The Japanese conglomerate Hitachi, Ltd. has settled an investigation and enforcement act by the Securities and Exchange Commission into improper payments made as part of two contracts for power plants in South Africa. In the settlement of the FCPA investigation, Hitachi agreed to pay the SEC $19 million.
The allegations involve the sale of a minority interest in a subsidiary to a politically connected organization that was a front company for the African National Congress. Hitachi then paid the organization success fees of more than $1 million while booking those payments as consulting fees. Later, it paid a share of the profits from the contracts to the organization and labeled those payouts as dividends. The SEC charged it with violations of the books and records provisions of the Foreign Corrupt Practices Act.
Hitachi was an issuer prior to 2012 when it delisted its American Depository Shares from the New York Stock Exchange. Out of concerns for its extraterritoriality, the FCPA requires at least one tie to the United States in order to allow for an enforcement action brought by the Justice Department or SEC. Among them are the issuer requirement (required to report information to the SEC), the citizenship tie or geographical boundary (on U.S. soil or passing through the U.S.).
Humorously, on the same day that it announced the press release, a subsidiary of Hitachi issued a press release concerning new software that it had developed that offered advanced crime prediction in what can only be thought of as a bit of a nod to the Tom Cruise movie Minority Report. If only they had eaten their own dog food, they might have seen their own in-house crime before it had happened!
Questions about this or other FCPA issues? We have put together an informational guide for FCPA whistleblowers that may answer your question. If you have need additional information, contact one of our FCPA whistleblower attorneys. We can also assist you in reporting your evidence of bribery by a publicly traded company or other covered entity to the Securities and Exchange Commission. Please contact an attorney via our contact form or call 1-800-590-4116.