NPA files lawsuit over McKinsey's R1bn Eskom fee

South African prosecutors have filed a lawsuit aimed at recouping R1bn in consultancy fees they say were unlawfully paid to McKinsey & Co by Eskom.

This follows talks with the US firm about voluntarily repaying the money stalled.

The case is the latest twist in a series of scandals that saw billions of rand looted from state companies during Jacob Zuma’s nine-year tenure as president.

The case has drawn in several international companies, a number of senior officials and politicians and business executives with close ties to Zuma.

Zuma, who has denied wrongdoing, was forced to resign as president in February, and was replaced by Cyril Ramaphosa, who is spearheading a crackdown on graft.

The National Prosecuting Authority’s (NPA) Asset Forfeiture Unit filed the case against McKinsey in the North Gauteng High Court in the capital Pretoria on May 25, legal papers obtained by Bloomberg show.

The authority alleges that power utility Eskom didn’t follow proper procedures when it paid McKinsey to work on a turnaround plan and the consultancy was in possession of the "proceeds of unlawful activity".

Last year, McKinsey denied any wrongdoing but offered to pay back the money anyway, as a public uproar intensified about contracts being awarded to politically connected businesses. That never transpired, and on December 14, the Asset Forfeiture Unit obtained an order to freeze the money while negotiations about an out-of-court settlement continued.

The talks reached an "impasse", and a seizure order was needed before the asset preservation order expired to ensure the money would be recouped, the unit said in its court papers.

McKinsey partnered with Trillian, which at the time was majority owned by Salim Essa, an associate of the Gupta family, who had business dealings with one of Zuma’s sons.

'We expect it can be settled amicably'

While prosecutors last year froze R600m that Eskom paid to Trillian, it hasn’t yet moved to seize its assets. Trillian, Essa and the Guptas deny wrongdoing.

McKinsey said it remains committed to repaying the fees it received from Eskom as soon as possible.

"We need a court-endorsed process the public can have full confidence in," the company said in an emailed response to questions on Friday.

"However, the Asset Forfeiture Unit is taking some legal steps before it can sign up to an agreement. We expect this matter can be settled amicably, as the sole purpose of the Asset Forfeiture Unit’s involvement was to assist the voluntary return of the fee to Eskom."

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

ZAR/USD
17.63
(-0.04)
ZAR/GBP
23.01
(-0.05)
ZAR/EUR
20.79
(-0.01)
ZAR/AUD
12.62
(-0.03)
ZAR/JPY
0.17
(-0.01)
Gold
2034.21
(+0.05)
Silver
28.28
(+0.09)
Platinum
961.50
(+0.38)
Brent Crude
44.55
(-1.53)
Palladium
2166.01
(+0.63)
All Share
56757.73
(-1.56)
Top 40
52435.65
(-1.72)
Financial 15
9897.96
(+0.10)
Industrial 25
74671.49
(-1.98)
Resource 10
58948.78
(-1.89)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 934 votes
It depends on how the funds are used.
74% - 6257 votes
No. We should have gotten the loan elsewhere.
15% - 1285 votes
Vote