China prosecutors charge GSK-linked investigators with illegally obtaining data

SHANGHAI (Reuters) - Chinese prosecutors on Friday charged a British investigator and his American wife with illegally obtaining private information in a case that is seen as key to a bribery investigation against GlaxoSmithKline Plc .

The couple ran risk consultancy ChinaWhys, which was contracted by the British drugmaker. Their arrest over a year ago coincided with a Chinese probe into allegations that GSK staff had funneled hundreds of millions of pounds through travel agencies to bribe local doctors and health officials to boost sales and raise prices.

The prosecutors, laying out the charges at the start of the trial, said Peter Humphrey and American wife Yu Yingzeng had illegally obtained more than 200 items of private information, including house hold registration data, real estate documents and phone records, and then re-sold the data.

When asked by the judge whether the facts in charges were accurate, Humphrey said: "The overall situation presented was correct. I have no disputes."

The trial has unnerved China's risk consultancy community, whose members are much in demand by multinationals and foreign investors for information on potential partners or firms in China, where such data is not easily available.

It also coincides with a growing number of Chinese anti-trust probes that have seen authorities raid offices of Western firms, highlighting the obstacles foreign companies face in navigating China's murky business world.

Foreign firms must adhere to anti-corruption laws while operating in China amid more stringent enforcement of the U.S. Foreign Corrupt Practices Act and an increase in the number of Chinese firms involved in overseas deals.

While Chinese authorities have not openly connected the arrest of the couple to the GSK probe, Humphrey said in a note last year when he was already in detention that he felt "cheated" by GSK, adding that the drugmaker had not shared the full details of the bribery allegations.

A GSK spokesman has declined to comment on the trial. The drugmaker said in July that the issues relating to its China business were "very difficult and complicated."

The couple's son, Harvey, attended the proceedings, as well as officials from the British and U.S. embassies.

Humphrey is expected to plead guilty to the charges, which carry a maximum sentence of 3 years in jail.

He worked for Reuters as a journalist in the 1980s and 1990s, and has previously apologized on state television for breaking any Chinese law.

In testimony read out in court, Humphrey said the due diligence services offered by ChinaWhys largely relied on publicly available records and interviews with executives.

"For projects that required background checks, we engaged a third-party consultancy that provided household registration data. We were only paying for their services; we never purchased or obtained such data directly ourselves," he said, according to a transcript released by the court's official microblog.

Humphrey also said he had not sold the private information obtained.

China has in recent years moved to tighten its privacy laws. In 2009, it amended its criminal code to ban the transfer, sale or gathering of Chinese citizens' information by government firms and companies involved in telecoms, transportation, education and medical treatment.

(Additional Reporting by Engen Tham; Editing by Miral Fahmy)