McKinsey, KPMG targeted as Gupta graft scandal widens | Fin24
 
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McKinsey, KPMG targeted as Gupta graft scandal widens

Sep 14 2017 21:30
Paul Burkhardt and Renee Bonorchis, Bloomberg

Johannesburg - After helping topple Bell Pottinger, anti-corruption groups are now targeting US consultancy McKinsey & Co. and auditing firm KPMG for doing work for businesses tied to the Gupta family and President Zuma’s son Duduzane. 

“Instead of raising the alarm, these companies seemed to have played along,” said Lumkile Mondi, a senior lecturer at the University of the Witwatersrand, who was part of a group of eight academics who in May completed a study into how state-owned enterprises are allegedly being raided. The firms undermined South African laws “in pursuit of profit.”

Anti-corruption advocacy groups, as well as the DA, are now taking their fight overseas while waiting for the National Prosecuting Authority to act on allegations against the Guptas contained in the #GuptaLeaks

Corruption Watch plans to approach the U.S. Department of Justice within two weeks to probe McKinsey, executive director David Lewis said in Johannesburg on Monday.

Save South Africa, which includes civil-society groups and business leaders, has called on companies to drop KPMG because of the work it did for 36 entities tied to the Guptas since at least 2008. Both companies have started internal investigations into their dealings with the family.

Trouble Looming

“I don’t think the U.S. Department of Justice would take the accusations about KPMG or McKinsey lightly,” Magda Wierzycka, chief executive officer of Sygnia, a Cape Town-based money manager that has terminated KPMG’s services, said by phone. Companies in the country will stop using McKinsey if it had to be fined, while KPMG’s South African business would be “in trouble” if one large corporation had to fire it, she said.

SAP has also been ensnared in the scandal. It said in July that four South African managers were put on leave after media reports that the local unit agreed to pay commission to a firm in which Zuma’s son Duduzane has an indirect stake for help in winning contracts. An independent investigation is still ongoing, SAP said in an emailed response to questions on Thursday.

Scandal-hit Bell Pottinger, meanwhile, applied for administration on Tuesday, after being expelled from a UK public-relations body for stoking racial tensions in South Africa while working for the Gupta-owned Oakbay Capital.

The complaint was lodged by the DA, which on Thursday in a statement said it will request McKinsey’s local and U.S. representatives be called before a parliamentary committee’s inquiry into state graft.

Gupta Empire

“KPMG risks becoming the Bell Pottinger of the auditing profession,” Save South Africa said in a statement on its website. “Its fingerprints are all over the Gupta empire.”

KPMG last month said it suspended its lead audit-engagement partner in South Africa and fired two others pending the results of its investigation. KPMG spokesman Nqubeko Sibiya didn’t immediately answer emailed questions.

This followed a #GuptaLeaks expose in June, that revealed how the Free State provincial government had largely picked up the tab for a lavish Gupta family wedding at Sun City. KPMG was allegedly involved in siphoning taxpayer money to pay for the affair. Bloomberg couldn’t independently verify the information.

Moses Kgosana, the CEO and senior partner at KPMG at the time, has quit several board positions since the allegations, including Wal-Mart Stores Inc.’s Massmart Holdings and logistics company Imperial Holdings Ltd., to avoid them being tarnished. He also had to walk away from taking the chairman role at retirement-fund adviser Alexander Forbes Holdings Ltd.

Ongoing Probe

South African business leaders have a responsibility to distance themselves from KPMG, Iraj Abedian, CEO at Pan-African Investments and Research Services in Johannesburg, said in an opinion piece on the Daily Maverick. He resigned as a non-executive director of Munich Re’s African unit because it kept KPMG as an external auditor.

McKinsey in July said it was reviewing documents related to work done for Eskom. An interim report by Eskom and G9 Forensic found McKinsey and Trillian Capital Partners Ltd., a company linked to the Guptas, made R1.6 billion in fees and expected to make another 7.8 billion rand, according to amaBhungane and Scorpio.

Trillian was dropped by McKinsey when the company failed due diligence, the consultancy said in an emailed response to questions. It informed Eskom and Trillian in March 2016. The fees it made from Eskom were in line with similar projects, McKinsey said.

"Our investigation is ongoing,” it said. “We haven’t discovered anything that would require us to notify U.S. authorities."


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sap  |  trillian  |  mckinsey  |  kpmg  |  the guptas  |  gupta leaks  |  state capture
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