McKinsey & Co. Subsidiary Agrees to $123M Criminal Penalty for South Africa Bribery Scheme

McKinsey & Co. Africa has agreed to pay nearly $123 million to the U.S. Department of Justice (DOJ) as part of a settlement over allegations that it engaged in bribery to secure consulting contracts in South Africa.

According to a DOJ press release, the settlement resolves an investigation into a scheme where McKinsey & Co. Africa paid bribes to officials at two South African state-owned entities, Transnet and Eskom, between 2012 and 2016. These actions earned the company approximately $85 million in revenue.

The DOJ stated that up to half of the penalty will be credited against fines imposed by South African courts for the same misconduct. In 2018 and 2021, McKinsey & Co. and its African subsidiary repaid all revenues received from contracts that were potentially linked to the bribery scheme, the DOJ noted.

This resolution marks the third major case in the last three years involving coordinated efforts between U.S. and South African authorities under the Foreign Corrupt Practices Act (FCPA). In January, German software company SAP settled for $220 million, while Swiss technology firm ABB paid $327 million in December 2022 to resolve similar allegations of bribery in South Africa.

McKinsey & Co. Africa has entered into a three-year deferred prosecution agreement (DPA) with the DOJ to settle one count of conspiracy to violate the FCPA’s anti-bribery provisions. The DOJ highlighted that Vikas Sagar, a former senior partner in McKinsey’s South Africa office, previously pleaded guilty to one count of conspiracy to violate the FCPA.

Both SAP and ABB also resolved their cases through three-year DPAs with the DOJ.

In a statement addressing the settlement, McKinsey & Co. expressed regret over the conduct of its employee.“We are deeply remorseful that an employee of our firm engaged in corrupt conduct,” the company stated.

McKinsey noted that it had placed Sagar on leave shortly after uncovering the bribery scheme. Following an internal investigation that revealed Sagar’s efforts to conceal the scheme and destroy evidence by deleting company documents, he was terminated.

The company emphasized its efforts to address the situation and prevent future misconduct.“[We have] undertaken significant remediation efforts and investment in our risk control functions,” McKinsey said.

The case highlights continued scrutiny of multinational corporations operating in South Africa, underscoring the collaborative efforts of U.S. and South African authorities to address corruption. 

By fLEXI tEAM