Bain banned from UK state contracts for ‘gross misconduct’ in South Africa

Bain & Co, the Boston-based global management consultant, was hit on Tuesday with a three-year ban from bidding on UK government contracts due to its “gross misconduct” in a major corruption scandal in South Africa. South.

Cabinet Office minister Jacob Rees-Mogg told Bain the case had made the company’s integrity “questionable” and he was not convinced she had taken her part in the scandal.” seriously enough”.

Britain is the first Western country to impose such sanctions on Bain for his role in the South African ‘state capture’ scandal and there is already pressure on the United States 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 retrospectively from January 4, 2022. after three years, Bain & Co will have restored its reputation,” he wrote.

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

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

He told Hadley the company would be barred from Cabinet Office contracts under the 2015 legislation 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 the way Bain’s South African division had “connived” with the regime. former President Jacob Zuma to undermine the country’s tax services.

The consultancy has won UK public sector contracts worth up to £63m since 2018, including £40m of Brexit consultancy work for the Cabinet Office, but the damage caused to the company will be mainly related to reputation.

In a February letter to Hain, 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’m very happy. This sets a marker for any companies that behave illegally, unethically and unprofessionally 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 concern about the process and its outcome and to correct any inaccuracies in their letter.

“If necessary, we will then consider other options for the review of the decision. In the meantime, we will continue to work with the Cabinet Office to ensure that we do what is necessary to restore our standing with the UK government. »

Earlier this year, an investigation into South Africa’s biggest post-apartheid corruption scandal revealed that Bain helped undermine the country’s tax service through consultancy work that aided Zuma allies.

Bain’s work on a restructuring of South Africa’s tax services was “a clear example of how the private sector became complicit” in the collapse of public institutions, the inquiry said.

He added that Bain was looking to use a relationship with Zuma to acquire other government business.

Bain has previously admitted failures in his work in South Africa and reimbursed expenses, but said the findings of the investigation mischaracterized his activities. Zuma has denied any involvement in corruption.

Other international consulting firms have been implicated in corruption scandals in South Africa.

McKinsey agreed in 2020 to repay around 650 million rand ($39 million) for irregularities in contracts it had with a local partner in state-owned companies.

Auditor KPMG apologized in 2017 for “errors” in the work of companies linked to the Gupta family, accused of serious corruption through links to Zuma.

British public relations firm Bell Pottinger was bowled over by its work for the Guptas, leading to accusations that it stoked racial tensions in South Africa.

Prohibiting a company from bidding on public sector contracts is rare. Security group G4S was temporarily banned in 2013 after it overcharged the government for electronically tagging criminals, some of whom were dead or still in jail.

Consulting firm Deloitte stopped launching public works for six months in 2016 after a leaked memo in which its consultants criticized the government’s Brexit strategy.

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