WASHINGTON (Legal Newsline) — Global consultant firm McKinsey & Company Inc. has reached a $15 million settlement with the federal government to resolve allegations of insufficient bankruptcy case disclosures, according to the U.S. Department of Justice (DOJ).
The settlement, announced Feb. 19, stems from the DOJ U.S. Trustee Program's (USTP) allegations that McKinsey, which was hired to give financial advice on bankruptcy reorganization, provided "insufficient disclosures" relating to it clients' investments. According to the USTP, McKinsey also did not disclose clients who were connected to debtors it represented and did not disclose investment information that might have been a conflict of interest.
“This settlement ensures that McKinsey is held accountable for its conduct,” USTP director Cliff White said in a statement. “Transparency is the linchpin of the bankruptcy system and professionals employed in bankruptcy cases must be free of conflicts of interest... McKinsey failed to satisfy its obligations under bankruptcy law and demonstrated a lack of candor with the court and USTP.
"This settlement ensures that McKinsey is held to the same standards applicable to all professionals who participate in bankruptcy cases. If this conduct is repeated in future cases, we will seek even more far-reaching remedies.”
According to the settlement, McKinsey will pay $15 million in three bankruptcy cases that will go to creditors and other parties, and the company has agreed not to bring any further actions in the relating cases or other cases "based on past disclosures," the department said.
McKinsey said the settlement does not reflect on the adequacy of its disclosures and settled to move forward with its business.
"In reaching the agreement, McKinsey did not admit that any of its disclosures were insufficient or noncompliant, and the settlement does not in any way constitute an admission of liability or misconduct by McKinsey or any of its employees, officers, directors or agents," the company said.
"McKinsey thanks (Texas bankruptcy judge Marvin Isgur) for his help in putting the historical disagreements regarding disclosures with the Trustee behind us. With Judge Isgur’s guidance, this process has also provided additional clarity for the filing of future disclosures. McKinsey will be filing additional disclosures in the Westmoreland case and looks forward to working with the bankruptcy courts to continue to deliver value to debtors and stakeholders.”