You know, we talk about it occasionally on our show here the kind of stuff we would be doing if we weren't doing podcast.
Yeah, consulting about podcasts.
Join our new podcast consultancy.
Which is actually kind of part of our job descriptions, which is weird.
Technically is it?
Technically is we do develop shows? And it's not because we are some you know, moseses on the mountaintop who know what, who know everything. It's because we've been around long enough that if there is a mistake, we have made that mistake.
Yeah, we're the idea guys, because we messed up a lot pretty often.
Yeah.
And one of the one of the questions we got in correspondence several years ago was about consultancy, right, the idea of being a consultant. It's a heck of a group term, and it means it can mean a lot of things.
I don't want to spoil this one at all, this one, this episode unfolds. I think we should just let it happen.
From UFOs to psychic powers and government conspiracies, history is riddled with unexplained events. You can turn back now or learn the stuff they don't want you to know.
Hello, Welcome, back to the show. My name is Matt Our co host Noel Is on Adventures.
They call me Ben.
We are joined with our super producer Paul Mission Control dec At most importantly, you are you, You are here, and that makes this stuff they don't want you to know. Matt, do you ever contemplate alternative timelines or alternate timelines? Do you ever think of who you might be and what you might be doing in a universe just to the left of ours.
Yes, I have a similar thing to that. It's a it's a it's a yes but which is a weird thing. Shouldn't shouldn't do yes butts. But my wife and I have this theory that we jumped timelines sometime in twenty sixteen, that all of Earth jumped the timeline, and somehow we've were in this alternate reality now where where just things are a little bit off of what they were before, and we we don't really know because it's that whole Mandela effect thing where our memories are a little different.
But in this timeline, it's all been this way forever.
And that's that's an interesting argument. It's more common than you might think, especially here in the West. Quite a few people have on an individual level floated something like
that with me. I'm I guess my timeline question for you and for you listeners today is hinging on these these sorts of thought experiments that we have, these Walter Mitti esque moments where we think, you know, what is my life in this other universe, like where I am an astronaut or where I am a touring percussionist for I don't know what. What's a dream band that people want to play percussion for.
I always knew that you were going to do that one day. I knew it. Dave Matthews Man.
Oh yeah, I met one of their touring drummers, not the main guy, but I met one of their touring drummers a while back. Really nice guy. Uh That is the end of that story. But the reason I ask is because you met Carter. What's you met Carter?
No, not the main drummer.
Oh okay, no, no, one of the like one of the bongo guys.
Oh yeah, the percussionist gus Yeah.
Uh So, way back in a different version of my own life, I was on track to be an employee of something very much like the company that we are examining today. Thankfully, this is just my opinion. Thankfully I didn't do it, and my thoughts and prayers go out to whatever Benboland lives in an a version of the timeline where the cards fell differently.
And instead we got into this.
And instead we ended up doing this. Yes, when we think of global powers, we usually think of nations, right, governments, religions, huge multinational corporations and so on, and we understand in a very general way how all of these work. You don't need to be a president or prime minister to understand that nations on paper seek to make life better for their citizens.
On paper, and you.
Don't need to or maybe a certain segment of their citizenry. You don't need to be a priest, a patriarch or a pope to understand that religions typically strive to make new converts and spread their teachings, their philosophies and souls and save souls, yeah, depending on the religion, while a corporation will work to expand its market share and ultimately
its bottom line. And all of these things are fine in theory, right, but none of them are inherently good or evil, which I know can ruffle some feathers, especially when we talk about religion. We're not talking about a specific religion, just the concept none are inherently good or evil. Because some nations might improve life for their citizens or some percentage of their population by making things worse for other people in another country, or indeed in the same country.
And some religions may advocate slavery or death for non believers that may be the best way to save their souls, according to some teaching or interpretation thereof. And as we know, some corporations may reak tremendous havoc chasing that bottom line and even ultimately shoot themselves in the foot, you know what I mean.
But today's story is about something else entirely, not a religion, not a nation, perhaps not even really a corporation, at least in the way that we would traditionally think about one of those. Today's episode is about a mysterious consultancy firm called the McKenzie Group, but to those in the know, it's simply called the Firm. Ooh, I like that movie with Tom Cruise, right.
Yeah, there's also the book, a book The Firm. There's Chrishiam. Yeah, and there's a documentary about Mackenzie called The Firm. So let's look at the history first. Here are the facts. This thing is very, very old. The Mackenzie Group was founded in nineteen twenty six by a fellow named James O.
