McKinsey SA has vowed to defend itself after the management consulting firm was charged with crimes related to the multi-million rand corruption case against former executives of state-owned freight and logistics firm, Transnet.
This comes as government is turning the screws on so-called state capture crimes, after the National Treasury banned Bain & Co from tendering for government contracts due to its “corrupt and fraudulent practices” at the SA Revenue Service.
The National Prosecuting Authority (NPA) on Friday charged the South African unit of McKinsey & Company with fraud, corruption and theft related to a R394.8 million contract to advise Transnet on buying new locomotives.
McKinsey was implicated in State Capture Commission hearings, along with Trillian Asset Management and Regiments Capital, for having benefited from irregular contracts at State-owned enterprises (SOEs), including advising Transnet on the acquisition of 1 064 new locomotives worth more than R54 billion.
In 2020, McKinsey agreed to pay back roughly R650m on Transnet and South African Airways contracts, after returning more than R1bn in consulting fees it received from Eskom in 2017, following its admission of its role in state capture.
The global management consulting firm on Friday said it had gone beyond its legal obligation by making amends for its mistakes, and had co-operated with all authorities, including the NPA, by sharing everything it found from internal investigations.
“After four years of exhaustive evidence, the commission did not make any recommendations for further action against McKinsey and praised our responsible corporate citizenship,” it said.
“Given no new information has been presented since the commission, we believe pursuing McKinsey does not have merit and we will defend ourselves against any claims.”
The company will now join in the dock Transnet’s former top executives – who allegedly had direct links to the Gupta brothers – on charges stemming from the locomotives transaction advisory tender awarded to the McKinsey-led consortium in 2012.
The accused in the matter are former Transnet Group chief executives Brian Molefe and Siyabonga Gama, former group chief financial officers Anoj Singh and Garry Pita, and former group treasurer Phetolo Ramosebudi.
Regiments Capital directors Niven Pillay and Litha Nyhonhya, Regiments shareholder Eric Wood, Trillian Asset Management current director Daniel Roy and Albatime Pty Ltd owner Kuben Moodley are co-accused.
The former Transnet executives and their co-accused are charged with contravention of the Public Finance Management Act and fraud, while the other accused are charged with fraud, corruption and money laundering.
The NPA alleges that Regiments was irregularly on-boarded and ended up benefiting from the irregular appointment by Transnet in respect of the contract.
The contract value and scope for the services required was later escalated to more than R305m.
This agreement included, among other services, the sourcing of the China Development Bank loan and the club loan, which were in the amount of $2.5bn – equivalent to R30bn at the time – on behalf of Transnet.
The accused also face charges linked to the R93.4m paid to Trillian in 2015.
McKinsey SA is represented by its former principal Vigas Sagar, and employee Goitseone Mangope.
Sagar, whom the NPA is trying to extradite back into the country, stands accused in his personal and representative capacity, while Mangope stands as current representative of the company, and made a brief appearance in the Palm Ridge Magistrate's Court on Friday.
McKinsey on Friday threw Sagar under the bus, saying the Zondo Commission did reveal evidence suggesting he had been deceitful to the company.
“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,” it said.
The Palm Ridge Specialised Commercial Crimes Court deferred the matter to October 14, when Mangope will join his co-accused.
Eric Wood, who applied for relaxation of his bail conditions last month, was expected to return to South Africa on Friday from the UK and Spain.
BUSINESS REPORT