Risk Update

Conflicts News — Consulting Conflict Concern (McKinsey, Again), Texas Housing Agency Board/Law Firm Concerns

Texas housing agency board member voted for deals that paid his law firm” —

  • “At one of his first meetings as a member of a state housing board, Dallas attorney Paul Braden voted to approve renovations on a low-income apartment complex in a small town southeast of Houston. When the project was finalized, his law firm earned $70,000 for doing legal work on the deal.”
  • “Over the next three years, Braden voted to approve another dozen housing proposals that earned Norton Rose Fulbright more than $2 million, The Dallas Morning News found.”
  • “Braden did not report that his firm held a contract to do the work as a conflict of interest, records and video archives reviewed by The News show. State law requires board members with a personal interest in any agency matter to publicly disclose it and abstain from voting.”
  • “The firm said Braden had received assurances from the Texas Department of Housing and Community Affairs that no conflict existed. ‘We are confident that Paul Braden complied with all legal and ethical duties while serving on the TDHCA board,’ the firm said in a statement.”
  • “Two days after The News asked Braden about the fees, he stepped down from the board ‘to avoid even an appearance of a conflict,’ the firm said. In an April 28 resignation letter to Gov. Greg Abbott, Braden wrote that “certain professional matters” made it challenging for him to continue on the board. Braden declined requests for an interview.”
  • “Housing agency spokeswoman Kristina Tirloni said the agency did not believe Braden had a conflict because he was doing legal work for a nonprofit that helped finance the deals, not for developers who submit applications to the housing agency.”
    “Braden’s requirement to disclose his firm’s role is clear, said Andrew Cates, an Austin attorney who specializes in Texas ethics law. ‘He has a business interest in the votes that he’s taking,” Cates said. “And that should have been disclosed.'”

McKinsey Faces Conflict Disclosure Deadline in Puerto Rico Work” —

  • “McKinsey & Co. is in the spotlight as the consulting giant faces a deadline to disclose potential conflicts of interest in advising Puerto Rico‘s $120 billion restructuring.”
  • “A new law signed by President Biden on Jan. 20—the Puerto Rico Recovery Accuracy in Disclosures Act (PRRADA) —requires certain key professionals who worked on the island’s bankruptcy-like case to disclose if they have any previously hidden investments or business connections that could be considered a conflict of interest.”
  • “McKinsey, a market leader in bankruptcy consulting, in particular faces scrutiny as one of the case’s top billers with over $100 million in fees. Revelations that a McKinsey subsidiary held millions in Puerto Rico bonds provided the impetus to Congress’ push to enact PRRADA—a process in which McKinsey also engaged as a lobbyist to shape certain technicalities in the legislation.”
  • “The events highlight McKinsey’s penchant for confidentiality and multiyear fight against accusations that it intentionally conceals conflicts of interest from federal overseers.”
  • “McKinsey’s travails in Puerto Rico fit into a pattern of other accusations the firm has faced in recent years that it flouts federal disclosure laws to hide conflicts of interest.”
  • “In recent years, McKinsey has agreed to multimillion-dollar fines or settlements related to the adequacy of its disclosures as a bankruptcy consultant for SunEdison Inc., Westmoreland Coal Co., and the mining company Alpha Natural Resources.”
  • “And in November 2021, McKinsey paid the U.S. Securities and Exchange Commission $18 million to settle an investigation into potential insider trading risks stemming from MIO’s investments in Puerto Rico and McKinsey’s other bankrupt clients.”
    “Since 2018, when it started lobbying Congress on bankruptcy matters, McKinsey has paid more than $6 million to the three law firms lobbying on Puerto Rico and bankruptcy oversight, according to federal lobbying records. The onset of that lobbying effort marked the first time the firm filed lobbying disclosures in 15 years.”