McKenzie.
He was a University of Chicago professor and an expert on what's known as management accounting. He worked his way up from the bottom.
Okay, management accounting, So I guess a manager of sorts? Mart I guess in this case he is a consultant.
High level accounting. Right, how do we best understand a budget for an organization?
Right?
How do we streamline that budget? How do we grow certain parts of it?
And so on.
He was born way back in eighteen eighty nine. He grew up in fairly modest means in a three room house in the Ozarks. And this kind of these kind of humble beginnings are talking points that a lot of companies of this nature love to hit, you know what I mean? Large corporations love to talk about the humble
beginnings and therefore the implied genius of their founder. Right, this was an extraordinary person, whatever their name is, because through nothing but their own intellect and gumption they rose to the top.
Yeah, his grip on his bootstraps is very strong.
This is this is very popular. This is this is an iteration of the American myth, you know what I mean. So it's no wonder that that's one of the first things you'll read about the founder in any of the official literature.
It is interesting he started as a professor. That that fascinates me.
Mm hmmm.
He's a learned man who's already teaching people something there. I feel like this may be just completely naivete on my part, but to be a professor or a teacher of any kind, I feel like there has to be a certain amount of selflessness in somebody. But maybe I'm wrong about that.
I'm professors are people, Matt. You know, people have a terrible track record, Okay, but which I mean?
I'm not.
I share the same I share the same bias in many ways because I am one of those people who, like you, I believe, looks up to professors, people who dedicate such a large portion of their life to learning a specific discipline or even a specific subset of a specific discipline, you know.
And then not necessarily using all of that hard work for your own means, you're using it to teach other people to do what you have learned so much about I don't know that. To me, it speaks to somebody's character and I guess at a base level.
Yeah, yeah, I agree.
It also brings us to I mean, this may be a story for a different day, but it brings us to the idea of academic wars, wars of ideology, which are fought in the ivory towers as we record this episode. You know what I mean, what is the nature of humanity? How does that translate philosophically to the best economic model? Things like that, right, people have been People still choose which hill they want.
To die on in this debate.
And it can sound dry and academic, but we have to remember that the same people who are opposing one another in these sorts of things, anywhere from more political philosophy to more economic philosophy, these people end up in the halls of power. They end up making laws, you know what I mean, or having a very very strong
influence on the laws that are made. So it can seem dry, but at the end of the day, it does impact you, and it impacts everyone around you, at least who lives in that government, and sometimes often people who at least in the case of the US, people who don't have anything to do with the US get impacted by these beliefs. McKenzie's original, I guess breakout single was the principles of what's called scientific management. It was an early practitioner this and this will sound very familiar
understandable to all of us. It's just the detailed study of workflow and the division of labor. So we have X amount of employees, why amount of task? How do we translate this into the most efficient process?
Right?
Which you know we're explaining in a very simple way, but you can see how this becomes incredibly complicated incredibly quickly. But it turns out mackenzie was really good at it. And we all know when we heard that date nineteen twenty six, we all know that there was a context. There was a disaster looming on the horizon. Just a few years after the foundation of the McKenzie group.
Yeah, it's not really a great time to found something.
Right, the Great Depression occurred.
But here's the deal. Under Mackenzie's leadership, this group, this organization that he created, it didn't just survive the depression. It didn't just make it through. This sucker thrived When the founder, James O. McKenzie died in nineteen thirty seven, a gentleman named Marvin Bauer took the firm, and he took it basically beyond what James had been able to take it to some would say glory over the next
thirty years. In part, though, this is part of an obsession with being quote unquote professional in appearance and tone and conduct, so really creating an outward image of what this firm is, what a representative of the McKenzie group would be.
And an pretty specific, right and pretty meticulous. One word that you would use in a corporate boardroom to describe this would be granular.
Yeah, so let's talk about some argyle socks. Who gets to wear them? Who doesn't get to wear them? Argyle? What's your take, mister, mister Bauer.
Yeah, mister Bauer once forbade all junior consultants from wearing argyle socks because he thought they would distract clients, And the firm's consultants were all required to wear fedoras at this time. They were all if we were all probably dudes until President Kennedy stopped wearing them.
Wow, I see now that I don't know why it just reminds I do know why. It reminds you of the peaky blinders. That's what I'm seeing in my head.
