Glencore : Law firm to probe McKinsey ‘sham tie’

Budlender inquiry claims false statements on Trillian were made

International consulting firm McKinsey has appointed law firm Norton Rose Fulbright to probe explosive allegations against it in an inquiry led by advocate Geoff Budlender.

In Budlender’s report, released on Thursday, McKinsey is accused of knowingly entering into a & sham& arrangement with Trillian to keep the Eskom taps flowing.

Eskom appointed McKinsey in 2015 to provide a range of advisory services to the value of an estimated R1bn a year.

Budlender’s report also suggests McKinsey had tried to mislead the inquiry and stopped its co-operation when confronted with evidence that it had provided false statements.

McKinsey said on Sunday it had appointed Norton Rose Fulbright to help investigate the allegations. Bonita Dordel, McKinsey’s director of external relations for Africa, said it was investigating the matter & seriously, supported by& the law firm. The probe was being overseen by McKinsey’s general counsel and chief risk officer.

Trillian, majority-owned by Gupta lieutenant Salim Essa, received contracts worth hundreds of millions of rand from Eskom and Transnet that the report says are suspect.

The inquiry also found further evidence to support former public protector Thuli Madonsela’s view that Trillian had contributed R235m to the Gupta purchase of the Optimum coal mine from Glencore. Trillian has denied this.

Trillian said it had not been given the chance to comment on the report before its release and that many allegations in it & appear to be incorrect& McKinsey comes in for a roasting in the report for agreeing to subcontract 30% of its services to Trillian as its supplier development partner despite the consulting firm’s senior managers thinking it was & a sham& International firms working on large contracts with state entities have to partner with local firms to transfer skills as part of the supplier development programme. Budlender’s report details how McKinsey managers allegedly regarded the programme and its partnership with Trillian as a necessary evil. Budlender cited damning information provided by a former Trillian executive. The attitude of McKinsey’s leadership was that & Trillian as the development partner is simply a necessary but unwanted piece of baggage in the awarded contract& the executive had said.

At a meeting of the joint team, a senior McKinsey representative had allegedly said of the supplier development programme: & It doesn’t really matter as long as you get your percentage.& Budlender concluded in the report that & the Eskom contract price included 30% for Trillian, which from those [McKinsey] representatives’ point of view served little purpose other than to provide a substantial financial benefit to Trillian and its shareholders — and presumably to induce Eskom to award the contract to McKinsey& Documents attached to the report reveal McKinsey had also authorised Trillian in February 2016 to invoice and be paid by Eskom directly for its subcontracted services.

When the inquiry first asked McKinsey about its partnership with Trillian, the consultancy replied it & did not work on any projects on which Trillian was as an SDP [service delivery plan] or a subcontractor to McKinsey.& After Budlender had provided McKinsey with proof it had subcontracted with Trillian, the consulting firm stopped co-operating with the probe.

& I conclude that the denial of McKinsey is false,& said Budlender. & Why they made a false denial is for them to explain.& Dordel did not respond on Sunday to the accusations that it had misled the inquiry or had knowingly formed a bogus partnership with Trillian.

& At one time, we explored a formal supplier-development partnership with Trillian, but as a consequence of a detailed risk review, we decided over a year ago not to proceed because of our concerns about Trillian’s shareholding,& Dordel said.

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Support: The Budlender inquiry supports former public protector Thuli Madonsela’s finding that Trillian had contributed R235m to the Gupta purchase of Optimum coal mine from Glencore. File picture

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