Japanese conglomerate Hitachi, Ltd. agreed to pay $19 million to settle charges brought by the U.S. Securities and Exchange Commission (SEC) related to alleged violations of the FCPA. The SEC charged Hitachi with inaccurately recording improper payments made to a front company for South Africa’s ruling political party, the African National Congress (ANC), in connection with contracts to build two multibillion-dollar power plants.

The SEC alleged that Hitachi sold a 25 percent stake in a South African subsidiary to Chancellor House Holdings (Pty) Ltd., which served as a front for the ANC. This arrangement allowed the front company and the ANC to share profits in the power plant construction contracts secured by Hitachi. The SEC’s complaint accused Hitachi of paying $1 million in “success fees,” improperly booked as consulting fees, to Chancellor. The fees allegedly compensated Chancellor for exerting influence during the bidding process pursuant to a separate undisclosed agreement.

Hitachi was ultimately awarded the contracts by South African state-run electricity utility Eskom Holdings SOC Ltd. Hitachi allegedly paid the ANC front company approximately $5 million in dividends based on 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,” said Andrew J. Ceresney, director of the SEC’s Enforcement Division. Hitachi settled without admitting or denying the SEC’s allegations. In announcing the settlement, which is subject to court approval, the SEC noted that it received significant assistance in its investigation from the African Development Bank’s Integrity and Anti-Corruption Department through a new cooperative relationship that the SEC hopes to continue.