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Prominent Republican lawmakers are urging the U.S. Department of Justice to investigate McKinsey & Company for allegedly violating federal law by not disclosing potential conflicts of interest between its operations in China and its contracts with the Pentagon. In a letter addressed to U.S. Attorney General Merrick Garland, which was reviewed by the Financial Times, the chair of the House Select Committee on the Chinese Communist Party, along with two U.S. senators, suggested that McKinsey may have breached government contracting rules and misled Congress.
The call for investigation intensifies political scrutiny on McKinsey, a consultancy firm whose extensive work with the U.S. military has drawn criticism from Republican lawmakers. They argue that McKinsey’s concurrent engagements in China pose a threat to U.S. national security, an assertion McKinsey disputes. This demand adds to the array of challenges McKinsey is facing, from its involvement with opioid producer Purdue Pharma, which has resulted in a Department of Justice criminal investigation and substantial legal settlements, to a slowdown in the consulting sector prompting staff reductions.
Since 2008, McKinsey has secured contracts worth nearly half a billion dollars from the U.S. Department of Defense, as per public records. These contracts necessitate the disclosure of any potential conflicts of interest. The letter, signed by House committee chair John Moolenaar and Senators Marco Rubio and Joni Ernst, states that McKinsey appeared to have failed to reveal any such conflicts based on a review of Department of Defense documents available to the committee.
The lawmakers cited McKinsey’s engagements with Chinese state-owned enterprises, including China Communications Construction Company, which has been sanctioned by the U.S. Department of Commerce for aiding China in constructing military bases in the South China Sea. They suggested this represented at least a potential conflict of interest that should have been disclosed, along with details of how McKinsey managed these conflicts. Similar concerns were highlighted regarding McKinsey’s work for the Chinese central government, disclosed in unrelated U.S. legal filings.
The letter emphasized that U.S. law requires McKinsey to disclose conflicts to enable the contracting agency to determine the appropriateness of mitigation measures. McKinsey reportedly has no authority to self-regulate in this regard. McKinsey declined to provide comments, reiterating its adherence to federal conflict of interest reporting requirements.
The letter also revisits testimony given by McKinsey’s global managing partner, Bob Sternfels, to Congress earlier this year, wherein he stated the firm had not represented the Chinese central government as a client. However, the letter referred to two U.S. bankruptcy case filings where McKinsey listed “China, Chinese government” as a client and noted that 1% to 3% of its Shanghai office revenues were derived from the State-owned Assets Supervision and Administration Commission. McKinsey clarified a referenced client, “CN Government — Fed/Prov,” actually pertained to Canadian public sector clients, contrary to the letter’s allegations.
The lawmakers have requested Attorney General Garland to investigate McKinsey’s business in China for potential national security risks, legal violations concerning conflict disclosures, and possible misrepresentations by Sternfels to Congress. They also urged the Pentagon to reassess McKinsey’s eligibility for contracts with the U.S. military.
The Department of Justice declined to comment, and there was no response from the Department of Defense. McKinsey, however, stands by Sternfels’ congressional testimony and has been gradually decreasing its collaborations with state-owned enterprises and government entities in China to prioritize multinational corporate clients.
