Bain ‘regrets mistakes’ but disagrees with the consequences

US consulting firm Bain & Co says* it “deeply regrets mistakes made” in its engagement with the South African Revenue Service (Sars) between 2015 and 2017, and that it is embarrassed and angry that its work was used by others to damage the tax agency and SA.

This follows National Treasury’s announcement on Thursday (29 September) that Bain would be prohibited from tendering for public sector work for a period of 10 years, commencing 5 September 2022, “for engaging in corrupt and fraudulent practices related to a Sars contract”.

This follows a ban imposed by the UK government, prohibiting the company from tendering for public sector work for three years for its role in state capture in SA. Bain is challenging that ban in court.

Whistleblower Athol Williams, a former senior partner at Bain, led a chorus of condemnation against Bain and demanded that the SA government follow the UK’s example.

In August, National Treasury acting director-general Ismail Momoniat called on private sector companies in SA and abroad not to conduct business with Bain.

Responding to the latest ban, Iraj Abedian, CEO of Pan-African Investment & Research Services, tweeted:

Finally some action from the Government! Better late than never. Now, the private sector has to follow suit urgently..

Treasury bans Bain & Co. from public sector contracts for a decade https://t.co/IPnbth8AnE

— Iraj Abedian (@IrajAbedian) September 29, 2022

Responding to the ban on Thursday, Bain & Co says it had repaid all fees plus interest received from Sars prior to the sitting of the Nugent Commission, which was set up in 2018 to investigate governance failings at Sars and to recommend steps to prevent their repetition.

Read: State capture scorecard: R500bn looted, zero assets recovered

Bain says it has not pursued any public sector work since 2019, nor did it have plans to do so in the future.

The company says it nevertheless disagrees with the ban and is considering its options in response to this decision.

“We had already reached out to various stakeholders, including Treasury and Sars, to engage in further dialogue. Despite this outreach, we were given no notice of or opportunity to respond to the restriction prior to its apparent implementation,” says the statement.

National Treasury says it is collaborating with Sars and is “in the process of restricting Bain & Co South African Directors through a phased approach”.

‘Premeditated offensive’

The Nugent report concluded that there was a “premeditated offensive against Sars”, strategised by the South African office of Bain to allow former Sars commissioner Tom Moyane to seize the tax agency.

The interests of Bain and Moyane were symbiotic, but not altogether the same, says the Nugent report.

“Mr Moyane’s interest was to take control of Sars. Bain’s interest was to make money. This was not a plan for mere succession in public service.”

Read: Bain, Zuma and Moyane colluded to seize and restructure Sars

Bain featured prominently in both the Nugent and Zondo reports, the latter dealing more specifically with state capture.

Remote control …

As Moneyweb previously reported, the Zondo report detailed how Bain was brought in to Sars and, after a perfunctory diagnosis with little or no consultation with Sars operational managers or employees, a new operating model was devised and implemented.

A restructuring plan was devised without Bain having stepped foot into the tax agency.

Read: Bain’s role in dismantling Sars

Bain says there is no evidence that it colluded with Sars or engaged in any corrupt and fraudulent practices.

“While we acknowledge that Bain SA was aware of the request for proposal (RFP) before it was formally issued (as detailed on www.bain.com/sars), we have found no evidence, nor has any been produced, that Bain manipulated the procurement process in any way to exclude other bidders or specifically advantage Bain. This process was wholly run by Sars.”

The Nugent Report found no evidence of complicity in wrongdoing by Bain’s international parent, but that does not exonerate the parent.

The head of the local office of Bain at the time was Vittorio Massone, who appeared briefly before the Nugent Commission before stepping on a plane to Italy, never to return.

‘Tragic consequences’

According to the Nugent Report: “Soon after Mr Moyane took office, Bain was contracted, ostensibly to review, and later to restructure Sars, which it did, with damaging consequences. Mr Massone said in his evidence that he was not aware of what was happening beneath the surface, and had he known he would have acted differently, but the facts show the contrary.”

The Nugent Commission concluded that Sars was one of the first, but not the only, target for Bain to get access to public sector business in SA.

Massone met several times with former president Jacob Zuma and seven times with Moyane before bidding for the Sars contract. Bain prepared a document for Moyane that would guide him through his first 100 days as commissioner at Sars.

The rogue within

Moyane took office and proceeded to dismantle the High Risk Investigation Unit, rather than the debunked claim of a ‘rogue unit’ operating within Sars to track down big time tax cheats.

By 2017, the exco that existed when Moyane arrived in 2014 had been dismembered. No responsible leader of so complex an organisation would have acted as Moyane did, says the Nugent report.

“Almost immediately, and then continuously for the next eighteen months, Sars was thrown into turmoil, with tragic consequences for the lives of many people, tragic consequences for the reputation of Sars, and tragic consequences for the country at large.”

*Read the full statement from Bain in response to the 10-year ban by National Treasury:

We deeply regret the mistakes made in the procurement and execution of Bain South Africa‘s (Bain SA) work with SARS between 2015 and 2017. SARS was – and remains – a critical institution and a source of pride for us as South Africans. We are embarrassed that this could have occurred in the first place and are angry that our work was used by others to damage a critical institution and South Africa. 

We have acknowledged and apologised publicly for the mistakes that were made and we accept that there must be consequences for those mistakes.

We repaid to SARS all fees plus interest prior to the completion of the Nugent Commission in 2018 and have not pursued any public sector work since 2019, nor did we have plans to do so in the future.

We note National Treasury’s decision to restrict Bain SA from any public sector work for 10 years effective September 2022 based our work with SARS which ended in 2017.

We disagree with the ban and are considering our options in response to this decision. We had already reached out to various stakeholders, including Treasury and SARS, to engage in further dialogue. Despite this outreach, we were given no notice of or opportunity to respond to the restriction prior to its apparent implementation.

There is no evidence that Bain colluded with SARS or engaged in any corrupt and fraudulent practices. While we acknowledge that Bain SA was aware of the request for proposal (RFP) before it was formally issued (as detailed on www.bain.com/sars), we have found no evidence, nor has any been produced, that Bain manipulated the procurement process in any way to exclude other bidders or specifically advantage Bain. This process was wholly run by SARS.

Bain SA competed for the bid award alongside other candidates pursuant to a competitive tender process and was awarded the contract in January 2015. At the time of the investigation, Baker McKenzie asked SARS for additional information regarding the procurement process which only SARS had access to, but SARS never responded to the request. 

The new Bain South Africa leadership is determined to make sure that the events of the past can never be repeated. In line with the public commitment we made in our recent appeal for constructive dialogue, we will continue reaching out to key stakeholders to engage openly and honestly on a way forward. This includes doing what is required to restore our standing with the South African government and other stakeholders over time and to be a force for good in the country. 

Read: The anger towards Bain following Zondo report is justified: Mavuso