Hitachi Ltd. has agreed to pay $19 million to settle U.S. charges that the Japanese conglomerate inaccurately recorded improper payments to South Africa’s ruling party in connection with contracts worth $5.6 billion to build two power plants.

The Securities and Exchange Commission said Monday that Hitachi encouraged Chancellor House Holdings, a front company for the African National Congress, to use its political influence to obtain the contracts and in April and July 2008 paid “success fees” of about $1 million for its assistance.

The success fees were improperly recorded as “consulting fees” in its books and records for the year ended Dec. 31, 2008, and were consolidated into its financial statements, the SEC said in a civil complaint alleging violations of the Securities Exchange Act. Hitachi also allegedly mischaracterized $5 million that it paid Chancellor in “dividends” based on profits derived from the contracts.

Without admitting or denying liability, the company agreed to a settlement that requires it to pay a $19 million penalty.

“Hitachi’s lax internal control environment enabled its subsidiary to pay millions of dollars to a politically connected front company for the ANC to win contracts with the South African government,” Andrew J. Ceresney, director of the SEC’s Enforcement Division, said in a news release. “Hitachi then unlawfully mischaracterized those payments in its books and records as consulting fees and other legitimate payments.”

According to the SEC, Hitachi in 2005 created a subsidiary in South Africa to pursue lucrative public and private contracts in that country. It sold 25% of the stock to Chancellor, the SEC said, giving “Chancellor — and by proxy the ANC — the ability to share in the profits from any power station contracts secured by Hitachi.”

As part of an undisclosed arrangement, Chancellor would also be entitled to “success fees” in the event that contract awards were a substantial result of its efforts, the SEC alleged.

During the bidding process for the power station contracts, Hitachi “was aware that Chancellor was a funding vehicle for the ANC,” according to the regulator. “Hitachi nevertheless continued to partner with Chancellor and encourage Chancellor’s use of its political influence to help obtain the government contracts.”

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