2024-12-05 DOJ SDNY pdf 21,534 chars

United States v. MCKINSEY, Southern District of New York (Dec. 5, 2024)

raw: Mckinsey Africa Information 0

Mckinsey Africa Information 0 (S.D.N.Y. Dec. 5, 2024)

Caption: United States v. MCKINSEY

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

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summary

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McKinsey and Company Africa, a subsidiary of McKinsey, has been charged by the United States for violating the Foreign Corrupt Practices Act by bribing South African government officials to secure business contracts with Transnet and Eskom. The bribery scheme involved using confidential information, intermediaries, and a BEE partner to split fees and award contracts to McKinsey, with a portion of the fees intended as bribes. McKinsey earned approximately $85,000,000 in profits from this scheme, which continued at Eskom using similar tactics.

narrative

Enriched metadata

Scheme: fcpa (100%)
Court: Southern District of New York

Classified fcpa(confidence 100%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →

Extracted insights

Dollar amounts 1

$85.00M $85,000,000 $10M–$100M

Entities 4

company mckinsey africa (pty) ltd
company mckinsey & company, inc.
company transnet soc ltd.
person vikas sagar

Triples 5

McKinsey & Company, Inc. was an international consulting firm headquartered in New York, New York
McKinsey Africa (Pty) Ltd was a wholly owned and wholly controlled subsidiary of McKinsey
Vikas Sagar was a partner and senior partner of McKinsey working in Johannesburg, South Africa
Transnet SOC Ltd. was a South African state‑owned and state‑controlled company headquartered in Johannesburg
Foreign Official 1 was a high‑ranking official and board member at Transnet with responsibility over procurement and contracting

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Mckinsey Africa Information 0 · Source

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Extracted body text (21,534c)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA

MCKINSEY AND COMPANY

AFRICA (PTY) LTD,

Defendant.

INFORMATION

24 Cr.

The United States charges:

GENERAL ALLEGATIONS

Relevant Statutory Background

1. The Foreign Corrupt Practices Act of 1977, as amended, Title 15, United States

Code, Sections 78dd-1, et seq. (“FCPA”), was enacted by Congress for the purpose of, among

other things, making it unlawful to act corruptly in furtherance of an offer, promise, authorization,

or payment of money or anything of value, directly or indirectly, to a foreign official for the

purpose of obtaining or retaining business for, or directing business to, any person.

MCKINSEY AFRICA and Relevant Entities and Individuals

2. At all times relevant to this Information, McKinsey & Company, Inc.

(“McKinsey”) was an international consulting firm, headquartered in New York, New York, that

operated with offices around the world, including in South Africa as described below. McKinsey

was a “domestic concern” as that term is used in the Foreign Corrupt Practices Act (“FCPA”),

Title 15, United States Code, Section 78dd-2(h)(1)(B).

3. At all times relevant to this Information, McKinsey and Company Africa (Pty) Ltd

(“MCKINSEY AFRICA”), the defendant, was a wholly owned and wholly controlled subsidiary

of McKinsey, incorporated in South Africa and located in Sandton, South Africa. MCKINSEY

AFRICA was an agent of a domestic concern, McKinsey, as that term is used in the FCPA, Title

15, United States Code, Section 78dd-2(a).

4. At all times relevant to this Information, Vikas Sagar (“Sagar”) was a citizen of

India, a lawful permanent resident of the United States, a resident of South Africa, a partner and

senior partner of McKinsey working in McKinsey’s office in Johannesburg, South Africa, and a

stockholder, employee, and agent of McKinsey. Sagar was a “domestic concern” and an employee,

agent, and stockholder of a “domestic concern,” as those terms are used in the FCPA, Title 15,

United States Code, Section 78dd-2(a).

5. At all times relevant to this Information, Company 1, the identity of which is known

to the United States, McKinsey, and MCKINSEY AFRICA, the defendant, was a consulting firm

incorporated in South Africa, with its principal place of business in South Africa. Company 1 was

an agent of MCKINSEY AFRICA.

6. At all times relevant to this Information, Company 2, the identity of which is known

to the United States, McKinsey, and MCKINSEY AFRICA, the defendant, was a consulting firm

incorporated in South Africa, with its principal place of business in South Africa. Company 2 was

an agent of MCKINSEY AFRICA.

