McKinsey Charged in South African Corruption Case

McKinsey has said it played no role in the decision to pay the extra money. But Matthew Chaskalson, a member of a judicial commission investigating suspicious contracts with state-owned agencies, said in a 2020 hearing that after hiring Regiments, McKinsey received “an extraordinary succession of sole-source contracts” during which its fees increased “exponentially.” Subsequent investigations by the media and the commission discovered that Regiments had links to the politically powerful Gupta family — three brothers who for years hid their ties to companies that were improperly securing lucrative state contracts.

By the end of 2020, the judicial commission had uncovered three tainted McKinsey contracts, including ones with the state-owned airline and the nation’s power company, Eskom. McKinsey said it knew nothing about the improprieties, nor was any evidence introduced that indicated that the firm had been aware of them. McKinsey voluntarily returned about $100 million.

“We publicly apologized and took action where we made mistakes,” the McKinsey spokesman said in the statement. “We also returned our full fees with interest for those projects. We did this because of our firm belief that it was the right thing to do. We cooperated with all authorities and shared everything we found from our own extensive internal investigations.”

A focal point of the government’s investigation is Mr. Sagar, a leader in McKinsey’s consulting work on behalf of Transnet and Eskom.

Before joining McKinsey, Mr. Sagar studied at the University of Michigan and received an M.B.A. from the Wharton School at the University of Pennsylvania in Philadelphia. Mr. Sagar rose quickly through the ranks at McKinsey’s South African office. He was popular, with a vivacious personality and a noted interest in fashion, but he was also a risk taker, one who once arranged for McKinsey employees to write part of a thesis on behalf of a senior official at Transnet. An internal investigation concluded that Mr. Sagar had done nothing illegal. Later, he left the firm amid an investigation into his undisclosed ties to politically connected individuals.

Article source: https://www.nytimes.com/2022/09/30/world/africa/mckinsey-corruption-case-south-africa.html