Hitachi hit with USD$19 million fine for bribery

Tokyo conglomerate Hitachi was forced to pay USD$19 million in penalties, following a Securities and Exchange Commission (SEC) investigation which revealed the company had inaccurately recorded improper payments to South Africa’s ruling political party, the African National Congress (ANC).

Hitachi knowingly sold a 25% stake in one of its South African subsidiaries to a front company for the ANC, which allowed the pair to share profits from any contracts the subsidiary secured, the SEC alleged.

The subsidiary was ultimately awarded two contracts to build a pair of multi-billion dollar power stations in South Africa. The ANC and its front company turned an immediate profit of approximately USD $5 million in ‘dividends’, based on the profits from the contracts.

“Hitachi’s lax internal control environment enabled its subsidiary to pay millions of dollars to a politically-connected front company for the ANC to win contracts with the South African government,” SEC Enforcement Division Director Andrew Ceresney is quoted as saying in a SEC press release.

“Hitachi then unlawfully mischaracterized those payments in its books and records as consulting fees and other legitimate payments.”

A separate, confidential arrangement also saw the ANC front company receive a one-off USD$1 million ‘success fee’ that was later misleadingly marked as a “consulting fee”.

Accordingly, the SEC found Hitachi had breached provisions of Securities Exchange Act, relating to proper book-keeping and record-keeping obligations.

This case demonstrates the expansive extraterritorial reach and sizeable fines the SEC possesses, in relation to corruption and bribery offences.

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Source: Securities and Exchange Commission.