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It’s rarely good news these days for consulting powerhouse McKinsey & Co. to see its name in headlines, as these headlines generally read things like, “McKinsey Opened a Door in Its Firewall Between Pharma Clients and Regulators,” or “McKinsey Clients Won Puerto Rico Contracts as Firm Advised Government,” or “How McKinsey Got Into the Business of Addiction,” or “McKinsey Charged in South African Corruption Case.” The muckraking authors of many of these articles have gone so far as to compile them into a book that concludes, more or less, that McKinsey is, at best, amoral, but more likely evil.
Jay Alix, however, can’t help but love each and every one, especially as they so often seem to focus on the breathtaking array of conflicts of interests that any firm the size and influence of McKinsey must have. This is Alix’s primary interest these last few years, because while the average bankruptcy consultant—like, say, the firm Alix founded and still owns a third of, AlixPartners—discloses more than 100 potential conflicts in every bankruptcy they work on, McKinsey averages just five. And much to McKinsey’s dismay and Alix’s delight, just about every single judge—to say nothing of everyone who hears about it at the Justice Department and Securities and Exchange Commission—thinks that does sound a little light. And those judges now include the nine sitting on the U.S. Supreme Court.
The justices turned away McKinsey’s request that they overturn a lower court’s decision that the lawsuit by Alix, who has accused the firm of running a “criminal enterprise” by hiding its ties to lenders and its clients’ competitors….
U.S. District Judge Jesse Furman in Manhattan in 2019 dismissed the lawsuit, saying Alix did not assert a “proximate” link between McKinsey’s alleged wrongdoing and harm to AlixPartners. Alix reported owning a 35% equity stake in AlixPartners.
The New York-based 2nd U.S. Circuit Court of Appeals in January revived the case, saying Furman gave “insufficient consideration” to whether McKinsey undermined the integrity of federal judicial proceedings.
“If McKinsey’s conduct has corrupted the process of engaging bankruptcy advisors, as Alix plausibly alleges, then the unsuccessful participants in that process are directly harmed,” 2nd Circuit Judge Barrington Parker wrote.
U.S. Supreme Court Spurns McKinsey & Co Appeal in Bankruptcy Conflicts Case [Reuters via U.S. News]
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