McKinsey & Co embroiled in controversy as US judge reopens case
CONTROVERSIAL global management consulting firm McKinsey & Co, which was at the centre of the state capture project, is embroiled in yet another controversy after a US bankruptcy judge decided to reopen a two-year case amid allegations of non-disclosure.
The New York Times this week reported that the US Bankruptcy Court had moved to reopen the case of coal-mining company Alpha Natural Resources’ amid allegations that the firm hid investments that gave it a financial stake in the outcome of the case.
Judge Kevin R Huennekens reportedly said the allegations were among the most serious he had ever seen.
New York-headquartered McKinsey, whose clients include sovereign wealth funds worth more than a trillion dollars, was not available for comment yesterday.
McKinsey & Co fell from grace after being fingered in scandals that resulted in taxpayers losing billions of rand to looting from state companies during Jacob Zuma’s nine-year tenure as president.
McKinsey earned R1.6bn in consultancy fees for dubious work with Eskom, which has been described as the biggest mistake in the company’s nine-decade history.
In South Africa, it had initially denied subcontracting 30 percent of its business with Eskom to the Gupta-linked Trillian. It denied wrongdoing, but later apologised and repaid R902 million of the money, following a ruling by the National Prosecuting Authority (NPA).
The NPA claimed that it colluded with Gupta-linked Trillian and Eskom officials in the theft of R1.6bn from the power utility. Following the scandal, McKinsey made sweeping changes to its South Africa business to try to rebuild its reputation.
A report into corruption at stateowned entities conducted by Fundudzi Forensic Services on behalf of the Treasury found that Transnet had paid McKinsey, Trillian and Regiments R3.26bn between 2005 and 2017.
Released in November, it included the controversial purchase of 1 064 locomotives and said payments were made from the time McKinsey was appointed at Transnet in 2005 to 2017.
McKinsey reflected corruption in the public and private sector with GuptaLeaks, also implicating KPGM, Bell Pottinger, and SAP and testing ethical leadership.
KPMG helped the Gupta family in tax evasion and corruption, while software company SAP admitted that its local arm had paid R107 million in bribes to Gupta associates to land contracts at Eskom and Transnet.
Public relations firm Bell Pottinger was accused of sowing racial division in South Africa through a social media campaign orchestrated on behalf of the Guptas.