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FCPA Blog Daily News

« Navalny convicted, jailed five years | Main | Virginia’s Shamefully Inadequate Ethics Laws, Part III: Ethics Reform or Empty Promises? »
Thursday
Jul182013

GSK China probe shows limits of due diligence

As the GlaxoSmithKline bribery investigation widens, it will soon engulf hundreds of third parties across China, accused of being conduits for bribe paying.

We decided to retrieve the basic Administration of Industry and Commerce (AIC) filings for a quick due diligence on one of the travel agents named -- Shanghai Linjiang International Travel Agency.

We wanted to see what typical due diligence would turn up on this supplier. You can see the actual filing by clicking on the image below.

A few interesting details emerged from this research:

  • The company is legally incorporated
  • It was incorporated seven years ago (2006)
  • It has a registered capital of RMB10,000,000 ($1.63 million)
  • There is no adverse media on this company -- Chinese language or English language
  • The company did not appear on the database we use of some 18 million negative risk records worldwide before this event

So was this company OK to do business with? Certainly no obvious red flags appear.

This is why due diligence, while an essential component, is only a part of an effective compliance program for third parties. The DOJ-SEC guidance clearly states that training and continuing advice, policy management, and a robust management reporting system are essential.

If you haven’t checked out the Ethical Alliance’s free solution to this, sign up here for more information.

We are also tracking Chinese media for additional companies named in the GSK scandal and will be obtaining their filings for our China Compliance Digest. With this information, subscribers will be able to cross check against their own third parties in China. You can subscribe to the China Compliance Digest here.

____________

Scott Graham is the CEO of ethiXbase. He can be contacted here.

Reader Comments (1)

So are you saying that given what is available in conducting due diligence, as per DOJ-SEC standards, it is not possible to do so without running afoul of FCPA? If so, this puts a lot of companies in a dangerous Catch-22 situation. Do the DD, but still risk being nailed for violation.
Or am I missing something?
July 18, 2013 | Unregistered CommenterPeter
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