McKinsey to repay $43mn for tainted SAA contracts

Management consulting firm McKinsey & Co will repay ZAR650 million (USD43 million) for tainted contracts it had with South African Airways (SA, Johannesburg O.R. Tambo) and state logistics company Transnet SOC Ltd as it seeks to clear its name in that country’s ongoing graft investigation. The consultancy firm’s Chief Risk Officer, Jean-Christophe Mieszala, on December 10 testified via video link before the Judicial Commission of Inquiry into Allegations of State Capture, also known as the Zondo Commission of Inquiry, that is investigating allegations of state capture, corruption, and fraud in the public sector under the administration of former State President Jacob Zuma. Mieszala, in his submission to the Commission, declared that neither McKinsey’s own investigations, nor those of the Commission, had “uncovered evidence that our firm secured business through corruption or bribery at (state-power supplier) Eskom, Transnet, or SAA”. “Our own investigation has identified no suspicious payments to individuals or companies made or directed by McKinsey or any of its personnel. We are not aware of any external investigation that has found any such confirmed payments either.” This, he said, followed more than three years of independent investigations by two global law firms, Norton Rose Fulbright and Morrison & Foerster, involving 65 full-time attorneys, who had researched nine million documents, reviewed more than one million emails, financial records, and had conducted 115 interviews. McKinsey also hired a third-party forensics firm to conduct a forensic review of phone records, devices, financial information, and expense records, he said. However, he acknowledged problematic behaviour by a former partner at the firm, Vikas Sagar, which lead to him being sacked in October 2017. Sagar had allegedly helped coordinate research and draft coursework for the MBA studies of Transnet’s then Chief Executive Officer Siyabonga Gama in late 2015 and early 2016. In a letter in 2016, Sagar had also inaccurately referred to black empowerment firm Trillian as a subcontractor of McKinsey’s. Forensic analysis conducted on Sagar’s computer and phone after his dismissal had shown that he had wiped the memory on his work laptop. This may have included an email linking him to corruption accused businessman Salim Essa. State capture commission evidence leader Matthew Chaskalson SC told the Commission a letter written to Sagar and copied to Trillian owner Eric Wood and Essa was sent to Sagar’s private e-mail address on November 16, 2016. In that e-mail, the executive director of Integrated Capital Management, Clive Angel had informed Sagar that “we are still waiting for the financial spreadsheet re the proposed aggregate 50-50 fee split and timelines as mentioned last week. Salim needs this in advance of setting up a meeting for you and Alex with Brian”. Chaskalson said it was clear that “Alex” was McKinsey partner Dr. Alex Weiss and “Brian” was Brian Molefe, former Chief Executive Officer of Eskom. Meanwhile, Mieszala acknowledged that McKinsey had worked with Regiments Capital, a black empowerment company, on a project to unlock working capital for SAA. Regiments Capital is associated with the notorious Gupta family, a wealthy Indian-born family with close links to Zuma, some of whom have refused to return to South Africa from Dubai to face graft charges.