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McKinsey to Pay $122 Million in South Africa Bribery Case

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A tug boat patrols at the Port of Cape Town in Cape Town, South Africa. Photographer: Dwayne Senior/Bloomberg (Dwayne Senior/Bloomberg)

(Bloomberg) -- McKinsey & Co. has agreed to pay more than $122 million to resolve US criminal allegations tied to a corruption scandal involving former leaders of South Africa’s ports and rail operator Transnet SOC Ltd. 

The US Justice Department agreed not to proceed with a case against the consulting firm if it engages in no further misconduct for 3 1/2 years, federal prosecutors and defense lawyers said at a Thursday court hearing in New York. The agreement resolves both a US investigation and charges brought against McKinsey by South Africa’s National Prosecuting Authority.

The Justice Department credited 50% of the penalty to South Africa, NPA spokesman Mthunzi Mhaga said in a text message. An amount of approximately 1.1 billion rand ($61 million) will be paid into the country’s Criminal Assets and Recovery Account. 

McKinsey pleaded not guilty to a single count of conspiracy on Thursday before US District Judge Colleen McMahon. 

The firm said in a statement that it will continue to cooperate with US and South African authorities and “welcomes the resolution of these matters and the closure of this regretful situation.”

The consulting firm was retained to advise state-owned Transnet on the purchase of 1,064 locomotives that cost 54 billion rand ($3 billion). In a statement, the Justice Department said McKinsey made $85 million as part of the alleged bribery scheme.

A number of international companies have acknowledged playing a role in misconduct at state companies during former South African President Jacob Zuma’s administration, during which funds were funneled out to private entities in a practice known locally as state capture. SAP SE, KPMG LLP and ABB Ltd. have all accepted responsibility for improper work and in some cases paid back fees. Zuma has denied wrongdoing.

McKinsey repaid $63 million in fees to Transnet in 2021. The Justice Department said a former senior McKinsey partner, Vikas Sagar, previously pleaded guilty to conspiring to violate US foreign bribery laws. Brian Blais, a lawyer for Sagar, didn’t immediately respond to a call and email seeking comment on Friday.

The agreement also resolves US and South African investigations into McKinsey’s work for another South African state-owed enterprise, power utility Eskom Holdings SOC Ltd.

--With assistance from Rene Vollgraaff.

(Updates with amount paid to South Africa in third paragraph, background)

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