McKinsey and Company Africa (Pty) Ltd (McKinsey Africa), which operates in South Africa as a wholly owned and controlled subsidiary of international consulting firm McKinsey & Company Inc. (McKinsey), will pay over $122 million to resolve an investigation by the Justice Department into a scheme to pay bribes to government officials in South Africa between 2012 and 2016. The guilty plea of a former McKinsey senior partner who participated in the bribery scheme was also unsealed. The Justice Department’s resolution is coordinated with prosecutorial authorities in South Africa.
McKinsey Africa entered into a three-year deferred prosecution agreement (DPA) with the department in connection with a criminal information filed in the Southern District of New York charging the company with one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). Vikas Sagar, a former senior partner of McKinsey who worked in McKinsey Africa’s South Africa office, previously pleaded guilty to one count of conspiracy to violate the FCPA.
According to court documents and admissions, McKinsey Africa, acting through a senior partner and for the benefit of McKinsey, agreed to pay bribes to then-officials at Transnet SOC Ltd. (Transnet), South Africa’s state-owned and state-controlled custodian of ports, rails, and pipelines, and at Eskom Holdings SOC Ltd. (Eskom), South Africa’s state-owned and state-controlled energy company. Between at least 2012 and 2016, McKinsey Africa obtained sensitive confidential and non-public information from Transnet and Eskom regarding the award of lucrative consulting contracts and submitted proposals for multimillion-dollar consulting engagements, while knowing that South African consulting firms with which McKinsey Africa had partnered would pay a portion of their fees as bribes to officials at Transnet and Eskom. As a result of the bribery scheme, McKinsey and McKinsey Africa earned profits of approximately $85,000,000.
“McKinsey Africa bribed South African officials in order to obtain lucrative consulting business that generated tens of millions of dollars in profits,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “As a consequence, McKinsey Africa has agreed to pay a criminal penalty of more than $122 million. The resolution announced today — the department’s third coordinated resolution with South African authorities in only two years — is evidence that our International Corporate Anti-Bribery (ICAB) initiative, which we announced in November 2023, is bearing fruit. Through the ICAB, the Criminal Division remains committed to strengthening its international partnerships, including in South Africa, to combat corruption.”
“McKinsey Africa participated in a yearslong scheme to bribe government officials in South Africa and unlawfully obtained a series of highly lucrative consulting engagements that netted McKinsey Africa and its parent entity McKinsey & Company approximately $85 million in profits,” said U.S. Attorney Damian Williams for the Southern District of New York. “The scheme was carried out by a senior partner at McKinsey and allowed McKinsey Africa to repeatedly get awarded consulting contracts through corruption and bribes at two different state-owned entities in South Africa. This office and our law enforcement partners will continue our fight against American companies that seek to gain an unfair business advantage by supporting corrupt political officials overseas, no matter the industry, no matter the country, and no matter how prominent or profitable those companies may be.”
“This settlement underscores our unwavering commitment to holding companies accountable that willfully engage in corrupt activities around the world,” said Assistant Director Chad Yarbrough of the FBI Criminal Investigative Division. “McKinsey Africa engaged in a serious and long-running bribery scheme to secure contracts by corrupting government officials. This misconduct is a blatant violation of law and a breach of public trust. No matter what country the crime occurs in, the FBI will always work closely with our international partners to root out corruption.”
“McKinsey Africa will pay over $122 million, a clear indication that corruption comes at a significant cost,” said Inspector in Charge Eric Shen of the U.S. Postal Inspection Service (USPIS) Criminal Investigations Group. “The resolution of this case underscores that justice has no borders, and those who engage in bribery and conspire to commit crimes will be held accountable. The Postal Inspection Service is committed to ensuring that government resources and international partnerships serve the public good and are never exploited for personal or corporate gain.”
Pursuant to the DPA, McKinsey Africa has agreed to pay a criminal penalty of $122,850,000. The Justice Department has agreed to credit up to one-half of the criminal penalty against amounts McKinsey pays to authorities in South Africa in related proceedings. In addition, both McKinsey and McKinsey Africa have agreed to, among other things, continue cooperating with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of New York in any ongoing or future criminal investigation arising during the term of the DPA. McKinsey and McKinsey Africa have also agreed to enhance their compliance program where necessary and appropriate and to report to the government regarding remediation and implementation of their enhanced compliance program.
The Justice Department reached this resolution with McKinsey Africa based on a number of factors, including, among others, the nature and seriousness of the offense. McKinsey Africa received credit for its cooperation with the department’s investigation, which included (i) immediately and proactively cooperating from the inception of the department’s investigation; (ii) making numerous factual presentations to the department over the course of its investigation, derived from information obtained through the company’s internal investigation; (iii) collecting, reviewing, and producing voluminous records, including those located abroad, in response to requests from the department; (iv) promptly reporting the discovery of document-deletion efforts by the McKinsey partner involved in the conduct found during its internal investigation, taking additional investigative steps to uncover information and evidence regarding those efforts, and producing such information and evidence to the department; (v) reporting, in real time, newly discovered information and documents that allowed the department to preserve and obtain evidence as part of its independent investigation; (vi) tracing complex internal accounting money-flows and currency exchange-information in response to requests from the department; (vii) preserving, collecting, and producing to the department documents located abroad, and engaging a third-party forensics consultant to analyze key electronic devices and providing to the department the results of that analysis; (viii) collecting and producing to the department personal email and bank account information of the McKinsey partner involved in the conduct relevant to the department’s investigation; (ix) engaging with the department in response to a deconfliction request to preserve the integrity of the department’s investigation; and (x) making company officers and employees available for interviews.
McKinsey and McKinsey Africa also engaged in timely remedial measures, including: (i) putting the McKinsey partner involved in the criminal scheme on leave when it learned of the partner’s role in the scheme, subsequently separating that partner from McKinsey after discovering his deletion activity, and requiring that partner’s continued cooperation post-separation; (ii) conducting additional anti-corruption training for employees in South Africa and elsewhere in Africa, and ceasing work with all state-owned enterprises (SOEs) for a period of time while it conducted its internal investigation; (iii) enhancing due diligence processes for third-party partners, including instituting controls to ensure that due diligence is completed before work begins on an engagement and imposing a more rigorous risk-review for public sector clients; (iv) carrying out an enhanced review process for all sole-source work that requires advance-approval before the engagement can begin; and (v) voluntarily repaying, in 2018 and 2021, all revenues that McKinsey and McKinsey Africa received from potentially tainted contracts to the SOEs in South Africa from which they received contracts as a result of the criminal scheme.
In light of these considerations as well as McKinsey’s prior history, the criminal penalty calculated under the U.S. Sentencing Guidelines reflects a 35% reduction off the fifth percentile of the otherwise applicable guidelines fine range.
FBI’s Los Angeles International Corruption squad and USPIS are investigating the case.
Trial Attorneys William E. Schurmann and Alexandra P. Swain of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Andrew K. Chan and Nicholas Chiuchiolo for the Southern District of New York are prosecuting the case.
The Justice Department’s Office of International Affairs and authorities in South Africa provided assistance in this matter.
The Criminal Division’s Fraud Section is responsible for investigating and prosecuting FCPA and Foreign Extortion Prevention Act matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.