Well.
Also, this is interesting because it feels like the guy's creating a uniform, right, Yeah, he is creating a uniform, not just a fabric, but also of minds. Marvin Bauer Is can be considered the head brand visionary or propagandist internal propagandist for McKenzie. He's the one who told everybody to start calling it the firm. He established the terminology, jargon, nomenclature, or whatever you want to call it that the employees
would use going forward. One example would be the all employees of a certain type were called partners.
That was him.
It gives everybody some prestige, especially from a client basis. You know, I'm not working with an employee now, I'm not spending millions of dollars on that.
I'm working with a partner. That's my partner man.
And additionally, he is responsible for a corporate culture that continues by all reports today, you'll hear former mckensey employees say things like there are only three great institutions remaining in the world, the Marines, the Catholic Church and mackenzie and they're serious.
Whoa they believe it.
Yeah, this kind of loyalty, fervent loyalty and belief in the company is baked into every single employee. He also established a set of rules, rules of engagement and rules of.
Conduct, and let's just listen, these off consultants should put the interests of clients before McKenzie's revenues. That's a big change, at least if you're a corporation that is for profit, you are basically saying, in a way, the customer is always right in this situation. But in this case, the customer is your partner.
And then he said, of course, Omerta, do not discuss client affairs. That makes sense absolutely. He also said, tell the truth as you see it, even if this means challenging the client's opinion. So let's say that you are working with a large beverage company and they want to make a new kind of product that you know, as
McKenzie partner, it's just not going to work. Then it's your job to instead of just taking their money, it's your job to tell them that this ranch dressing flavored soda is a terrible idea.
But I'm going to stop you there. That is one of the most disgusting things I've heard in a while.
It's also a real thing. Oh god, it's a real thing.
So did you do that in the Natural Flavorings episode?
No, I was.
I went to visit our friends Lauren and Annie over at Savor, Yeah, to do an episode with them about Ranch. Okay, so check that out if you are, if you are, like forty percent of the American public, a diehard fan of Ranch.
Wow, can you believe.
That my son's in there? Yeah, I'm definitely not.
No, neither, I like my buttermilk and mayonnaise separate. Oh I'm kidding. I mean that's what it was originally. Anyway, Just you could check out that episode. Another example's let's say you're a McKinsey partner working for a strong man or dictator an authoritarian regime, and they say, look, the best way to subjugate this ethnic minority is to, I
don't know, shoot them all. And then you say, no, the best way to subjugate this ethnic minority is to imprison all of them, but call them re education camps or summer camps. You know, we'll work on the phrasing. That's the stuff you're supposed to do as a McKenzie consultant. You're supposed to stick by what you think is the correct answer, even if your clients, some of whom may
be quite dangerous people will disagree with you. And then they said, only perform work that is both necessary and that McKenzie can do.
Well, Okay, only stuff that's necessary. I wonder, I wonder why that one is so important. But I guess that's the idea of we're only going to outwardly show good wine. So if we don't know that we can perform this task like to perfection, then we're not even going to attempt it that way, nothing ever, dings our reputation. Yeah.
Yeah, there's some self preservation there, right, And it makes sense when you think about it. The idea of only doing work that is necessary also also makes sense. It's a matter of professionalism. You're not doing unneeded work and then finding the client or giving them a fee for that, you know what I mean. It's the difference between a good mechanic and an unscrupulous one.
Yeah. Absolutely, here's another rule that mackenzie set for itself. They only work with CEOs and They only work with clients that the firm itself feels will follow the advice of the firm, So they're not trying to get somebody in there that's maybe just wealthy enough, but won't actually heed their advice. Again, they're so selective with how they're viewed. I think we keep painting this picture here and so far since what what was the year nineteen six, it's just been working for them.
Yeah, they keep a very very low profile. They did expand their restriction on CEOs to include CEOs of subsidiaries and divisions of larger companies.
Isn't that nice?
Yeah, so it's a.
It's a little bit of a bigger pull than it was originally. But the changes over the years have not fundamentally changed the rules of engagement or the core values of the company. And as you said, Matt, this has been a winning formula.
There was a profile story on.
McKenzie in nineteen ninety three and said McKenzie and Company was quote the most well known, most secretive, most high priced, most prestigious, most consistently successful, most envied, most trusted, most disliked management consulting firm on Earth.
Wow. Love. They threw that most disliked in there right at the end, I wonder who dislikes it.
