An American consulting firm became a power broker in South Africa, then a pariah – The New York Times | Region & Cash

JOHANNESBURG – Ronel van Wyk was a tax fraud investigator with the South African Revenue Service for 18 years and led a group that tracked down smugglers and other criminals with a 90 percent conviction rate.

Then she received an email that puzzled her: a team from American consulting firm Bain & Company had been hired to overhaul the Revenue Service, even though the agency was considered effective by the International Monetary Fund and other international organizations. Bain advisors, empowered to make personnel decisions, soon told her that she and her entire team would be demoted — and stripped of their ability to go after tax cheats.

Ms van Wyk was one of dozens of Treasury officials who were sidelined in 2015 in what is now widely seen as an attempt by Jacob Zuma, the country’s then-president, to control the Inland Revenue, according to a report that emerged in January from a wide-ranging inquest into the nine bribery-ridden years of his tenure.

The report, which followed a series of hearings over four years, said Bain & Company was involved in “collusion” with Mr. Zuma in “one of the few instances in which President Zuma himself was directly and personally involved in the proposed activities and plans worked through a government agency.”

Bain was one of several international companies, including McKinsey and KPMG, to help facilitate this corruption, according to the report, which was overseen by Raymond Zondo, then Deputy Chief Justice of South Africa’s Constitutional Court. (He has since become Chief Justice.) The first part of the report dealt with Bain’s role with the IRS.

According to the report, Bain formed a “collaboration” with Ambrobrite, a local communications and project management firm that had little public sector experience but a direct link to Mr Zuma. Ambrobrite was co-founded by a soap opera producer, Duma ka Ndlovu, who was producing a telenovela with one of Mr. Zuma’s daughters.

Vittorio Massone, Managing Partner of Bain in South Africa, hired Ambrobrite in 2013 to grow Bain’s business with government agencies. Ambrobrite eventually became Bain’s second-highest-paid local “consultant” out of 53 worldwide, according to the Justice Commission’s report, which drew on a plethora of emails.

Bain said a forensic investigation of his work at the South African Revenue Agency by the law firm Baker McKenzie found that while the company made mistakes, they did not “intentionally harm” the Revenue Agency.

In a statement to The New York Times, Bain singled out Mr. Massone for wrongdoing. Bain said that he set up meetings with Mr. Zuma on his own time and that he formed the relationship without management approval.

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

In the emails given as evidence to the inquiry, Mr Massone’s colleagues raised concerns about Ambrobrite’s poor track record, fearing a political scandal. According to those emails, Mr Massone dismissed his colleagues’ warnings.

An employee in the Johannesburg office alerted her colleagues in London to what she believed to be a fraudulent tax compliance certificate from Ambrobrite. “This whole situation seems very shady,” said Geoff Smout, Bain’s finance director in London, in an email.

Ambrobrite did not respond to requests for comment or testify before the Commission. He was never accused of fraud.

Wendy Miller, Bain’s global marketing director at the time, wrote to Mr. Massone when concerns about the Ambrobrite deal reached the Boston headquarters. She feared that by hiring a virtually unknown local company with ties to Mr. Zuma, Bain would appear like he was just trying to buy influence.

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

She wrote that Bain was trying to restore his reputation after the 2012 presidential election, when Republican candidate Mitt Romney was criticized for his work at the consulting firm. Ms Miller, who has since left Bain, did not respond to a request for comment.

Internal presentations by Bain, given to the commission as evidence, show the company made proposals to Mr Zuma to reorganize other state agencies, such as those overseeing communications and energy, so that Mr Zuma would have direct oversight of them. This, according to the Justice Commission, could violate South African laws that prohibit the head of state from directly controlling state-owned companies.

Mr. Massone and Mr. Zuma met 17 times from 2012 to 2014. The commission’s report suggested that those meetings, and the fact that Bain knew who the new Treasury chief would be – Tom Moyane – before it was published were evidence of a plan between the consultancy and the presidency, the Treasury to infiltrate “and harm the institution”.

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

At the time, Mr Zuma was facing allegations of tax evasion, and the first task was to “neutralize” employees at the Financial Services Authority, who were seen as impediments, according to evidence presented during the investigation. The investigative report described Bain’s work with Mr. Moyane as “one of the clearest displays of government capture,” a term used to describe politically connected individuals and corporations made rich by government agencies.

Mr Zuma was forced to resign in 2018 after Cyril Ramaphosa became leader of the ruling African National Congress. Mr Ramaphosa promised to root out the bribery and soon sacked Mr Moyane. Mr Moyane did not respond to a request for comment.

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

It’s not clear to what extent Bain played a direct role in the day-to-day operations of the tax authority during the two years that it was under contract. But IRS executives who left told the commission that after Bain’s arrival, officials stopped holding town hall-style meetings and instead made big decisions behind closed doors.

Under a new commissioner appointed after Mr Moyane, the Treasury Board filed a criminal case against Bain in August 2019 for violating South Africa’s finance laws because his annual contract was renewed several times without the due public process. This case is still open. The Judiciary Commission also suggested that prosecutors investigate Bain’s behavior and review all of his contracts with the South African government.

In January, Bain had to leave Business Leadership SA, a coalition of companies in South Africa.

Prosecuting Bain could be difficult in part because of South Africa’s weakened prosecutor’s office, which has also been a victim of years of corruption, said Karam Singh, the executive director of Corruption Watch, an independent watchdog.

Bain’s work at the South African Treasury was first scrutinized during a 2018 investigation that led to Mr Moyane’s sacking. However, this latest report accuses Bain of a lack of transparency and cooperation with South African investigators.

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

The other investigation failed at Bain.

In 2018, the company hired Athol Williams, a former South African employee, to investigate what happened at its South African operations. But Mr. Williams quickly turned against the company, saying Bain officials ignored his questions about gaps in the internal investigation. His role feels ceremonial, he said in an interview.

Mr Williams became a whistleblower and was the source of many emails and other information that the Judiciary Commission relied on to prepare its report. He has written a book about Bain’s work at the IRS and has been very critical of the company on social media.

“It was just a consulting firm that sat at the table with Jacob Zuma and his buddies and designed the state conquest plan,” he said.

Ms van Wyk, the tax fraud investigator, said that after her demotion she was threatened by criminals, who were encouraged after learning that the tax agency’s police and investigative units were paralyzed by internal disputes.

She was subject to seven internal investigations at the IRS, which she says tried to hustle her out as she attempted to proceed with sensitive investigations. She later had two mild strokes and said she is still struggling to recover from the physical and mental effects of what happened to her at work.

“You start to question yourself and your own decisions, and you see conspiracies everywhere,” she said. “But then after five years you realize that there were no conspiracies. You were right. And no one wanted to listen to us.”

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