McKinsey has worked with Chinese government despite assurances, document says

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

Charles Platiau | Reuters

The management consulting firm McKinsey & Co. has acknowledged a business connection to “the Chinese government,” according to a court document, although the company has told a US senator that it has no business connection to the Beijing regime.

According to Senator Marco Rubio, R.-Fla., McKinsey told lawmakers in July 2020 that he was not working with the Chinese government or the ruling Chinese Communist Party. Company executives repeated the claim during a Zoom conference call in March this year with Sen. Rubio’s advisers, according to the senator.

But in a bankruptcy case involving offshore drilling company Valaris, in which McKinsey asked to act as an advisor, the consulting firm has exposed a business connection to the “Chinese government,” according to a September 2020 court document.

Rubio had asked the company to share more information about their work in China and explain how he prevents conflicts of interest between his consulting activity for the US government and Chinese clients close to the Beijing government.

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

“It has come to my attention that McKinsey & Company appears to have lied to me and my staff on several occasions regarding McKinsey’s dealings with the Chinese Communist Party (CCP) and the Chinese government,” Rubio wrote.

Rubio said McKinsey’s work with the Chinese government as well as with state-owned enterprises, coupled with his advice to US federal agencies, poses “serious institutional conflicts of interest.”

“It is increasingly clear that McKinsey & Company cannot be trusted to continue working on behalf of the United States government, including our intelligence community.”

A McKinsey spokesperson said the company does not do work for the Chinese central government, but only for provincial and local governments in China, and that the company made this clear in previous correspondence with the office. by Rubio.

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

The disclosure in the bankruptcy case “reflects an accurate description of customer service that includes local and provincial governments, and is very much consistent with the type of work we have openly communicated with the senator’s office,” said the spokesperson. “It does not in any way refer to work for the central government, the Chinese Communist Party or the Central Military Commission of China, none of which is a McKinsey client and, to our knowledge, has never been a McKinsey client. “

The bankruptcy declaration cites the “Chinese government” and does not specify whether the client is the provincial or central government.

Analysts say Chinese state-owned companies like the ones McKinsey worked with have Chinese Communist Party officials embedded in the upper layers of management.

A McKinsey spokesperson told NBC News last month that the bars in company politics work with political parties.

“We don’t serve political parties anywhere in the world,” McKinsey spokesperson said.

According to Rubio, in a July 3, 2020 letter in response to his request, Liz Hilton Segel, McKinsey’s managing partner of operations in North America, wrote that “to our knowledge, [neither the Chinese Comunist Party nor the Chinese government] has never been a McKinsey client. “

In a Zoom conversation on March 17, 2021, “Members of McKinsey’s global management team once again told my staff that they had no knowledge of the CCP or the Chinese government having been a client.” , wrote Rubio.

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

NBC News previously reported that McKinsey carried out sensitive consultations for the Pentagon and US intelligence agencies while also doing work for powerful state-owned companies in China supporting Beijing’s military build-up. The company’s work in China has attracted increasing attention from lawmakers, who say it poses a potential conflict of interest that could jeopardize U.S. national security.

McKinsey’s consulting contracts with the federal government give him an insider’s perspective on US military planning, high-tech intelligence and weapons programs. But the cabinet is also advising Chinese state-owned companies that have supported Beijing’s naval reinforcement in the Pacific and played a key role in China’s efforts to expand its influence around the world, according to lawmakers, experts and federal officials. .

McKinsey says it follows US federal contracting laws and has detailed house rules to prevent conflicts of interest and protect customer information.

Critics like Rubio say the company, the world’s largest consultancy, must disclose more details about its work in China, especially amid concerns in Washington over Beijing’s industrial espionage, accumulation of weapons and intellectual property theft.

In one November 2020 letter at McKinsey, Rubio said he feared the company “knowingly or not – is helping the Chinese Communist Party’s attempt to supplant the United States.”

In the same bankruptcy case involving the company Valaris, McKinsey also revealed its ties to Shenzhen Dajiang Baiwang Technology Co, a manufacturing plant specializing in unmanned aerial vehicles and owned by Chinese drone maker DJI.

Thursday, the US Treasury Department noted it will add DJI and seven other Chinese companies to an investment blacklist linked to the “Chinese military-industrial complex”.

The Treasury Department said that DJI “has provided drones to the Xinjiang Public Security Bureau, which are used to monitor Uyghurs in Xinjiang.”

In addition to its consulting business in China, McKinsey has come under heavy criticism from lawmakers and faced legal challenges over alleged conflicts of interest in other areas.

Learn more about China from CNBC Pro

This year, without admitting wrongdoing, the company agreed to pay $ 573 million to address claims by 49 states that its work for opioid makers helped “turbocharge” drug sales, contributing to a deadly epidemic of drug addiction. At the same time, the firm was working for pharmaceutical companies, McKinsey was advising the Food and Drug Administration on its prescription drug policy, court documents show.

Last month, a multibillion-dollar private equity fund affiliated with McKinsey & Co. settled regulatory claims that it did not have adequate policies in place to prevent the misuse of gleaned inside information. in its extensive business advisory business, according to the Securities and Exchange Commission.

While the SEC did not claim that the fund had in fact misused confidential information, it cited the dual role played by McKinsey partners who oversaw the massive fund’s investment choices even though they had access to it. to non-public information about customers.

The McKinsey investment fund, known as MIO Partners, agreed to pay $ 18 million to settle the case, without admitting or denying the allegations. Concluding the settlement, the MIO said in a statement, “The historical issues identified in the SEC order have been resolved by the MIO through strengthened policies and procedures, and the order does not identify any misuse. confidential or non-public information by the MIO. or McKinsey. “

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