McKinsey & Company Africa To Pay Over $120 Million In Connection With Bribery Of South African Government Officials

Damian Williams, United States Attorney for the Southern District of New York; Nicole M. Argentieri, Principal Deputy Assistant Attorney General for the Criminal Division of the U.S. Department of Justice (“DOJ”); Akil Davis, Assistant Director in Charge of the Federal Bureau of Investigation (“FBI”) Los Angeles Field Office; and Eric Shen, Inspector in Charge of the U.S. Postal Inspection Service (“USPIS”) Criminal Investigations Group, announced today that MCKINSEY AND COMPANY AFRICA (PTY) LTD (“MCKINSEY AFRICA”), a wholly-owned and controlled subsidiary of McKinsey & Company, Inc. (“McKinsey”), a multinational strategy and management consulting firm headquartered in the U.S., will pay over $120 million to resolve an investigation by the DOJ into a scheme to bribe government officials in South Africa in exchange for lucrative consulting contracts at multiple state-owned and state-controlled entities.  MCKINSEY AFRICA entered into a deferred prosecution agreement (“DPA”) in connection with a criminal information filed today in the Southern District of New York charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act ("FCPA").  The case has been assigned to U.S. District Judge Colleen McMahon.

Also unsealed today is the guilty plea of VIKAS SAGAR, a former Senior Partner at McKinsey & Company, who pled guilty to participating in a conspiracy to violate the Foreign Corrupt Practices Act before U.S. District Judge Laura Taylor Swain on December 16, 2022.

U.S. Attorney Damian Williams said: “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. 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 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.”

Principal Deputy Assistant Attorney General Nicole M. Argentieri said: “McKinsey Africa bribed South African officials in order to obtain lucrative consulting business that generated tens of millions of dollars in profits.  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.”

USPIS Inspector in Charge Eric Shen said: “McKinsey Africa will pay over $122 million, a clear indication that corruption comes at a significant cost.  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.”

FBI Assistant Director in Charge Akil Davis said: “McKinsey Africa’s corruption seemed to pay off for a time, yielding millions in government contracts.  Those actions have now cost the company dearly.  Individuals and companies who collude to thwart free market competition have a direct and negative impact on communities and the American consumer.  This agreement demonstrates the commitment of the FBI and our partners to investigate anti-competitive behavior, and we will continue to work with foreign governments, including South Africa, to hold accountable those who try to cheat the system for their own benefit and profit.” 

According to court documents and admissions:

Between at least 2012 and 2016, MCKINSEY AFRICA, acting through McKinsey Senior Partner SAGAR, 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 Limited ("Eskom"), South Africa’s state-owned and state-controlled energy company.  As part of the scheme, 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.

As part of the DPA, MCKINSEY AFRICA has agreed to pay a criminal penalty of $122,850,000.  The 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, among other things, to continue cooperating with the U.S. Attorney’s Office for the Southern District of New York and the Criminal Division’s Fraud Section and in any ongoing or future criminal investigation arising during the term of the DPA.  In addition, McKinsey and MCKINSEY AFRICA have 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 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  immediately and proactively cooperating from the inception of the Offices’ investigation; making numerous factual presentations to the Offices over the course of their investigation, derived from information obtained through the Company’s internal investigation; collecting, reviewing, and producing voluminous records, including those located abroad, in response to requests from the Offices; 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 Offices; reporting, in real time, newly discovered information and documents which allowed the Offices to preserve and obtain evidence as part of their independent investigation; tracing complex internal accounting money-flows and currency exchange-information in response to requests from the Offices; preserving, collecting, and producing to the Offices documents located abroad, and engaging a third-party forensics consultant to analyze key electronic devices and providing to the Offices the results of that analysis; collecting and producing to the Offices personal email and bank account information of the McKinsey partner involved in the conduct relevant to the Offices’ investigation; engaging with the Offices in response to a deconfliction request to preserve the integrity of the Offices’ investigation; and making Company officers and employees available for interviews. 

McKinsey and MCKINSEY AFRICA also engaged in timely remedial measures, including: 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; conducting additional anti-corruption training for employees in South Africa and elsewhere in Africa, and ceasing work with all SOEs for a period of time while it conducted its internal investigation; 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; carrying out an enhanced review process for all sole-source work that requires advance-approval before the engagement can begin; and 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 it 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.

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The FBI’s International Corruption Unit and the USPIS are investigating the case as part of the IRS Global Illicit Financial Team in Washington, D.C.

SAGAR, 56, of Johannesburg, South Africa, pled guilty to participating in a conspiracy to violate the Foreign Corrupt Practices Act.

Mr. Williams praised the outstanding work of the FBI and USPIS.  Mr. Williams also thanked the Department of Justice’s Office of International Affairs and authorities in South Africa for their assistance in this matter.

The case is being prosecuted by Assistant U.S. Attorneys Andrew K. Chan and Nicholas Chiuchiolo of the Southern District of New York; and Trial Attorneys William E. Schurmann and Alexandra P. Swain of the Criminal Division’s Fraud Section.