African Development Bank penalises Hitachi

JAPANESE company Hitachi, which was fined $19m by the US Securities and Exchange Commission (SEC) in September, has also been penalised by the African Development Bank (AfDB) over allegations of corruption in its contract to build Eskom’s Medupi power station.

The AfDB, which lent Hitachi €1.86bn in 2009, announced the sanction on Wednesday after a three-year investigation by its anticorruption department.

The loan went to Hitachi’s South African subsidiary, Hitachi Power Africa, in which the African National Congress (ANC) investment arm Chancellor House secured a 25% stake in 2005 for next to nothing.

The bank did not elaborate on its exact findings, but said that it had found that Hitachi had engaged “in sanctionable practices”. Hitachi would be debarred for 12 months from AfDB loans, which would be terminated once the company “enhances its integrity compliance programme”.

In the case of the SEC, two specific findings were made. The first was that Hitachi had sold a stake to a company “serving as a front for the ANC” and paid it handsome dividends for its relatively small investment. The second was that “through a separate, undisclosed arrangement, Hitachi paid Chancellor House an additional $1m in ‘success fees’ that were inaccurately booked as consulting fees without appropriate documentation”.

The AfDB said that the relative leniency of the penalty on Hitachi was because of the excellent co-operation it had received in the investigation.

“The AfDB acknowledges that Hitachi and its affiliates co-operated fully and openly with the investigation, and that Hitachi was determined throughout to maintain its good relations with the AfDB and to protect the integrity of the Medupi project. Despite their differences, both parties shared a desire to resolve the current difficulties by way of settlement,” said a statement.

In addition, Hitachi had “voluntarily agreed to make a substantial financial contribution to the AfDB, which will be used to fund worthy anticorruption causes on the African continent.”

The company would also co-operate with the bank on a variety of matters, “including enhancing where necessary its existing integrity compliance programme”, the statement said.



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