McKinsey and Company Africa (Pty) Ltd (McKinsey Africa), which operates in South Africa as a wholly owned and controlled subsidiary of international consulting firm McKinsey & Company Inc. (McKinsey), has agreed to a settlement to pay over $122 million to resolve an investigation by the Justice Department into a bribery scheme that paid bribes to government officials in South Africa between 2012 and 2016.
The global consulting company entered into a three-year deferred prosecution agreement (DPA) with the department in connection with a criminal information filed in the Southern District of New York charging the company with one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).
Vikas Sagar, a former senior partner of McKinsey who worked in McKinsey Africa’s South Africa office, previously pleaded guilty to one count of violating the FCPA.
South African State Owned Enterprises Compromised
According to court documents and admissions, McKinsey Africa, acting through a senior partner and for the benefit of McKinsey, agreed to pay bribes to then-officials at Transnet SOC Ltd. (Transnet), a South African state-owned and state-controlled custodian of ports, rails, and pipelines, and at Eskom Holdings the state-owned and state-controlled energy company.
Between at least 2012 and 2016, McKinsey Africa obtained sensitive confidential and non-public information from Transnet and Eskom regarding the award of lucrative consulting contracts and submitted proposals for multimillion-dollar consulting engagements, while knowing that South African consulting firms with which McKinsey Africa had partnered would pay a portion of their fees as bribes to officials at Transnet and Eskom.
As a result of the bribery scheme, McKinsey and McKinsey Africa earned profits of approximately $85,000,000.
Bribery Continued for Years
“McKinsey Africa bribed South African officials in order to obtain lucrative consulting business that generated tens of millions of dollars in profits,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “As a consequence, McKinsey Africa has agreed to pay a criminal penalty of more than $122 million. The resolution announced today — the department’s third coordinated resolution with South African authorities in only two years — is evidence that our International Corporate Anti-Bribery (ICAB) initiative, which we announced in November 2023, is bearing fruit. Through the ICAB, the Criminal Division remains committed to strengthening its international partnerships, including in South Africa, to combat corruption.”
“McKinsey Africa participated in a scheme over several years, to bribe government officials in South Africa and unlawfully obtained a series of highly lucrative consulting contracts U.S. Attorney Damian Williams for the Southern District of New York commented that,” The scheme was carried out by a senior partner at McKinsey and allowed McKinsey Africa to repeatedly get awarded consulting contracts through corruption and bribes at two different state-owned entities in South Africa. This office and our law enforcement partners will continue our fight against American companies that seek to gain an unfair business advantage by supporting corrupt political officials overseas, no matter the industry, no matter the country, and no matter how prominent or profitable those companies may be.”
South Africa Still to See Prosecutions of Corrupt Officials
Despite a three-and a half year investigation into corruption via the State Capture hearing conducted in South Africa, headed by the now-chief Justice Zondo, many of those implicated by the findings have still not been prosecuted.
This is despite the President, Cyril Ramaposa, ensuring the country that his administration would root out and prosecute all those found to have been involved in corrupt activities.
