The world's best-known consulting firm and fixture in the top echelons of major banks has had the worst 24 hours imaginable.
The U.S. consulting giant was hit on Wednesday with a double-whammy of scandal: it will pay $573 million in restitution for playing an active role in the opioid epidemic ravaging America, «Reuters» reported. McKinsey is also mothballing its ambition to build a research department for investment banks after evidence of misconduct was found among its staff, the «Financial Times» (behind paywall) reported.
The drug epidemic has led to class-action lawsuits in more than 43 states against pharmaceutical manufacturer Purdue and others, including McKinsey. The New York-based firm had advised the wealthy Sackler family which owns Purdue as well as the firm itself on «turbocharging», as Massachusetts' prosecutor put it, for its opioids prescribed as painkillers.
U.S. Drug Epidemic
More than 450,000 Americans have died of overdoses connected to opioids between 1999 and 2018, according to official data. Widespread use of the painkillers, distributed by Purdue but also by other drugmakers including Johnson & Johnson, McKesson, Cardinal Health, and Amerisource Bergen, has led many patients in the U.S. into addiction, including to heroin and fentanyl.
More than 3,200 lawsuits are currently pending, and Purdue applied for bankruptcy protection two years ago amid the threat of a $10 billion settlement. The sprawling Sackler clan, long prolific donors to the arts, had already taken much of their wealth out of the firm. McKinsey was forced into a rare apology for its conduct, two months ago.
Swiss Stalwart
McKinsey, long an adviser to Swiss giants UBS and Credit Suisse but also popular with smaller houses like Julius Baer and Edmond de Rothschild, also suffered an embarrassing setback to its efforts to build a research firm, CIB Insights, for investment banks. It has shuttered that effort after sacking or suspending several employees for undisclosed policy breaches.
CIB Insights was launched in 2019 in response to research firms like Coalition to sell data to corporate and investment banks. Credit Suisse as well as Deutsche Bank and Morgan Stanley were among its early clients, according to the «FT».
