So, McKinsey consultants will be allowed to stalk the halls of the Bank of England, to review “strategic investment decisions, working methods, and allocation of time and resources.”
FT Alphaville already have some ideas. Read more
Rajat Gupta, a former head of the McKinsey consultancy, has been indicted on insider trading charges that allege he used his position on the boards of Goldman Sachs and Procter & Gamble to share secret company information with his friend and business associate Raj Rajaratnam, founder of the hedge fund Galleon Group, the FT reports. Mr Gupta is the highest profile executive to be caught in the US government’s sweeping investigation of corruption on Wall Street. He was charged with one count of conspiracy and five counts of securities fraud. The Securities and Exchange Commission also filed civil fraud charges on Wednesday. Mr Gupta, 62, surrendered to Federal Bureau of Investigation agents soon after 8am on Wednesday morning. He pleaded not guilty and was released on a $10m bond. His lawyer, Gary Naftalis, vigorously denied the allegations. He said Mr Gupta “did not trade in any securities, did not tip Mr Rajaratnam so he could trade and did not share in any profits as part of any quid pro quo”.
Rajat Gupta, former boss of McKinsey and Goldman Sachs board member, on Wednesday morning surrendered to the FBI, pending criminal charges for insider trading.
This would be a big scalp for the Feds — bigger even than that of Gupta’s friend, Raj Rajaratnam, who went down last month. Gupta is one of the most connected people in business and, if convicted, would arguably make for the most high profile conviction in insider trading history. Read more
Rajat Gupta, the former head of McKinsey, will face criminal charges as soon as Wednesday for allegedly passing Goldman Sachs earnings data to Raj Rajaratnam, the hedge fund manager, while serving on the bank’s board, the FT reports, citing people familiar with the matter. Mr Gupta is expected to voluntarily surrender to Federal Bureau of Investigation agents on Wednesday morning, these people say, with the charges expected to be announced by US prosecutors in Manhattan. Gary Naftalis, attorney for Mr Gupta, said any allegation that Mr Gupta engaged in any unlawful conduct was “totally baseless”. Mr Naftalis said Mr Gupta did not trade in any securities, did not tip Mr Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo.
Rajat Gupta, the former head of McKinsey & Co accused by the SEC of insider trading, has been given the green light to pursue legal action against the regulator for singling him out unfairly, the FT reports. In March, the SEC filed an administrative proceeding alleging that Mr Gupta engaged in insider trading by tipping Raj Rajaratnam, convicted founder of hedge fund Galleon Group, with secret information about Goldman Sachs and Procter & Gamble while serving on the boards of both companies. Mr Gupta, who denies engaging in insider trading, sued the SEC, alleging that the regulator violated the equal protections clause of the US constitution by suing him administratively when other Galleon defendants were sued in federal court. US Judge Jed Rakoff, an outspoken critic of the SEC at times, on Monday denied the SEC’s motion to dismiss Mr Gupta’s lawsuit, saying it could move forward on an expedited basis. He chastised the SEC in his 22-page opinion, saying it had engaged in a “seeming exercise in forum shopping” by choosing to file the case in its “home court”. The case is one of the more remarkable to emerge from a federal crackdown on insider trading, the Washington Post says.
McKinsey & Co will not know for 20 years what damage the Galleon insider trading scandal has done to its brand, the head of the management consultancy has told the FT, describing the case – in which two of its senior executives were caught up – as “incredibly distressing and embarrassing”. Clients had been very supportive, Dominic Barton, McKinsey’s global managing director, said in his fullest public comments on the affair, pledging to make the organisation stronger. Anil Kumar, a former McKinsey partner, has pleaded guilty to charges of providing confidential information to Raj Rajaratnam, the ex-head of the Galleon Group hedge fund who was found guilty in May in a landmark insider trading case.
Hundreds of McKinsey partners will hear first-hand this week how the consultancy is handling the fallout from a high-profile insider dealing case, reports the FT. The firm’s annual partner meeting will take place on Tuesday and Wednesday in Washington. Its board started a two-day meeting in the US capital on Sunday. McKinsey was unsettled by the appearance of Anil Kumar, a former partner, as a star witness for the government in its insider trading case against hedge fund billionaire Raj Rajaratnam, founder of Galleon Group, which resumes on Monday. The case is not on the formal agenda of the McKinsey partner meeting, which brings together more than 1,300 top staff. But Dominic Barton, global managing director, is expected to discuss with partners the potential implications of the trial and the separate civil charges against Rajat Gupta, one of his predecessors as elected head of McKinsey.
