POLITICS
03/05/2018 12:12 SAST | Updated 03/05/2018 12:12 SAST

Emails Show How Former Eskom Exec Changed His Tune On McKinsey Money

It seems the global consultancy firm didn't believe the Eskom leadership to be honest brokers – and insisted on a court process to finalise the matter.

Arnd Wiegmann / Reuters

Sean Maritz, who resigned from Eskom earlier this year while suspended as acting CEO, wrote two separate letters to consultancy firm McKinsey asking it to return fees paid before he was suspended at the end of January.

According to two different emails — sent to McKinsey within 30 minutes of each other on January 16 this year — Maritz declares that the agreement between the two companies is legal and valid. In one email he makes no reference to the Eskom board, while in the other he says the board "finalised investigations" into the contract and found no wrongdoing. The board was replaced four days later. Maritz was suspended within 10 days.

The Asset Forfeiture Unit obtained a preservation order earlier this year to freeze R1.6-billion in fees paid to McKinsey and Gupta-linked firm Trillian to devise a turnaround strategy for the parastatal. McKinsey refused to enter into a BEE partner agreement with Trillian, after the company failed to provide clarity on, inter alia, its ownership and shareholding structure. Eskom has now initiated proceedings to obtain a court order to ensure it is refunded by the two firms.

In one email to McKinsey, Maritz refers to the consultancy's submission to Parliament and provides a bank account number into which the fees of R1-billion needed to be repaid.

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In another email, sent on the same day, Maritz sings a different tune, and refers to the Eskom board's new position that the payments were valid — even though it wants the fees returned.

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McKinsey balked at Maritz's request, in response to the state-owned entity's lack of communication over the previous months — especially after the consulting firm was served with a letter by law firm Bowman's in October last year stipulating that the contract was invalid.

The firm has been hurt by its exposure to the Gupa-Trillian-Eskom fallout, and has lost most of its financial-services business in South Africa, including Standard Bank and Absa. It has also instructed each of its global partners, numbering 1,000 partners and 500 senior partners, to cough up various amounts in order to finance the return of the R1-billion the company received from Eskom. McKinsey has also launched forensic investigations into the company's activities at Eskom,while restructuring its risk-management protocols.

The firm has, however, continued to take fire because of its insistence on a court order to force it to return the fees to Eskom — even though the company has claimed it will do so by any means possible.

It now seems that McKinsey was reluctant to pay back the fees, because it did not trust the Maritz regime to manage the money legally and wanted a transparent and open process in court. There were also fears at the consultancy's Sandton headquarters that the company might be exposing itself to accusations of bribery, if it didn't take the legal route and hand the money back in full view of the public.

A McKinsey spokesperson said the company welcomed Eskom's approach to the courts. "We welcome this move by Eskom's new leadership. We have since October last year been seeking a transparent legal process through which to return the fee we earned on the turnaround programme. With Eskom joining the legal proceedings, we are a step closer. We hope that together with the Asset Forfeiture Unit (AFU) and Eskom, we can work to resolve the legal process necessary to reach a speedy conclusion to this matter."

An Eskom spokesperson confirmed McKinsey wanted to return its fees, but that Trillian had refused to do so. The company has received leave from the court to intervene in the AFU's attachment of the McKinsey and Trillian monies "to ensure that its rights to the property which has been preserved are recognised and dealt with appropriately in the proceedings".