The McKinsey RTC division of McKinsey & Co. participated in the restructuring of United Airlines, American Airlines, Edison Mission Energy, NII Holdings, Inc., Alpha Natural Resources, Inc. and SunEdison, Inc. McKinsey RTC was an adviser to those companies during their restructurings. McKinsey RTC did not disclose to the bankruptcy court that McKinsey & Co.’s retirement funds, through its hedge fund investors, held a stake in the debt or other obligations of those six companies.
The disclosure form to the bankruptcy court is a sworn statement that the adviser is a “disinterested party.” McKinsey released a statement saying that it met all legal requirements and that it has been approved for participation by the bankruptcy courts handling the Chapter 11 proceedings for the companies. McKinsey believes that the retirement fund is run separately and therefore disclosure was not required under the regulations.
McKinsey may be right. But, let’s look at it from another angle. How those companies fared in Chapter 11 restructuring had an effect on every McKinsey employee in terms of the performance of their retirement fund. The data are still out on that one. We have us a little letter of the law vs. spirit of the law situation here.
As we say in training on conflicts of interest, if there is the slightest chance of appearance or a glimmer of doubt, disclose.
Interesting how sophistication always gets in the way of being upfront.