Boston Consulting Group — consultant to kleptocrats

15 Aug 2023

Boston Consulting Group is one of the world’s largest consulting firms. Its corporate mission is to ‘unlock the potential of those who advance the world’. What Boston Consulting Group fails to mention is that this includes its clients who are kleptocrats and dodgy corporations. If you thought Bain and McKinsey were the only consulting firms implicated in dodgy dealings, meet Boston Consulting Group.

Together with McKinsey and Bain, the Boston Consulting Group (BCG) is one of the Big Three US-based global consulting firms. McKinsey and Bain have been deeply implicated in several cases linked to State Capture and corruption in South Africa: Bain in connection with its work at the SA Revenue Service and McKinsey at multiple sites of capture but most notably at Eskom and Transnet.

Although BCG has not featured in the saga of South African State Capture, evidence from Angola and Saudi Arabia reveals that the firm is no stranger to profiting from its relationships with kleptocrats, politicians and companies involved in economic crimes. BCG, like the other two of the Big Three, is well-versed in this business model.

Open Secrets made several attempts to contact BCG in Boston, Munich and Johannesburg with questions about its work and conduct in Angola and Saudi Arabia, but no response was received.

BCG was established in 1963 and has offices in more than 90 cities across 50 countries and regions across the world, with operations in Africa, Asia Pacific, Central and South America, Europe, the Middle East and North America. The firm has a large executive committee to manage its operations in different regions, with Rich Lesser serving as its global chair based in New York.

The firm set up operations in Johannesburg in 2011, and its website promotes its work in Africa as having a heavy focus on renewable energy and addressing the climate crisis. Yet BCG’s global offices also have an extensive list of clients to whom it provides tailored advice and business models, including those implicated in corruption and other crimes, including in southern Africa. Angola’s Isabel dos Santos was one of those clients.

Luanda Leaks: Consultant to a kleptocratic dynasty

Isabel dos Santos rose to international fame under the guise of being a “self-made billionaire” from Angola, enjoying the company of some of the wealthiest celebrities and business moguls in the world and living a life of extreme opulence.

According to Forbes, Dos Santos was “once the richest woman in Africa”, featuring on both the Forbes Billionaires and Africa’s Billionaires lists with an estimated net worth of $1.4-billion as of 2020. However, she was removed from these lists in January 2021 after her assets were frozen following revelations of the full extent of her role in looting the Angolan state.

Dos Santos was born in Baku, Azerbaijan and is the eldest child of Russian-born Tatiana Kukanova and former Angolan president José Eduardo dos Santos, who ruled with an iron fist from 1979 to 2017. Dos Santos’ parents divorced in 1979, and she moved to London with her mother in that same year. After schooling and working in London, she returned to Angola in the late 1990s and immediately began to profit from a financial empire that benefitted the Dos Santos family to the disadvantage of the Angolan people.

During his tenure in public office, José dos Santos seized control of almost all state entities, including Sonangol, the oil company that functioned as the bedrock of the regime and Angolan economy. In the wake of the collapse of world oil prices in 2014, the president issued a decree that called for the restructuring of Angola’s oil sector, and invited Wise Intelligence Solutions, a company owned by Isabel dos Santos, to put together a team of consultants to advise on this process. Dos Santos Snr appointed his daughter as the director of Sonangol in June 2016 through a presidential decree.

Isabel dos Santos’ exploitation of Sonangol, as well as a complex web of corrupt deals and contracts, beginning in 1980 and spanning the entirety of the 2000s, was revealed by Luanda Leaks, an investigation by the International Consortium of Investigative Journalists (ICIJ) and 36 media partners into Dos Santos and her business empire. Luanda Leaks exposed how the Dos Santos family acquired and moved public funds to offshore jurisdictions, with the help of powerful Western firms including BCG.

Enter BCG

BCG’s Angolan windfall was a deal to modernise Sonangol, secured with the help of Isabel dos Santos. According to evidence in Luanda Leaks, BCG along with other consulting firms received millions of dollars in payments from a Dubai firm linked to Dos Santos — Matter Business Solutions — in connection with the corrupt 2017 project to “modernise” Sonangol.

The evidence shows that BCG entered into contracts with and received funds from private companies that were fronts for Dos Santos and her connections. These front companies were used by Dos Santos to transform Angola’s public funds into her personal fortune, and arguably should have raised red flags at BCG and the other firms that were involved.

BCG was initially brought on board by Wise Intelligence Solutions, Dos Santos’ firm, in 2015, when its consultants put forward a plan that outlined ways to revive the state-owned oil company. BCG was hired by Wise and received more than $3.5-million to consult on the project. Wise’s consulting contract was then transferred to Matter Business Solutions, which was owned by a close friend of Dos Santos, Paula Oliveira. Matter Business Solutions went on to contract with global consulting giants, BCG, PwC and McKinsey.

