A battle between two titans of the lucrative corporate finance restructuring industry is brewing in New York. Jay Alix is suing McKinsey & Company on a range of alleged racketeering charges.
Jay Alix is a veteran of the post-bankruptcy landscape for big-name corporations. They helped to save General Motors and the Detroit Public School System when both were on the verge of collapse. However, Alix claims in his lawsuit that a newer competitor, McKinsey & Company, isn’t competing fairly in the industry. In fact, he accuses them of widespread criminal activity.
According to the complaint, McKinsey and company leadership, “knowingly and intentionally submitted false and materially misleading declarations under oath in … bankruptcy proceedings … in order to … avoid revealing numerous disqualifying conflicts of interest …” that should have prevented them from representing certain clients. Accordingly, Alix charges McKinsey with bankruptcy, mail and wire fraud among other crimes. Alix asserts that this activity enabled McKinsey to pocket tens of millions of dollars in fees that it was not legally entitled to.
The problem arises, as alleged by Alix, because McKinsey did not disclose its connections to certain “interested parties” in the restructurings it handled. If McKinsey had complied with the law that required them to disclose any possible conflicts of interest, they would have been prevented from representing certain clients.
Further, the complaint charges that McKinsey conducted nefarious “pay to play” relationships with bankruptcy attorneys who routinely handled cases for major corporate clients. McKinsey expected those bankruptcy attorneys to refer all of their clients to McKinsey in exchange for access to McKinsey’s impressive network of clients.
Alix additionally claims that Dominic Barton, CEO at McKinsey, essentially admitted to these crimes several months ago, saying that McKinsey was going to be backing off such activity and going into different lines of work. However, that has not been the case.
The referenced case is Jay Alix vs. McKinsey & Co., 18-04141, U.S. District Court, Southern District of New York.
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