Hitachi To Pay $19 Mln To Settle SEC Charges Over ”Improper” Payments

Investigators revealed that Hitachi offered a 25per cent gain in the South African part in 2005 for usd190,819 to effectively Chancellor House Holdings, a front side establishment for the African National Congress. An domestic Hitachi paper said the firm was also “politically preferred”, the SEC said.

The SEC said the accord resolves civil charges that Tokyo-based Hitachi violated the U.S. Foreign Corrupt Practices Act by booking about $6 million of improper payments it made as “consulting fees” and other legitimate payments.

Chancellor House was, until past year, empowerment partner of Hitachi subsidiary Hitachi Power Africa, in which it was a 25% shareholder.

Neither the ANC nor Chancellor was charged by the SEC.

Business Day reports that Hitachi Power Africa begrudgingly divested from Chancellor House past year following intense public pressure, but also not before R50 million in dividends had been paid out to the ruling party’s so-called “front” company. A follow-up story in 2007 showed that a contract to supply steam generators for South Africa’s first new major power station in two decades, was awarded to a consortium led by Hitachi and includes the ANC’s investment company.

The DA commented: “This is clearly an admission of de facto corruption that implicates the ANC – a party that has infected government at every level with corruption”.

The SEC’s complaint, which was filed in the US District Court for the District of Columbia, alleges that Hitachi knew that the front company was a funding vehicle for the ANC during the bidding process.

It said the party has been inundated with queries following news of Hitachi’s fine.

The settlement was subject to court approval. Through a separate, undisclosed arrangement, Hitachi paid the front company an additional $1m in success fees that were inaccurately booked as consulting fees without appropriate documentation. Eskom refused to disclose at the time whether Moosa had declared a conflict of interest or recused himself when his board decided on the contracts.

It was Hitachi’s “lax” financial controls that enabled its South African subsidiary to make the improper payments and then disguise them in its books, SEC Enforcement Director Andrew Ceresney said in a statement.

The Hitachi case is the latest corruption scandal to hit the ANC, which is still reeling from accusations it paid a $10 million bribe to win hosting rights for the 2010 World Cup.

The ANC said it found it “difficult to respond” to the Hitachi matter because the party “has not participated in the said transaction”, said its spokesperson Zizi Kodwa.