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(Bloomberg) — Bain & Co. is fighting a legal battle against South African finance and tax authorities in a bid to overturn a decade-long ban on doing business with the state after becoming embroiled in a corruption scandal.

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The Boston-based consultancy is pursuing the case, which hasn’t been reported before, that’s now about to enter its second year as it tries to rehabilitate its reputation in the country through efforts including unpaid work for prominent business organizations.

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In the court documents, Bain admitted to “mistakes” at the state revenue service. Its restructure gutted the agency, damaging its ability to combat crime in an era of endemic government corruption under former President Jacob Zuma. Still, the consultancy says the legal provisions used to ban it were unconstitutional. 

The local unit of Bain “knows and accepts that we must take our rightful medicine. We’ve willingly done so to date,” it said in papers. “That does not mean we should be supine in the face of unconstitutional and unlawful revenge measures that may erode the rule of law for everybody.”

Bain is just one of a number of international organizations —  including McKinsey & Co., SAP SE, KPMG LLP and ABB Ltd. — that have seen their reputations tarnished because of links to state-corruption scandals during Zuma’s rule, which ended in 2018. All have paid back fees or accepted fines in a bid to atone for the conduct of their employees. 

Both the Treasury and tax agency acknowledged Bloomberg’s queries regarding the case but have yet to respond.

The National Treasury banned Bain in 2022 because it “engaged in corrupt and fraudulent practices” related to a contract with the country’s tax agency, it said at the time. 

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The move came after a judicial commission tied it to illegal dealings during a restructuring of the revenue service, where Bain’s recommendations saw senior staff ousted and investigative capacity destroyed. 

While Bain has said it’s “ashamed” of its role in destabilizing the tax agency, court papers show it blames “lapses in leadership” and said its employees didn’t knowingly partake in corruption or fraud. 

Its former South African head, Vittorio Massone, met with Zuma, contravening normal practice. He also met with the former president’s ally, Tom Moyane — whom a commission of inquiry accused of wrongdoing — before Moyane became head of the tax agency. 

Both Moyane and Zuma have denied wrongdoing. Bain replaced Massone in 2018 and he has left the country.   

‘Sledgehammer’

Bain argues its blacklisting was a result of regulatory overreach by the Treasury and South African Revenue Service, and that the Treasury took the decision in terms of an alleged unconstitutional provision in the country’s laws, making it procedurally unfair, the court papers show. 

It wants the court to declare clauses in acts that govern state procurement unconstitutional, and for it to set aside the Treasury’s decision to ban it from government work for being unlawful and invalid.

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“The sledgehammer that has been used to punish Bain SA without legal restraint is not a weapon that should lie in the hands of any regulator in a constitutional state,” it said. 

The tax agency, in line with court rules, produced a record of the processes it followed. Bain is expected to further supplement its papers; after that, both the Treasury and revenue service would be entitled to file answering affidavits. 

While Bain paid the tax office about 217 million rand ($11.7 million) including interest it received for its dealings at the tax agency, it has struggled to restore its reputation in South Africa. It stopped bidding for state work in 2019. It has consulted for Sasol Ltd., the country’s biggest company by revenue.

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“Since our work with the South African Revenue Service, we have taken significant remedial actions, both locally and globally, to ensure such issues do not recur,” Bain said in a response to queries. “This includes significantly strengthened governance for public sector engagements worldwide.”

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The company took the legal action after its attempts to engage with the Treasury and tax agency were ignored, it said. 

In December, Bloomberg reported Bain supported the project management office of the Energy of Council South Africa, an industry body that includes Sasol, Anglo American Plc and the local units of Shell Plc and TotalEnergies SE, on a pro-bono basis. That, together with Bloomberg’s reporting on McKinsey partnering with a local business-lobby group to prepare for a Group of 20 event, prompted a statement from President Cyril Ramaphosa’s office urging companies to “appoint more suitable partners.”

The energy body has since ended its work with Bain. 

“The board sat down and said ‘you know what guys we don’t know if anything is right or wrong, whether the government is overreacting or whether the guys are rehabilitated or not,’” Simon Baloyi, the chief executive officer of Sasol and the council’s chairman, said in a January interview. “But for the engineering council, as a young council, it doesn’t need it.”

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