7. At all times relevant to this Information, Transnet SOC Ltd. (“Transnet”) was a

South African state-owned and state-controlled company headquartered in Johannesburg, South

Africa, that operated as the custodian of South Africa’s ports, rails, and pipelines. Transnet was

controlled by the government of South Africa and performed government functions. Transnet was

an “instrumentality” of the South African government and Transnet’s officers and employees were

“foreign officials,” as those terms are used in the FCPA, Title 15, United States Code, Section

78dd-2(h)(2)(A).

8. At all times relevant to this Information, Foreign Official 1, an individual whose

identity is known to the United States, McKinsey, and MCKINSEY AFRICA, the defendant, was

a high-ranking official and board member at Transnet with responsibility over procurement and

contracting during the relevant time. Foreign Official 1 was a “foreign official” as that term in

used in the FCPA, Title 15, United States Code, Section 78dd-2(h)(2)(A).

9. At all times relevant to this Information, Eskom Holdings SOC Ltd. (“Eskom”) was

a South African state-owned and state-controlled company headquartered in Sandton, South

Africa, that operated as South Africa’s public power utility. Eskom was controlled by the

government of South Africa and performed government functions. Eskom was an

“instrumentality” of the South African government and Eskom’s officers and employees were

“foreign officials,” as those terms are used in the FCPA, Title 15, United States Code, Section

78dd-2(h)(2)(A).

10. At all times relevant to this Information, Foreign Official 2, an individual whose

identity is known to the United States, McKinsey, and MCKINSEY AFRICA, the defendant, was

a high-ranking official at Eskom with responsibility over procurement and contracting during the

relevant time. Foreign Official 2 was a “foreign official” as that term in used in the FCPA, Title

15, United States Code, Section 78dd-2(h)(2)(A).

11. At all times relevant to this Information, co-conspirator 1 (“CC 1”), an individual

whose identity is known to the United States, McKinsey, and MCKINSEY AFRICA, the

defendant, was a South African national and businessperson who worked in South Africa.

12. At all times relevant to this Information, co-conspirator 2 (“CC 2”), an individual

whose identity is known to the United States, McKinsey, and MCKINSEY AFRICA, the

defendant, was a South African national and businessperson who worked in South Africa at

Company 1 and Company 2.

Overview of the Bribery Scheme

13. From at least in or around 2012, up to and including in or around 2016,

MCKINSEY AFRICA, the defendant, acting through Sagar and for and on behalf of McKinsey,

agreed with others to bribe foreign officials in South Africa to obtain and retain business for

McKinsey and MCKINSEY AFRICA and partner firms, Company 1 and Company 2. In

furtherance of the scheme, MCKINSEY AFRICA, together with co-conspirators, among other

things: (a) obtained sensitive confidential and non-public information from Transnet and Eskom

through CC 1, CC 2, and others, regarding the award of consulting contracts; and (b) submitted

proposals for multimillion-dollar consulting contracts to Transnet and Eskom on behalf of

MCKINSEY AFRICA and partner firms, Company 1, and Company 2, knowing that a portion of

the proposed consulting fees from the contracts would be used to pay bribes to Foreign Official 1

and Foreign Official 2.

14. In carrying out the scheme described herein, McKinsey and MCKINSEY AFRICA,

the defendant, through Sagar, engaged in communications with co-conspirators, relying on email,

messaging apps, and other forms of communication that used the means and instrumentalities of

interstate commerce, and in total, McKinsey and MCKINSEY AFRICA earned profits of

approximately $85,000,000 as a result of the bribery scheme.

A. Bribes Involving Transnet

15. In or around 2011, in an effort to obtain business for MCKINSEY AFRICA, the

defendant, with Transnet, Sagar began meeting with Foreign Official 1, a former acquaintance of

Sagar. Sagar knew that Foreign Official 1 was a board member at Transnet with the ability and

authority to influence the award of consulting contracts.

