McKin­sey, KPMG tar­geted in graft scan­dal

Weekend Argus (Saturday Edition) - - FRONT PAGE -

AF­TER help­ing top­ple one of Bri­tain’s best known public-re­la­tions com­pa­nies, South African anti-cor­rup­tion groups are now tar­get­ing US con­sul­tancy McKin­sey & Co and au­dit­ing firm KPMG for do­ing work for busi­nesses tied to the Gup­tas and Pres­i­dent Ja­cob Zuma’s son.

The Gup­tas are be­ing ac­cused of us­ing their friend­ship with Zuma to in­flu­ence gov­ern­ment con­tracts and cab­i­net ap­point­ments.

“In­stead of rais­ing the alarm, these com­pa­nies seemed to have played along,” said Lumk­ile Mondi, a se­nior lec­turer at the Uni­ver­sity of the Wit­wa­ter­srand, who was part of a group of eight aca­demics who com­pleted a study into how state-owned en­ter­prises are al­legedly be­ing raided.

Anti- graft or­gan­i­sa­tions and the DA are tak­ing their fight over­seas while wait­ing for South African pros­e­cu­tors to act on al­le­ga­tions against the Gup­tas.

Many of those ac­cu­sa­tions are con­tained in leaked e-mails that lo­cal news or­gan­i­sa­tions have re­ported on.

Cor­rup­tion Watch plans to ap­proach the US De­part­ment of Jus­tice soon to probe McKin­sey, ex­ec­u­tive di­rec­tor David Lewis said on Mon­day.

Save South Africa, which in­cludes civil so­ci­ety groups and busi­ness lead­ers, has called on com­pa­nies to drop KPMG be­cause of the work it did for 36 en­ti­ties tied to the Gup­tas. Both com­pa­nies have started in­ter­nal in­ves­ti­ga­tions into their deal­ings with the fam­ily.

SAP SE, a soft­ware com­pany based in Wall­dorf, Ger­many, has also been en­snared in the scan­dal. It said in July that four South African man­agers were put on leave af­ter re­ports that the lo­cal unit agreed to pay com­mis­sion to a firm in which Zuma’s son has an in­di­rect stake for help in win­ning con­tracts.

Bell Pot­tinger ap­plied for ad­min­is­tra­tion on Septem­ber 12 af­ter be­ing ex­pelled from a UK PR body for stok­ing racial ten­sions in South Africa while work­ing for the Gup­tas.

The com­plaint was lodged by the DA, which on Thurs­day said it will re­quest McKin­sey’s lo­cal and US rep­re­sen­ta­tives be called be­fore a par­lia­men­tary com­mit­tee’s in­quiry into state graft.

“KPMG risks be­com­ing the Bell Pot­tinger of the au­dit­ing pro­fes­sion,” Save South Africa said on its web­site. “Its fin­ger­prints are all over the Gupta em­pire.”

KPMG last month said it sus­pended its lead au­dit-en­gage­ment part­ner in South Africa and fired two others pend­ing the re­sults of its in­ves­ti­ga­tion.

The au­dit­ing firm failed to act when busi­nesses con­trolled by the Gup­tas di­verted public money to pay for a wed­ding, ac­cord­ing to the amaBhun­gane Cen­tre for In­ves­tiga­tive Jour­nal­ism and Tiso Black­star Group’s Sun­day Times, cit­ing e-mails known as the Gupta Leaks.

KPMG’s clients in­clude Bar­clays Africa, the coun­try’s third-largest bank, Old Mu­tual, Africa’s big­gest in­surer, Sibanye Gold, the coun­try’s big­gest gold pro­ducer and Stan­dard Bank, Africa’s big­gest bank by as­sets. All of these com­pa­nies have said they’re mon­i­tor­ing de­vel­op­ments with KPMG.

South African busi­ness lead­ers have a re­spon­si­bil­ity to dis­tance them­selves from KPMG, Iraj Abe­dian, chief ex­ec­u­tive at Pan- African In­vest­ments and Re­search Ser­vices in Johannesburg, said on news web­site Daily Mav­er­ick.

He re­signed as a non-ex­ec­u­tive di­rec­tor of Mu­nich Re’s African unit be­cause it kept KPMG as an ex­ter­nal au­di­tor.

McKin­sey in July said it’s re­view­ing doc­u­ments re­lated to work done for Eskom. An in­terim re­port by Eskom and G9 Foren­sic found McKin­sey and Tril­lian Cap­i­tal Part­ners, a com­pany linked to the Gup­tas, made R1.6 bil­lion in fees and ex­pected to make another R7.8 bil­lion, ac­cord­ing to amaBhun­gane and Scor­pio, an in­ves­tiga­tive unit tied to the Daily Mav­er­ick.

Tril­lian was dropped by McKin­sey when the com­pany failed due dili­gence, the con­sul­tancy said in an e-mailed re­sponse to ques­tions.

It in­formed Eskom and Tril­lian in March 2016. The fees it made from Eskom were in line with sim­i­lar projects, McKin­sey said.

“Our in­ves­ti­ga­tion is on­go­ing,” it said. “We haven’t dis­cov­ered any­thing that would re­quire us to no­tify US au­thor­i­ties.” – Bloomberg

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