Hitachi Ltd: African Development Bank debars company for paying bribes

The African Development Bank Group, the group dedicated to sustainable economic development and social progress in its member countries, has reached a settlement with Hitachi Ltd over allegations of bribery. Hitachi previously agreed to pay $19m to settle charges brought by the US Securities and Exchange Commission in September 2015, considered in a earlier blog.

The settlement concludes a three year investigation concerning a power station construction contract in South Africa by the AFDB’s Integrity and Anti-Corruption Department. The settlement includes the following penalties:

  •  A one year conditional debarment, “terminated as soon as Hitachi enhances its integrity compliance program to the standard set by the AFDB’s Integrity Compliance Guidelines”.
  • An undisclosed financial contribution to the AFDB.

The AFDB acknowledged the co-operation provided by Hitachi and its affiliates, and that the sanctions imposed reflect the level of co-operation given.

There are interesting parallels to be drawn with the approach taken by the UK authorities.

First, the consistent message from the SFO over the past few years has been to self report matters and co-operate fully. This message is common to most regulatory and prosecuting authorities. However, organisations will always weigh the benefits of self-reporting and co-operation, needing to believe that following such a route will be advantageous to the company and its shareholders. In order to demonstrate this, prosecutors will need to show both a desire to co-operate and reach agreement with defendants, including in cases where not everything is quite as straightforward as the ICBC Standard Bank, and to successfully prosecute companies who do not co-operate and self-report allegations in a timely fashion.

Secondly, the Hitachi case is a timely reminder to practitioners that concluding a matter in one jurisdiction does not ensure the same matter will not be pursued in another. One of the concerns for practitioners when advising on whether to self-report, or enter into a DPA negotiation, is whether such actions could lead to investigations in additional jurisdictions. In circumstances where there is a clear multi-national element, practitioners should consider carefully whether reports should be made to more than one regulatory and or prosecuting authority.

Finally, the growth of monitoring and compliance procedures put in place after any agreement between a prosecutor and a company  is likely to be a feature of any future cases. DPAs have a clear focus on prevention as well as punishment, and it seems difficult to imagine an agreement without some requirements to revamp existing anti-corruption measures.

For more information on Deferred Prosecution Agreements, see the Practical Law practice note, Deferred Prosecution Agreements: overview.

For more information on self reporting and co-operation, see the Practical Law practice note, The Serious Fraud Office: self reporting and co-operation.

Practical Law David Bacon

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