16. McKinsey, MCKINSEY AFRICA, the defendant, and Sagar were aware that,

pursuant to South Africa’s Broad-based Black Economic Empowerment Act of 2003 and the South

African government policies implementing it, and other subsequently promulgated policies,

including the Supplier Development & Localization Plan (collectively, the “BEE program”),

MCKINSEY AFRICA’s ability to obtain contracts with Transnet depended, in part, on

MCKINSEY AFRICA’s engagement of certain local South African subcontractors as BEE

program partners. Pursuant to the requirements of the BEE program, MCKINSEY AFRICA

agreed to split the fees that were payable on contracts for which it partnered with South African

companies. Accordingly, MCKINSEY AFRICA’s client would pay a portion to MCKINSEY

AFRICA and a portion directly to MCKINSEY AFRICA’s BEE partner.

17. In or around 2012, Foreign Official 1 suggested to Sagar that MCKINSEY

AFRICA, the defendant, engage Company 1 as its BEE program partner for future consulting

engagements at Transnet, and Sagar agreed to the request.

18. In approximately the latter half of 2012, Foreign Official 1 helped arrange a

meeting between Sagar and representatives of Company 1 at a restaurant in Sandton, South Africa.

Following this meeting, Sagar exercised his influence within MCKINSEY AFRICA, the

defendant, to encourage the selection of Company 1 as MCKINSEY AFRICA’s BEE partner for

consulting work at Transnet, and MCKINSEY AFRICA selected Company 1 in or around late

2012.

19. Also in the latter half of 2012, Foreign Official 1 introduced Sagar to CC 1—an

individual with no apparent connection to Transnet—and indicated that CC 1 would serve as

Sagar’s intermediary for communications with Foreign Official 1 relating to MCKINSEY

AFRICA’s contracts with Transnet moving forward.

20. Following CC 1’s introduction by Foreign Official 1, CC 1 acted as Sagar’s primary

point of contact regarding MCKINSEY AFRICA, the defendant, and Company 1’s efforts to

obtain consulting contracts from Transnet, and the division of fees between MCKINSEY AFRICA

and Company 1 (a portion of which Sagar understood to continue to be paid to or for the benefit

of CC 1 and Foreign Official 1). In return for the bribes, Foreign Official 1 acted as MCKINSEY

AFRICA’s “inside man” at Transnet, providing confidential, inside information from Transnet

through CC 1 and orchestrating the award of multiple lucrative contracts to MCKINSEY AFRICA

over a period of years.

21. To avoid detection, Sagar and CC 1 conducted meetings at coffee shops,

restaurants, and other locations in and around Johannesburg, South Africa, instead of meeting at

MCKINSEY AFRICA or Transnet offices. Sagar and CC 1 also limited their use of written

communications over the course of the scheme, and when they did correspond via email, they often

used private personal email addresses rather than Sagar’s McKinsey email address.

22. As part of the scheme, MCKINSEY AFRICA, the defendant, through Sagar,

received sensitive non-public information from Transnet, which was transmitted to Sagar by CC

1. Such information included confidential, inside information regarding MCKINSEY AFRICA’s

competitors for contracts, and Transnet’s decision-making for such contracts. For example, CC 1

advised Sagar as to the identities of potential competitors for consulting contracts that MCKINSEY

AFRICA sought at Transnet and provided advance assurances that MCKINSEY AFRICA would

receive the award of a contract focusing on Transnet’s acquisition of certain locomotives. Also in

furtherance of the scheme, Sagar shared confidential MCKINSEY AFRICA information and work

product with CC 1 regarding the work that MCKINSEY AFRICA sought to conduct at Transnet

and its proposed engagement with Company 1. For example, on or about February 10, 2014, Sagar

sent an email to CC 1 containing confidential internal MCKINSEY AFRICA information

regarding a specific project at Transnet, proposed division of work between MCKINSEY AFRICA

and Company 1, and the proposed division of fees between MCKINSEY AFRICA and Company

1 of nearly 50 percent. CC 1 subsequently forwarded the information to CC 2.

23. At CC 1’s urging—which Sagar understood to be coming from Foreign

Official 1—the fee split between MCKINSEY AFRICA and Company 1 shifted over time,

increasing the share of fees that were being paid to Company 1, even though Company 1’s

contributions to the work being done for Transnet diminished.

