This Congressman Wants to Know if McKinsey & Co. is Jeopardizing the U.S. Bankruptcy System This Congressman Wants to Know if McKinsey & Co. is Jeopardizing the U.S. Bankruptcy System – NTK Network

This Congressman Wants to Know if McKinsey & Co. is Jeopardizing the U.S. Bankruptcy System

In a letter to the director of the U.S. Trustee Program, an Arizona congressman is asking about conflicts of interest.

By NTK Staff | 07.18.2018 @3:59pm
This Congressman Wants to Know if McKinsey & Co. is Jeopardizing the U.S. Bankruptcy System

Rep. Andy Biggs (R-AZ) wants to know what management consulting company McKinsey & Co. is hiding.

The freshman congressman sent a letter to the U.S. Trustee Program at the Justice Department asking the director to “detail how it enforces bankruptcy rules.” The reason? Biggs is concerned that McKinsey may be compromising the nation’s bankruptcy system by refusing to fully disclose its connections to parties involved in chapter 11 bankruptcy cases.

In an April page-one article, the [Wall Street] Journal detailed how McKinsey initially identified 59 connections to participating debtors, creditors, lawyers and accountants in those cases, compared with the more than 15,000 total connections named by 45 other bankruptcy professionals in those matters. On average, McKinsey reported five such relationships per case compared with the other firms’ disclosures of 171 connections each.

The bankruptcy code “requires all companies to disclose connections, including conflicts of interest, in order to receive the bankruptcy court’s approval to assist an entity through the bankruptcy process,” Rep. Biggs wrote to the director of the U.S. Trustee Program, Clifford J. White III.

The Wall Street Journal’s Gretchen Morgenson and Tom Corrigan explain why transparency in bankruptcy cases is critical:

The chapter 11 bankruptcy process, which gives ailing businesses a chance to reorganize and creditors a shot at repayment, is intended to be transparent, and advisers are supposed to be disinterested advocates for their clients. To ensure conflict of interests won’t taint plans for dividing assets, bankruptcy rules require advisers to disclose all relationships that might give rise to a conflict.

Biggs’ letter seeks to find out why there’s such a large discrepancy in disclosures between McKinsey and other bankruptcy management firms.

According to the WSJ, the U.S. Trustee Program has previously criticized McKinsey for “vague and amorphous” disclosures involving past bankruptcy cases.

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