McKinsey, ex-partner added to SA graft case

South African prosecutors added McKinsey & Co. and a former partner at its local office to a corruption case against former leaders of the nation’s ports and rail operator Transnet.

The company and Vikas Sagar, who was placed on leave and later left the company amid allegations of involvement in corruption related to business with South African state-owned companies, have been summoned to appear in the Palm Ridge Specialised Commercial Crimes Court on October 14, the National Prosecuting Authority said.

Last month, former Transnet Chief Executive Officer Brian Molefe, ex-Chief Financial Officer Anoj Singh and Regiments Capital Ltd. directors Niven Pillay and Litha Nyhonyha were charged with corruption relating to Transnet’s award of a contract to a consortium led by McKinsey to advise it on the purchase of 1 064 locomotives that cost R54 billion. Sagar is not in the country. That contract, and another cited in the case, came to a total of R398 million, the NPA said.

“We are trying to get him back,” Sindisiwe Seboka, a spokeswoman for the NPA, said in an interview.

McKinsey said in a response to queries that it’s returned the fees related to the contract and cooperated with the South African authorities. The firm participated in a judicial inquiry into state corruption and no recommendations for further action were made against the company.

“We believe pursuing McKinsey does not have merit and we will defend ourselves against any claims,” the company said, adding that the commission had heard evidence that Sagar may have been untruthful with McKinsey. “Where we found issues of concern regarding Mr. Sagar’s conduct, we reported them to the appropriate law-enforcement authorities, including the NPA, for which he will have to account.”

On Thursday, South Africa’s National Treasury banned Bain & Co. from bidding for state contracts for a decade because of allegations of fraud and corruption in a contract with the state tax agency.

A number of international companies have acknowledged playing a role in misconduct at state companies during former South African President Jacob Zuma’s rule, during which funds were funneled out to private entities in a practice known locally as state capture. SAP SE, KPMG LLP and ABB have all accepted responsibility for improper work and in some cases paid back fees. Zuma has denied wrongdoing.

© 2022 Bloomberg

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