AlixPartners founder sues McKinsey under racketeering act

18 May 2018 Consulting.us

Jay Alix, who founded corporate turnaround specialist AlixPartners, is suing the management consulting giant under the RICO act. McKinsey, he claims, intentionally misled bankruptcy courts to conceal conflicts of interests that would have precluded the firm from being hired as a bankruptcy consultant. Lawyers for McKinsey have vigorously denied the allegations.

In a lawsuit that is making worldwide headlines, Jay Alix – the restructuring pioneer who founded AlixPartners in 1981 – has accused McKinsey & Company of “running a criminal enterprise.” Filed at a federal court in Manhattan, the lawsuit alleges that McKinsey illegally pocketed more than $101 million in fees by committing bankruptcy fraud, wire fraud, mail fraud, and engaging in racketeering.

The litigation cites multiple instances where McKinsey is alleged to have “knowingly and intentionally submitted false and materially misleading declarations under oath” in cases where the consulting firm had been hired as a bankruptcy consultant. Strict bankruptcy laws demand that lawyers and consultants who advise bankrupt clients must disclose any links with other interested parties, particularly investors and creditors. 

The case has been brought against McKinsey's Recovery & Transformation Services (RTS) practice. Jay Alix, now a board member at AlixPartners (having sold most of his shares in 2006) has been assigned the claims against McKinsey to prevent the consulting firm getting dragged into what is certain to be a leviathan struggle in the courts.AlixPartners founder sues McKinsey under racketeering actOne specific allegation surrounds Tennessee-based coal company Alpha Natural Resources, which filed for bankruptcy in 2015. As its bankruptcy consultant, McKinsey was duty-bound to maximize the firm’s resources to protect creditors. Instead, Alix accuses the consulting firm of using its influence to drive down the purchase price paid to Alpha by United States Steel – a McKinsey client.

Other McKinsey clients cited in the lawsuit include SunEdison Inc and GenOn Energy Inc. The litigation also accuses the Big Three strategy consulting firm of orchestrating ‘pay-to-play’ arrangements whereby it offered to refer consulting clients to lawyers as a quid pro quo for the lawyers referring their bankruptcy clients to McKinsey.

In the complaint, Alix claims that Dominic Barton – McKinsey’s global managing partner – admitted in a private meeting that his firm had engaged in pay-to-play offers after being challenged to investigate allegations stretching back to 2014. Barton, he said, was “upset and angry” to discover such illegal conduct and pledged to root it out after his re-election as company chief.

Alix alleges Barton didn’t keep to his word, and instead offered to introduce him to an Australian mining company which could be a potential AlixPartners client. The complaint states that Alix rejected this “shocking and improper” offer, describing it as a blatant bribe “offered in return for dropping the issues concerning McKinsey’s acknowledged pay-to- play scheme and its illegal disclosure declarations.”

A McKinsey spokesman has dismissed Alix’s “baseless and anti-competitive litigation” as the “latest attempt by Jay Alix and AlixPartners to harass and disparage McKinsey.” “We will vigorously defend ourselves against these meritless claims and expose Mr. Alix’s clear pattern of anti-competitive behavior in court,” the statement said.

McKinsey and AlixPartners are bitter rivals in the tightly-woven field of bankruptcy consulting. AlixPartners has been a dominant player in the market since the 1980s alongside Alvarez & Marsall and FTI Consulting. The three have controlled around 75% of the bankruptcy consulting industry – which is naturally low on competition to prevent conflicts of interest emerging – throughout this decade.

But McKinsey has expanded well beyond its traditional management consulting remit and – with a series of heavyweight bankruptcy contracts that includes American Airlines – made substantial inroads into AlixPartners’ market share. Two former managing directors at AlixPartners who jumped ship to McKinsey were sued for breaching their contracts in 2014.

McKinsey lawyers have also stressed that other disclosure cases brought against the firm by Jay Alix have been rejected by the courts and US trustees, which concluded that the RTS practice met all of its disclosure requirements.

×

US tech consultancy Slalom to open Manchester office

19 April 2019 Consulting.us

Slalom is on the move again, this time expanding its UK footprint. The American tech consulting firm has announced plans to open a Manchester office in which it will employ 200 staff by 2025. The firm, which opened a London office in 2014, was formerly known as Slalom Consulting until a 2015 rebranding.

The announcement of the Manchester move follows a January relocation of its more than 700 Chicago-based employees from its office in Chicago’s Prudential Plaza to Aon Center, the third-tallest building in the city. Slalom’s previous space at Prudential was separated between floors, causing inconvenience. The new space at Aon is a marked improvement, in addition to the sheer size difference, with the move nearly doubling the firm’s floor space. The space will also utilize hoteling (scheduled workspaces), project-based workspace, and flexible areas for events and education. Slalom also expanded into Canada in 2016, opening an office in Toronto.

Paul Squire, managing director of Slalom’s London location, will head up the Manchester office. “I’m excited about working with our clients in the North West of England, helping them to deliver people-centric change, bring strategic solutions to life, and ultimately, to love their future,” he said.

Slalom has been one of Fortune 100’s “Best Companies to Work For” for four consecutive years, and has partnerships with powerhouse organizations including Amazon Web Services, Google Cloud, Microsoft, Salesforce, and Tableau. It employs more than 6,500 people in 29 offices across North America and the UK.US tech consultancy Slalom to open Manchester office“Manchester is a city of digital enterprise with a wide range of strengths across industries including manufacturing, healthcare, utilities and consumer services; which perfectly complements Slalom’s breadth of expertise,” Dave Williams, UK Country Managing Director, said. "We're looking forward to collaborating with clients to shape their internal capabilities, building a team and investing in the local community."

“Greater Manchester is a hotbed for collaboration and innovation, making it the ideal location for pioneering businesses like Slalom. There are strong complementarities between Slalom and Greater Manchester’s efforts to collaborate with companies going through digital transformation and supporting them to grow within the region. Establishing operations within one of Europe’s largest digital and technology clusters will provide the consultancy firm with ample opportunities to join forces with the rapidly increasing number of world-leading brands that are choosing Manchester,” Tim Newns, chief executive of Manchester’s inward investment agency, added.

In December 2018, the firm launched Slalom Build, a software and tech product “Build-as-a-service” offering that enables companies to build cloud-native software and tech products. While Slalom is headquartered in Seattle, Slalom Build centers can currently be found in Boston, Charlotte, Chicago, Denver, and Toronto.