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SEC v. Hitachi, Ltd.

 
:
Hitachi, Ltd.
:
SEC Civil
:
September 28, 2015
:
SEC v. Hitachi, Ltd.
:
SEC v. Hitachi, Ltd., 1:15-cv-01573 (D.D.C. 2015)
:
According to the SEC, the alleged improper payments were directed to a political party not any one individual official.
:
Engineering Services
:
South Africa
:
2005; 2006; 2007; 2008; 2009; 2010; 2011; 2012
:
African National Congress
:
Hitachi, Ltd. is a multinational conglomerate headquartered in Tokyo, Japan. Among its lines of business, Hitachi designs and constructs power stations. From January 2005 until April 2012, Hitachi maintained a class of American Depository Shares on the New York Stock Exchange and was therefore an issuer.

According to the SEC, beginning in 2005, Hitachi established a subsidiary in South Africa (“HPA”) to pursue public and private infrastructure contracts in South Africa. To do so, Hitachi sold 25 percent of its shares in HPA to a local South African company called Chancellor House Holdings (Pty) Ltd. which, according to the SEC, was a front for the African National Congress (“ANC”)—South Africa’s ruling political party.

The SEC claims as part of the arrangement, Chancellor agreed to use its political connections to steer procurement contracts to HPA in exchange for a success fee (in addition to its 25 percent equity stake in HPA). The SEC’s complaint explains that over the course of several years, HPA was able to secure two lucrative power station contracts in South Africa as a result of Chancellor’s efforts—jointly worth approximately $5 billion. According to the SEC, HPA paid a $1.1 million success fee to Chancellor for the award of the two contracts. Further, in 2012, HPA issued a dividend worth approximately $5 million and later repurchased Chancellor’s 25 percent equity stake for $4.4 million. In total, the SEC claims that HPA paid Chancellor $10.5 million for its association with HPA.

In September 2015, the SEC announced that it settled charges against Hitachi for HPA’s alleged violations of the books-and-records and internal controls provisions of the FCPA. Specifically, the SEC accused Hitachi of inaccurately recording the “success fee” in its books and records as consulting fees. Further, the SEC concluded that HPA violated the internal controls provisions of the FCPA, alleging that Hitachi executives were able to knowingly circumvent internal company policies in favor of the HPA-Chancellor arrangement. In exchange for settling the SEC’s charges, Hitachi agreed to pay a $19 million civil penalty.
:
Books and records (Issuer), Internal controls (Issuer)
:
Civil penalty, Civil Settlement
:
Hitachi consented to pay a civil penalty of $19 million.
:
19,000,000
:
0
:
Issuer
:
Foreign
:
Japan
:
Contract Procurement/Retention
:
Not stated.
:
Cash, Political contribution
:
Shell entity
:
10,500,000
:
South Africa
:
No
:
No