Racketeering suit against McKinsey revived by appeals court
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(Reuters) – A U.S. appeals court on Wednesday revived a racketeering lawsuit accusing the consulting firm McKinsey & Co. of concealing potential conflicts when seeking permission from bankruptcy courts to perform lucrative work on corporate restructurings.
The 3-0 decision by the 2nd U.S. Circuit Court of Appeals in Manhattan was a victory for retired turnaround specialist Jay Alix, who accused McKinsey of running a "criminal enterprise" by hiding its ties to lenders and its clients' competitors.
Mr. Alix said McKinsey's conflicts of interest should have disqualified it from 13 bankruptcies including American Airlines, food retailer Harry & David and coal producer Alpha Natural Resources, causing his former firm AlixPartners to lose assignments.
He also accused McKinsey of running a "pay-to-play" scheme in which it arranged meetings between clients and bankruptcy lawyers in exchange for referrals from those lawyers.
The appeals court said a lower court judge erred in finding that Mr. Alix did not allege a "proximate" link between McKinsey's alleged wrongdoing and harm to AlixPartners, in which Alix reported owning a 35% equity stake.
The case is Alix v. McKinsey & Co et al, 2nd U.S. Circuit Court of Appeals.
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