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22 May, 2022 13:17

US firm advised Pentagon and Russian defense conglomerate at same time – report

McKinsey worked on US defense and intelligence contracts while advising a company whose engines power Russian missiles, NBC says
US firm advised Pentagon and Russian defense conglomerate at same time – report

US consulting firm McKinsey & Co. reportedly worked on contracts for the Pentagon and US intelligence agencies while simultaneously providing services to Russian state-owned defense conglomerate Rostec, which makes some of the military hardware now being used in the Ukraine offensive, according to NBC News.

McKinsey’s work with Rostec was going on while the firm undertook sensitive national security projects for America’s Department of Defense and intelligence community, NBC reported on Saturday. The American consulting firm told the news network that its work with the Russian defense and aerospace giant didn’t relate directly to weapons systems.

The former Rostec relationship raises questions over potential conflicts of interest for a firm that advises various US government agencies, in some cases involving issues of national security, and many of the country’s leading corporations, according to NBC. McKinsey has previously attracted similar scrutiny over its work with state-owned companies in China.

“It’s really hard to understand how an American consulting firm... would want to be involved in sensitive areas of the Russian defense or intelligence or scientific establishment,” consultant Scott Blacklin, former head of the US Chamber of Commerce in Russia, told NBC. “And when you talk about Rostec, you’re talking about all of those mixtures.”

McKinsey spokesman Neil Grace said the firm has strict policies to prevent conflicts of interest, and its overseas work is “walled off” from its projects in Washington. The firm’s services for Rostec concerned routine “commercial and operational topics” he added, and “it would not be fair or accurate to describe this work as benefiting the Russian military.”

Rostec is Russia’s largest defense company, and one of its subsidiaries has a monopoly on Russian arms exports. It oversees research and development of military hardware, such as the new “Checkmate” fighter jet, and its companies produce weaponry ranging from armored fighting vehicles to attack helicopters. As NBC noted, Rostec-made engines power many of the missiles that have been used in Russia’s military offensive against Ukraine.

McKinsey was accused previously of ignoring potential conflicts of interest when it consulted opioid manufacturers and their federal regulator, the Food and Drug Administration, at the height of the US opioid crisis. The firm agreed last year to pay $573 million to settle allegations that it helped “turbocharge” sales of opioids, contributing to addictions that led to more than 400,000 deaths.

US Senator Maggie Hassan (D-New Hampshire) suggested that McKinsey’s “pattern of behavior” has raised “grave concerns” about its overseas work. “Whether it be the substance-misuse crisis or work for state-owned enterprises in places like Russia and China, I am deeply concerned by McKinsey’s choices and by the fact that the US government continues to contract with McKinsey despite those potential conflicts,” she told NBC.

Many of McKinsey’s former employees have gone on to influential roles in business and government. Its former consultants include such people as US Transportation Secretary Pete Buttigieg, Facebook chief operating officer Sheryl Sandberg and Susan Rice, who was national security advisor under then-President Barack Obama and currently heads President Joe Biden’s Domestic Policy Council.

McKinsey has done consulting work for Russia’s largest bank, SberBank, VTB bank and state-owned energy giants Gazprom and Rosneft, NBC said, citing court documents. In March, the firm announced that it was pulling out of Russia, joining an exodus of Western corporations to punish Moscow over the Ukraine conflict.