Chinese dad in Stanford admission scandal faces scrutiny over company's sales expenses

Mr Zhao Tao is the chairman of Shandong Buchang Pharmaceuticals Co, whose stock dropped over 20 per cent since Mr Zhao's family's involvement in the college admissions scandal was reported earlier this month.
Mr Zhao Tao is the chairman of Shandong Buchang Pharmaceuticals Co, whose stock dropped over 20 per cent since Mr Zhao's family's involvement in the college admissions scandal was reported earlier this month.PHOTO: AFP

HONG KONG (BLOOMBERG) - The Chinese father who allegedly paid US$6.5 million (S$8.9 million) to get his daughter into Stanford University has another reason to worry: His pharmaceutical company is under scrutiny by the Shanghai stock exchange regulator over the level of its sales expenses.

Shandong Buchang Pharmaceuticals Co, whose chairman Zhao Tao has been caught up in the United States college admissions scandal, said in a statement on Monday (May 14) that it had received questions from the stock exchange over why its sales expenses amounted to a higher-than-average 59 per cent of the company's 2018 revenue of 13.7 billion yuan (S$2.7 billion).

The company, which sells herbal medicines and bio-pharmaceuticals, said that the sales expenses were for general marketing and consulting, but did not explain why it was higher than the industry average.

According to data compiled by Bloomberg, Buchang's peers like Jiangsu Hengrui Medicine Co and Fosun Pharmaceutical Group Co have sales expenses to revenue ratios of around 40 per cent.

Paying fees to doctors and hospitals for prescribing products is an oft-reported although legally questionable occurrence in the pharmaceutical industry in China. In 2014, British drugmaker GlaxoSmithKline had to pay a half a billion dollar fine after China charged the company with bribery of local health officials.

Shandong Buchang did not respond to calls for comment. Its stock has dropped over 20 per cent since Mr Zhao's family's involvement in the college admissions scandal was reported earlier this month.

Mr Zhao's wife said in a statement on May 3 that she had given US$6.5 million to the foundation of William Singer, the man at the centre of an admissions scandal that exposed how wealthy parents got their children into elite schools by cheating.

 

Their daughter Yusi was reportedly presented by Singer as a competitive sailor in order to gain admission to Stanford. Mrs Zhao said in the statement that she had been misled by Singer into thinking the payment was a charitable donation.