Corruption Can Happen Anywhere. Even With Respected Technology Companies Like Hitachi

Oct 5, 2015 1:00 PM ET

Over the past week, the Japanese company Hitachi was subject to a multi-million dollar fine for bribing South African officials to win over power plant contracts. By using another company to facilitate the transaction and to engage in South African officials, the Hitachi organization was found they were being non-compliant with the SEC and the Foreign Corrupt Practices Act.

Chancellor House, the middle company being the focal point of the bribery scandal, was the primary entity focusing on winning the contracts from the South African government. As these contracts were won, these smaller entities would benefit from the established contracts, from Hitachi, and earn a percentage the secured Hitachi contracts.

In an article written by Michael Christensen, “Hitachi Settles FCPA Charges With SEC for $19 Million,” he writes how the smaller subsidiaries benefited from the deal and how the success of a bribed government contract, under these subsidiaries, earned them additional gains:

“There were complaints from opposition parties that the ANC was controversially benefiting from stated-funded contracts through Chancellor Houses’s stake in Hitachi. The deal terms also made the organization eligible for “success fees” on contract awards. Of that, $1 million in fees paid in a 2008 secret arrangement were masked as consulting fees in Hitachi’s books, the agency said”

So after being uncovered with these allegations Hitachi has now agreed to settle and admit its wrongdoing.

“Tokyo business conglomerate Hitachi agreed to settle claims that it wasn’t honest about paying a South African political group for power plant contracts, the SEC said Monday.”

Corruption and bribery happens at all levels of the organization. From C-level executives down to agents working overseas, the risk in having these issues infiltrating your organization is high. Having systems in place at all levels of the organization and being able to control and monitor your 3rd parties is key to minimizing this threat. Our latest webinar: Anti –Corruption and Examining Third Party Pitfalls, explores these issues and highlights how a people, process, and technology can help with reducing your risk. Click here to learn more.