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McKinsey unit will pay $123M to settle claims it bribed South African officials
- curtis3389 2y agoRemember the name McKinsey. They are an evil organization that does bad things to good people. Anyone from McKinsey is to be regarded with suspicion at the very least.
- brailsafe 2y agoSurely we have to have some people lurking here that currently or used to be at McKinsey, I guess it wouldn't be surprising why they wouldn't chime in, but many have the same feelings about every other sus company many of us work for.
- bttrpll 2y agoEveryone I worked with that had affiliation to McKinsey owned projects that ended up costing the company tens to hundreds of millions of dollars. They were better at office politics, however their actual skill was rubbish. Everyone paid for it, except them of course. In fact, after record layoffs guess who is still managed to keep their position? The McKinsey dudes. Crazy.
- jncfhnb 2y agoI work there. It’s just a very decentralized place. What you do is driven by a tiny branch of the widest, flattest org you’ve ever seen. They’ve added some governance as to what partners can just sign up to do themselves. But it’s all firewalled internally. Idk what people in the next room over are doing to avoid creating conflicts of interest. I would say a lot of people here are not grounded, but in more of an anxious way than an evil profit minded kind of way (which may sound mythical but I’ve seen it blatantly in other company cultures)
- antisthenes 2y ago> not grounded, but in more of an anxious way than an evil profit minded kind of way What do you mean by "anxious way" ?
- jncfhnb 2y agoThere’s simply a lot of anxious people with a lot of imposter syndrome. Half of the company encourages it. Half of the company discourages it.
- hilux 2y agoI'm no McKinsey fan, but it's naïve to think that they are worse (or different) than other multinationals, particularly firms providing consulting or legal or other advisory services.
- sharpshadow 2y agoAmazing the punishment is a bribe itself.
- therobot24 2y agopayment isn't bad, just need to make sure everyone gets their cut
- some_random 2y agoDo you genuinely believe that fines are the same as bribes?
- diffeomorphism 2y agoThe fines are more public. But low fines are otherwise pretty indistinguishable from "here is some money for you to look elsewhere". As explained in other threads, McKinsey made almost the same amount of profit (adjusted for inflation) as the fine. So the message is: - the effective fine (profit minus fine) is approximately 0, if you get caught. - if you don't get caught, you get a profit of 120M.
- LPisGood 2y ago[dead]
- which 2y agoWhen a decently sized percentage of it goes to "independent monitors" almost entirely run by ex-DOJ revolving door types, yeah. See https://www.forbes.com/global/2010/0607/companies-payoffs-washington-extortion-mendelsohn-bribery-racket.html https://www.forbes.com/global/2010/0607/companies-payoffs-wa... And some think that FCPA enforcement and huge fines targeted at European companies like BNP Paribas motivated the creation of the EU tech extortion apparatus.
- some_random 2y agoIf you're going to argue that then it's not a bribe it's extortion which is very much a different thing.
- languagehacker 2y ago"McKinsey is a very different firm today than when these matters first took place" No they are most certainly not. Corruption is in McKinsey's DNA. Outside of the specific harms that McKinsey has caused across the country and across the world, management consulting groups in general have been utilized to sidestep legal protections against corporations within a shared industry colluding against each other. Companies like McKinsey, Bain, Accenture, etc., have been instrumental in the rapid increase of executive compensation, flat comp for workers compared to inflation, intentionally unsafe practices and corner-cutting to save money, and just generally creating as many negative externalities as possible in the name of feeding the beast that Milton Friedman created with his rhetoric about the primacy of the shareholder. A good read on this topic is "When McKinsey Comes to Town" by Forsyth and Bogdanich. There's a whole chapter dedicated to the South African bribery scandal. Sagar was not just a bad apple -- the company itself is the rot.
- awanderingmind 2y agoThank you for this, I agree.
- vundercind 2y agoYuuuup. They launder both corporate espionage and collusion as “best practices” (where’d they learn those? Your company! And your competitors!)
- alexashka 2y agoThis. More broadly, anyone that claims you can improve anything by sending randoms who read some books to companies and 'consult' there is selling you a fantasy.
- asdff 2y agoPart of that is the side effect that the companies themselves are not giving their own employees time to actually pause from the slog in the trenches for a second and you know, read the book themselves. Instead book readers are brought in to consult on operations.
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- awanderingmind 2y agoAs a South African, this is good news (it would have been nice if the payment was higher and more people at McKinsey were held accountable). Unfortunately we are unlikely to see accountability locally for whoever actually paid this bribe. The background is that this was part of the program of State Capture enabled by our former president (Jacob Zuma) and a very dubious family from India: https://en.wikipedia.org/wiki/Gupta_family https://en.wikipedia.org/wiki/Gupta_family. Our country was basically sold to the highest bidder - people speak of 'ten lost years'.
- DAGdug 2y agoWonder if Rajat Gupta, the former CEO of McKinsey who was incarcerated for sharing insider information, and the corrupt Gupta family, were connected in any way (they’re from the same inbred trading caste in India, a country that is sadly notoriously corrupt).
