Nevada News Reporter

Hitachi to pay $19 million settlement of SEC charges

Hitachi to pay $19 million settlement of SEC charges

Hitachi has agreed to a $19 million settlement of U.S. charges the Japanese multinational improperly recorded more than $10 million in payments to a front for South Africa’s ruling party in connection with successful efforts to win power plant contracts. The company’s actions allegedly violated the Foreign Corrupt Practices Act, a federal law that bars companies from paying foreign officials to get or retain business, the Securities and Exchange Commission said Monday.

Hitachi consented to the agreement, which requires federal court approval, while neither admitting nor denying the SEC allegations. Investigators found that Hitachi sold a 25% stake in its South African subsidiary in 2005 for $190,819 to Chancellor House Holdings, a front organization for the African National Congress. An internal Hitachi document said the organization was “politically preferred,” the SEC said.

The agreement authorized the organization to share in any profits from South Africa power station contracts secured by Hitachi, the SEC said. The deal terms also made the organization eligible for “success fees” on contract awards. Hitachi paid Chancellor House more than $1.1 million in success fees in April and June 2008,  after the company landed power plant contracts worth approximately $5.6 billion, the SEC said.

The company recorded the payments in its “consulting fees” expense account, the SEC said. The expense account was included in Hitachi’s annual financial statement for 2008, which were consolidated with SEC filings the following year. Hitachi also paid Chancellor House more than $1.7 million in 2010, and nearly $3.3 million in 2011, reflecting a share of the company’s total profits, the SEC investigation found. The payments, temporarily delayed until Chancellor House assured it would not pass the funds to government officials, were recorded as dividends, the SEC said.