Why McKinsey is not innocent

Eusebius McKaiser writes that McKinsey must apologise to South African taxpayers. (Photo: Arnd Wiegmann/Reuters)

Eusebius McKaiser writes that McKinsey must apologise to South African taxpayers. (Photo: Arnd Wiegmann/Reuters)

I sometimes wonder whether corporations think we are a bunch of fools incapable of seeing excrement for what it is. Take, for example, management consulting firm McKinsey, which has been implicated in an axis of evil with Trillian and Eskom.

This week, McKinsey denied any wrongdoing following reports that it facilitated millions of our public money to be wrongfully channelled to Gupta-linked firm Trillian, through a dodgy supplier development contract with Trillian as part of a primary contractual deal, in turn, with state-owned company Eskom.

Furthermore, McKinsey denied that the R1‑billion it got from the main contract was a result of wrongdoing on its part. Instead, it argued, if Eskom did not comply with the state’s relevant legislative and policy requirements when it set up that main contract, then Eskom is solely and wholly responsible.
McKinsey, on its version of events, is innocent.

Except this is all demonstrably false. It does not square with the established facts that are already in the public space, facts that McKinsey has not refuted. Let’s work through these facts.

McKinsey, we know because of the work done by advocate Geoff Budlender, wrote on a company letterhead to Eskom, authorising Eskom to make payments to Trillian. That letter explicitly described Trillian as a subcontractor.  It was signed off by Vikas Sagar, an experienced McKinsey partner who was a director at its Johannesburg office until he “decided to leave” recently.

This is not disputed by McKinsey. This letter is damning because it refutes McKinsey’s insistence that it never had a relationship with Trillian.

Now let’s examine how they are trying to spin this.

Long after they had started working with Trillian, which was to score 30% of the main contract with Eskom, McKinsey then concluded, after an internal risk assessment process, that Trillian was too dodgy to continue working with. At that point, McKinsey got cold feet, declined to sign the papers that would create a formal contractual relationship and informed Eskom of this new position.

We are not idiots, however. McKinsey, up to that point, had a de facto commercial relationship with Trillian at the expense of South African taxpayers who, by then, had had about R600‑million of public money funnelled to thieves with the knowledge and assistance of McKinsey.

It gets worse when you look at the annexures in the Budlender report. First, McKinsey had happily agreed to a joint team structure consisting of staff members from McKinsey, Eskom and Trillian. That proves McKinsey was not merely exploring a potential future relationship but was operationalising the axis of evil.

It does not end there. McKinsey’s worst moral sin in the entire story is correspondence that shows unethical behaviour when it started getting annoyed with Trillian — and then cajoled Trillian to back off on the work streams because it would get 30% of the profits from the deal with Eskom even if it did nothing.

In other words, McKinsey implied that Trillian was technically useless quite apart from being politically dodgy. But because McKinsey wanted the R1‑billion from the main contract, it chose not to blow the whistle on Trillian and Eskom. Greed was more important than living up to the firm’s values. Greed was more important than asking lawyers about the Prevention and Combating of Corrupt Activities Act.

Whichever way you look at the mountain of correspondence and evidence in the best-case scenario, McKinsey wilfully acted unethically, and in the worst-case scenario it acted unlawfully — pending a closer examination of our anticorruption laws that require us to do the right thing when we witness corruption or are asked to participate in corrupt deals.

The latest public relations farce from McKinsey does not succeed. It does not tell us why and how the de facto relationship with Trillian came about before the company’s risk assessment had been completed.

The public relations farce also does not work because it does not explain why McKinsey, which boasts that it brings the cleverest people into a room, did not bother to check whether Eskom was lawfully entering into a R1‑billion relationship with McKinsey in respect of the main contract (quite apart from the Trillian windfall built into it). The latest communication from McKinsey is conspicuously silent on these lacunae.

It is hoping that sacrificing Sagar will be enough to end the public relations battle in its favour. But Sagar would not have acted outside what the firm does as a matter of routine.

Sagar was not a rare bad apple in a garden of healthy apples. Sagar is and was “the firm”. He is McKinsey. The fuller truth is that the firm, at the level of organisation, must for years have done this kind of thing. Surely? It must now come completely clean. Throwing one senior partner under the bus does not convince anyone.

Pay back the money. Admit wrongdoing. Apologise to the taxpayers of South Africa. Only then can you talk to us about better safeguards to prevent this in future.

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