McKinsey and Company Africa (Pty) Ltd (“McKinsey Africa”), a South Africa-based subsidiary of international consulting firm McKinsey & Company Inc. (“McKinsey”), recently agreed to pay more than $122 million as part of a deferred prosecution agreement to resolve a DOJ investigation into McKinsey Africa’s alleged scheme to pay bribes to South African government officials between 2012 and 2016. The DPA was entered in connection with a one-count criminal information, which charged McKinsey Africa with conspiring to violate the FCPA. The guilty plea of Vikas Sagar, a former senior partner of McKinsey who worked in McKinsey Africa’s South Africa office, was also unsealed at the time of the filing of the DPA. Sagar had previously pled guilty to one count of conspiracy to violate the FCPA.
According to court documents, beginning in or around 2012, Sagar worked on McKinsey Africa’s behalf to obtain business for the company with Transnet SOC Ltd., South Africa’s state-owned and -controlled custodian of ports, rails, and pipelines, by paying bribes to a Transnet foreign official who was a “former acquaintance” of Sagar. In exchange for the bribes, the foreign official provided confidential, insider information to McKinsey Africa that enabled the company to obtain multiple lucrative contracts with Transnet, according to the DPA. In or around 2015, Sagar began seeking to obtain consulting contracts at Eskom Holdings SOC Ltd., South Africa’s state-owned and -controlled energy company, as multiple Transnet executives had transitioned to leadership positions at Eskom. As described in the DPA, as part of the Eskom scheme, after paying bribes to a different foreign official, McKinsey Africa obtained sensitive, confidential and non-public information and was awarded lucrative consulting contracts. According to the DPA, to avoid detection, Sagar and his coconspirators met in coffee shops, restaurants, and other locations instead of McKinsey Africa’s or Transnet’s offices and communicated using private email addresses.
The DOJ stated that McKinsey Africa received credit for its cooperation with the DOJ’s investigation, including its provision of numerous factual presentations derived from the company’s internal investigation, sharing voluminous records located abroad in response to DOJ requests, and promptly reporting information about the McKinsey partner involved in misconduct, including his document-deletion efforts uncovered during the company’s internal investigation.
The DOJ also credited McKinsey and McKinsey Africa’s remediation, including the separation of the McKinsey partner from the company upon discovery of his deletion activities, requiring the partner’s continued cooperation with the investigation following his separation from the company, conducting additional anti-corruption training for employees located in South Africa and elsewhere, and ceasing work with all state-owned enterprises while it conducted its internal investigation.
In light of these steps, the DOJ determined an independent compliance monitor was unnecessary. Instead, the DPA requires McKinsey and McKinsey Africa to report annually to the DOJ on the progress of remediation and the implementation of compliance measures dictated by the DPA. With respect to the $122 million penalty, the DOJ agreed to credit McKinsey Africa up to one-half of the criminal penalty against any amounts paid by McKinsey to South African authorities in relation to the bribery scheme.
DOJ Press Release | Deferred Prosecution Agreement | Criminal Information – McKinsey Africa | Unsealed Information – Vikas Sagar