- hilux 2y agoAFAIK, they are not. Gupta is a very common name in India, and Rajat Gupta is from West Bengal.
- fakedang 2y agoBarring the insider trading case (where Rajat Gupta was largely an smaller accomplice to most of Rajaratnam's scheme), Rajat's rags to riches story is actually extremely inspiring. Perhaps he did not benefit from having good mentors - his mentor-professor at IIT Delhi being slimey Subramanian Swamy. https://en.m.wikipedia.org/wiki/Subramanian_Swamy https://en.m.wikipedia.org/wiki/Subramanian_Swamy
- fallingknife 2y agoWhy is the US DOJ wasting time and money enforcing other countries laws for them? They broke the law in South Africa. Let South Africa handle it.
- OnlineGladiator 2y agoBecause they also broke the law in the US.
- vkou 2y agoBecause US companies bribing foreign officials is anti-competitive against US companies which don't.
- crazygringo 2y agoAlthough you've got to balance that against the fact that US companies not bribing foreign officials will result in them losing business to foreign companies that are perfectly happy to bribe. It's a good question to ask why Chinese companies are allowed to get business in Africa with bribery, and the US then doesn't allow its companies to compete on a level playing field with China. Why should the US take a stance at all? Why not let South Africa deal with it? It's not harming the US, is it?
- vkou 2y agoForeign companies bribing foreign officials who operate in the US can also be sanctioned. And if they don't operate in the US, it's not the US's business to police something a company that has no presence in it does. It's very simple and consistent. Americans and American companies are subject to American laws. People and companies who are in America are also subject to American laws. If you are neither American nor in America, you are not. Nearly every country in the world follows a very similar set of rules regarding jurisdiction.
- tzs 2y agoThat doesn't really address the question they asked, which is more about whether or not it should be illegal rather than whether or not it is consistent. Your earlier comment justified it being illegal on the grounds that US companies bribing foreign governments is anti-competitive against other US companies that do not do so. That's an economic justification, not a moral justification. But if we are considering it economically rather than morally then we do have to consider what happens in the case of a foreign country where bribery is common and there are companies other than US companies that are competing there. In that case not allowing US companies to bribe does indeed level competition among US companies--they all lose equally to non-US companies. Is that actually a better economic outcome than allowing US companies to bribe (and thus compete with foreign companies) in countries where bribery is normal? That's a complicated question. It also might be a national security question if we continue heading into a new cold war kind of world. Is it better to have US companies operating in countries the US would like to influence even if those companies have to bribe to do so, or for US companies to stay out and cede influence to companies from countries on the others sides of that cold war?
- blackhawkC17 2y agoOf course, the company of concern is Eskom, the underperforming state electricity monopoly whose incompetence has dragged the South African economy down.
- swifthesitation 2y agoWhen the settlement cost is just the price of doing business... you know they made many times more than the fine.
- pluc 2y agoIt's a fee not a fine
- paulddraper 2y agoYou think they made more than $123M profit from this?? HN numbers are wild.
- echoangle 2y agoThat’s not strictly necessary for the claim. You have to factor in the odds of getting caught. If you do this and only get caught 10% of the time, you can make slightly less than 1/10 of the fine per case and still make money.
- paulddraper 2y agoFair. Speeding isn't worth a $100 fine. But if you only get caught 1/100 times you speed...
- Scoundreller 2y agoI mean, speeding is a pre-crime
- RandallBrown 2y agoThe article says they made approximately 85 million from this. Since it happened 10 years ago, they may very well have made money on this deal.
- some_random 2y agoIf the DOJ estimate (which is always inflated, let's be real here) is $85M how could they have possibly made more than $123M on it? Unless you're talking about other hypothetical bribes that we don't know about.
- yieldcrv 2y agoForeign Corrupt Practices Act is a Domestic Corrupt Practices Act
- sitkack 2y agoMoney shouldn't an allowed remedy for bribery. I think community service by the c-suite, at $10/hr should suffice.
- ozgrakkurt 2y agoYeah or just couple years prison time seems fair
- deleted 2y ago[deleted]
- FactKnower69 2y agofederal minimum wage is $7.25 actually :(
- sitkack 2y agoPerfect!
- moshegramovsky 2y agoBribery. So someone's going to jail?
- ozgrakkurt 2y agoNot in this world. We might go to jail for stealing stuff though
- Aeolun 2y agoMcKinsey pays a bribe to settle claims it bribed in the past. Very convincing.
- some_random 2y agoA fine levied by a sovereign nation is different from under the table bribes to government officials.
- smegger001 2y agodepends was the fine enough to make their action nonprofitable? if a fine is less than the profit from the action then its a cost of doing business
- some_random 2y agoYou can click on the article and read how much money the DOJ says McKinsey made from this bribe, and if you don't want to you can just take my word that it made this action unprofitable.
- FactKnower69 2y agoapply your critical thinking skills before posting. $85M in 2014 dollars is $113M in 2024 dollars, and something tells me McKinsey didn't just leave the money sitting in a high yield savings account all this time
- some_random 2y agoOh so still less than the $123M fine? As for what they did with the money, I get the point that they could have reinvested it and made additional profit but I find it way too speculative to be worth discussion especially when the $85M number doesn't appear to be the marginal value of the bribe and is possibly inflated already.
