Eskom has reversed its position that its R1bn contract with McKinsey was unlawful and has now declared the payment above board, even though prosecutors regard it as the proceeds of crime.
The move appears to be a desperate attempt by Eskom executives to avoid being held accountable and criminally liable for paying McKinsey and Gupta-linked Trillian R1.6bn without a valid contract.
McKinsey has written to the cash-strapped Eskom five times since October to initiate legal proceedings to set aside its contract so that it can return the fees after it was served with a letter of demand from law firm Bowmans in October, but has received no response. McKinsey told Parliament it would reimburse Eskom regardless of the outcome of legal process.
The letter of demand, served on Trillian and McKinsey by Eskom’s head of legal Suzanne Daniels, said the contract was unlawful as it had not been approved by the Treasury. She was suspended two days later.
Now Eskom says the payment and the contract are above board — but it still wants the money back.
Business Day has seen e-mails outlining Eskom’s new position written earlier in January by then acting CEO Sean Maritz to McKinsey, shortly before he was replaced by Phakamani Hadebe.
In e-mails sent on January 16, Maritz withdrew the Bowmans letter of demand and said that the Eskom board had "finalised its investigation" into the deal and found no wrongdoing by Eskom executives, declaring that "the payments are valid".
The move came a day after the National Prosecuting Authority (NPA) announced it had been granted ex parte preservation orders for R1.6bn paid to Trillian and McKinsey.
In court papers, the NPA’s Asset Forfeiture Unit said that the payments amounted to the proceeds of crime, "namely fraud, theft, corruption and money laundering".
Despite Maritz’s endorsement of McKinsey’s contract and payment, he asked the consultancy to deposit R1bn into Eskom’s FNB account. Eskom confirmed on Wednesday that it had given the McKinsey contract and payments a clean bill of health but still wanted to be reimbursed "based on their offer
in Parliament".
McKinsey described the position of Eskom as "shifting and contradictory". The consultancy said Bowmans had found Eskom executives had acted unlawfully in contracting with McKinsey without Treasury approval. "McKinsey encouraged Eskom to pursue the court process by which to refund the fees," the firm said.
Then Eskom changed its mind and told McKinsey "the contract was in order and that there had been no wrongdoing by Eskom executives".
McKinsey was "nevertheless [asked to] pay the money into Eskom’s bank account". "Eskom has not shared the basis for this new conclusion," it said.
"Eskom’s shifting and contradictory positions only reinforce our belief that the South African authorities are the appropriate bodies to determine how and to whom to return the fees."
McKinsey said it had talked to the NPA last week "on how to give effect to our pledge to return the fees we earned" and was served the preservation order on Wednesday.
"We may need to file papers to preserve our legal rights, but we want to be very clear that
we are totally committed to returning the fees we earned on the Eskom turnaround programme through an appropriate legal process and we are hopeful that engagement with the AFU [asset forfeiture unit] will present such an opportunity," McKinsey said.
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