Documents and bank statements from the investigations further revealed that in total BCG received $31.2-million, while PwC and McKinsey received $21.4-million and $15.4-million, respectively, in consulting contracts. According to Luanda Leaks, these payments were actioned by Matter Business Solutions, a front for Dos Santos, and played a pivotal role in the network that she used to move Angola’s public funds into offshore accounts that were linked to her and her late husband, Sindika Dokolo. Money was syphoned from Sonangol into Matter Business Solutions, and other companies linked to Dos Santos and her associates, leaving the state entity with little more than $300 in its bank account.

All this was eventually uncovered after her father ceded the presidency in 2017. After she was fired in 2017, the new Sonangol chair announced that Dos Santos had approved more than $135-million to be spent on consulting fees. But this wasn’t the only dodgy project that BCG was involved in that contributed to the economic decline of Angola; it had received a lucrative contract years before it worked for Sonangol.

‘Begotten of gold’

As the ICIJ investigation shows, BCG, alongside consulting giant PwC, played a crucial role in maintaining Dos Santos’ business dealings, with BCG facilitating the operation of a “failing jewellery business that was acquired with Angolan public money”. de Grisogono, now bankrupt, was a luxury jeweller established in Switzerland whose name means “begotten of gold”.

Dos Santos’ husband Dokolo and Angola’s diamond trading company Sodiam made a $120-million investment in de Grisogono to acquire a controlling stake in the company in 2012. Under this new ownership structure, de Grisogono hired consultants from BCG and placed several of them in top leadership roles.

In 2013, the company named a BCG project leader, John Leitão, as its CEO, who described BCG’s role as “shadow management”, which BCG later disputed. While millions of dollars of Angolan money were pumped into the business, it could not survive the millions spent on extravagant parties and Sodiam’s soaring debt. The result was that the already struggling firm filed for bankruptcy in 2020, following the release of Luanda Leaks.

BCG walks away — Angolans feel the pain

Consulting firms like BCG avoided legal responsibility for their conduct because of a low legal bar for vetting clients. Unlike banks and other financial institutions, whose due diligence requirements have increased since the Global Financial Crisis in 2008, consulting firms are permitted to operate with limited scrutiny.

Responding to the exposé of its role in Angola, BCG insisted that it adequately “reviewed the payment structures and contracts … to avoid corruption and other risks”.

Yet this response does not account for the fact that it still paid money to and received money from companies with opaque ownership structures, that were owned by, or affiliated with, Dos Santos and Dokolo. These individuals were using the fronts to loot state-owned enterprises, with grave consequences for Angolan people, but BCG was content to do business with them and retained these business relationships after several global banks had cut ties with Dos Santos due to questions about the sources of her wealth.

Angola’s economy is heavily reliant on oil and diamond exports, and the oil crisis of 2014 had a dire impact on the already struggling country which had emerged from a brutal civil war just over a decade earlier. After the war ended, the government pledged that revenue from oil and diamond exports would go towards rebuilding the economy and strengthening infrastructure and civil institutions that had been destroyed in the war. However, Angola today paints a different picture.

According to the World Bank, more than 32% of Angolan people live in poverty, and underinvestment in key social sectors such as education and healthcare has had disastrous consequences. Contrary to those early promises, funds that could have been made to strengthen education, healthcare, housing and other crucial infrastructure were invested into state entities that were pillaged to line the pockets of Dos Santos, her associates and her consultants.

Reputation laundering in Saudi Arabia

This pattern of providing services to clients with insufficient concern for the possible human cost is also apparent in BCG’s relationship with the Crown Prince of Saudi Arabia, Mohammed bin Salman (MBS).

MBS has fostered close relationships with several Western firms which have been instrumental in strengthening his rise to power. BCG, McKinsey and Booz Allen are the top consulting firms that have provided extensive services to MBS and have continued to cultivate and enjoy extremely beneficial relationships with the kingdom. This is despite human rights groups calling on global leaders and corporations to distance themselves from the Saudi government following the brutal state-sanctioned murder of Jamal Khashoggi, a Saudi Arabian journalist and critic of the Saudi government.

Saudi Arabia has a notorious reputation for human rights violations that persists to this day, including brutal repression by security forces, torture and executions, abuse and exploitation of migrant workers, discrimination based on gendered and religious grounds, lack of freedom of expression and continued violations of international humanitarian law in the war in Yemen.

These violations have been rife under MBS’s leadership, with human rights groups calling for global powers such as the US to hold him and other Saudi Arabian officials to account. While the long list of human rights violations is a cause for outrage and condemnation, consulting firms have not been deterred.

BCG’s connection with MBS goes back to 2015, when he was appointed as minister of defence. Following this appointment, BCG was awarded a contract to facilitate the process of reconstructing and improving the ministry’s procurement systems as well as the way it handles its personnel and finances.