Anil Kumar, a former McKinsey partner, has testified that he shared client secrets with Raj Rajaratnam, the Galleon founder being tried for insider trading, because he felt obligated to him after agreeing to accept $500,000 a year in consulting fees, the FT says. Mr Kumar has pleaded guilty to securities fraud and is co-operating with the government in hopes of a lighter prison sentence. He has agreed to forfeit $2.7m in fees and profits he received from Galleon. Lawyers played a phone recording in which Mr Kumar tells Rajaratnam of an imminent transaction that will boost the shares of AMD, a McKinsey client, the WSJ reports.
Rajat Gupta, who ran McKinsey for almost a decade and was a board member of Goldman Sachs from 2006 to 2010, has been hit with civil insider trading charges for allegedly sharing secret information he gained as a Goldman director with Galleon Group founder Raj Rajaratnam, the FT reports. The SEC alleges Gupta shared information about Warren Buffett’s $5bn capital infusion into Goldman in 2008 within one minute of the board’s approval of the deal. Gupta’s lawyer called the charges “baseless”. FT Alphaville examines highlights of the SEC charges.
A former McKinsey director who has already pleaded guilty to insider trading in the Galleon hedge fund probe agreed to pay $2.8m to settle civil charges stemming from his actions, according to federal court documents on Monday, reports the FT. Anil Kumar, a former senior partner and director at McKinsey, signed a consent order with the SEC last month, calling for him to pay $2.6m in disgorgement and another $190,621 in interest for his role in the Galleon affair. The consent order was filed on Monday.
Former McKinsey director Anil Kumar on Thursday agreed to forfeit $2.6m that prosecutors said he received for confidential tips to Raj Rajaratnam, the Galleon hedge fund founder at the centre of insider trading allegations. Kumar is the seventh person to plead guilty in the case. Prosecutors said he was approached by Rajaratnam in late 2003 or early 2004 and offered $500,000 a year for information on companies he could access through McKinsey.
Okay, this looks like a big one. The FBI and other US enforcement agencies on Friday moved against an alleged insider dealing ring stretching from Wall Street to Silicon Valley, by way of Bear Stearns, IBM and even a Moody’s analyst.
Conde Nast will close four magazines – Gourmet, Modern Bride, Elegant Bride and Cookie — amid a severe slump in advertising, reports Reuters. The decision is one of the clearest signs yet of deep cost cuts and problems at the publishing house best known for magazines such as The New Yorker and Vogue. The cuts follow a review of the business by consultants McKinsey & Co.
McKinsey & Co, the management consultancy, will announce on Monday that Dominic Barton, its Shanghai-based Asia head, has been chosen by his peers to take over as managing director. McKinsey’s 400 senior partners elected Barton, 46, to serve a three-year term when Ian Davis retires in June. He defeated long-time contender Michael Patsalos-Fox in the final run-off and will be the 11th partner to head McKinsey since it was founded in 1926.
Global capital markets would be able to finance a near-doubling of the US current account deficit to $1,600bn a year by 2012, argues a McKinsey study published on Friday. The study, by McKinsey Global Institute, breaks new ground in analysing the sources of funding for the deficit, and what a large dollar depreciation would mean for different industries and US trading partners. McKinsey estimates that, based on trend growth rates and current exchange rates, the US deficit will reach $1,600bn, or 9 per cent of GDP, in five years’ time, up from 6.5 per cent of GDP last year.
It is received wisdom that mergers and acquisitions destroy value, Lex notes, but recent data suggests deals are creating better value for shareholders.
A McKinsey study measured the change in buyers’ and sellers’ share prices two days before and two days after a deal is announced. The aggregate value created, as a percentage of the transaction’s value (adjusted for market movements), reached a 10-year high of 10.6 per cent in 2006. Merged companies underperformed the MSCI World index by 6.4 per cent in 1988 and by 2.5 per cent in 1998, whereas in 2004 they outperformed by 7 per cent. Read more
Little is more irritating to an American banker who works outside New York than people who talk about New York as if the entire US financial services industry is based there, says the FT’s Observer.
As we approach the end of a year marked by record M&A volumes, McKinsey have weighed in to ask whether shareholders are once again losing out in the deal-making frenzy?
The answer, they say, is no – or at least, not as much. While earlier research from the consultants showed that 60 per cent of deals destroyed value for shareholders of the acquiring company, a review of almost 1,000 deals of over $500m from 1997 to 2006 suggest that deals in this cycle are on average creating more value. Read more