McKin­sey & Co em­broiled in con­tro­versy as US judge re­opens case

The Star Early Edition - - BR - DINEO FAKU [email protected]

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.

IN SOUTH Africa, McKin­sey & Co had ini­tially de­nied sub­con­tract­ing 30 per­cent of its busi­ness with Eskom to the Gupta-linked Tril­lian. | SUP­PLIED

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