Bain banned from UK government contracts for ‘serious misconduct’ in South Africa

Bain & Co, the Boston-based global management consultant, was hit on Tuesday by a three-year ban on tendering for UK government contracts for its “serious professional misconduct” in a major corruption scandal in South Africa.

Cabinet secretary Jacob Rees-Mogg told Bain that the affair had left the company’s integrity “questionable” and that he was not convinced it had taken its role in the scandal “sufficiently seriously.”

Britain is the first Western country to impose such penalties on Bain for his role in South Africa’s state capture scandal and there is already pressure on the US to follow suit.

In a letter seen by the Financial Times, Rees-Mogg told James Hadley, Bain’s UK managing partner, that the three-year ban would apply retroactively from January 4, 2022. His reputation,” he wrote.

Rees-Mogg’s intervention came after pressure from Lord Peter Hain, the veteran anti-apartheid activist, who had urged Boris Johnson’s government to punish Bain for his “despicable” behavior.

Initially, Cabinet Office officials advised that no action was needed against the company, but Rees-Mogg sought further advice, including from an outside QC.

He told Hadley the company would be barred from contracts with the Cabinet Office under the 2015 law on the grounds that “Bain & Co is guilty of serious professional misconduct which renders its integrity questionable”.

Rees-Mogg, who will advise all government departments to apply the same three-year ban, said he was particularly concerned about how Bain’s South African division “conspired” with former President Jacob Zuma’s regime to overthrow the government. undermine the country’s tax authorities.

The consultancy has been awarded UK public sector contracts worth up to £63million since 2018, including £40million worth of Brexit consultancy work for the Cabinet Office, but the damage to the company will mainly be reputational damage.

In a letter to Hain in February, the then cabinet minister, Steve Barclay, wrote that the company “was not a strategic supplier to the government and is not currently undertaking any substantial work for the government”.

Hain said: “I am very satisfied. This is a flag to all companies that behave in an illegal, unethical and unprofessional manner that they will not be able to bid for government contracts.

“I commend Jacob Rees-Mogg for doing this and I want the US government to do the same.”

Bain said: “We were disappointed and surprised by the minister’s decision. . . We will respond to express our concerns about the process and its outcome and to address inaccuracies in his letter.

“If necessary, we will look at other options to review the decision. In the meantime, we will continue to work with the Cabinet Office to ensure we are doing what it takes to re-establish our position with the UK government.”

Earlier this year, an investigation into South Africa’s biggest post-apartheid corruption scandal found that Bain had helped undermine the country’s tax authorities through consulting work aiding Zuma’s allies.

Bain’s work on a restructuring of the South African tax authorities was “a clear example of how the private sector colluded” with the collapse of public institutions, the study said.

It added that Bain wanted to use a relationship with Zuma to take over further government activities.

Bain has previously admitted that his work in South Africa has failed and has refunded his fees, but said the investigation’s findings misrepresented his activities. Zuma has denied any involvement in corruption.

Other international consultancies are embroiled in corruption scandals in South Africa.

In 2020, McKinsey agreed to reimburse approximately R650 million ($39 million) for irregularities in contracts it entered into with a local partner at state-owned companies.

Accountant KPMG apologized in 2017 for “mistakes” in work for companies associated with the Gupta family, accused of serious corruption through ties to Zuma.

British public relations firm Bell Pottinger was brought down for its work for the Guptas, leading to accusations that it fueled racial tensions in South Africa.

Banning a company from bidding on government contracts is rare. Security group G4S was temporarily banned in 2013 after they overcharged the government for electronically marking criminals, some of whom were dead or still in prison.

Consultancy Deloitte stopped pitching public works for six months in 2016 after a note leaked in which its consultants criticized the government’s Brexit strategy.

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