January 6, 2020—Jay Alix is the founder, board member, and largest shareholder of AlixPartners, a competitor of McKinsey’s bankruptcy affiliate in providing corporate restructuring advice to clients. Over the past few years, Jay Alix has conducted a relentless campaign in the courtroom, in the press, and on Capitol Hill designed to prevent McKinsey from competing with AlixPartners in advising clients in bankruptcy. Jay Alix has hired lawyers, lobbyists, and a public relations firm to support his attacks on McKinsey, and Alix’s false and unsubstantiated accusations have often been repeated in the press.
We are providing the following information to help clients, the media, and the public better understand Jay Alix’s dispute with McKinsey.
McKinsey’s Bankruptcy Practice
- McKinsey first served a client in bankruptcy in 2001.
- In the intervening years, McKinsey has achieved an impressive track record helping companies in bankruptcy attain stability and long-term value creation that benefits relevant stakeholders, including creditors, lenders, and employees. We provide a unique service to companies in distress, enabling them to not only emerge from Chapter 11, but to emerge with a foundation that provides for stability and growth going forward.
- When serving clients, the disclosures in our bankruptcy filings have always been lawful and made in good faith. In particular, we have consistently been transparent in our bankruptcy court filings about the process we are using to identify any connections and potential conflicts requiring disclosure. No bankruptcy court or any other court has ever ruled otherwise.
- Bankruptcy courts approved every debtor application to retain McKinsey from 2001 to 2017, in 13 out of 13 cases.
- In 2016, the US Trustee (the US official who oversees bankruptcy proceedings) asked McKinsey to modify our approach to disclosure and we immediately adjusted our approach.
- In 2019, McKinsey and the US Trustee mutually agreed to resolve recently surfaced disagreements regarding our past disclosures.
- The senior bankruptcy judge who presided over the discussions leading to that agreement noted that the US Trustee’s critiques of our past disclosures fell squarely into the category of “good faith disputes” about how certain bankruptcy disclosure rules should be interpreted.
- Our agreement with the US Trustee contained no indication whatsoever that our past disclosures were insufficient or noncompliant or that McKinsey or any employees engaged in any misconduct.
- In light of the interpretive differences that plainly exist in the industry regarding bankruptcy disclosure requirements, McKinsey took the initiative in 2019 to help bring additional clarity to this topic. Jan Baker, the former President of the American College of Bankruptcy, worked with us on a pro bono basis to develop a new protocol for future bankruptcy disclosures (The Baker Protocol).
Jay Alix’s campaign against McKinsey
- Jay Alix is a 35% owner of AlixPartners, a direct competitor of McKinsey’s bankruptcy affiliate, and Jay Alix sits on AlixPartners’ board of directors.
- In 2016, as McKinsey’s bankruptcy advisory service line continued to gain market share, Jay Alix formed a special purpose legal entity for the sole purpose of ending the competitive threat that McKinsey posed to AlixPartners.
- Jay Alix even named his special purpose vehicle “Mar-Bow Value Partners,” after former McKinsey leader Marvin Bower. The sole purpose of Mar-Bow Value Partners is to bring lawsuits accusing McKinsey and our employees of fraud in relation to our bankruptcy advisory work on behalf of clients. Despite Jay Alix’s relentless and ongoing legal campaign, not a single court has ruled in his favor.
- In 2018, Jay Alix filed a 200-plus page civil RICO complaint in federal court in New York against our firm and seven current and former colleagues. The complaint alleged that our bankruptcy practice is built on fraudulent disclosures and has led clients to choose McKinsey, instead of AlixPartners, in corporate restructuring engagements.
- Shortly after Jay Alix filed his May 2018 RICO lawsuit, we received an inquiry from the US Attorney’s Office in New York, which we promptly addressed. Since then, we have received no additional requests from the US Attorney’s Office.
- In 2019, Jay Alix’s RICO lawsuit was dismissed by the federal court in New York and Alix was ordered not to refile it. In ruling against Alix, the federal judge referred to Alix’s claims as “insufficient,” “speculative,” and “devoid of any supporting specifics.” Nonetheless, Jay Alix has already filed papers indicating he will appeal his federal RICO case against us.
