Risk Update

Conflicts Allegations — Clyde Upsets UAE, Consultant McKinsey Comes Under Scrutiny

Posted Dan Bressler

“Clyde & Co lawyers suspended in Dubai for ‘upsetting powerful Emirati’” —

  • “Four Clyde & Co lawyers working in the United Arab Emirates have been temporarily banned from working after they crossed paths with a powerful Emirati.”
  • “The solicitors have been suspended from practising law for three months by the Dubai Legal Affairs Department for a ‘breach of certain conflict of interest rules.'”
  • “Details are scant. Unlike legal regulators in the UK, the DLAD does not publish records of its proceedings, judgments and sanctions, nor does it identify lawyers against whom it has taken action. The DLAD did not respond to requests for comment.”
  • “RollOnFriday understands that the DLAD honed in on Clyde’s four lawyers, as well as local lawyers, after a powerful Emirati successfully overturned a judgment made in 2013 where Clyde & Co acted for the other side.”
  • “A source suggested the influential figure had pulled strings to ‘take revenge,’ and that ‘there appears very little in the way of any wrongdoing or negligence highlighted in the bringing of the sanction.'”
  • “In a statement, Clyde & Co told RollOnFriday, ‘We are aware of a decision by the Dubai Legal Affairs Department (DLAD) against a number of lawyers in the UAE. While we are pleased that two of the three allegations that were contained in the original complaint to the DLAD were dismissed, the DLAD has upheld the decision that there was a breach of certain conflict of interest rules. We maintain that our lawyers acted with integrity at all times and are exploring avenues to challenge the decision.'”

“Advising both Chinese state companies and the Pentagon, McKinsey & Co. comes under scrutiny” —

  • “Global consulting giant McKinsey & Co.’s work with both the Pentagon and powerful Chinese state-owned enterprises poses a potential risk to national security that federal agencies can no longer ignore, lawmakers and critics say.”
  • “McKinsey’s consulting contracts with the federal government give it an insider’s view of U.S. military planning, intelligence and high-tech weapons programs. But the firm also advises Chinese state-run enterprises that have supported Beijing’s naval buildup in the Pacific and played a key role in China’s efforts to extend its influence around the world, according to an NBC News investigation.”
  • “Asked about its work in China and the United States, McKinsey told NBC News that it abides by U.S. laws on federal contracting and that it has extensive internal rules to prevent conflicts of interest and to protect clients’ information.”
  • “‘We follow strict protocols, including staffing restrictions and internal firewalls, to avoid conflicts of interest and to protect client confidential information in all of our work. When serving the public sector, we go further: in addition to managing potential staffing conflicts, we are subject to our Government clients’ organizational conflict of interest requirements and comply with these obligations accordingly,’ a company spokesperson, Neil Grace, said in an email.”
  • “The Pentagon and other federal government agencies rely on McKinsey to carry out often sensitive work touching on national security strategy, cybersecurity and cutting-edge technology, paying the firm hundreds of millions of dollars for its advice and data-crunching.”
  • “‘I can’t see how you could work in the areas they’re working in for the Defense Department and at the same time have the extensive connections in China, and not be compromised,’ said Marianne Jennings, a professor of legal and ethical studies in business at Arizona State University. ‘If you just step back objectively, there’s a great deal of risk here for the United States.'”
  • “In four federal contracts obtained by NBC News, including with the Defense Department and the Navy, McKinsey made no mention of its clients in China or any possible conflict of interest. Under federal law, contractors must disclose any possible conflicts of interest.”
  • “But McKinsey does not view its consulting for Chinese enterprises as a conflict, and experts say the federal government often doesn’t focus on a contractor’s foreign clients. Instead, federal officials usually look at whether a company has foreign ownership or control, and vet contractors’ employees for any security concerns. Still, the burden is on the contractor to divulge even the appearance of a potential conflict.”
  • “Lawmakers from both parties and critics of McKinsey worry its work with Chinese state-owned companies could allow Beijing access to valuable information associated with the firm’s extensive consulting with U.S. government agencies, possibly giving China an upper hand in its competition with the U.S. Even if no secret material was obtained by China, McKinsey could inadvertently provide Beijing with valuable insights into senior leadership and strategic thinking in the U.S. government, critics say.”
  • “Apart from its consulting in China, McKinsey has come under sharp criticism from lawmakers and faced legal challenges over alleged conflicts of interest in other fields.”