The Evolution of the FCPA | Article | FTI Consulting

The Evolution of the FCPA

Navigating the Japanese-African business environment

Forensic & Litigation Consulting

October 19, 2015

Fast pace moving blurred downtown city in the night

On 28 September 2015, the US Securities and Exchange Commission (SEC) issued a press release stating that the Japanese multinational conglomerate, Hitachi Ltd, had been charged with violating the Foreign Corrupt Practices Act (FCPA). Hitachi agreed to pay USD 19 million to settle the SEC charges which included the inaccurate recording of improper payments made to South Africa’s ruling political party, the African National Congress (ANC).

Underlying FCPA Trends

Philippa Symington and Pamela Wadi of our Global Risk & Investigations Practice look at Japan’s growing influence in Africa and the potential risks it faces against a background of tougher anti-corruption enforcement.

On the face of it Hitachi’s FCPA violation is nothing new; foreign company with poor internal controls pays politically-connected intermediary to secure contract. According to the SEC’s press release, Hitachi sold a 25% interest in its South African subsidiary to Chancellor House Holdings (Pty) Ltd., a company whose ultimate shareholding was held by the ANC. This allowed profits from power station contracts secured by Hitachi - using Chancellor House’s political influence – to be shared with the ANC backed company. Hitachi also paid a USD 1 million ‘success fee’ to Chancellor House which was inaccurately recorded in the company’s accounts as consulting fees. Despite the familiar pattern, both the nature and target of this SEC investigation indicates a changing regulatory focus.

The last ten years have seen a striking shift in tone from the US regulators who have adopted a more aggressive posture with respect to enforcing the provisions of the FCPA. The US authorities continue to target bribery offences committed outside the US through the use of more stringent investigative tactics and increased cooperation with other enforcement agents worldwide.

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