Alabama to begin working with a consulting company that’s under criminal investigation
International consulting giant McKinsey & Company is working with the state of Alabama, while being investigated by the U.S. Department of Justice.
The state of Alabama is working with the international consulting giant McKinsey & Company to help put together a new strategic economic growth plan. But, just days after the state announced the partnership, reports surfaced that McKinsey is being criminally investigated by the U.S Department of Justice for the consultancy’s work helping drug companies maximize the sale of opioids.
Since 2021 — well before the state began working with the company — McKinsey has agreed to pay almost $1 billion to settle lawsuits and findings of investigations related to the firm’s work with opioid makers, mainly Purdue Pharma, the maker of OxyContin. That work happened during an opioid crisis that has killed hundreds of thousands of Americans. McKinsey has not admitted any wrongdoing.
WBHM’s Richard Banks spoke with Pulitzer Prize-winning investigative reporter Walt Bogdanich about the company. Bogdanich co-wrote the book When McKinsey Comes to Town. It argues the firm has earned considerable profits at the expense of moral principle.
This interview was edited for clarity.
McKinsey & Company has this good, some might even say stellar, reputation within the business world, but they’ve come under considerable criticism in some circles. Tell us about that.
Well, when you have one of your major profit centers as the addiction business, they have, you know, collected millions upon millions of dollars advising companies that sell products that are addictive. For half a century, they advised the cigarette companies, and I should point out, long after it was well known that it was deadly. It was the most lethal consumer product in history. They knew that. And they knew, for instance, that when they went to work for Purdue Pharma, they knew what was happening with that company, and they knew what was happening with the product that they sold, which was OxyContin, and that this was in the midst of an opioid epidemic. And they were advising, Purdue Pharma, in addition to other opioid makers, but specifically with Purdue, on how, to quote, “turbocharge” their sales.
In addition to working on things like a strategic economic growth plan, McKinsey also does things like help companies understand regulatory environments. They even come in and help companies decide who to lay off within those companies. Is that correct?
Oh, it’s definitely correct. And that kind of raises a point that I think we tried to make in the book, that income inequality is tearing the country apart. And McKinsey played a major role in creating that, by layoffs, by offshoring, by taking actions that were not necessarily in the best interest — and usually weren’t in the best interest — of the employees or the communities in which these companies operated.
Describe what you know about the DOJ’s criminal investigation concerning McKinsey, related to the company’s work with drug manufacturers, and helping them maximize their sale of opioids.
We knew that this investigation had been going on for a couple of years. We knew that there were subpoenas going out. But what I know is that one of the elements of it is an obstruction of justice [charge] that they’re looking into. McKinsey says that they’ve done nothing wrong in their advice to Purdue Pharma and other opioid makers. On the other hand, McKinsey saw fit to pay almost $1 billion — that’s with a B — to settle lawsuits and government investigations into their conduct. So, it’s just common sense. How can you say you did nothing wrong when you’re ponying up $1 billion? That’s just nuts.
In your opinion, how should the residents of Alabama look at the fact that the state government is hiring McKinsey & Company, a company that is being investigated criminally by the DOJ?
Well, I think people in the state of Alabama need to demand some answers and some transparency because, one of the things that I find very interesting, is McKinsey takes the position that they have no real obligation to explain how they spend tax dollars, which is not really how a democracy and a good government should work.
What are some of the things that we should be asking our state government to reveal about their work with McKinsey & Company? I’m assuming price would be one of those things.
It would. I mean, one of the most basic questions is why do they need McKinsey? Why are they hiring them at all? It shows a horrible lack of confidence in the people that you hire to work in your office, if you don’t trust them enough to make decisions and you got to bring in a private company with a, frankly, a bit of a blemish on its — more than a bit of a blemish — on its record, [that’s] charging top dollar. It doesn’t make sense for a state that’s trying to watch its money and serve its people in a smart sort of way.
Editor’s Note: State officials say they have not yet determined how much McKinsey will be paid. Meanwhile, the Economic Development Partnership of Alabama, which is a nonprofit working with the state and did the actual hiring of McKinsey for the project, would not divulge what McKinsey is charging. Spokespersons for both the EDPA and the state say they have full confidence in McKinsey. McKinsey declined to comment for this story.
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