A subsidiary of the global consulting giant McKinsey & Company has agreed to pay nearly $123 million to settle claims of bribing South African government officials, according to the U.S. Department of Justice (DOJ). The settlement addresses allegations that McKinsey Africa, a subsidiary of the firm, engaged in corrupt practices to secure lucrative consulting contracts with state-controlled utility companies in South Africa.
Guilty Plea by Former McKinsey Partner
In addition to the settlement, federal prosecutors unsealed a 2022 guilty plea by Vikas Sagar, a former senior partner at McKinsey who worked in the South Africa office of the subsidiary. Sagar, 56, of Johannesburg, admitted guilt in U.S. District Court for the Southern District of New York to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA).
The DOJ revealed that Sagar and McKinsey Africa conspired to bribe officials at South Africa’s Transnet SOC Ltd. and Eskom Holdings SOC Ltd. between 2012 and 2016. These bribes were paid to secure multimillion-dollar consulting contracts.
Details of the Bribery Scheme
Prosecutors alleged that McKinsey Africa obtained confidential information from Transnet and Eskom during the bidding process for the contracts. Armed with this insider knowledge, the firm submitted proposals for consulting engagements worth millions of dollars.
To facilitate the scheme, McKinsey partnered with South African consulting firms that agreed to pay part of their fees as bribes to officials at Transnet and Eskom. This arrangement helped McKinsey and its subsidiary earn approximately $85 million in profits, prosecutors said.
Deferred Prosecution Agreement
As part of the settlement, McKinsey Africa has entered into a three-year deferred prosecution agreement with the DOJ. The agreement relates to a criminal charge of conspiracy to violate the anti-bribery provisions of the FCPA.
Under the terms of the agreement, McKinsey Africa must acknowledge responsibility for its actions and adhere to compliance measures to prevent future violations.
The DOJ described the bribery scheme as a serious breach of the law and public trust. Chad Yarbrough, assistant director of the FBI Criminal Investigative Division, emphasized that the FBI, in collaboration with international partners, is committed to rooting out corruption, regardless of where the crime occurs.
McKinsey’s Response
McKinsey Africa expressed regret over the situation, stating that it welcomes the resolution of the matter and is committed to moving forward. The firm highlighted that it has taken significant steps to address the issues, including firing Vikas Sagar upon discovering the misconduct, returning fees with interest, and cooperating with authorities during the investigation.
The company also stated that it has made substantial upgrades to its risk, legal, and compliance controls to prevent similar incidents in the future. It noted that McKinsey has become a much different firm since the events in question occurred, striving to set a higher standard for ethical practices within the consulting industry.
This settlement marks another high-profile case of corporate misconduct, drawing attention to the critical need for strong compliance measures and transparency in international business operations.
