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UK Government Ban on Bain Sets Key Precedent, Former MP Says

(Bloomberg) -- A UK government ban on Bain & Co. from competing for state contracts sets an important precedent for the handling of companies found to have assisted with corruption overseas, according to lawmaker Peter Hain.

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The global consultancy was this year found by a South African judicial commission to have had links with corruption in the country under the presidency of Jacob Zuma, specifically in work restructuring the national tax agency.

Labor peer and veteran anti-apartheid campaigner Hain has long called for repercussions for the firm and other international businesses that were implicated in the practice known locally as state capture, which the government estimates cost the country 500 billion rand ($30 billion).

“This is an important precedent which I welcome because when this was going on and Bain in South Africa was doing all this nefarious business and earning big fees in the process, then it was away from global scrutiny,” Hain, who grew up in South Africa, told Bloomberg Radio. “I don’t think that public contracts should be handed out in a country like Britain to any company that has behaved in that unlawful way.”

Bain was barred from bidding for British government contracts for three years for being “guilty of grave professional misconduct which renders its integrity questionable,” Minister for Government Efficiency Jacob Rees-Mogg told Bain’s UK Managing Partner, James Hadley, according to a letter reported by the Financial Times and confirmed by Bloomberg.

‘Serious Failure’

Bain said the firm is “disappointed and surprised” and would be responding to express concern about the decision-making process before considering other options.

The global company said in 2018 its work for the South African Revenue Service amounted to “serious failure” and paid back fees, but has since denied willfully facilitating or being party to corruption.

Other international firms have returned earnings for their links to graft in South Africa, notably McKinsey & Co., another global consultancy, and Swiss industrials firm ABB Ltd. German IT services firm SAP SE. and auditor KPMG LLP are two others to have been embroiled in scandals in the country during the Zuma era.

Hain urged US President Joe Biden and UK Prime Minister Boris Johnson in February to suspend Bain’s operating licenses after the judicial commission’s report, which Bain said mischaracterized what took place. Athol Williams, a former partner at Bain who turned whistleblower, said the UK government’s decision shows the findings were taken seriously -- more so than South African President Cyril Ramaphosa’s administration.

“I think this should embarrasses the South African government because the South African government has had this information for years,” Williams said in an interview Wednesday with Johannesburg-based broadcaster eNCA.

(Updates with Bain statement in sixth paragraph.)

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