24. Nevertheless, and repeatedly, MCKINSEY AFRICA, the defendant, through Sagar,

submitted and caused proposals for multimillion-dollar consulting contracts to be submitted to

Transnet, understanding that a portion of the consulting fees from the contracts would be used to

pay bribes to Foreign Official 1. MCKINSEY AFRICA personnel, including Sagar and others

whom Sagar did not advise of the bribery scheme, also participated in the drafting of Transnet and,

later, Eskom, Requests for Proposals and internal memoranda that justified the award of contracts

to MCKINSEY AFRICA without a public tender process. These efforts were intended to prevent

MCKINSEY AFRICA’s competitors from competing fairly for awards of contracts, and they had

the effect of ensuring that Transnet and Eskom’s awards of contracts occurred on a sole-source

basis.

B. Bribes Involving Eskom

25. In or around 2015, multiple Transnet executives who had worked with MCKINSEY

AFRICA, the defendant, transitioned to leadership positions at Eskom. Around that same time,

CC 2 advised Sagar of CC 2’s intent to spin off a new consulting entity, Company 2.

26. MCKINSEY AFRICA, the defendant, was seeking to obtain consulting contracts

at Eskom at that time, and Sagar joined MCKINSEY AFRICA’s client service team for Eskom.

Between in or around 2015 and continuing until in or around 2016, as MCKINSEY AFRICA

sought business with Eskom, Sagar continued to work with CC 1 and CC 2, with the understanding

that the bribery scheme at Transnet would continue at Eskom.

27. At Eskom, MCKINSEY AFRICA’s, the defendant’s, bribery scheme proceeded in

a very similar manner as it had at Transnet, but with Company 2 ultimately replacing Company 1,

and with at least Foreign Official 2 receiving the bribes rather than Foreign Official 1. CC 1

worked on MCKINSEY AFRICA’s behalf to orchestrate the award of contracts to MCKINSEY

AFRICA. In exchange for these efforts, CC 1 and Foreign Official 2 would receive a portion of

the fees paid to Company 2 as MCKINSEY AFRICA’s BEE partner for Eskom work.

28. In communications with Sagar, Foreign Official 2 focused heavily on the proposed

fee split between MCKINSEY AFRICA, the defendant, and its BEE partner, insisting that fees be

split 50/50. For Eskom engagements, MCKINSEY AFRICA’s BEE partner was initially

Company 1, but MCKINSEY AFRICA was in the process of formally retaining Company 2 as its

BEE partner after CC 2 spun off the entity. CC 1 and personnel from Company 2 again pressured

Sagar to deliver an even split of fees between Company 2 and McKinsey.

29. On or about November 16, 2015, in connection with the negotiation of a potentially

highly lucrative contract with Eskom, personnel from Company 2—copying CC 1 and CC 2—

emailed Sagar at his McKinsey business email address, also copying Sagar’s personal email

address, (i) requesting proof that fees from the engagement would be subject to a “50/50 fee split”

and (ii) noting that CC 1 needed such proof in advance of setting up a meeting with key Eskom

executives.

30. On or about November 18, 2015, using the means and instrumentalities of interstate

commerce, Sagar responded to the email referenced in paragraph 29 above, using his personal

email address, copying CC 1, and attaching a confidential internal spreadsheet by MCKINSEY

AFRICA, the defendant, showing a near-50 percent split for Company 2 from the project: the

equivalent of hundreds of millions of U.S. dollars in projected revenue. Sagar understood that a

portion of the contract split for Company 2 would be paid to Foreign Official 2 in exchange for

Eskom awarding the contract to MCKINSEY AFRICA and its potential BEE partner, Company

2. In or around December 2015, Eskom awarded the contract to MCKINSEY AFRICA.

31. In or around late 2015 and early 2016, MCKINSEY AFRICA, the defendant,

conducted due diligence on Company 2, but did not complete its due diligence process before

beginning work on the Eskom contract with Company 2. In or around March 2016, MCKINSEY

AFRICA rejected Company 2 as a BEE partner after Company 2 failed to respond adequately to

MCKINSEY AFRICA’s due diligence inquiries. MCKINSEY AFRICA notified Eskom that

MCKINSEY AFRICA would not engage Company 2 as its BEE partner, but MCKINSEY

AFRICA continued to work alongside Company 2 at Eskom, until Eskom notified MCKINSEY

AFRICA in June 2016 that the contract would be terminated. Separately, in or around March

2016, MCKINSEY AFRICA terminated Company 1 as its BEE partner, and provided notice to

Transnet, after public reporting regarding the involvement of a recently departed Company 1

executive in a scandal, and linking the Company 1 executive to politically exposed persons.

