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Press Release

U.S. Trustee Program Reaches $15 million Settlement with McKinsey & Company to Remedy Inadequate Disclosures in Bankruptcy Cases

For Immediate Release
Office of Public Affairs
Settlement Addresses Deficiencies and Possible Conflicts Relating to McKinsey’s Retention in Bankruptcy Cases

The Department of Justice’s U.S. Trustee Program (USTP) has entered into a multi-district settlement agreement with global consulting firm McKinsey & Company, Inc. (McKinsey), resolving disputes over the adequacy of McKinsey’s disclosures of connections in Chapter 11 bankruptcy cases.  Under the Bankruptcy Code and Rules, the retention and payment of a professional firm by a debtor company in bankruptcy is contingent upon approval by the bankruptcy court after the firm discloses all of its connections to the debtor, creditors, and other parties.  These strict disclosure requirements allow the court, USTP, and parties involved in the case to identify any conflicts of interest that may taint the professional’s advice and favor one interested party over another.

The USTP alleged that McKinsey made insufficient disclosures about its clients and investments in certain entities that were connected with the debtors that employed McKinsey to provide financial advice on their respective bankruptcy reorganizations.  Specifically, the USTP alleged in court filings that McKinsey failed to identify clients who were connected with the debtors it represented and lacked candor regarding its investments in entities that could create a conflict of interest.

“This settlement ensures that McKinsey is held accountable for its conduct,” said USTP Director Cliff White.  “Transparency is the linchpin of the bankruptcy system and professionals employed in bankruptcy cases must be free of conflicts of interest..  McKinsey failed to satisfy its obligations under bankruptcy law and demonstrated a lack of candor with the court and USTP.  This settlement ensures that McKinsey is held to the same standards applicable to all professionals who participate in bankruptcy cases.  If this conduct is repeated in future cases, we will seek even more far-reaching remedies.”

Settlement Terms

Under the terms of the settlement, McKinsey agrees to pay $15 million in three bankruptcy cases to remedy inadequate disclosures of connections and to make additional disclosures.  The payment will be distributed to the creditors and other parties in accordance with the reorganization plans approved by the courts or other applicable law.  This is one of the highest repayments made by a bankruptcy professional for alleged non-compliance with disclosure rules.

The USTP has agreed not to bring additional actions in these and other cases based on McKinsey’s past disclosures.  If facts later show that those disclosures contained material misrepresentations or omissions that would have rendered McKinsey not disinterested or otherwise disqualified from retention, then the USTP is free to seek disqualification from employment, disgorgement of fees, and other remedies in the settled cases.  While the agreement resolves disputes with the USTP, it does not impact the rights of any parties or government agencies not participating in the settlement.  A term sheet for the proposed settlement has been filed in three U.S. Bankruptcy Courts, where the settlement will be subject to the courts’ approval.  The cases are captioned Alpha Natural Resources, Case No. 15-33896 (Bankr. E.D. Va.), Westmoreland Coal, Case No. 18-35672 (Bankr. S.D. Tex.), and SunEdison, Case No. 16-10992 (Bankr. S.D.N.Y). 

The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws.  The Program has 21 regions and 90 field office locations.  Learn more information on the Program at:


Updated February 19, 2019

Press Release Number: 19-138