McKinsey Africa Settles South Africa Bribery Case for $122 Million

McKinsey & Company’s African subsidiary, McKinsey Africa, has agreed to pay over $122 million to resolve a U.S. Department of Justice (DOJ) investigation into its involvement in a bribery scheme in South Africa.

The company was charged with conspiring to violate the Foreign Corrupt Practices Act (FCPA) by paying bribes to officials at state-owned enterprises Eskom and Transnet in exchange for non-public information about consulting contracts.

Details of the Scheme

According to the DOJ, McKinsey Africa:

• Paid bribes to secure lucrative consulting contracts, resulting in approximately $85 million in profits for the firm.
• Collaborated with officials at Eskom and Transnet, two entities whose inefficiencies have significantly hampered South Africa’s economy over the past decade.
• Entered into a three-year deferred prosecution agreement with the DOJ, under which it will continue cooperating with the investigation and implementing anti-corruption measures.

Justice Department Commentary

Nicole M. Argentieri, head of the DOJ’s Criminal Division, emphasized:

“McKinsey Africa bribed South African officials to obtain lucrative consulting business that generated tens of millions of dollars in profits.”

McKinsey’s Response

McKinsey noted that its former senior partner, Vikas Sagar, who had pleaded guilty to conspiring to violate the FCPA, acted independently and concealed his actions. The company terminated his employment upon discovering the misconduct.

Penalty Breakdown

The $122,850,000 settlement includes a penalty to be paid in South Africa and reflects the firm’s cooperation and its adoption of anti-corruption training programs.

The McKinsey Africa bribery case underscores the persistent corruption challenges within South Africa’s state-owned enterprises. Both Eskom, the energy provider, and Transnet, the freight and rail operator, have been central to investigations into widespread graft over the past decade.

These inefficiencies have stifled growth in Africa’s most industrialized economy.

The bribery settlement is not McKinsey’s only legal issue:

• The firm is reportedly in talks to pay over $600 million to resolve a separate DOJ investigation into its consulting work with opioid manufacturers, which allegedly contributed to the U.S. opioid crisis.

While McKinsey Africa’s penalty serves as a warning to multinational corporations, it also highlights the need for continued reforms in South Africa’s public and private sectors.

The DOJ’s case against McKinsey Africa and other entities reflects a growing focus on holding companies accountable for corrupt practices worldwide.

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