McKinsey & Co. won the backing of a federal judge in Virginia over the consulting firm’s efforts to navigate potential conflicts of interest arising from its work in large corporate bankruptcy cases, WSJPro reported. In a decision filed Thursday with the U.S. Bankruptcy Court in Richmond, Va., Judge Kevin Huennekens accepted a certification from McKinsey showing it won’t directly benefit from a $5 million penalty the firm agreed to pay to settle allegations of improper disclosure practices. Last month, McKinsey lawyers said they couldn’t guarantee the firm wouldn’t indirectly benefit from the payment because of how it invests billions of dollars on behalf of current and former employees. McKinsey said its investment arm, MIO Partners Inc., operates primarily as a fund of funds, investing with third-party managers whose investment decisions are independent of both McKinsey and MIO. McKinsey said the certification mirrors those made by federal judges who are required to disclose direct investments but not individual holdings of mutual funds or other widely held investment vehicles. The $5 million payment stems from a settlement McKinsey reached in February with a unit of the Justice Department, which has said McKinsey wasn’t forthcoming about MIO investments that gave the firm an interest in the outcome of bankruptcy cases on which the firm advised.
