Boston consultancy turned power broker, then pariah, in South Africa


Then she received an email that left her perplexed: a team from the American consulting firm Bain & Co had been hired to overhaul the revenue department, even though the agency had been considered effective by the Monetary Fund. International and other international organizations. Bain’s consultants, empowered to make personnel decisions, quickly told her that she and her entire team were being demoted – stripped of their ability to fight tax evaders.

Van Wyk was one of dozens of tax service workers who were sidelined in 2015 in what is now widely seen as an effort by Jacob Zuma, the country’s president at the time, to control the tax agency, according to a January report of a thorough judicial investigation into its administration’s nine years of corruption.

During Zuma’s tenure as president, corruption seeped into nearly every facet of South Africa’s government, the investigation found, and corruption in the tax collection agency hampered the country’s ability to provide basic services, such as housing and electricity.

The report, which follows a four-year series of hearings, says Bain & Co worked in “collusion” with Zuma in “one of the few instances where Chairman Zuma himself was directly and personally involved in activities and takeover plans of a government entity.”

Bain was one of many international companies, including McKinsey and KPMG, that helped facilitate this corruption, according to the report, which was overseen by Raymond Zondo, Deputy Chief Justice of the Constitutional Court of South Africa at the era. (He has since become chief justice.) The first part of the report focused on Bain’s role at the tax agency.

Bain, according to the report, began a “collaboration” with Ambbrrite, a local communications and project management firm that had little experience in the public sector but a direct connection to Zuma. Ambbrrite was co-founded by a soap opera producer, Duma ka Ndlovu, who produced a telenovela with one of Zuma’s daughters.

Bain’s managing partner in South Africa, Vittorio Massone, hired Ambbrrite in 2013 to help grow Bain’s business with government agencies. Ambbrrite eventually became Bain’s second highest-paid local “advisor” out of 53 worldwide, according to the Judiciary Committee’s report, which relied on a trove of emails.

Bain said a forensic investigation into his work at the South African Revenue Service by law firm Baker McKenzie found that although the company made mistakes, it did not “intentionally harm” the tax agency.

In a statement to The New York Times, Bain named Massone for wrongdoing. Bain said he arranged meetings with Zuma in his spare time and developed that relationship without the approval of company management.

Massone, who left Bain in 2018, did not respond to a request for comment.

In emails submitted as evidence to the inquest, Massone’s colleagues, fearing a political scandal, raised concerns about Ambbrrite’s poor track record. Massone dismissed his colleagues’ warnings, according to those emails.

A worker in the Johannesburg office alerted her colleagues in London to what she believed to be Ambrite’s fraudulent tax compliance certificate. “This whole situation looks very fishy,” read an email from Geoff Smout, Bain’s chief financial officer in London.

Ambbrrite did not respond to requests for comment, nor did it testify before the commission. He was never charged with fraud.

Wendy Miller, Bain’s global head of marketing at the time, wrote to Massone as concerns about the Ambbrrite deal reached headquarters in Boston. She worried that by hiring a virtually unknown local company with ties to Zuma, it would appear that Bain was simply trying to buy influence.

“I’m concerned that we’re trading short-term access for long-term issues,” Miller wrote in an internal email in 2014.

She wrote that Bain was trying to recover his reputation after the 2012 presidential election, when Republican candidate Mitt Romney came under fire for his work at the consultancy. Miller, who has since left Bain, did not respond to a request for comment.

Bain’s internal presentations, given to the commission as evidence, show that the company presented proposals to Zuma to restructure other public agencies, such as those that oversee communications and energy, so that Zuma could oversee them directly. According to the Judiciary Committee, this could violate South African laws which prohibit the head of state from directly controlling state-owned companies.

Massone and Zuma met 17 times from 2012 to 2014. The commission’s report suggested that those meetings and the fact that Bain knew who would become the new head of the tax agency – Tom Moyane – before he was made public were evidence of a plan between the consulting firm and the presidency to infiltrate the tax authorities “and cause damage to the institution”.

Bain helped groom Moyane, a Zuma loyalist, to take over the tax agency as the new commissioner. Moyane is accused of destabilizing the agency and losing millions of dollars in tax revenue.

At the time, Zuma was facing tax evasion charges, and the first thing to do was to “neutralize” tax department employees who were seen as obstacles, according to evidence presented at the inquest. The investigative report describes Bain’s work with Moyane as ‘one of the clearest displays of state capture,’ a term used to describe politically connected individuals and companies who enrich themselves through agencies. of State.

Zuma was forced to resign in 2018 after Cyril Ramaphosa became the leader of the ruling African National Congress. Promising to root out the graft, Ramaphosa quickly fired Moyane. Moyane did not respond to a request for comment.

Zuma, through his foundation, did not respond to a request for comment. He also refused to testify before the commission, which led to his incarceration for contempt of court.

It is unclear to what extent Bain played a direct role in the day-to-day running of the tax agency during the four years of his contract. But the tax agency executives who left told the committee that once Bain arrived, officials stopped holding town hall-style meetings and instead made big decisions behind closed doors.

Under a new commissioner named after Moyane, the Revenue Service filed a criminal complaint against Bain in August 2019 for breaching South African financial laws because his annual contract was renewed multiple times without proper public process. This case is still open. The Judiciary Committee also suggested that prosecutors investigate Bain’s conduct and that all of his contracts with the South African government be reviewed.

In January, Bain was forced to resign from Business Leadership SA, an association of companies in South Africa.

According to Karam Singh, executive director of Corruption Watch, an independent watchdog, it can be difficult to prosecute Bain criminally, in part because of the weakening of the South African prosecution service, which has also been victim to years of corruption.

Bain’s work at the South African Revenue Service first came under scrutiny during a 2018 investigation that led to Moyane’s dismissal. This latest report, however, accuses Bain of a lack of transparency and cooperation with South African investigators.

Bain sought to make amends, apologizing to the South Africans and reimbursing his costs. The consultancy has also launched two internal investigations into its conduct in South Africa, including that of Baker McKenzie.

The other investigation backfired on Bain.

In 2018, the company hired Athol Williams, a former employee from South Africa, to look into what happened in its South African operations. But Williams quickly turned on the company, saying Bain officials ignored her questions about flaws in the internal investigation. His role was ceremonial, he said in an interview.

Williams became a whistleblower and was the source of numerous emails and other information that the Judiciary Committee relied on to produce its report. He wrote a book about Bain’s work at the tax agency and was highly critical of the company on social media.

“There was only one consulting firm sitting at the table, with Jacob Zuma and his cronies, to design the state capture plan,” he said.

Van Wyk, the tax evasion investigator, said after being demoted she was threatened by emboldened criminals after learning that the tax agency’s police and investigative units were crippled by disputes internal.

She has been the subject of seven internal investigations at the revenue agency into what it believes are attempts to deport her as she tried to pursue sensitive investigations. She later had two mild strokes and said she was still struggling to recover from the physical and mental effects of what happened to her at work.

“You start questioning yourself and your own decisions, and you see conspiracies everywhere,” she said. “But then you realize, after five years, it wasn’t conspiracies. You were right. And nobody wanted to listen to us.

© 2022 The New York Times Company


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