McKinsey Africa Agrees to Pay $122.8 Million for Bribery of Officials

McKinsey & Company Africa has agreed to pay $123 million to settle a bribery case related to contracts with South African state-owned enterprises. The firm was involved in a scheme to pay kickbacks to officials at Transnet and Eskom, resulting in significant illicit profits. A former partner pled guilty to conspiracy charges, highlighting serious breaches of the Foreign Corrupt Practices Act.

McKinsey & Company Africa has reached an agreement to pay approximately $123 million to resolve investigations into bribery involving South African officials aimed at securing lucrative consulting contracts. The firm was implicated for making improper payments to officials at Transnet Ltd, which manages South Africa’s ports and railways, and Eskom Holdings Ltd, the nation’s power utility. This settlement follows a deferred prosecution agreement with U.S. authorities and includes a criminal fine of $122.8 million.

Vikas Sagar, a former senior partner at McKinsey Africa’s South Africa office, has admitted guilt to conspiracy charges under the Foreign Corrupt Practices Act. The U.S. Justice Department revealed that, between 2012 and 2016, McKinsey Africa acquired confidential data about upcoming contracts from Transnet and Eskom, while being aware that local partners would provide kickbacks to officials involved. This scheme reportedly allowed McKinsey Africa and its parent firm to yield approximately $85 million in profits.

The bribery scandal arose during the presidency of Jacob Zuma, during which Eskom was at the heart of significant corruption allegations. Investigations indicated that substantial sums were unlawfully extracted from government contracts in exchange for bribes. McKinsey’s involvement underscores a broader issue of corruption within South African state-owned enterprises. The case reflects ongoing efforts by U.S. authorities to hold corporations accountable for violations of the Foreign Corrupt Practices Act, which aims to deter corrupt practices in international business transactions.

In summary, McKinsey & Company Africa’s settlement with U.S. authorities highlights serious misconduct involving bribery to secure contracts with state-owned enterprises in South Africa. The financial penalty of nearly $123 million serves to reinforce the commitment of U.S. law enforcement to combat corruption in international business. Furthermore, this incident serves as a reminder of the pervasive issue of corruption within South Africa’s public sector and the need for continued vigilance.

Original Source: www.barrons.com