McKinsey Africa to pay $122 million in South Africa bribery scheme, US Justice Department says

By Doina Chiacu and Luc Cohen

WASHINGTON/NEW YORK (Reuters) -McKinsey and Company Africa Ltd, a subsidiary of McKinsey & Company, will pay more than $122 million to resolve a U.S. investigation into a bribery scheme in South Africa, the Justice Department said on Thursday.

Privately owned McKinsey Africa was charged with one count of conspiracy to violate the Foreign Corrupt Practices Act for agreeing to pay bribes to officials at state-owned energy company Eskom and port and freight rail operator Transnet in exchange for non-public information about consulting contracts.

McKinsey Africa entered into a three-year deferred prosecution agreement with the Justice Department.

"McKinsey Africa bribed South African officials in order to obtain lucrative consulting business that generated tens of millions of dollars in profits," said Nicole M. Argentieri, head of the Justice Department’s Criminal Division.

Vikas Sagar, a senior former partner at McKinsey, previously pleaded guilty to one count of conspiracy to violate the act. He could not immediately be reached for comment.

In a statement, McKinsey said Sagar had concealed his conduct from the company, and that it fired him soon after it learned about the issues.

McKinsey and McKinsey Africa earned around $85 million in profits through the bribery scheme, the Justice Department said. Eskom had hired McKinsey to help it execute a "turnaround plan."

Inefficiencies at Eskom and Transnet have constrained growth in Africa's most industrialized economy for more than a decade.

The Justice Department said McKinsey Africa had received credit for cooperating with its investigation and conducting anti-corruption training for employees. The $122,850,000 McKinsey has agreed to fork up includes a penalty it will pay in South Africa.

McKinsey is also in talks with the Justice Department to pay more than $600 million to resolve a separate investigation into the consulting firm's work helping opioid manufacturers boost sales that allegedly contributed to a deadly addiction epidemic, people familiar with the matter have told Reuters.

(Reporting by Doina Chiacu and Ismail Shakil; additional reporting by Nate Raymond; Writing by Luc Cohen; Editing by Caitlin Webber and Jonathan Oatis)