Spooked by probes, pharma executives ask: should I leave China?

* Charges against GSK's Mark Reilly shocked businesscommunity

* Managers weigh legal responsibility of taking toppositions

* Crackdown is part of wider campaign against corruption

By Adam Jourdan

SHANGHAI, June 13 (Reuters) - China's crackdown oncorruption in the pharmaceutical sector has frightened foreignexecutives so much that some fear they could be jailed and haveasked their lawyers if they should leave the country for sixmonths. Others are thinking of going for good.

While the crackdown has been building for a year, Chinesepolice shocked the foreign business community a month ago whenthey filed corruption charges against Mark Reilly, former Chinahead of British drugmaker GlaxoSmithKline Plc. TheBriton, who has been barred from leaving China, could facedecades in prison.

Even before then, executives were getting worried about awave of visits from police and regulators to their offices aswell as articles in Chinese media alleging corrupt practicesagainst many global drugmakers.

The charges against Reilly had prompted some seniorexecutives to look at all contingencies, several legal andindustry sources said.

"Many of our clients are asking about personal liabilitiesand insurance, with executives asking if they are put in jailwhat will happen to their families and how the company willprovide protection for them," said John Huang, Shanghai-basedco-founder and managing partner at law firm MWE China.

Police said a year-long investigation found GSK madebillions of yuan from schemes to bribe doctors and hospitals.Two senior Chinese executives were also charged.

Britain's biggest drugmaker has said the accusations were"deeply concerning" and that it had zero tolerance for bribery.Reilly has not been reachable for comment while his lawyer hasdeclined to talk to the media. Reilly's whereabouts are unknown.

LOOKING FOR THE EXIT

Global drugmakers contacted by Reuters declined to commentabout the crackdown and how it was affecting executive morale inthe world's third-largest pharmaceutical market.

But Huang and two pharmaceutical executives said somemanagers were reconsidering the legal risks involved in holdingany position where they were responsible for some of thethousands of marketing and sales staff that global firms employacross China.

Investigators have focused on those staff and how they dealwith poorly paid doctors and administrators in public hospitals,the biggest buyers of medicine in China.

The crackdown, which shows no sign of abating, coincideswith a wider campaign by President Xi Jinping against corporateand official graft.

Lawyers said some executives and in-house counsel had soughtlegal advice about leaving China to avoid getting caught up inany future probes. Some top managers were actively pursuingcareer options outside China, said one source.

Others were contemplating a more temporary escape until theworst blew over.

"They are thinking about leaving China short-term, stayingout of the country on a three or six-month rotation," saidanother Shanghai-based lawyer, who asked not to be identifiedbecause of the sensitivity of the subject.

By moving abroad, executives would avoid being arrestedshould there be any formal investigation into their firms,lawyers said. Executives had sought advice on relocating toSingapore, Hong Kong and other destinations, they added.

Some international firms were also finding it harder toattract staff to China, said the two pharmaceutical executivesat separate global drugmakers, who declined to be identifiedbecause they were not authorised to speak to the media.

Other executives believe the GSK case is a one-off event andare more focused on not falling foul of the U.S. Foreign CorruptPractices Act (FCPA), which can apply to a wide variety of firmsthat have business ties to the United States.

That would be a mistake, said Steven Dickinson, partner atlaw firm Harris Moure in the Chinese port city of Qingdao.

"Every week I write an email saying you're missing the point- you won't have time to get hit by the U.S. law because you'llbe in jail in China," Dickinson said.

WIDER SCRUTINY

While formal charges have only been levelled against GSKexecutives, virtually all big drugmakers in China have comeunder scrutiny from police or regulators.

Last year authorities visited Novartis AG ofSwitzerland, Britain's AstraZeneca Plc, Sanofi SA of France, U.S. firm Eli Lilly & Co, Germany'sBayer AG and Danish drugmaker Novo Nordisk A/S.

All said they were cooperating with the authorities and thatthey did not condone bribery.

Most recently, Swiss drugmaker Roche Holding AG said last month its Hangzhou office in eastern China was visitedby China's anti-graft watchdog, the State Administration forIndustry & Commerce (SAIC). The regulator declined to givedetails while Roche said it would cooperate with theauthorities.

A leaked memo from the Health Ministry in Hangzhou alsonamed Eli Lilly, Novo Nordisk and AstraZeneca as examples ofdrugmakers suspected of making kickbacks. The three firms saidthey had not been contacted by authorities over the matter.

Several global drugmakers including Novo Nordisk, Eli Lillyand Roche have also changed their China heads in the past year.The three firms said the moves had nothing to do with thecrackdown.

GSK replaced Reilly in July after the investigation into thecompany was announced. Johnson & Johnson appointed aChina chairman in a newly created role in August to oversee thefirm's business. The U.S. company declined to comment on themove. (Additional reporting by Kazunori Takada and John Ruwitch;Editing by Dean Yates and Mark Bendeich)