $500 million, one of the largest corporate penalties leveled by Chinese authorities.

The case laid bare a tale of intrigue involving a mysterious sex tape, whistleblowers, private investigators, and a culture of bribery and graft in China's vast medical industry.

The Wall Street Journal reported in June 2013 that Glaxo was investigating allegations from an anonymous tipster that its sales staff engaged in widespread bribery to sell drugs between 2004 and 2010. Documents reviewed by the Journal showed Glaxo employees often treated doctors and others to trips and paid their expenses. The company said an internal probe found no evidence of corruption or bribery.

A month later, Chinese investigators accused the company of bribing government officials, hospitals and doctors to sell more drugs at higher prices. Glaxo said some of its employees might have violated the law and said it would cooperate.

Mr. Humphrey and Ms. Yu on Tuesday said they were hired by Glaxo in April 2013 to investigate Vivian Shi, a former Glaxo China employee, whom Glaxo suspected of being the whistleblower. The company accused Ms. Shi of orchestrating a smear campaign against the company, including, the company suspected, sending a video of Mark Reilly, then the top company executive in China, having sex with his Chinese girlfriend.

The couple offered to investigate the whistleblower's bribery allegations, according to the complaint, but were rebuffed by Glaxo, which said it had probed them and found nothing.

Ms. Shi, who headed the company's government relations in China before being fired, had strong political connections to the Communist Party, the pair said in the complaint, and investigating her led to their downfall.

As Chinese authorities escalated their probe, Mr. Reilly met with Mr. Humphrey in July 2013 and said Ms. Shi had "read your report and she will be coming after you," according to the complaint. Mr. Reilly fled the country the next day. On July 10, the offices of ChinaWhys, the couple's company, were raided and the pair were arrested.

Ms. Shi was rehired by Glaxo in 2015. On Tuesday, a Glaxo spokeswoman said Ms. Shi wasn't available to comment.

Mr. Reilly ultimately returned to China and was convicted of bribery-related charges. He received a suspended sentence and was allowed to leave the country.

The complaint filed Tuesday seeks damages for ChinaWhys' lost business, which Mr. Humphrey and Ms. Yu say was destroyed, and for the mental and physical mistreatment they received while in prison. The pair are represented by law firm Boies, Schiller & Flexner LLP.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

(END) Dow Jones Newswires

November 15, 2016 19:19 ET (00:19 GMT)

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