Racketeering Suit Filed Against Bankruptcy Consulting Firm

By on May 14, 2018

May 14, 2018

Well-known restructuring specialist Jay Alix has filed suit under the RICO Act against McKinsey & Company. He accuses the management-consulting firm of misleading bankruptcy courts about conflicts of interest. According to the suit McKinsey “knowingly and intentionally submitted false and materially misleading declarations under oath” in cases where it had been hired as a bankruptcy consultant. The declarations allegedly allowed McKinsey to conceal its many significant connections to “interested parties.” The complaint also accuses McKinsey of offering pay to play deals to various bankruptcy lawyers. A McKinsey spokesman called the suit baseless and anti-competitive. McKinsey’s conduct shut AlixPartners out of a market it had served since the 1980s, according to the complaint. Bankruptcy professionals are required by law to have undivided loyalty to their clients, but Alix gave examples of cases in which McKinsey had ties to parties whose interests appeared to be in direct conflict with each other, including the case of Alpha Natural Resources, a Tennessee coal company that filed for bankruptcy. As the company’s representative, McKinsey was duty bound to work to maximize its resources on behalf of its creditors. Alix claims McKinsey’s ties to United States Steel were concealed, and the steel company’s interests were served by the outcome, not the creditors’.
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The New York Times

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