McKinsey agrees to $122m SA settlement

McKinsey and Company Africa Ltd will pay more than $122m to resolve a US investigation into a bribery scheme in SA, the Department of Justice confirmed on Thursday. Legalbrief reports that the National Prosecuting Authority (NPA) said that, in terms of the corporate alternative dispute resolution reached with the local arm of the multinational management consulting company, McKinsey will also assist its Investigating Directorate Against Corruption by handing over ‘information and material’ it has in its possession. It said McKinsey has acknowledged the social and economic harm caused by its conduct. News24 reports that the resolution followed co-operation between the NPA and the US Department of Justice, and the settlement was confirmed by a US Federal Court. As part of the agreement, the NPA says, McKinsey has admitted, accepted and acknowledged responsibility for the criminal actions and conduct of its former partner, Vikas Sagar, whose ‘corrupt actions’ landed the company contracts with Transnet and Eskom. ‘McKinsey has already made financial restitution to these entities by returning all fees paid to it, with interest,’ the NPA said.

The Daily Maverick reports that McKinsey Africa was charged with one count of conspiracy to violate the Foreign Corrupt Practices Act for agreeing to pay bribes to officials at state-owned energy company Eskom and port and freight rail operator Transnet in exchange for non-public information about consulting contracts. ‘McKinsey Africa bribed SA officials in order to obtain lucrative consulting business that generated tens of millions of dollars in profits,’ said Nicole Argentieri, head of the Justice Department’s Criminal Division. McKinsey and McKinsey Africa earned about $85m in profits through the bribery scheme, the Justice Department said. Eskom had hired McKinsey to help it execute a ‘turnaround plan’. The Justice Department said McKinsey Africa had received credit for co-operating with its investigation and conducting anti-corruption training for employees. The $122 850 000 McKinsey has agreed to fork up includes a penalty it will pay in SA. McKinsey is also in talks with the Justice Department to pay more than $600m to resolve a separate investigation into the consulting firm’s work helping opioid manufacturers boost sales that allegedly contributed to a deadly addiction epidemic, sources told Reuters.

Advocate Ouma Rabaji-Rasethaba, the head of the Asset Forfeiture Unit and Deputy National Director of Public Prosecutions, said the resolution is yet another significant step that takes SA forward in fighting crime: 'The NPA remains committed not only to prosecuting criminals, but also to contributing to the economic recovery of the country through restitution. Corporate alternative dispute resolutions address both of these mandates of the NPA in a cost effective, impactful way.’ News24 reports that the agreement also requires McKinsey to continue to invest in its anti-corruption programme to prevent corruption in the future. It also has to fulfil other anti-corruption requirements – which, if it fails to do, allows the NPA to reopen its investigation into the company's activities in SA during the state capture period.