- Beginning in 2016, Jay Alix also attempted both to reopen multiple closed federal bankruptcy cases, and intervene in open bankruptcies, in which McKinsey has been retained by our clients. Jay Alix has justified his attempts to do so by arguing that McKinsey’s previous or current bankruptcy disclosures were all fraudulent and that his actions are not anticompetitive but simply designed to protect the integrity of the bankruptcy process.
- All bankruptcy courts to date have ruled against Jay Alix.
- Multiple bankruptcy courts have ruled that Alix completely failed to meet the legal requirement of “standing” to bring his claims.
- Multiple bankruptcy courts have also denied Alix’s request either that he be appointed personally to investigate McKinsey for fraud or that the courts themselves conduct any such investigation.
- Bankruptcy judges to date have described Alix’s allegations as “fantasy” and noted that his approach and some of his requests are “troubling,” “absurd,” and “arrogant.”
- Judges have also found that Alix lacks “first-hand knowledge,” is “not neutral,” has “an admitted, direct financial interest,” and that “it speaks volumes” that no party in bankruptcy other than Jay Alix has complained about McKinsey’s past or current disclosures or the service it has provided, or is providing, to clients.
- Most recently, a prominent bankruptcy judge presiding over Jay Alix’s latest attack stated in open court: “I don’t believe anymore” that Jay Alix’s attacks on McKinsey are designed, as Alix has long claimed, to ensure the integrity of the bankruptcy process.
- Jay Alix’s legal filings routinely include false and unsupported allegations of fraud and other misconduct against individual McKinsey professionals. Our partners have directly addressed Alix’s repeated falsehoods. 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, 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.”
- Jay Alix’s criticisms of our bankruptcy disclosures have also evolved over time to focus on MIO Partners (MIO), a McKinsey affiliate that manages McKinsey’s employee pension assets and other investments of our current and former partners. Alix has repeatedly contended that MIO is insufficiently separate from McKinsey’s consulting business. However, in a different matter (involving our service to a public sector client), a government-appointed independent examiner concluded precisely the opposite in a 2019 report, noting 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.”
Our clients stand by us
- Despite Jay Alix’s continued efforts to damage McKinsey’s reputation through his repeated false accusations of fraud, clients have rejected Alix’s attacks and have stood with us. A few examples:
- “[Alix] appears to have [his] own agenda against McKinsey that is completely unrelated to these bankruptcy cases.” (ANR)
- “The Reorganized Debtors, however, do not believe that any party in interest would benefit from Mar-Bow’s latest attempt to hijack these closed cases to continue its vendetta against McKinsey.” (ANR)
- “Based on the facts of which it is aware, NII Holdings has no basis to conclude that McKinsey RTS’s alleged non-disclosures would have impacted NII’s chapter 11 cases or caused harm to NII Holdings or its creditors.” (NII)
- “Our silence on certain matters in this McKinsey dispute should not be interpreted as anything but our full-throated support for McKinsey.” (Westmoreland)
- “Holding our hand at the parent level step by step, day by day in the face of meritless ad hominem attacks was McKinsey. Our creditors . . . bought into this transaction. They signed up for this case because of McKinsey. They signed up because McKinsey identified tens of millions of dollars of savings that could be found in Westmoreland.” (Westmoreland)
- “And in closing, we just want to restate and amplify that the Westmoreland bankruptcy case was, in our view, a huge success. That success at the parent level was made possible by McKinsey.” (Westmoreland)
Conclusion
- McKinsey has delivered and continues to deliver tremendous and demonstrable value to our clients undergoing restructuring – value that benefits all our clients’ stakeholders.
- Jay Alix’s relentless and ongoing attempt to use the courts, the media, and lobbying to pressure McKinsey into abstaining from competing with AlixPartners is abusive and wholly improper anticompetitive behavior.
- In the face of Jay Alix’s attacks, we will continue to defend our firm and our colleagues. Our advisory role in bankruptcy continues to be appreciated and valued by our clients. Our disclosures remain entirely lawful and responsive to industry developments.