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(Adds detail from ChinaWhys report)
By John Ruwitch, Adam Jourdan and Ben Hirschler
SHANGHAI/LONDON, June 30 (Reuters) - GlaxoSmithKline Plc's tangled web of problems in China, including a sex videoof its former China chief and anonymous emails allegingcorruption, are highlighted in a lengthy draft report preparedfor the British drugs firm and seen by Reuters.
The report into the origin of the video and emails wascompiled at the request of GSK by ChinaWhys, a Shanghai-basedcompany founded by British investigator Peter Humphrey and hisAmerican wife Yu Yingzeng. Presented to GSK on June 6, 2013, itdid not reach a conclusion as to who was behind the actions.
On July 10, 2013, authorities detained Humphrey and Yu forillegally buying and selling private information. The couplewere subsequently arrested, which typically means the policebelieve they have enough evidence for the case to be brought totrial.
Five days after their detention, police accused GSK offunnelling up to 3 billion yuan ($482 million) through travelagencies to bribe doctors and officials in China.
A GSK spokesman in London confirmed the video existed butdid not comment on how it related to the alleged briberyscandal. He also said GSK, Britain's biggest pharmaceuticalfirm, had hired ChinaWhys to investigate the video.
Reuters was not independently able to verify any linkbetween the video and the bribery case.
The British newspaper the Sunday Times first reported theexistence of the video on Sunday.
ChinaWhys was employed in April 2013 to investigate anex-employee suspected of sending anonymous emails of an intimatevideo of GSK's then China chief Mark Reilly with his Chinesegirlfriend as well as allegations of widespread bribery at thefirm.
Chinese authorities charged Mark Reilly and other colleagueswith corruption last month, after a government investigationfound the firm made billions of yuan from elaborate schemes tobribe doctors. The Briton, who has been barred from leavingChina, could face decades in prison.
Reilly has not been reachable for comment and his lawyer hasdeclined to talk to the media. Sources close to Reilly have saidthat he was still in Shanghai but had not been detained.
Humphrey and Yu have not commented. They are expected to goon trial late next month, a source familiar with the case toldReuters.
GRAPHIC BEDROOM VIDEO
On March 16, 2013, an anonymous person sent an email to GSKsenior executives, including the company's chief executiveofficer Andrew Witty, alleging the firm had used travel agentpartners to funnel kickbacks to medical staff, the draft reportsaid. The email also included the graphic bedroom videoinvolving Reilly.
The recording was shot without Reilly's knowledge or consentat his Shanghai flat and showed the Briton, who is separatedfrom his wife, with another woman, the draft report said. It wasnot clear who shot the video or with what motivation.
In total, at least 23 emails making allegations ofwidespread bribery at GSK's China operations were sent togovernment bodies, including China's State Administration ofIndustry and Commerce, the watchdog that leads probes againstcorporate bribery, the draft report said.
The GSK investigation was sparked by at least onehigh-ranking whistleblower, a person with direct knowledge ofthat investigation previously told Reuters. The person declinedto be identified because of the sensitivity of the case.
WIDER RIPPLES
China's investigation into GSK and its scrutiny of numerousother foreign and local drugs companies have frightened foreignpharmaceutical executives so much that some fear they could bejailed and have asked their lawyers if they should temporarilyleave the country, legal and industry sources have said.
GSK, which described the bribery allegations as "shameful"when they came to light last year, said it was continuing tocooperate fully with Chinese authorities on the ongoinginvestigation.
"The issues relating to our China business are verydifficult and complicated," it added in a statement.
The bribery case has hit GSK's sales in China, according tothe company's quarterly results, as buyers have shied away fromdoing business with the company and GSK itself has revamped itssales and marketing model.
Bribery allegations involving GSK have come to light sincethen in other countries and GSK is now investigating claims thatbribes were also paid to doctors in Poland, Iraq, Jordan andLebanon.
Last month, Britain's Serious Fraud Office (SFO) launched aformal criminal investigation into the commercial practices ofGSK and its subsidiaries. GSK said it was cooperating fully withthe SFO. ($1 = 6.2050 yuan) (Additional reporting by Kazunori Takada in Shanghai; Editingby Jane Barrett, Diane Craft, Dean Yates and David Evans)
