Alabama begins working with a consulting firm under criminal investigation

The state of Alabama is partnering with international consulting giant McKinsey & Company to help develop a new strategic economic growth plan. But just days after the state announced the partnership, reports surfaced that McKinsey was under criminal investigation by the U.S. Department of Justice for helping pharmaceutical companies maximize opioid sales.

Since 2021 — long before the state began working with the company — McKinsey has agreed to pay nearly $1 billion to settle lawsuits and investigations related to the company’s work with opioid manufacturers, primarily Purdue Pharma, the maker of OxyContin. This work occurred 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-authored the book When McKinsey comes to town. It is argued that the company has made significant profits at the expense of moral principles.

This interview has been edited for clarity.

McKinsey & Company enjoys a good, some would even say outstanding, reputation in the business world, but the company has faced significant criticism in some quarters. Tell us about it.

Well, if you have one of your biggest profit centers as an addiction company, they’ve raised, you know, millions and millions of dollars advising companies that sell addictive products. They have been advising the cigarette companies for half a century, and I would like to point this out long after it was common knowledge that it was deadly. It was the deadliest consumer product in history. They knew that. And they knew, for example, 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 were selling, which was OxyContin, and that this was in the middle of an opioid Epidemic. And they advised Purdue Pharma, in addition to other opioid manufacturers, particularly Purdue, on how they could, so to speak, “boost” their sales.

In addition to working on things like a strategic economic growth plan, McKinsey also helps companies understand the regulatory environment. They even come in and help companies decide who to fire within those companies. Is that correct?

Oh, it’s definitely true. And that drives home a point that I think we made in the book, which is that income inequality is tearing the country apart. And McKinsey played a major role in making that happen, through layoffs, through offshoring, and through actions that were not necessarily in the best interests – and usually not in the best interests – of the employees or the communities in which these companies operated .

Describe what you know about the U.S. Department of Justice’s criminal investigation into McKinsey related to the company’s work with drug manufacturers and helping those companies maximize their opioid sales.

We knew that this investigation had been ongoing for several years. We knew there were subpoenas. But I know that one of the elements in it is an obstruction of justice (charge) that they are investigating. McKinsey says they did nothing wrong in their advice to Purdue Pharma and other opioid manufacturers. On the other hand, McKinsey saw fit to pay nearly $1 billion—that is, with a B—to settle lawsuits and government investigations into their conduct. So it’s just common sense. How can you say you didn’t do anything wrong when you’ve amassed a billion dollars? That’s just crazy.

How do you think Alabamians should view the fact that the state government is hiring McKinsey & Company, a company that the Justice Department is criminally investigating?

Well, I think the people of the state of Alabama need to demand some answers and some transparency because one of the things that I find very interesting is that McKinsey takes the position that they don’t really have an obligation to explain how they use taxpayer dollars spend what democracy and good government aren’t supposed to work like that.

What are some of the things we should require our state government to disclose about their work with McKinsey & Company? I’m assuming the price would be one of these things.

It would. I mean, one of the most fundamental questions is why do they need McKinsey? Why are they even hiring them? It shows a terrible lack of trust in the people you hire to work in your office when you don’t trust them enough to make decisions and you have to hire a private company with what, frankly, is a minor blemish – more than just a minor blemish – has on its record that it commands premium prices. It makes no sense for a state to try to watch its money and intelligently serve its people.

Editor’s note: State officials say they have not yet determined how much McKinsey will be paid. Meanwhile, the Economic Development Partnership of Alabama, a nonprofit that works with the state and actually hired McKinsey for the project, wouldn’t reveal what McKinsey is charging. EDPA and state spokesmen say they have full confidence in McKinsey. McKinsey declined to comment for this story.