Senator Marco Rubio (R-Fla.) claims that McKinsey said to him in July 2020 that it didn’t work with the Chinese government and the ruling Communist Party. According to Rubio, company executives reiterated the claim in a Zoom conference call with Rubio’s advisors in March.
McKinsey, however, disclosed a commercial connection with the Chinese government in bankruptcy proceedings involving Valaris offshore drilling company. The firm applied to act as an advisor in the case. According to a September 2020 court filing, McKinsey.
Rubio demanded more information from the firm about its work in China, and how it avoids conflicts of interests between its consulting work for both the U.S. government as well as for Chinese clients who are close to the Beijing government.
Rubio wrote a Thursday letter to McKinsey, which was obtained by NBC News. He expressed outrage at the episode and accused McKinsey of misleading him about its activities.
Rubio wrote, “It has been brought to my attention McKinsey & Company appears have lied to us on multiple occasions about McKinsey’s relationship with China Communist Party (CCP), and the Chinese government.”
Rubio stated that McKinsey’s work with the Chinese government, state-owned enterprises, and its consulting for U.S. agencies create “serious institutional conflicts”
McKinsey & Company can no longer be trusted to continue working for the United States government, which includes our Intelligence Community,” he stated.
McKinsey was not responsible for work for the Chinese central government. It only performed work for Chinese provincial and local governments. A spokesperson stated that this had been made clear in past correspondence with Rubio’s.
The spokesperson stated that “We have been consistent in our communications with Sen. Rubio’s office.” McKinsey stated in a July 2020 letter to Rubio that a small portion of its work was done with local and provincial governments. This included economic zones, urban planning, and real estate.
According to a spokesperson, the disclosure made in bankruptcy cases “reflects an accurate description about client service that includes local or provincial government and is completely consistent with the type work we discussed openly with Senator’s office.” It does not refer to work for McKinsey’s Central Government, Communist Party of China, or Central Military Commission of China. None of these entities are McKinsey clients, according to our knowledge.
The bankruptcy disclosure mentions the “Chinese Government” but does not indicate whether the client is a provincial government or a central government.
Analysts believe that top leaders in Chinese state-owned enterprises, such as McKinsey’s, are Chinese Communist Party members.
McKinsey spokesmen said that McKinsey’s policy bans work with political parties.
The spokesperson stated that they do not support any political parties in the world.
Rubio claims that Liz Hilton Segel (the managing partner of McKinsey North America’s North America operations) replied to his inquiry on July 3, 2020. He said that Liz Hilton Segel had stated in a letter that “neither [the Chinese Communist Party] nor the Chinese government] have ever been clients of McKinsey.”
Rubio wrote that in a Zoom conversation, McKinsey’s global leadership team members told my staff on March 17 that they knew nothing about the CCP and the Chinese government ever being a client.
Rubio wrote, “As you know, any dealings that the Chinese government have to do with the CCP,”
NBC News reported that McKinsey performed sensitive consulting for the Pentagon, U.S intelligence agencies, and also worked for powerful state-owned companies in China supporting Beijing’s military buildup. Legislators are increasingly concerned about McKinsey’s China work, claiming that it could be a conflict of interest that could compromise national security.
McKinsey has a contract with the federal government to provide it with an insider’s perspective on U.S. military planning and intelligence. According to federal officials, experts, and lawmakers, the firm also provides advice to Chinese state-run companies that supported Beijing’s Pacific naval buildup and played a crucial role in China’s attempts to expand its influence worldwide.
McKinsey states that it adheres to U.S. federal contracting laws and has developed extensive internal rules to prevent conflicts and protect client information.
Rubio and other critics believe that the company, which is the largest consultancy firm in the world, should be more open about its work in China. This is especially important given Washington’s concerns about Beijing’s industrial spying, arms buildup, and intellectual property theft.
Rubio wrote McKinsey a November 2020 letter in which he expressed concern that the company was “either wittingly, or unwittingly” aiding the Chinese Communist Party’s attempt at supplanting the United States.
McKinsey also revealed its ties with Shenzhen Dajiang Baiwang Technology Co. in the bankruptcy case that involved the company Valaris. This manufacturing facility, which specializes in unmanned aerial vehicle production, is owned by DJI, the Chinese drone maker.
The U.S. Treasury Department announced Thursday that DJI and seven other Chinese companies will be added to an investment blacklist related to the “Chinese army industrial complex.”
According to the Treasury Department, DJI provided drones to Xinjiang Public Security Bureau. These drones are used to monitor Uyghurs living in Xinjiang.
McKinsey’s consulting in China is not the only thing that has been criticized. McKinsey also faced legal challenges due to allegations of conflict of interest in other areas.
The company paid $573 million to settle 49 state allegations that it had helped opioid manufacturers “turbocharge” the sales of the drugs. This led to an epidemic of addiction. According to court documents, McKinsey was also advising the Food and Drug Administration about its prescription drug policy while it was working with pharmaceutical companies.
According to the Securities and Exchange Commission, a multibillion dollar private investment fund that was affiliated with McKinsey & Co. settled allegations that it didn’t have sufficient policies to prevent misuse of inside information gleaned through its vast corporate consulting business.
Although the SEC didn’t claim that the fund had actually misappropriated confidential information, it did cite the dual roles of McKinsey partners, who managed the huge fund’s investments while they had access non-public client information.
McKinsey Investment Fund, also known as MIO Partners, agreed that $18 million would be paid to settle the matter. It neither admitted nor denied the allegations. MIO stated in a statement that the settlement was reached because “the historical issues identified by the S.E.C. MIO has strengthened its policies and procedures to resolve the issue. McKinsey or MIO have not misused any confidential or non-public information.
