Criminal charges against McKinsey cast spotlight on its business during former Canadian ambassador Dominic Barton’s tenure

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Canada’s former ambassador to China is declining to comment on South Africa’s decision to file criminal charges against McKinsey & Co. for alleged wrongdoing in a corruption scandal during his tenure as global director of the giant consulting company.

Dominic Barton, the Canadian ambassador to Beijing from 2019 to 2021, was McKinsey’s global managing partner for nearly a decade. Before leaving the post in 2018, he issued an apology for “errors of judgment” in McKinsey’s dealings with corruption-tainted firms in South Africa.

McKinsey later agreed to repay about US$100-million in fees it had received from state-owned companies in South Africa. But the country’s prosecutors went further last Friday, laying criminal charges against McKinsey’s local branch in connection with its contract with Transnet, the state-owned freight rail company.

It is believed to be the first time in its 96-year history that McKinsey has faced criminal charges.

In his final year as McKinsey’s global managing partner, Mr. Barton travelled six times to South Africa to respond to issues relating to McKinsey’s dealings with state-owned companies during the corruption saga, which became known as the “state capture” scandal, referring to the capture of the state by private business interests.

On Thursday, Mr. Barton said he would not comment on South Africa’s criminal charges against McKinsey. “Unfortunately, I don’t have any information on this development,” he told The Globe and Mail in an e-mail.

He referred The Globe to a statement McKinsey issued last week after the criminal charges were announced. “We remain deeply remorseful that our firm has in any way been associated with the dark era of state capture,” the statement said.

The statement noted that three McKinsey partners had testified to a South African commission of inquiry on state corruption. “Given no new information has been presented since the commission, we believe pursuing McKinsey does not have merit and we will defend ourselves against any claims,” it said.

The charges relate to a contract McKinsey obtained to advise Transnet on a US$5-billion contract to buy a fleet of locomotives.

It was the biggest procurement contract in South African history, and the cost mysteriously increased by nearly 40 per cent just a few months after McKinsey’s original estimate. Canadian company Bombardier Inc. received a quarter of the contract, with Transnet receiving a large loan from federal export agency Export Development Canada.

McKinsey’s local partner on the deal was Regiments Capital, controlled by the powerful Gupta family – three brothers who were business partners with the son of Jacob Zuma, the South African president at the time of the locomotive contract in 2014.

“We should have conducted a more thorough and professional due diligence of Regiments in 2012,” Mr. Barton’s successor at McKinsey, Kevin Sneader, said in a 2018 speech in which he repeated Mr. Barton’s profuse apologies.

Criminal charges were also laid last week against McKinsey’s former senior partner in South Africa, Vikas Sagar, who was closely involved in the Regiments deal. The next court hearing in the case is scheduled for Oct. 14.

In its statement, McKinsey said the state inquiry found evidence suggesting Mr. Sagar was “untruthful” with the company. It said it had reported Mr. Sagar’s conduct to the police and prosecutors, “for which he will have to account.”

The South African corruption scandal was just one of many controversies that have dogged Mr. Barton. During his tenure at McKinsey, the firm worked to improve the image of pro-Kremlin Ukrainian president Viktor Yanukovych. It also prepared a brief on how Saudi Arabia’s austerity measures were being received, raising questions about whether its analysis played a role in Riyadh’s effort to target its online critics.

McKinsey recently agreed to pay US$573-million to settle investigations in U.S. states over its consulting work related to sales of opioids. Mr. Barton has said he was unaware of the consulting firm’s role in advising a U.S. drugmaker to bolster sales of OxyContin, the highly addictive painkiller that contributed to tens of thousands of deaths in Canada and the United States.

He told The Globe earlier this year that it was personally upsetting to learn McKinsey was providing advice to Purdue Pharma on tactics to drive sales of Oxycontin, and that he understands the damage caused by opioid misuse.

As head of McKinsey, he also led the company through several controversies related to China. While he was praised as ambassador for helping secure the release of two Canadians from Chinese imprisonment, he was criticized for ignoring China’s human-rights abuses.

In 2018, the company held a retreat in China’s western Xinjiang region, just six kilometres from what is believed to be an internment camp where members of the Uyghur ethnic minority are subjected to forced political indoctrination.

McKinsey’s work in China, including during Mr. Barton’s tenure, has drawn scrutiny from U.S. lawmakers, who have demanded it share information about its work for state-owned clients.

U.S. Senator Marco Rubio, vice-chairman of the Senate Select Committee on Intelligence, has pressed McKinsey to reveal all its relationships with the Chinese Communist Party and whether it made sure its Chinese clients were not controlled by the military or involved in human-rights violations.

The New York Times reported in 2018 that McKinsey advised 22 of China’s 100 largest state-owned enterprises. The Times said Mr. Barton advised China Communications Construction Co., which has built militarized islands in the South China Sea in violation of international law. The World Bank had banned the company for eight years over bid-rigging in the Philippines.

Opposition parties accused Mr. Barton of leveraging his China ambassadorship when he resigned last December to become chair of Rio Tinto, an Anglo-Australian mining conglomerate that does half of its business in China.

After he took over as chair of Rio Tinto, Foreign Affairs Minister Mélanie Joly named him to an Indo-Pacific advisory panel. One source on the panel said Mr. Barton has argued that relations with Beijing can be managed. The Globe is not identifying the source, who was not authorized to publicly discuss the panel’s deliberations.