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McKinsey statement concerning US bankruptcy disclosures and Jay Alix litigation

Over the last year, there have been several media reports focused on McKinsey’s disclosures in US bankruptcy cases. These reports emanate from meritless claims and a media campaign by Jay Alix, the founder and largest shareholder of AlixPartners – a competitor in the corporate restructuring space – in what we believe are his efforts to limit competition by forcing McKinsey out of this field. Not only do these media stories blindly adopt Mr. Alix’s false and unsupported allegations, but they also omit critical facts. The following information is designed to help clients, the media, and the public better understand McKinsey’s perspective on this topic.

About our bankruptcy disclosures

  • McKinsey first served a client in bankruptcy in 2001. Bankruptcy courts approved every debtor application to retain McKinsey from 2001 to 2017, in 13 out of 13 cases.
  • Throughout that period and continuing to today, our bankruptcy disclosures have been lawful and made in good faith. We have always been transparent in our bankruptcy court filings about the process we utilized to identify any connections and potential conflicts.
  • We are proud of our substantive track record of helping companies in bankruptcy attain stability and long-term value creation that benefits all stakeholders, including creditors, lenders, and employees. We have demonstrated that we provide a unique industry-leading service to companies in distress, enabling them to not only emerge from Chapter 11, but to emerge with a foundation which has provided stability and growth going forward.
  • The very first time the US Trustee, the US official who oversees bankruptcy proceedings, asked McKinsey to change its approach to disclosures, in 2016, we immediately adjusted our approach to the US Trustee’s satisfaction. Earlier this year, McKinsey and the US Trustee’s office agreed to fully resolve recently surfaced disagreements between McKinsey and the US Trustee regarding McKinsey’s past disclosures. Three courts approved the agreement, noting that it was forged based on “good faith negotiations” between McKinsey and the US Trustee.
  • That agreement with the US Trustee did not include any indication whatsoever that our disclosures were insufficient or noncompliant or that McKinsey or any employees engaged in misconduct. In fact, a respected senior bankruptcy judge who conducted the mediation between McKinsey and the US Trustee noted that the Trustee’s critiques of our disclosures fall into the category of “good faith disputes” about how certain bankruptcy disclosure rules have been and should be interpreted.
  • To be clear: there has never been any court that has held that our disclosures did not comply with the law or that McKinsey or any employees engaged in misconduct, and McKinsey continues to defend those disclosures in courts where they have been challenged by Jay Alix.
  • In 2019, we took another constructive step aimed at achieving much-needed clarity in the applicability of rules governing bankruptcy disclosures. The former President of the American College of Bankruptcy, Jan Baker, agreed to work with us to develop a protocol for Chapter 11 cases that can guide McKinsey in its future disclosures. Mr. Baker had no previous involvement on behalf of any party involved in the McKinsey/Jay Alix disputes, has never represented McKinsey previously, and is engaging in this effort on a pro-bono basis. One bankruptcy court has expressed enthusiasm that the protocol might also guide other advisory firms in their future disclosures in the face of the wide variability in industry disclosures that flow, in part, from ambiguous disclosure rules.

About Jay Alix’s campaign against McKinsey

  • Jay Alix is a 35% owner of AlixPartners, a direct competitor of McKinsey’s bankruptcy affiliate, and sits on the company’s board of directors. Mr. Alix, through his company AlixPartners, began using the courts for his anticompetitive efforts by suing former employees who left AlixPartners to join McKinsey. He then moved on to argue over contested bankruptcy disclosure rules.
  • Mr. Alix has recklessly and repeatedly made unsupported allegations of fraud and other misconduct against McKinsey and several individual McKinsey professionals in furtherance of his campaign. In response to Mr. Alix’s false accusations, our partners have set the record straight. Two examples:
    • Bob Sternfels, a member of McKinsey’s Board of Directors, has said, “Jay Alix’s allegations are patently false. The discussions that I had with Mr. Alix were to see if we could resolve an employment lawsuit with AlixPartners. To suggest I would say in such context that we would purposely not comply with bankruptcy law is ludicrous.”
    • Dominic Barton, the former Managing Director of McKinsey & Company, has said, “Mr. Alix has repeatedly made false accusations about me in various places. Contrary to Mr. Alix’s claims, I never agreed or believed that McKinsey RTS was acting improperly and I never told Mr. Alix that I would disband McKinsey RTS. I would never say to anyone that bankruptcy laws are unimportant or that McKinsey doesn’t care about these laws.”
  • Mr. Alix’s criticism about our bankruptcy disclosures then evolved to focus on MIO Partners (MIO), a separate affiliate that manages McKinsey current and former employee pension assets and other investments of McKinsey’s current and former partners. Mr. Alix wrongly contends that MIO is insufficiently separate from McKinsey and has made false, unsupported allegations that McKinsey has directly invested in the clients it served in bankruptcy. In a different matter but one that examined the separateness between McKinsey and MIO, a recent independent report concluded that McKinsey made the required disclosures and that “McKinsey’s policies, procedures, and practices ensured and continue to ensure that McKinsey’s consulting work and MIO’s investment management work were and are separate and that there is no information sharing between them.”
  • In sum, the facts show that we have delivered tremendous and demonstrable value to our clients undergoing restructuring – value that passes on to all our clients’ stakeholders. Jay Alix’s relentless and extreme attempts to use the courts, the media and his lobbying efforts to disseminate false allegations in an attempt to stifle competition demonstrate nothing more than his fear of our impact and our point of differentiation. Our role in bankruptcy has been and continues to be constructive and our disclosures entirely lawful and responsive to industry developments. We have and will vigorously confront Mr. Alix in all venues, but his efforts do not change the essential facts: that McKinsey is committed to its clients’ success and always has and will deliver its work lawfully and in good faith.