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African Development Bank debars Hitachi for South Africa bribes

The African Development Bank Group said Wednesday it reached a settlement with Hitachi Ltd. that includes a one-year debarment for sanctionable practices by Hitachi subsidiaries on an AfDB-financed power project in South Africa.

The settlement ended a three-year investigation by the AfDB’s Integrity and Anti-Corruption Department into the Medupi Power Station Boiler Works Contract.

The bank imposed a one-year conditional debarment. “Debarment will be terminated as soon as Hitachi enhances its integrity compliance program to the standard set by the AfDB’s Integrity Compliance Guidelines,” the bank said in a release emailed to the FCPA Blog.

As part of the settlement, Hitachi will make “a substantial financial contribution to the AfDB, which will be used to fund worthy anti-corruption causes on the African continent,” the bank said.

In September this year, Tokyo-based Hitachi paid $19 million to the U.S. Securities and Exchange Commission to resolve Foreign Corrupt Practices Act violations. The SEC said Hitachi inaccurately recorded improper payments to South Africa’s ruling political party in connection with contracts to build two multi-billion dollar power plants.

Hitachi sold a 25-percent stake in a South African subsidiary to a company serving as a front for the African National Congress (ANC), the SEC said. The arrangement allowed the front company and the ANC to share in profits from any power station contracts that Hitachi secured.

Hitachi was ultimately awarded two contracts to build power stations in South Africa. It paid the ANC’s front company $5 million in “dividends” based on profits derived from the contracts.

Through a separate, undisclosed arrangement, Hitachi paid the front company another $1 million in “success fees” and inaccurately booked them as consulting fees without proper documentation.

The AfDB said Wednesday Hitachi and affiliates in Germany and South Africa cooperated “fully and openly” with the investigation. “Despite their differences, both parties shared a desire to resolve the current difficulties by way of settlement,” the bank said.

Anna Bossman, director the bank’s Integrity and Anti-Corruption Department, said: “Hitachi has shown by its actions that it is committed to doing business in an ethical manner and the IACD believes in giving credit for such dedication.”

“As I have said before,” Bossman said, “the IACD is ever willing to resolve amicably allegations of sanctionable practices with companies that show a sincere commitment to integrity, who collaborate in the resolution of allegations, and who elect to enhance their compliance policies and procedures.”

The African Develpment Bank has cross debarment agreements for sanctionable practices with the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank Group, and the World Bank Group. Sanctionable practices are corruption, fraud, coercion, and collusion.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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