1 Reason I Wouldn’t Buy GlaxoSmithKline plc Today

Today I am looking at why intensifying bribery claims could seriously whack GlaxoSmithKline’s (LSE: GSK) (NYSE: GSK.US) revenues outlook.

Corruption calls on the rise

GlaxoSmithKline remains stuck between a rock and a hard place as allegations of improper conduct spread across its global operations continue to grow. Indeed, reports have emerged in recent days that the company has been bribing doctors in Syria to prescribe a wide range of its drugs to patients, according to Reuters.

The news follows earlier claims that the drugs giant has been engaged in wide-scale corruption to massage sales of its over-the-counter GlaxoSmithKlineproducts in the country. The Brentford-headquartered firm was made aware of the allegations in an anonymous letter sent to top management, and has since suspended work with its distributors in Syria as it investigates the conduct of these third parties as well as its own staff.

These claims are the latest dark chapter in the ongoing misconduct scandal enveloping the firm, and suggest that a culture of corruption could be running through the pharma play’s global operations — GlaxoSmithKline has already been accused of inappropriate activity in Iraq, Poland, Lebanon, Jordan, and of course China.

Indeed, the business noted in July’s interims that total Chinese sales crumbled 25% during January-June, to £129m as a result of the investigation there. I have previously stated that the importance of GlaxoSmithKline’s industry-leading labels would result in a resolution to the case sooner rather than later, but Beijing’s enthusiasm to play hardball in an investigation which began last summer has surprised many.

This week corporate investigator Peter Humphrey and his wife Yu Yingzeng — who were dispatched to China by GlaxoSmithKline to cast light on the allegations — were sentenced to two-and-a-half years and two years respectively on charges of illegally obtaining information.

Although the drugs firm was not directly named in the case, the sentences are seen as a direct shot across the bow. And with GlaxoSmithKline’s former head of Chinese operations, Mark Reilly, expected to enter the dock in the coming months, the company faces fresh waves of negative headlines.

GlaxoSmithKline is already under close scrutiny from the Serious Fraud Office (SFO), which launched a formal investigation into the firm’s conduct back in May. So with claims of alleged corruption continuing to stack up, the drugs leviathan faces the prospect of heavy financial penalties as well as a deteriorating sales outlook across a multitude of key markets.

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Royston Wild has no position in any shares mentioned. The Motley Fool has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.