Global Consulting Firm’s Subsidiary Pays $123 Million to Settle Bribery Claims
Corruption Uncovered in South Africa
A subsidiary of top global consulting firm McKinsey & Company has agreed to pay a staggering $123 million to settle claims that it bribed government officials in South Africa. This revelation comes after federal prosecutors unsealed a 2022 guilty plea by Vikas Sagar, a former senior partner at McKinsey who worked in the subsidiary’s South Africa office.
The Guilty Plea
Sagar, 56, of Johannesburg, pleaded guilty in U.S. District Court for the Southern District of New York to one count of conspiracy to violate the Foreign Corrupt Practices Act. His guilty plea sheds light on a widespread corruption scheme that involved bribing officials at two state-controlled utility companies in South Africa between 2012 and 2016.
Bribery Scheme Exposed
The subsidiary, McKinsey Africa, paid bribes to officials at Transnet SOC Ltd. and Eskom Holdings SOC Ltd. to secure lucrative consulting contracts. Prosecutors revealed that McKinsey Africa obtained confidential information from the two companies during the bidding process and submitted multimillion-dollar consulting engagement proposals. Meanwhile, other South African consulting firms it had partnered with would pay part of their fees as bribes to Transnet and Eskom officials.
The Fallout
The bribery scheme helped McKinsey and McKinsey Africa net approximately $85 million in profits, according to prosecutors. McKinsey Africa has entered into a three-year deferred prosecution agreement with the DOJ, requiring the subsidiary to accept responsibility for the allegations.
Condemnation from Law Enforcement
“McKinsey Africa engaged in a serious and long-running bribery scheme to secure contracts by corrupting government officials,” said Chad Yarbrough, assistant director of the FBI Criminal Investigative Division. “This misconduct is a blatant violation of law and a breach of public trust.”
McKinsey’s Response
In a statement, McKinsey Africa said, “McKinsey welcomes the resolution of these matters and the closure of this regretful situation… McKinsey is a very different firm today than when these matters first took place.” The subsidiary added that it had fired Sagar soon after learning of the issues, returned its fees with interest, cooperated with the authorities, and made significant upgrades to its risk, legal, and compliance controls.
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