Unaccountable 00039: BCG – Consultant to Kleptocrats
by Luvano Ntuli for Open Secrets
16 August 2023
Boston Consulting Group (BCG) is one of the world’s largest consulting firms. Its corporate mission is to “unlock the potential of those who advance the world”. What BGC 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 BCG.
Together with McKinsey and Bain, the Boston Consulting Group (BCG) is one of the ‘Big 3’ 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 SARS 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 their 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 offices in Boston, Munich and Johannesburg with questions regarding their work and conduct in Angola and Saudi Arabia, but no response was received.
BCG was established in 1963 and has offices in over ninety cities across fifty 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 their 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 which 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. Later, dos Santos senior appointed his daughter as the director of Sonangol in June 2016 through a presidential decree.
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 the Luanda Leaks an investigation by the International Consortium of Investigative Journalists (ICIJ) and 36 media partners into dos Santos and her business empire. The Luanda Leaks exposed the way in which the Dos Santos family, acquired and moved public funds to offshore jurisdictions, with the help of powerful Western firms including BCG.
BCG’s Angolan windfall was a deal to modernise Sonangol, secured with the help of Isabel dos Santos. According to evidence in the 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 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 over $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 Oliviera. 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 the 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 siphoned 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 over $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 they 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 marque means “begotten of gold”.
Dos Santo’s husband Sindika 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 was 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 expose of their role in Angola, BCG has 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, in fact, were owned by or affiliated with dos Santos and Dokolo. These individuals were using the fronts to loot state owned entities, with grave consequences for Angolan people, but BCG were content to do business with them. It is notable that BCG 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 only emerged from a brutal civil war just over a decade earlier. After the war ended, the government made a commitment that revenues from oil and diamond exports would go towards rebuilding the economy, strengthening infrastructure and civil institutions that had been destroyed in the war. However, Angola today paints a different picture. According to the World Bank, over 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.
Saudi Arabia: Reputation Laundering for Human Rights Abuse
This pattern of providing services to clients with insufficient concern for the possible human cost is also apparent in BCG’s relationship with 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 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 who was a 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, the use of torture and executions as punishment, abuse and exploitation of migrant workers, discrimination based on gendered and religious grounds and lack of freedom of expression as well as a 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 United States to hold him, and other Saudi Arabian officials to account. Whilst the long list of human rights violations are a cause for outrage and condemnation, consulting firms have not been deterred.
BCG’s connection to 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 both BCG and McKinsey accompanied five representatives from the Saudi royal court to Washington to attend a series of think tanks in which they made presentations to Gulf experts about MBS’ plans to “remake Saudi life”.
Accountability for some
It was reported in December 2019 that Isabel dos Santos had been sanctioned by the United States “for her involvement in significant corruption by misappropriating public funds for her personal benefit”. Following 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 sent by 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 Joao Lourenco 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” reputation of consulting firms such as BCG, McKinsey and Bain has provided a veneer under which individuals like MBS and dos Santos are able to sanitise their own image and line their pockets, whilst simultaneously repressing and impoverishing their people. On 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 fact that the human cost that results from this is so high.
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. Whilst 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.
Join the Financial Mail and Open Secrets on 17 August 2023 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.
Luvano Ntuli is an Investigator at Open Secrets.