32. On October 5, 2016, Sagar traveled to New York City to meet with a senior

executive of Eskom and others to discuss MCKINSEY AFRICA’s, the defendant’s, work under

the contract in furtherance of the bribery scheme. MCKINSEY AFRICA’s work for Eskom ended

in or around November 2016.

STATUTORY ALLEGATIONS

COUNT ONE

(Conspiracy to Bribe a Foreign Official)

33. Paragraphs 1 through 32 of this Information are repeated and realleged as if fully

set forth herein.

34. From in or around 2012 through at least 2016, both dates being approximate and

inclusive, in the Southern District of New York and elsewhere, MCKINSEY AFRICA, the

defendant, together with others known and unknown, willfully and knowingly combined,

conspired, confederated, and agreed together and with each other to commit an offense against the

United States, to wit, to violate the anti-bribery provisions of the FCPA, in violation of Title 15,

United States Code, Section 78dd-2.

35. It was a part and object of the conspiracy that MCKINSEY AFRICA, the defendant,

being the agent of a domestic concern acting on behalf of that domestic concern, would and did

make use of the mails and any means and instrumentalities of interstate commerce corruptly in

furtherance of an offer, payment, promise to pay, and authorization of the payment of any money,

and offer, gift, promise to give, and authorization of the giving of anything of value to a foreign

official, and to any person, while knowing that all or a portion of such money and thing of value

would be and had been be offered, given, and promised, directly and indirectly, to any foreign

official, to any foreign political party or official thereof, and to any candidate for foreign political

office, for purposes of (A)(i) influencing any act and decision of such foreign official in that

foreign official’s official capacity; (ii) inducing such foreign official to do and omit to do any act

in violation of the lawful duty of such foreign official; and (iii) securing any improper advantage;

and (B) inducing such foreign official to use that foreign official’s influence with a foreign

government and agencies and instrumentalities thereof to affect and influence any act and decision

of such government and agencies and instrumentalities, in order to assist MCKINSEY AFRICA

in obtaining and retaining business for and with, and directing business to, MCKINSEY AFRICA

and others, in violation of Title 15, United States Code, Section 78dd-2, to wit, MCKINSEY

AFRICA and others agreed to pay Foreign Official 1, Foreign Official 2, CC 1, and others known

and unknown, a portion of fees generated by and in connection with MCKINSEY AFRICA’s

contracts with Transnet and Eskom, in order to assist MCKINSEY AFRICA in obtaining and

retaining business for, and directing business to, MCKINSEY AFRICA and others.

Overt Acts

36. In furtherance of the conspiracy and to effect the illegal object thereof, the

following overt acts, among others, were committed in the Southern District of New York and

elsewhere:

a. On or about February 10, 2014, Sagar sent an email to CC 1 containing

confidential internal information from MCKINSEY AFRICA, the defendant, regarding a specific

project at Transnet, proposed division of work between MCKINSEY AFRICA and Company 1,

and the proposed division of fees between MCKINSEY AFRICA and Company 1 of nearly 50

percent. CC 1 subsequently forwarded the information to CC 2.

b. On or about November 16, 2015, in connection with the negotiation of a

potentially highly lucrative contract with Eskom, personnel from Company 2—copying CC 1 and

CC 2—emailed Sagar at his McKinsey business email address, also copying Sagar’s personal

email address, (i) requesting proof that fees from the engagement would be subject to a “50/50 fee

split” and (ii) noting that CC 1 needed such proof in advance of setting up a meeting with key

Eskom executives.

c. On or about November 18, 2015, using the means and instrumentalities of

interstate commerce, Sagar responded to the email referenced in paragraph 36(b) above, using his

personal email address, copying CC 1, and attaching a confidential internal MCKINSEY AFRICA

spreadsheet showing a near-50 percent split for Company 2 from the project: the equivalent of

hundreds of millions of U.S. dollars in projected revenue.

d. On or about October 5, 2016, Sagar met in the Southern District of New

York with a senior executive of Eskom and others to discuss MCKINSEY AFRICA’s work under

the contract in furtherance of the bribery scheme.

(Title 18, United States Code, Section 371.)

___________________________ ______________________________
GLENN S. LEON DAMIAN WILLIAMS
Chief, Fraud Section United States Attorney

AChan
Stamp

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