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Founder of Turnaround Giant AlixPartners Sues McKinsey for RICO Violations

May 11, 2018, 08:02 AM
Filed Under: Fraud

Jay Alix, the founder of one of the world's largest turnaround firms, AlixPartners, is accusing one of his company’s main competitors of engaging in unfair business practices and multiple criminal violations that resulted in significant losses to his firm.

In a complaint filed Wednesday in federal court in New York, Alix alleges that global consulting giant McKinsey & Co. violated the Racketeer Influenced and Corrupt Organizations Act (RICO), and committed mail fraud, bankruptcy fraud and obstruction of justice, among other crimes.

The lawsuit alleges that between 2001 and the present, McKinsey’s Recovery & Transformation Services concealed its connections to “Interested Parties” identified in bankruptcy proceedings “in order to avoid revealing numerous disqualifying conflicts of interest that would preclude it from being hired as a bankruptcy professional in those proceedings.”

Specifically the complaint points to eight separate bankruptcy proceedings, including Lyondell Chemical and Edison Mission Energy, in which McKinsey violated its disclosure obligations under bankruptcy law by submitting false disclosure declarations in order to avoid disqualification.
This resulted in lost business to AlixPartners, that suit alleges.
According to a report in the New York Times, McKinsey is also accused of offering “pay to play” deals to bankruptcy lawyers, in which the company  would offer “to refer its vast network of consulting clients” to them if in exchange they would refer their bankruptcy clients to McKinsey’s restructuring business.
In a statement provided to the Times, McKinsey said Alix’s claims are “baseless” and called the accusations “the latest attempt by Jay Alix and AlixPartners to harass and disparage McKinsey...which courts have consistently rejected.”
In 2014, AlixPartners sued two former managing directors claiming they breached employment contracts and stole trade secrets after they left to join McKinsey & Co. That suit ended in a settlement.
Alix currently serves as a board member of AlixPartners. He sold his controlling stake in the company in 2006 to private equity firm Hellman & Friedman.

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