Standard Bank Says Regiments Account Shut After Suspicious Deals

JOHANNESBURG (Capital Markets in Africa) – Standard Bank Group Ltd. shut an account belonging to advisory firm Regiments Capital Pty Ltd. when it failed to adequately explain suspicious transactions totaling tens of millions of rand, according to one of the South African lender’s top lawyers.

Regiments partnered with McKinsey & Co. to advise Transnet SOC Ltd., South Africa’s ports and freight rail operator, on the acquisition of new locomotives and took 30 percent of the consulting fees, lawyer Ian Sintontold a judicial panel that’s investigating the alleged looting of billions of rand from state companies during former President Jacob Zuma’s rule. Regiments then paid 30 percent to 50 percent of its cut to companies controlled by Salim Essa, whom it credited with landing the Transnet contract, he said.

Sinton said Regiments officials told him the rates McKinsey agreed with Transnet were five-times higher than they would have been had they negotiated directly with the state-owned company. As a result, they were happy to pay commission to Essa, who did no further work on the contract, he told the panel in Johannesburg on Tuesday.

“We found it implausible and our remedy was to terminate the relationship,” the lawyer said. “We complied with our statutory obligation. We didn’t think it was our responsibility to prove our suspicions correct or not.”

McKinsey in August last year said it withdrew from the Transnet contract before its fee was paid, that it didn’t help determine the locomotive prices or help select the winning suppliers. Regiments was the beneficiary of the deal, the U.S. consultancy said.

Last year, McKinsey separately reached a settlement to repay 1 billion rand ($69.8 million) to Eskom Holdings SOC Ltd. after admitting to having overcharged the state power utility.

Sinton, who retired as Standard Bank’s group general counsel in June last year but continues to work for the lender’s legal department, also testified that Standard Bank ceased doing business with McKinsey after it failed to adequately explain reports implicating it in unsavory deals in South Africa.

Essa is an associate of members of the Gupta family, who were friends with Zuma and in business with his son. Previous testimony given to the commission and other probes have implicated the Guptas in having orchestrated a looting spree with Zuma’s tacit consent, allegations they all deny. Regiments and Essa have also denied wrongdoing.

Source: Bloomberg Business News