It was also reported that the managing director of BCG’s operations in the Middle East, Joerg Hildebrandt, had cultivated a personal relationship with MBS. In February 2016, consultants from BCG and McKinsey accompanied five representatives from the Saudi royal court to Washington, DC, to attend a series of think tanks in which they made presentations to Gulf experts about MBS’s plans to “remake Saudi life”.

BCG has also been instrumental in the development of Saudi Arabia’s economic blueprint, called Vision 2030, an ambitious plan which, among other things, aims to lessen the country’s dependency on oil revenue. BCG is also a key adviser to the prince’s foundation, Misk, a non-profit organisation that specialises in running programmes focusing on education and entrepreneurship as well as culture and the creative arts for youth.

The firm has helped shape and strengthen significant parts of MBS’s rule, and while the prospects of modernising Saudi Arabia have been presented as an important way forward for the kingdom by BCG, injustice continues to persist against the people of Saudi Arabia at the hands of its ruler and the consultants on his payroll.

BCG’s work for MBS and Saudi Arabia can be described as reputation laundering — transforming despots to debutantes by guiding kleptocratic actors through a process of rebranding. While this has traditionally been the foray of PR firms like Bell Pottinger, reputation laundering is a growing industry that includes lawyers, accountants, image consultants and consultancy firms like BCG, Bain and McKinsey.

https://youtu.be/czSZ9b1yipI

BCG has also been implicated in a highly controversial plan to build the megacity Neom in the northwestern province of Tabuk, on Saudi Arabia’s Red Sea coastline. It has been reported that BCG has struck a multimillion-dollar deal in relation to the construction of this city. While it has been claimed that this is “virgin” territory, much of the region is home to the Huwaitat people, who are being forced to leave the area by Saudi officials to make way for the new city.

This subsequently led to the death of Abdul Rahim al-Huwaiti, one of the Huwaitat people and a campaigner against the project. The Saudi authorities sentenced three other Huwaitat people to death after they were convicted of “terrorism” for resisting forced removal from their homes, and sentenced three others to harsh prison terms, ranging from 27 years to 50 years. Josh Cooper, the deputy director of ALQST, a Saudi human rights watchdog, said that the firms involved in this contract, including BCG, are complicit in the violence against and the arrests of Huwaitat people.

Accountability for some

It was reported in December 2019 that Isabel dos Santos had been sanctioned by the US “for her involvement in significant corruption by misappropriating public funds for her personal benefit”. After the publication of Luanda Leaks, authorities in Angola, Portugal, Malta and the Netherlands announced that they had filed lawsuits against and were investigating her and her companies, many of which ceased operations. In November 2022, Interpol issued a Red Notice for Dos Santos, which called for her arrest for charges related to her creation of corrupt financial mechanisms between 2015 and 2017.

January 2023 saw Portuguese authorities raiding the Lisbon offices of BCG, along with those of PwC. Authorities conducted these searches in response to a request from the Angolan government, which is seeking records pertaining to the loss of public funds from Sonangol, which BCG is implicated in.

The concerted efforts of the Angolan government, under João Lourenço who took over as president in September 2017, in addressing the legacy of corruption left by former president Dos Santos have seen the removal of several individuals in the Dos Santos family network from positions of power in Angola.

The cooperation between the Angolan government and Portuguese authorities in the raiding of BCG’s offices marks a positive step in holding the powerful firm to account for the role it played in enabling fraud and corruption in Angola. However, the firm continues to deny any wrongdoing, and there have been no further steps to hold the firm or any of its consultants to account.

BCG walks free

The “world-class” reputations of consulting firms such as BCG, McKinsey and Bain have provided a veneer under which individuals like MBS and Dos Santos can sanitise their images and line their pockets while repressing and impoverishing their people.

On the one hand, the legal requirements to vet their clients aren’t as stringent as other financial institutions and professional firms, which enables them to avoid accountability when their clients are implicated in corruption or human rights abuses.

On the other hand, legal mechanisms don’t cover or punish the type of reputation laundering that consulting firms like BCG specialise in, despite the high human cost that results from this.

The involvement of consulting firms with despots and in global money laundering networks is glaring, and their impunity must be challenged. Exposing their work is one way of doing this, but stronger legal frameworks to hold them accountable are also required. While some of the politicians mentioned here have been subjected to a significant amount of scrutiny, and action taken against them in some instances, BCG remains unaccountable. DM

Join the Financial Mail and Open Secrets on Thursday, 17 August, for the launch of the Corporations and Economic Crime Report: The Consultants, an Open Secrets report that explores the destructive power of BCG and the other consulting giants, Bain & Company and McKinsey & Company. Register to join us here.

Unaccountable, we have not forgotten.

Open Secrets is a non-profit organisation which exposes and builds accountability for private-sector economic crimes through investigative research, advocacy and the law. To support our work including the investigations that go into the Unaccountable series visit Support Open Secrets

Read more profiles from the Unaccountable series here

Categories:

Tags:

DM is much better if you are signed in...

Africa