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Friday
Apr292016

China pharma news: Former company chief arrested for bribery, others face investigation

Prosecutors in Hefei City said they arrested the former legal representative and president of a local pharma and charged him with “organizational bribery” under Section 393 the Criminal Law. 

Yang Ling was the president of Hefei Tianxing Pharmaceutical Services Co Ltd.

He was arrested in February but the Procuratorate (the prosecutor's office) made the announcement on April 11.

The case is “under investigation,” the Procuratorate said.

The same prosecutors also recently arrested the former president of Hefei Jingu Hospital, a former employee of Hefei Medical Insurance Center, and the former cashier of Hefei Xifei County Hospital, charging them with the crime of receiving bribery.

It's unclear whether those arrests are related to a same bribery scheme; however, the Chinese prosecutors usually charge both sides of the bribery in this type of case.

Hefei Tianxing Pharmaceutical is a subsidiary of Nanjing Pharmaceutical Company Limited, a public company listed on the Shanghai Stock Exchange.

Nanjing Pharmaceutical, the parent company, released a clarification announcement on April 26, that said it didn't receive any prior notice from the local prosecution regarding the arrest, and that the company’s business operations are in normal order. 

The company also said in the announcement that it will comply with any anti-bribery laws and regulations, and will cooperate with the government’s investigations.

Another pharma -- China Traditional Chinese Medicine Co. Limited, a Fortune 500 company listed on Hong Kong Exchange  -- said on April 6 that one of its subsidiaries received a complaint from Guangzhou Intermediate People's Court, charging the company with the criminal offense of organizational bribery. 

According to the complaint, the legal representative of Jiangyin Tianjiang Pharmaceutical Company Limited, Tan Dengping, was involved in organizational bribery in December 2006. 

The announcement said that Tan is under investigation and has resigned from all his positions, but there are currently no other claims against the company. 

The company said it will improve its internal anti-bribery compliance system and cooperate with any further government investigations.

Under China’s Criminal Law, it is crime to give or receive bribes for businesses and government officials.  Section 393 of the Criminal Law makes it an offense for an organization (including private companies, non-profits, and other entities) to give bribes to government workers. 

The criminal liability of organizational bribery can be imposed upon the managers or other persons directly responsible for the bribery of the organization.

The Supreme Court of China recently published new judicial interpretations of the anti-bribery provisions of the Criminal Law.

Notably, the amount required to charge a person or entity with criminal liability is lower -- only RMB10,000 or about $1,540, compared to the normal RMB30,000 threshold or about $4,620 -- if the bribe is given to a government worker in charge of the regulation or supervision of medicines, which may include hospital employees and other government officials that pharmaceutical companies frequently interact with.

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Chang Liu is an attorney in Kaufman Dolowich & Voluck, LLP based in the firm’s Woodbury, New York office. Prior to law school at Hofstra University, he worked for a defense contractor in China on cross-border transactions. He's fluent in Chinese and Spanish. He can be contacted here.