Heat on for firms that go along with unethical practices
It has been gratifying to see global consultancy McKinsey outed for its dodgy dealings with Eskom and Transnet through the Gupta-related company Trillian.
Trillian, it appears, has made a great business out of being paid for work it has not done, an achievement that depended much on McKinsey’s reputation and ability to win the contracts.
It took advocate Geoff Budlender, who had been asked by Trillian chairman Tokyo Sexwale to investigate several contracts, scarcely any time at all to unmask the farce. This was even though both Trillian and McKinsey had done their best to withhold information from Budlender.
The schadenfreude comes from the fact that while politicians are frequently caught in the act of corruption, big corporate consultancies and law firms, which aid and abet all sorts of malfeasance, usually escape with their reputations intact.
With every South African state-owned enterprise having been embroiled in some kind of political infighting and internal strife, holding on to a clean reputation in the era of state capture is getting harder.
Law firms, consultancies and auditors are increasingly called in to do the dirty work of one or another faction, with the result that the reputational risk of taking on such contracts is rising.
In the Eskom-TransnetTrillian case, McKinsey’s transgressions went much further than editing or tampering with findings at the request of the client. In this case, McKinsey SA formed a partnership with Trillian, which according to Budlender required it to do no work at all for a 30% slice of the contract price.
McKinsey global is in a flat spin over the fallout and has asked country director Vikas Sagar to take leave while Norton Rose does an urgent investigation. Prior to the Budlender report McKinsey had instructed Sagar to end the partnership with Trillian as it didn’t meet due-diligence concerns.
A second large consultancy also faces reputational damage linked to the state-capture saga.
KPMG, until recently the auditors for the Oakbay group of companies, is under investigation by the Independent Regulatory Board for Auditors for allowing the diversion of funds allocated by the Free State government for a dairy project owned by the Guptas into another Gupta company account, which was then used to pay for the now infamous Gupta wedding.
Law firms are being drawn into the fray. ENS, which has South African Airways as a client, has “investigated” at least four top executives on instruction from chairwoman Dudu Myeni. At times, these investigations were based on badly written “whistle-blower reports” that former board member Yakhe Kwinana has admitted were faked and sent from an internet café by herself and Myeni.
At other times, they have been nothing more than a fishing expedition targeting executives Myeni wanted to get rid of. In only one case – that of Monwabisi Kalawe – was there any basis for a forensic investigation.
HOLDING ON TO A CLEAN REPUTATION IN THE ERA OF STATE CAPTURE IS GETTING HARDER
Kalawe was dismissed, but the purpose of the other three investigations was also served: all three left the airline with no charges levelled against them.
Law firm Dentons has also found itself walking a fine line between satisfying its client and behaving in an ethical manner. Asked by Public Enterprises Minister Lynne Brown to “take a deep dive at Eskom”, Denton’s investigation came to an abrupt end when Brown and chairman Ben Ngubane pulled the plug, not liking what was emerging.
The credibility of the credible is being worn away. Firms that care about their reputation are going to need to think more carefully before becoming hired guns in the state-capture saga.