Hard Lessons Learned

It is a risk McKinsey now regrets taking.

The advocacy group Corruption Watch referred the firm’s conduct to the United States Justice Department for possible violations of the Foreign Corrupt Practices Act. McKinsey declined to say whether federal investigators had contacted the firm; the Justice Department declined to comment. The National Prosecuting Authority in South Africa has frozen the proceeds of the Eskom contract, pending the completion of the government’s investigation. And several banks and corporations, including the South African arm of Coca-Cola, have said they will not do business with McKinsey until investigations are concluded.

McKinsey vehemently denies breaking any laws, and says that this view has been validated by a monthslong internal inquiry involving more than 50 lawyers reviewing millions of documents and emails.

The firm does admit mistakes. McKinsey will now give state-owned companies the same scrutiny it would government agencies or ministries. That policy may have a major impact in China, where McKinsey has advised at least 19 of the biggest state-owned companies as well as the country’s powerful planning agency.

In a statement, McKinsey said that it was “not careful enough about who we associated with,” that it should not have worked alongside Trillian after cutting its ties and that it did not communicate properly with Mr. Budlender. “We are embarrassed by these failings, and we apologize to the people of South Africa, our clients, our colleagues and our alumni, who rightly expect more of our firm.”

At the end of June, Mr. Barton, 55, will step down as previously planned. McKinsey’s nearly 600 senior partners voted to replace Mr. Barton with Kevin Sneader, a British citizen. Last weekend, as The Times was preparing this article after weeks of questioning McKinsey about its secretive culture, The Financial Times published an interview with Mr. Sneader, who said the firm could no longer “hide from the outside world.”

Mr. Sagar has left the firm with his full benefits in place. Mr. Weiss has been sanctioned, though McKinsey declined to say what that involved. The firm’s Johannesburg lawyer, Mr. Phiri, resigned, and the head of McKinsey’s Africa practice was transferred to Hong Kong.

Mr. Fine, who now leads McKinsey’s worldwide public-sector practice in London, cast the fallout from Eskom in personal terms. “I have seen the anger and disappointment in my clients’ eyes,” he told the South African Parliament. He added, “I’ve experienced rejection from people that I really love and trust, and that’s been hard.”