A McKinsey & Co. retirement fund held investments that gave it a financial interest in the outcome of six bankruptcy cases in which the company also was serving as an adviser, court and regulatory filings show, the Wall Street Journal. McKinsey’s restructuring unit, known as McKinsey RTS, didn’t disclose those investments publicly. Rules governing the chapter 11 bankruptcy process require advisers to disclose all relationships that might give rise to a conflict of interest, to ensure that advisers will be disinterested advocates for their clients and that other participants in the cases are aware of them. The McKinsey retirement fund’s investments with two hedge-fund companies, Whitebox Advisors LLC and Strategic Value Partners LLC, gave it a stake in the debt or other obligations of six companies that sought bankruptcy protection: United Airlines parent UAL Corp. in 2002; American Airlines parent AMR Corp. in 2011; Edison Mission Energy in 2012; NII Holdings Inc. in 2014; Alpha Natural Resources Inc. in 2015; and SunEdison Inc. in 2016. McKinsey was a bankruptcy adviser to all six companies. In each bankruptcy case McKinsey advised on, its officials signed a sworn statement that the firm was a disinterested party.
The new president of the Federal Reserve Bank of New York, John C. Williams, yesterday gave his backing to his predecessor's campaign to clean up bank culture, the New York Times reported. “I do commit to continue the New York Fed’s leadership on this in future years,” he said at a New York Fed conference on bank governance. More than four years ago, after a number of big scandals on Wall Street, William C. Dudley, who was until Sunday the president of the New York Fed, started the initiative to improve the culture at large financial institutions. Dudley succeeded in getting top bankers to participate in regular discussions about how they could overhaul the culture of their institutions, and in some cases, boards of major banks have started to focus on the issue of employee conduct. But some of his more ambitious ideas have not been taken up. Williams, previously the president of the Federal Reserve Bank of San Francisco, did not specify the policies that he might pursue to try to bring about a lasting improvement in bankers’ ethics. Instead, his main message yesterday was that bankers and regulators must be careful not to relax their efforts at a time when banks’ financial performance looks strong.
Six former and current employees of Fitbit Inc. were charged in a federal indictment for possessing trade secrets stolen from rival Jawbone, according to a statement yesterday from the Department of Justice, Reuters reported. The indictment filed in San Jose, Calif., alleges each defendant was aware that the trade secrets were stolen and that they were being possessed without authorization. The individuals had all worked for the now-defunct San Francisco-based Jawbone, owned by AliphCom Inc., for at least a year between May 2011 and April 2015, before being employed by Fitbit, it said. Each of them has been charged with one or more counts of possession of trade secrets and is scheduled to make an initial court appearance on July 9, the DoJ said. Jawbone sued Fitbit in May 2015, just weeks before the wearable device maker’s IPO, alleging Fitbit engaged in a clandestine effort to steal talent, trade secrets and intellectual property. However, the companies reached a global settlement agreement resolving all outstanding litigation in December 2017.
Streaming giant Netflix Inc. says Winston & Strawn LLP, the law firm hired to represent Relativity Media LLC in its latest bankruptcy, is legally bound to withdraw from the case, WSJ Pro Bankruptcy reported. According to Netflix, Winston & Strawn is also currently representing Netflix in patent-related litigation in Delaware. In an objection filed on Monday with the U.S. Bankruptcy Court in New York, lawyers for Netflix said that it never gave “informed consent” to Winston & Strawn regarding the firm’s representation of Relativity and that the situation creates the “potential for divided loyalty.” Netflix has asked Judge Michael Wiles, the judge overseeing Relativity’s bankruptcy, to deny the law firm’s application to work in the case or, as an alternative, to order the appointment of special conflicts counsel. Attorneys from Winston & Strawn didn’t respond to a request for comment Tuesday. A court hearing on the matter is set for June 28.
