Business

McKinsey worked with the Chinese government despite assurances, documents show

The logo of consulting firm McKinsey and Company is seen at the gathering of prominent startups and high-tech leaders, Viva Tech in Paris, France May 16, 2019.

Charles Platiau | Reuters

Management consulting company McKinsey & Co has acknowledged a commercial connection to the “Chinese government,” according to a court document, although the company told a US senator it had no business ties to the North Korean regime. Terrible.

According to Senator Marco Rubio, R.-Fla., McKinsey told the legislator in July 2020 that it does not work with the Chinese government or the ruling Chinese Communist Party. According to the senator, company executives repeated that assertion during a Zoom conference call in March of this year with advisors to Senator Rubio.

But in a bankruptcy case involving offshore drilling company Valaris, where McKinsey applied to serve as an adviser, the consulting firm disclosed commercial ties to the “Chinese government,” according to a document filed by the company. court in September 2020.

Rubio asked the company to share more information about its work in China and explains how it prevents conflicts of interest between the US government consulting business and Chinese clients close to the Beijing government.

In a letter Thursday to McKinsey obtained by NBC News, the senator expressed outrage at the episode and accused the company of misleading him about its operations in China.

“I realized that McKinsey & Company appeared to have repeatedly lied to me and my employees about McKinsey’s ties to the Chinese Communist Party (CCP) and the Chinese government,” Rubio wrote.

Rubio said McKinsey’s work with the Chinese government as well as state-owned enterprises, along with consulting with US federal agencies, poses a “serious institutional conflict of interest.”

“It is increasingly clear that McKinsey & Company cannot be trusted to continue working on behalf of the US government, including our Intelligence Community.”

A McKinsey spokesperson said the company does not perform work for the central government of China but only for provincial and local governments in China, and the company has made that clear in prior correspondence with the office. by Rubio.

“We are consistent and transparent in all of our communications with Senator Rubio’s office,” a spokesperson told NBC News. In a letter to Rubio in July 2020, McKinsey said a small part of their work in China is with local and provincial governments related to economic zones, urban planning and real estate, spokesman said.

Disclosure in the bankruptcy case “reflects an accurate description of customer service including local and provincial government, and is entirely relevant to the type of work we have awarded,” a spokesperson said. exchange openly with the senator’s office”. “In no way does it imply work for the Central Government, the Communist Party of China or the Central Military Commission of China, none of which are McKinsey clients, and to our knowledge, never have been. now a McKinsey customer.”

The bankruptcy notice cited “Chinese government” and did not specify whether the client was a provincial or central government.

Analysts say that Chinese state-owned enterprises like those with which McKinsey has worked have Chinese communist party officials in the top ranks.

A McKinsey spokesman told NBC News last month that the company’s policy bars work with political parties.

A McKinsey spokesperson said: “We do not serve political parties anywhere in the world.

According to Rubio, in a letter dated July 3, 2020 in response to his request, Liz Hilton Segel, managing partner for McKinsey’s North American operations, wrote that “we know, [neither the Chinese Comunist Party nor the Chinese government] was a McKinsey customer. “

In a conversation with Zoom on March 17, 2021, “members of McKinsey’s global leadership team once again told my staff that they had no knowledge of the CCP or that the Chinese government used to be. customers,” Rubio wrote.

“As you know, any transaction with the Chinese government is necessarily a transaction with the CCP,” Rubio wrote.

Former NBC News report that McKinsey has done sensitive consulting work for the Pentagon and US intelligence agencies while also doing work for powerful state-owned enterprises in China that support Beijing’s military build-up. . The company’s operations in China have drawn growing scrutiny from lawmakers, who say it poses a potential conflict of interest that could jeopardize US national security.

McKinsey’s consulting contracts with the federal government give it an insider look at US military planning, high-tech weapons and intelligence programs. However, the company also advises Chinese state-owned enterprises that have supported Beijing’s naval build-up in the Pacific and played a key role in China’s efforts to expand its influence globally. world, according to lawmakers, experts and federal officials.

McKinsey said it complies with US federal contract law and has extensive internal rules to prevent conflicts of interest and protect customer information.

Critics like Rubio say the company, the world’s largest consulting firm, needs to disclose more details about its work in China, particularly amid Washington’s concerns about industrial espionage. of Beijing, building weapons and intellectual property theft.

In one Mail November 2020 with McKinsey, Rubio said he was concerned that the company “whether knowingly or unknowingly – is supporting the Chinese Communist Party’s effort to displace the United States.”

In a similar bankruptcy involving Valaris, McKinsey also disclosed its relationship with Shenzhen Dajiang Baiwang Technology Co, a manufacturing facility that specializes in drones and is owned by the manufacturer. China’s DJI drones.

On Thursday, the US Department of the Treasury speak it will add DJI along with seven other Chinese companies to a blacklist of investments related to the “Chinese military-industrial complex”.

The Treasury Department said DJI “provided a drone to the Xinjiang Public Security Bureau, which was used to survey the Uighurs in Xinjiang.”

In addition to consulting in China, McKinsey has faced stiff criticism from lawmakers and faces legal challenges over alleged conflicts of interest in other areas.

Read more about China from CNBC Pro

This year, not admitting wrongdoing, company agrees to pay $573 million to address allegations from 49 states that their work for opioid manufacturers helped “accelerate” drug sales, contributing to a deadly addiction epidemic. At the same time, the firm have worked As for drug companies, McKinsey is advising the Food and Drug Administration on their prescription drug policy, according to court documents.

According to Securities and Exchange Commissions.

While the SEC does not claim the fund actually abused confidential information, it cites the dual role of McKinsey partners, who oversee the giant fund’s investment choices even when they have access into non-public customer information.

The McKinsey hedge fund, known as MIO Partners, agreed to pay $18 million to settle the matter, neither admitting nor denying the allegations. In reaching the settlement, the MIO said in a statement, “The historical issues identified in the SEC order were resolved by the MIO through enhanced policies and procedures, and the order did not identify any misuse of any confidential or material non-public information by the MIO or McKinsey.”

https://www.cnbc.com/2021/12/17/mckinsey-worked-with-chinese-government-despite-assurances-document-shows.html McKinsey worked with the Chinese government despite assurances, documents show

Emma James

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