South Africa Moves to Freeze McKinsey, Gupta-Linked AssetsBy and
Prosecutors target 1.6 billion rand from Eskom-related work
Government probing contracts between firms and state companies
South African prosecutors moved to freeze 1.6 billion rand ($130 million) of assets held by McKinsey & Co. and a company linked to the Guptas, the first significant response to corruption allegations against the politically connected family.
McKinsey earned about 1 billion rand in consultancy fees from Eskom Holdings SOC Ltd. in 2016, but has since pledged to pay it back after being drawn into allegations the Guptas used their friendship with President Jacob Zuma to win lucrative government contracts. Trillian Capital Partners, in which a Gupta family associate is a former shareholder, received cash from power provider Eskom at about the same time as McKinsey. The Guptas and Zuma have denied wrongdoing.
The National Prosecuting Authority’s move comes during a South African parliamentary corruption inquiry into contracts awarded by Eskom.
“We have received no formal communication,” McKinsey said in a statement late Monday. “As we have said before, including before the parliamentary inquiry, we will return the fee we earned from the Eskom turnaround program no matter what. We welcome any efforts to help us pay back the money.”
Revelations about the Guptas in a series of leaked emails last year have turned the family’s business dealings into South Africa’s biggest post-apartheid scandal. McKinsey said in October it had “made several errors of judgment” while working on a turnaround plan for Eskom, though the U.S. firm said it didn’t make payments to Trillian nor have a contract with the Gupta-linked company. The U.S. consultant suspended work for state entities, while companies including Coca-Cola Co.’s South African units aren’t awarding it new business.
South African police unit the Hawks have a warrant for the arrest of at least one of the three Gupta brothers, City Press reported Monday, citing a senior official it didn’t identify. The Hawks are now waiting for the NPA to sign off on the warrant, the news service said.
“We have not applied for an arrest warrant against any member of the Gupta family,” Hawks spokesman Brigadier Hangwani Mulaudzi said by phone from Johannesburg. “We are investigating a number of cases related to the issue of state capture, some of which have passed their stage-one levels, and we are awaiting direction from the National Prosecuting Authority.”
Ajay Gupta didn’t immediately respond to a phone call and text message seeking comment.
The NPA’s Asset Forfeiture Unit first obtained the order to freeze McKinsey and Trillian assets on Dec. 14, the prosecuting authority said. The two companies will have 90 days to show their contracts with various state-owned entities were lawfully awarded.
A spokesman for Trillian said he couldn’t immediately comment.
The Asset Forfeiture Unit alleged in an affidavit that Eskom’s payments to Trillian and McKinsey were “proceeds of crime,” Karyn Maughan, a reporter for Johannesburg-based broadcaster eNCA, said in a Twitter posting Tuesday. The AFU accused Eskom and McKinsey of colluding in a scheme designed to drain funds out of Eskom, she said in a separate tweet.
Spokespeople for McKinsey and Eskom couldn’t immediately comment on Maughan’s tweets or the allegations.
— With assistance by Janice Kew, Paul Burkhardt, and Paul Vecchiatto