Republican lawmakers in the United States are urging the Department of Justice to investigate consulting firm McKinsey for potential violations of federal laws, alleging a failure to disclose potential conflicts of interest between its business operations in China and its services for the Pentagon.
According to reports from the Financial Times, Chairman of the U.S. Congressional Committee on China, John Moolenaar, along with Senators Marco Rubio and Joni Ernst, jointly wrote to Attorney General Merrick Garland questioning whether McKinsey has violated government contract regulations and misled Congress.
Republicans argue that McKinsey’s business dealings in China while working for the Department of Defense pose a threat to national security, a claim vehemently denied by the company.
Public disclosures show that since 2008, McKinsey has secured nearly $500 million in contracts with the U.S. Department of Defense. Under U.S. procurement laws and specific contract details, McKinsey is required to disclose any potential conflicts of interest.
“After reviewing certain documents held by the committee, McKinsey appears to have failed to disclose any potential conflicts of interest,” the letter stated.
Lawmakers point out that McKinsey’s work for Chinese state-owned enterprises, including China Communications Construction Company, presents potential conflicts of interest as the latter is involved in building military bases in the South China Sea, a situation that led to it being blacklisted by the U.S. Department of Commerce.
They argue that McKinsey should report its business dealings in China to the U.S. government and provide details on how it mitigates these conflicts of interest. They insist that McKinsey should follow the same practices it has applied in disclosing its work for the Chinese central government in other U.S. legal documents.
In their letter, the three lawmakers state, “The law requires McKinsey to disclose any potential conflicts so that the appropriate contracting agencies can determine the adequacy of mitigation measures. There is no legal basis for McKinsey to self-regulate.”
McKinsey has declined to comment on requests for response from the Financial Times. The company previously stated that its policy of disclosing organizational conflicts of interest complies with federal laws.
Lawmakers also mention McKinsey’s Global Managing Partner, Bob Sternfels, who testified earlier this year to Congress that the company has never had the Chinese central government as a client.
The letter cites two legal documents from McKinsey’s involvement in U.S. bankruptcy cases, one listing “Chinese Government – Central/Provincial Government” as a client, and another showing that 1% to 3% of revenue from its Shanghai office comes from the Chinese government’s State-owned Assets Supervision and Administration Commission, which oversees state-owned enterprises.
Lawmakers are calling on Garland to investigate whether McKinsey’s business in China poses a threat to national security, whether the company’s failure to disclose potential conflicts of interest violates federal laws, and whether Sternfels made false statements to Congress.
They have also written to the Pentagon requesting a review of McKinsey’s eligibility to continue working for the U.S. military.
The U.S. Department of Justice declined to comment, and the Department of Defense did not immediately respond to requests for comments.
McKinsey previously stated its support for Sternfels’ testimony to Congress and has been reducing its collaborations with Chinese state-owned enterprises and government agencies, focusing instead on serving multinational corporations.