McKinsey Agrees to Pay $122 Million to Settle South African Corruption Case
McKinsey & Company has agreed to pay $122 million to authorities in the U.S. and South Africa for its role in a sprawling corruption scandal that involved bribing government officials to secure lucrative consulting contracts.
Bribery Scheme Targeted State-Owned Companies
The consulting giant admitted to a years-long scheme that involved bribing officials at Transnet, South Africa’s rail freight monopoly, and the energy company Eskom between 2012 and 2016. These bribes, channeled through local partner firms, were used to obtain confidential information that helped McKinsey win millions of dollars in consulting work.
“McKinsey Africa participated in a yearslong scheme to bribe government officials in South Africa and unlawfully obtained a series of highly lucrative consulting engagements that netted McKinsey Africa and its parent entity McKinsey & Company approximately $85mn in profits,” said Damian Williams, the U.S. attorney for the Southern District of New York.
Former Partner Pleads Guilty in U.S. Court
Vikas Sagar, a former senior partner at McKinsey’s Johannesburg office, pleaded guilty to participating in the conspiracy to violate the U.S. Foreign Corrupt Practices Act. His plea, entered in a New York court in 2022, had been kept under seal while the investigation continued.
“I deeply regret my actions and accept full responsibility for my conduct,” Sagar stated in his plea agreement. “My actions violated the law and the trust placed in me by McKinsey and its clients.”
McKinsey terminated Sagar’s employment more than seven years ago after conducting its own extensive internal investigation into his conduct.
Leniency Awarded for Cooperation
McKinsey received leniency from U.S. prosecutors in part because it cooperated fully with the investigation.
“The company conducted a thorough internal investigation into its own misconduct and took remedial measures to prevent future wrongdoing, including strengthening its compliance program and cooperating with law enforcement,” said a statement released by the firm.
McKinsey stated that it is committed to “regaining the trust” of the people of South Africa and pledged to continue strengthening its global compliance program.
Settlement to Benefit South African Enforcement Efforts
The $122 million settlement will be split evenly between U.S. authorities and South Africa’s criminal asset recovery account, which funds law enforcement efforts.
This settlement marks a significant milestone in South Africa’s ongoing fight against corruption. For years, prosecutors have been investigating the systematic pilfering of public contracts, a practice known locally as “state capture,” that took place during the presidency of Jacob Zuma, which ended in 2018.
Gupta Brothers Accused of Influence Peddling
Two years ago, an official commission of inquiry concluded that the business dynasty of the Gupta brothers had used their influence with Zuma to operate a “racketeering enterprise” at Transnet, securing contracts that favored their interests or those of their associates. The Guptas and Zuma denied any wrongdoing.
What are the legal ramifications of McKinsey’s involvement in the South African bribery scandal?
## McKinsey Agrees to Pay $122 Million to Settle South African Bribery Scandal
**Anchor:** Welcome back to the program. We’re joined today by Alex Reed, an expert on corporate ethics and governance, to discuss the recent news regarding McKinsey & Company. The consulting giant has agreed to pay a hefty sum to settle allegations of bribery in South Africa.
Alex Reed, can you give us some background on this case?
**Alex Reed:** Absolutely. McKinsey has admitted to participating in a scheme to bribe government officials in South Africa between 2012 and 2016. This involved funneling payments through local partners to gain confidential information and secure lucrative contracts with state-owned businesses like Transnet and Eskom. According to the U.S. Department of Justice, McKinsey Africa profited approximately $85 million from these illicit deals. [[1](https://www.nbcnewyork.com/news/business/money-report/mckinsey-unit-will-pay-123-million-to-settle-claims-it-bribed-south-african-officials/6043114/)]
**Anchor:** That’s a staggering amount. What does this settlement mean for McKinsey?
**Alex Reed:** This settlement, totaling $122 million, is a significant blow to McKinsey’s reputation. It highlights a failure in their internal controls and raises serious questions about their ethical standards. While this settlement helps resolve the legal issues, the damage to public trust will likely take much longer to repair.
**Anchor:** A former McKinsey partner, Vikas Sagar, has also pleaded guilty in connection with the case.
**Alex Reed:** That’s right. His guilty plea underscores the personal accountability that comes with engaging in such activities. It’s a reminder that even within prestigious institutions, individuals can be tempted by the allure of wrongful gain. Sagar’s cooperation with the authorities likely played a role in McKinsey’s decision to settle.
**Anchor:** This case has sparked outrage in South Africa, where corruption is a serious problem. What message does this send to other multinational corporations operating in the region?
**Alex Reed:** This case serves as a stark warning. It demonstrates that multinational corporations cannot operate with impunity and engage in corrupt practices without facing consequences. The U.S. Department of Justice, through the Foreign Corrupt Practices Act, has a strong track record of pursuing these cases, even when the corruption occurs abroad.
**Anchor:** Alex Reed, thank you for sharing your insights on this important issue.
