The Justice Department unit that oversees the nation’s bankruptcy system wants to reopen a 2015 case so it can investigate whether conflicts of interest at McKinsey & Co. tainted its work as an adviser to Alpha Natural Resources, a coal mining giant, WSJ Pro Bankruptcy reported. The request was filed Tuesday by John P. Fitzgerald III, acting U.S. Trustee in the Eastern District of Virginia, and asked Judge Kevin Huennekens, who heard Alpha’s chapter 11 case, to reopen it. The Trustee cited new information showing that a McKinsey retirement portfolio had a publicly undisclosed stake in a hedge fund that held Alpha debt and received some of its prime assets in the reorganization. That investment by McKinsey, a $110 million stake in a fund managed by Whitebox Advisors, gave it an undisclosed financial interest in the outcome of six bankruptcy cases in which the company served as an adviser. Read more.
In related news, McKinsey & Co. urged a Manhattan federal judge to dismiss turnaround veteran Jay Alix’s lawsuit claiming the consulting firm operates as a “criminal enterprise” by hiding conflicts of interest in its bankruptcy and restructuring operations, Reuters reported. In a Monday night court filing, McKinsey labeled Alix’s May 9 lawsuit “the litigation equivalent of a thermonuclear device,” bereft of support for its “stark allegations of fraud” or to show any scheme to harm the firm he founded, AlixPartners. Alix’s lawyer Sean O’Shea rejected McKinsey’s defenses. Read more.
