Bain & Co considers legal action against UK government over state contract ban

Management consultant Bain & Co is weighing up taking legal action against the UK government after being hit with a three-year ban on bidding for state contracts over its “grave professional misconduct” in a corruption scandal in South Africa.

Bain was considering “all options . . . including judicial review” after being caught by surprise by the decision earlier this week, said one person with knowledge of the matter.

Cabinet Office minister Jacob Rees-Mogg told Bain in a letter on Tuesday that the company’s role in undermining the South African Revenue Service had rendered its integrity “questionable” and that he was not convinced it had taken its role in the scandal “sufficiently seriously”.

Rees-Mogg said he was particularly concerned at the way Bain’s South African division “colluded” with the regime of former president Jacob Zuma to undermine the country’s revenue service. Zuma has denied any involvement in corruption.

The unusual move to ban Bain came after a personal intervention by Rees-Mogg, who obtained advice from an external Queen’s Counsel and read more than a thousand pages of documents relating to the case.

Cabinet Office officials had initially recommended no action be taken against the company, one of the world’s top management consultancies, but Rees-Mogg demanded they review the case.

Officials had indicated to Bain about a month ago that it would not be barred from bidding for public sector contracts but would be expected to take some “modest” extra remedial steps, said the person with knowledge of the matter.

Bain said in a statement on Thursday that it had co-operated fully with the Cabinet Office and had made changes after its “mistakes” in South Africa, including improvements to its governance.

“These steps have been scrutinised by the UK Cabinet Office and, prior to the minister’s decision, we understood that these remedial measures met the UK government’s requirements,” Bain added. “This appears not to have not been taken into consideration by the minister.”

Rees-Mogg’s decision to ban Bain followed a meeting last month with Lord Peter Hain, the veteran anti-apartheid campaigner, and Athol Williams, a former Bain partner in South Africa turned whistleblower against the firm.

The pair had spearheaded a campaign against Bain over its involvement in the “state capture” scandal in South Africa. The company said it had “no visibility into the points raised in the meeting . . . and no prior warning of the minister’s decision”.

Rees-Mogg’s allies said the minister was well aware of the risk of a judicial review — a type of legal action challenging the process behind decisions made by public bodies. But the decision was taken extremely carefully, drawing on a wide range of information, including a South African inquiry into the corruption scandal, they added.

There is some scepticism in Whitehall about whether Bain will actually proceed to a judicial review, which would bring further public attention to the company’s activities in South Africa. Rees-Mogg is said by colleagues to be confident the ban would be upheld.

The Boston-based group has yet to decide on its next move and among the options under consideration would be to accept the ban, said another person familiar with the matter.

The Cabinet Office said in a statement it had imposed the ban after reviewing the firm’s conduct in South Africa. “During this process, Bain failed to act collaboratively and clarify the facts and circumstances in a comprehensive manner,” it added.

Bain previously apologised for “mistakes” in its South Africa business and repaid the fees it earned for its work at Sars with interest in 2018. It has said it did not act illegally in the country.