McKinsey under new scrutiny in South Africa’s corruption scandals

By AT editor - 13 September 2017 at 7:57 pm
McKinsey under new scrutiny in South Africa’s corruption scandals

McKinsey is under renewed scrutiny following a report from Reuters that suggests the global business consulting firm in South Africa ignored warnings about business contracts with Eskom, the nation’s power provider, that were linked to the growing scandal surrounding the Gupta business family.

The Reuters report, published Wednesday, cited two former McKinsey employees who said they attended meetings in Johannesburg where questions were raised about related business dealings as early as 2013. That contradicts the McKinsey account, which sets the timeline in 2016 for a due diligence review that led the firm to cut ties with Trillian, a partner on the Eskom contracts controlled by Salim Essa, a close Gupta ally. The contracts accounted for more than half of McKinsey South Africa’s revenue. 

Trillian tells Reuters that Essa sold his shares in the firm last year. McKinsey denies any wrongdoing and said it will cooperate fully with authorities investigating the companies. Yet McKinsey did place a South African director, Vikas Sagar, on leave in July following an internal investigation into an apparent misrepresentation of the company’s ties to Trillian.

That move followed a June 29 report detailing the investigation into Trillian, including McKinsey’s decision to defer Trillian as a client. The report first revealed a letter from Sagar, who appeared nonetheless to authorize payments between parties at the heart of South Africa’s ongoing investigation into state-contract corruption.

The Gupta family and relationships with President Jacob Zuma and other officials are at the center of inquiries spanning more than a year, resulting in the “State of Capture” report on Gupta’s influence over contracts and political appointments released last November. Subsequent developments, including a cache of “Guptaleaks” emails released to local media outlets, have spurred further investigation by South Africa’s elite HAWKS police unit and other entities. Zuma has denied any wrongdoing, but remains embattled as new discoveries reveal an ever-widening circle of tangled connections and companies.

South Africa’s parliament continues to hold hearings on alleged corruption cases, and the nation’s main Democratic Alliance opposition political party said it plans to demand an accounting from McKinsey. On Monday, Corruption Watch in South Africa said it was submitting documents on McKinsey to United States officials by the end of September, seeking charges in the U.S. on corruption and bribery.

Image: RSA

 

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