Major firm guilty of serious offences wants a comeback in South Africa

Bain & Co. is fighting a legal battle against South African finance and tax authorities after becoming embroiled in a corruption scandal.

It wants to overturn a decades-long ban on doing business with the state.

The case is about to enter its second year as it tries to rehabilitate its reputation in the country through efforts, including unpaid work for prominent business organisations.

In the court documents, Bain admitted to “mistakes” at the South African Revenue Service (SARS).

The agency’s restructure gutted it, damaging its ability to combat crime in an era of endemic government corruption under former President Jacob Zuma.

Still, the consultancy said the legal provisions used to ban it were unconstitutional.

The local unit of Bain “knows and accepts that we must take our rightful medicine. We’ve willingly done so to date,” it said in papers.

“That does not mean we should be supine in the face of unconstitutional and unlawful revenge measures that may erode the rule of law for everybody.”

Bain is just one of a number of international firms — including McKinsey & Co., SAP, KPMG, and ABB — that have seen their reputations tarnished because of links to state-corruption scandals during Zuma’s rule, which ended in 2018.

All have paid back fees or accepted fines in a bid to atone for the conduct of their employees.

The Treasury has filed a notice to oppose Bain’s application and will focus on the constitutional challenge, it said in response to questions.

The tax agency has filed a similar notice and will respond to Bain’s submissions in an answering affidavit in due course, it said in an emailed response to questions.

The National Treasury banned Bain in 2022 because it “engaged in corrupt and fraudulent practices” related to a contract with the country’s tax agency, it said at the time.

The move came after a judicial commission tied it to illegal dealings during a restructuring of the revenue service, where Bain’s recommendations saw senior staff ousted and investigative capacity destroyed.

While Bain has said it’s “ashamed” of its role in destabilizing the tax agency, court papers show it blames “lapses in leadership” and said its employees didn’t knowingly partake in corruption or fraud.

Its former South African head, Vittorio Massone, met with Zuma, contravening normal practice. He also met with the former president’s ally, Tom Moyane.

A commission of inquiry accused Moyane of wrongdoing before he became head of the tax agency. Both Moyane and Zuma have denied wrongdoing. Bain replaced Massone in 2018 and he has left the country.

‘Sledgehammer’

Bain argues its blacklisting was a result of regulatory overreach by the Treasury and South African Revenue Service, and that the Treasury took the decision in terms of an alleged unconstitutional provision in the country’s laws, making it procedurally unfair, the court papers show.

It wants the court to declare clauses in acts governing state procurement unconstitutional and to set aside the Treasury’s decision to ban it from government work as unlawful and invalid.

“The sledgehammer that has been used to punish Bain SA without legal restraint is not a weapon that should lie in the hands of any regulator in a constitutional state,” it said.

In accordance with court rules, the tax agency produced a record of its processes. Bain is expected to supplement its papers further; after that, both the Treasury and SARS would be entitled to file answering affidavits.

While Bain paid the tax office about R217 million, including interest it received for its dealings at the tax agency, it has struggled to restore its reputation in South Africa.

It stopped bidding for state work in 2019. It has consulted for Sasol, the country’s biggest company by revenue.

“Since our work with the South African Revenue Service, we have taken significant remedial actions, both locally and globally, to ensure such issues do not recur,” Bain said in a response to queries.

“This includes significantly strengthened governance for public sector engagements worldwide.”

The company took the legal action after its attempts to engage with the Treasury and SARS were ignored, it said.