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Bankruptcy Judge David Jones yesterday approved McKinsey & Co.’s settlement with Justice Department watchdogs over how the firm discloses potential conflicts of interest, effectively ending a legal battle on transparency in the U.S. bankruptcy system, WSJ Pro Bankruptcy reported. Under the settlement, announced earlier this month, McKinsey agreed to walk away from about $8 million in fees for work it did helping navigate Westmoreland Coal Co. through a 2018 chapter 11 filing. McKinsey didn’t admit to any wrongdoing but agreed to broaden the scope of disclosures made in future cases, including the names of confidential clients and potential conflicts involving its many affiliates. In return, the Justice Department agreed to drop an objection it filed in the Westmoreland case alleging McKinsey’s disclosures were legally insufficient. The settlement is the latest in several multimillion-dollar deals in recent years tied to questions about McKinsey’s disclosure practices. Bankruptcy advisers legally are required to be disinterested and to disclose connections that could give rise to a conflict of interest.

Arlington County (Va.) Board member Christian Dorsey, whose ethical and financial difficulties have tangled him in a web of false statements over the past year, fraudulently misrepresented his assets while filing for bankruptcy, a federal court ruled Friday, the Washington Post reported. Dorsey had listed a second mortgage payment as one of his obligations, which would have reduced the amount he had to pay toward his other debts. But a trustee charged with overseeing his case said in court on Thursday that the mortgage debt had been forgiven, and Dorsey had made no payments on it since October 2019, when he filed for bankruptcy. It was “an act of overt misrepresentation,” Thomas P. Gorman told the court at a hearing on Thursday, and “misconduct . . . so over the line” that punishment was warranted. Judge Brian F. Kenney sided with Gorman, calling Dorsey’s filings “a misrepresentation that requires that the case be dismissed with prejudice.” In an order published Thursday, he dismissed the bankruptcy under a code section reserved for cases involving fraud.

McKinsey & Co. agreed to forgo roughly $8 million in fees from advising a bankrupt Colorado coal miner after reaching a settlement with Justice Department watchdogs over concerns about the firm’s disclosure of possible conflicts of interest, WSJ Pro Bankruptcy reported. Under the deal announced yesterday, McKinsey agreed to withdraw an application to work as an adviser to Westmoreland Coal Co. on its 2018 bankruptcy filing. McKinsey also agreed to broaden the scope of disclosures made in future bankruptcy cases, including the names of confidential clients. In return, the Justice Department agreed to drop an objection it filed in the Westmoreland case alleging that McKinsey’s disclosures were at odds with the law. “This settlement ensures that McKinsey is held accountable for its conduct in this case,” said Cliff White, director of the U.S. Trustee Program. The deal won’t become final unless it wins approval from Judge David Jones of the U.S. Bankruptcy Court in Houston, who has been overseeing the Westmoreland case and long-running litigation related to McKinsey’s disclosure practices. The settlement was reached with the help of Judge Marvin Isgur, another Houston-based bankruptcy judge, who served as a mediator between McKinsey and the Justice Department. McKinsey didn’t admit wrongdoing as part of the settlement. It isn’t clear how the settlement will affect ongoing litigation against McKinsey in the Westmoreland case brought by Jay Alix, the retired founder of rival corporate turnaround firm AlixPartners LLP. A trial on Alix’s claims that McKinsey flouted disclosure laws was set to resume next month after being halted over the coronavirus pandemic. Alix, whose claims aren’t covered by the Justice Department settlement, has targeted McKinsey over its roles in a number of large bankruptcy cases, especially in how it disclosed information about the billions of dollars it invests on behalf of current and former employees. In addition to the fees McKinsey agreed to walk away from in the Westmoreland case, court papers show the firm has paid some $32.5 million in settlements related to its past bankruptcy disclosure practices, including a separate $15 million settlement in 2019 with the U.S. Trustee. McKinsey also didn’t admit any wrongdoing under that agreement.

Bankruptcy Judge Alan Koshchik is ordering four Ohio lobbyists who work for the top law firm in the FirstEnergy Solutions bankruptcy to answer questions under oath about any possible ties to the Larry Householder bribery case, the Akron (Ohio) Beacon Journal reported. Judge Koshchik issued the order on Tuesday, telling the four lobbyists, known as the "Ohio statehouse team" with law firm Akin Gump, to answer his questions in writing by Jan. 8, with a related court hearing on Jan. 19. The four lobbyists "were the timekeepers involved who interacted with currently-indicted individuals or entities ..." according to the court filing. The judge, who had been withholding millions in dollars in fee requests from Akin Gump over the ongoing investigation, said about $2.8 million being sought by Akin Gump related to state government lobbying, including work tied to the passage of House Bill 6. The bill, now law, is at the center of the $61 million federal bribery investigation. Akin Gump is aware of the court’s order and will readily provide additional information to facilitate approval of the firm’s fees, a spokesman for the international law firm said on Wednesday. The firm has been seeking to be paid nearly $68 million in fees and expenses in the case.