- lesuorac 2y ago
- blindriver 2y agoNo jail for anyone of importance as usual.
- Aloisius 2y agoThe sentence for the McKinsey partner who pled guilty hasn't been announced yet.
- WangComputers 2y agoIt's impossible to do business in Africa without bribing people, all these laws do is put Western companies at a tremendous disadvantage compared to Chinese ones.
- passwordoops 2y agoIn my first real job about a decade ago, I asked the APAC/China rep why the prices were 30-40% higher... "The hookers and bribes tax. Hookers and bribes"
- akira2501 2y ago> impossible to do business in Africa without bribing people Why? > all these laws do is put Western companies at a tremendous disadvantage While attempting to address a serious problem. You could say this of any law. > compared to Chinese ones. Not a standard I care about or am willing to be held hostage to. Moral sacrifice to capture international business is pretty gross. Probably why it wasn't even hard to pass the law.
- weard_beard 2y agoAdding: https://www.hup.harvard.edu/books/9780674299344 https://www.hup.harvard.edu/books/9780674299344 and: https://www.hup.harvard.edu/books/9780674979796 https://www.hup.harvard.edu/books/9780674979796 to my christmas list. I don't think the law or war are appropriate tools for establishing international morality, but maybe the right ones are somewhere in these.
- ip26 2y agoWhy? The explanation I've heard before is that when you need anything from a thoroughly corrupt government, as simple as a building permit or a visa for a foreign employee involved in a project, officials will simply not process your request without a bribe. They believe it is owed. End of story. I don't like the explanation in the slightest. But I do see how it might shut down opportunity if you can't overpower the obstacles, and aren't willing to bribe. The utility of US laws against bribing foreign officials is to break down the expectation by those officials of a bribe. But, from a game theory point of view, if China is willing to bribe, this becomes much less effective.
- mmooss 2y agoHow do we justify deregulation with situations like McKinsey, Boeing, FTX, Silicon Valley monopolies, etc.? It doesn't make sense to me that people who want competitive, safe markets and consumer protection don't use these endless examples.
- betaby 2y ago> How do we justify deregulation What exactly you think was deregulated? In general and in this particular case.
- mmooss 2y agoI mean the deregulation drive by the GOP, the next administration, and a many others.
- eviks 2y agoJust from the side comment that's easy to justify: this monopoly would've been deregulated out of existence, so no bribes > Of course, the company of concern is Eskom, the underperforming state electricity monopoly whose incompetence has dragged the South African economy down.
- Beijinger 2y agoAFAIK Ursula von der Leyen was minister of defense, she funneled gov consulting contract to McKinsey without an obligatory bidding process. Even some public employees were shocked by her behaviors. Worse, her son works for McKinsey. In the end, who cares?
- passwordoops 2y ago> In the end, who cares? Certainly not the lawmakers
- jongjong 2y agoThe bribe that keeps on bribin'...
- southernplaces7 2y agoNot to defend your typical mendacious megacorp and its dishonest ways, but we should also focus attention on the other site of this equation, the governments operating in many countries. They're usually pervasively, profoundly corrupt across many levels and will often actively encourage a culture of massive bribes by creating a regulatory environment so stifling that no other means of getting any project or major process done exists. Often they'll simply ignore their own laws to stop investment projects until someone coughs up money on an extra-official basis. I'm not talking about these governments honestly and in good faith creating and applying regulations for the well-being of their own nation. I'm referring to laws so byzantine that they're in place more as a dragnet for bribes, which is applied only selectively on a pay as you go & stop when you don't basis.
- whatshisface 2y agoEveryone knows that poor countries often have very corrupt governments, that's why there are laws in developed countries specifically written to address what's happened here that were written decades ago.
- southernplaces7 2y agoEveryone knows it but it's impressive how often the media focus is made heavily on the businesses paying bribes while disregarding the government functionaries actively extorting those bribes, or at least happily accepting them and using mechanisms to keep them flowing. Aside from these governments no longer doing that, what should private interests do, cease all investment and business in certain countries?
- deleted 2y ago[deleted]
- soraminazuki 2y ago> How many uplifting McKinsey projects like "more snuggles at the puppet factory" or "make grandma live forever" would you need to hear about to effectively counterbalance "turbocharge the opioid epidemic," "help fuck up Rikers even more," and "make a Saudi Arabian snitch list"? https://www.youtube.com/watch?v=AiOUojVd6xQ https://www.youtube.com/watch?v=AiOUojVd6xQ Great video by John Oliver, as always.
- ulfw 2y agoCost of doing business for that company
- inemesitaffia 2y agoFascinating the money isn't going to the South African Government. The harmed party
- londons_explore 2y agoSo why is this money paid to the US government? Shouldn't it go to the south african government, since south africas taxpayers were the ones harmed?
- diffeomorphism 2y agoObvious answer: because this is the American lawsuit for breaking American laws and there is another separate South African one for breaking South African laws.