Deloitte Dragged Into South African State Corruption Scandals

(Bloomberg) -- Deloitte LLP has become the latest international company dragged into South Africa’s government-linked corruption scandals.

State-owned power utility Eskom Holdings SOC Ltd. said on Monday that it wants the accountancy and advisory firm to return 208 million rand ($14 million) that it alleges were overpriced contracts awarded in 2016.

The contracts were awarded during the tenure of former Chief Financial Officer Anoj Singh and ex-senior executive Prish Govender. Both have been tied to corruption probes at the utility. They deny wrongdoing.

“Deloitte was granted contracts when their prices were five times higher than those of their competitors,” Jabu Mabuza, Eskom’s acting chief executive officer, said in a statement. Correct procedures were not followed and in some cases proposals were submitted before tenders had been announced, he said.

Deloitte disputed the allegations, saying it’s been in talks with Eskom for “some time” over the matter and had explained the processes that were followed.

“Deloitte Consulting therefore disagrees with and disputes the allegations made by Eskom,” the company said in a statement. “While Deloitte Consulting is disappointed by this recent development, we welcome the opportunity to put our version and the facts of the matter before a court.”

The affidavit, signed by Mabuza, alleges that “the awards to Deloitte were tainted by gross impropriety.” Estimated costs for the services mirrored what had been set out in unofficial proposals a Deloitte director submitted to Singh and Govender, subverting a transparent process, according to a copy of the document.

Off the Record

There were five “off the record” proposals for services and what they would cost made to Eskom between March and June 2016, well before an official procurement process started, according to the affidavit. Subsequently, the scope of the services was increased, along with the price the utility paid.

McKinsey & Co agreed to return money to Eskom after a dispute over the legality of its contract. Bain & Co. has returned money to the South African Revenue Service over an improperly awarded contract and KPMG LLP has apologized for poor quality work that led to the departure of key revenue service officials.

Gartner Inc. is in talks with the revenue service over a contract the agency says was improperly awarded and SAP SE suspended executives after a probe found it paid about $11 million in commissions to secure contracts with Eskom and state ports and rail company Transnet SOC Ltd.

To contact the reporters on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net;Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editors responsible for this story: John McCorry at jmccorry@bloomberg.net, Liezel Hill, Jacqueline Mackenzie

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