PR firm Bell Pottinger failed in 'race hate' campaign

A law firm has criticised Bell Pottinger's senior management for failing to exercise "extreme care" over a campaign in South Africa.

Herbert Smith Freehills was commissioned by the PR firm after an outcry over allegations that it fuelled racial tensions in South Africa.

South Africa's opposition Democratic Alliance had accused Bell Pottinger of a "hateful and divisive campaign".

It was run for Oakbay, a firm owned by the wealthy Gupta family.

The Democratic Alliance accused the PR firm of emphasising the power of white-owned businesses in the Oakbay campaign, which used the #WhiteMonopolyCapital hashtag.

• Behind South Africa's Gupta saga

• Who are the Guptas?

• The British PR firm's role in South African politics

In its review released on Monday, the law firm said: "[Bell Pottinger's] senior management should have known that the campaign was at risk of causing offence, including on grounds of race.

"In such circumstances, BP ought to have exercised extreme care and should have closely scrutinised the creation of content for the campaign. This does not appear to have happened."

Herbert Smith also found that certain material created by Bell Pottinger for the economic emancipation campaign "was negative or targeted towards wealthy white South African individuals or corporates and/or was potentially racially divisive and/or potentially offensive and was created in breach of relevant ethical principles".

James Henderson, chief executive of the PR firm, confirmed his resignation on Monday, saying he "neither initiated nor was involved in the Oakbay work".

However, he added: "I accept that as CEO, I have ultimate executive responsibility for Bell Pottinger. I feel deeply let down by the colleagues who misled me. However, I think it is important I take proper accountability for what has happened."

Four Bell Pottinger staff were dismissed or suspended in July.

Phumzile Van Damme of the Democratic Alliance has criticised Bell Pottinger's conduct

The PR firm's chairman, Mark Smith, said Mr Henderson's decision to resign was "laudable".

Phumzile Van Damme, the Democratic Alliance's shadow communications minister, said his resignation was "not in any way an act of valour".

Almost two weeks ago, the UK trade body, the Public Relations and Communications Association, found that Bell Pottinger had breached an industry code of conduct and upheld the complaint from the Democratic Alliance. It is due to reveal what sanctions the firm will face on Tuesday.

The Guptas have been accused of using their connections with South Africa's President, Jacob Zuma, to win contracts and influence political appointments. Mr Zuma and the Guptas strongly deny all allegations.

Bell Pottinger left the Oakbay account in April.

Analysis: Amol Rajan, media editor

Bell Pottinger is no stranger to controversy, having been led for many years by Lord Tim Bell, the PR svengali who once advised Margaret Thatcher but has since worked with autocrats from General Pinochet to the Saudi government.

However, the PR firm whose job it is to ensure its clients receive favourable coverage now finds itself in the headlines for all the wrong reasons.

Its chief executive, James Henderson, has resigned following a monumental falling out with Lord Bell. The cause? A PR contract worth £100,000 for Oakbay, a South African firm run by the controversial Gupta Brothers.

Over the past quarter of a century, Ajay, Atul and Rajesh Gupta, who hail from India, have built a huge conglomerate with interests in South Africa ranging from mining to media - and stand accused of corruption on a vast scale. They deny all allegations.

Bell Pottinger was accused of spreading talk of "white monopoly capital" in a country where there are sensitivities about economic disparities between the black majority and white minority.

Herbert Smith Freehills, which examined more than 45,000 documents, reported that Bell Pottinger's management should have known their campaign "was at risk of causing offence, including on grounds of race".

The law firm added that management had several opportunities to discover the spread of false information, but these were missed; and that Bell Pottinger's managers "failed to put in place policies and procedures to minimise the risks associated with this account".

Mr Henderson, who is engaged to South African heiress Heather Kerzner and retains a 40% stake in the firm, is well connected enough to spring back quickly.

But with several clients threatening to terminate contracts with the PR firm, this scandal could yet result in greater scrutiny for the world of international corporate PR.