A lot of people, competitors dislike it, victims or I guess you would say unsatisfied clients, right, or people who as a result of a project maybe lost their livelihood.
Yeah. I bet there's some law enforcement agencies that don't like them so much, just because they're probably so good at, you know, keeping a face on whatever situation is going on.
It's true, but they you know, you can't be this large without having critics as well as fans, right, opponents as well as supporters.
Yeah. According to BusinessWeek, the firm is ridiculed, reviled, and revered depending on one's perspective, which makes complete sense. That's what we're talking about. If you're on the front lines with McKenzie, or rather mackenzie is on your front lines, you're probably liking them a lot because it does seem like they're pretty accommodating and are going to get whatever job done you need done.
There's one quote that I kept seeing float around which said that amidst the leaders of the business world, I was just saying that you can't be fired for hiring mackenzie. Oh so they also seem to be dependable, at least in certain circles. Let's talk about some of these statistics. They have over one hundred and twenty offices, they have a force of fourteen thousand consultants. They've been in business
for almost a century now, ninety plus years. And one of the key murky pieces of Mackenzie is it's alumni who are hugely influential, more current and former fortune five hundred CEOs are alumni of Mackenzie than any other company. I think they have the highest chance of becoming CEOs in general. It's like one on six hundred and ninety, which sounds like tough odds, but that's a hugely favorable number.
Okay, so two things here. They're they're being consultants and partners and then they end up becoming CEOs. That's what we're saying here of these giant corporations. Okay, we're not talking about like a pod people situation like CIA infiltration replacing CEOs with Mackenzie are we I don't know.
I mean, it is a there is a revolving door argument, but it's not it's not a public private revolution.
It's private private.
Yeah, it really is. I geah, that's true.
So people do. Also, alumni do also go into public service.
That's what I was gonna say, alumni go into public service. But then I wonder, I do wonder how many public servants end up at the McKenzie group as like a side gig. But it seems like it would be a very demanding job and not exactly a retirement.
It's yeah, it's a pretty rigorous system. Internally. They have a churn of about one fifth of their workforce a year because they practice something called up or out, which means that you're either getting promoted or being kicked out. Dang they know, which is another part of the lens to their credibility.
Right yeah, Okay, no dying on the vine there, just GTFO or you hired and promote it.
If you search on YouTube now you'll see a lot of pretty fascinating videos from people who we're talking about how to get through the mckenzy hiring process. Oh man, that's Those are the number one hits, more so than the any idea of a McKenzie cover.
Up, first step hack person that you're going to be interviewed by.
How do you know they haven't already hacked you. How do you know you weren't already selected?
You know what I mean.
So officially, let's look at their official stance. Officially, McKenzie describes itself as what you said, Matt, a quote, global management consulting firm that serves a broad mix of private, public, and social sector institutions. So they're active in nonprofits, they're active in private corporations, and they're active in mechanisms of the state. It also it doesn't make a secret of its alumni actions. It's pretty proud of the work of its former employees.
Yeah. According to its own website, quote, alumni number more than thirty four thousand and work in virtually every business sector in one hundred and twenty countries. Through formal events and informal networking, former Mackenzie consultants make and sustain professional relationships. This dynamic network is a lasting benefit of a Mackenzie career.
So once you're in, you're in.
Ah.
Yeah, And there's another thing that's weird here. The clients were not meant to be recruited in like a cold call situation. As a Mackenzie person, you are expected to be active in community events beyond the boards of things go to religious events and religious services and informally become friends with people people in power obviously, and then build
a relationship from there. So nepotism is nepotism, and informal social relationships are a huge part of the process of the workflow, wow, of the management accounting.
Yeah, do you think we've ever run into somebody from the Mackenzie group?
I have.
Yeah, you have had one of these things from your past life or your current life.
So at Firslance, Mackenzie appears to be a powerful multinational company.
Right.
They have interest in everything from cancer research to nonprofit initiatives, agricultural and stuff and much much more. This is not particularly unusual in the modern day. McKenzie is not the only game in town here. But the thing is, critics alleged there's much much more to Mackenzie than a shining public image may lead you to believe.
And we'll learn about that after a quick word from our sponsor.
Our sponsor was the McKenzie.
Yeah, this episode of stuff they don't want you to know is brought to you by the firm.
Here's where it gets crazy. There's a net of nepotism. That's what we're describing and much of the criticism concerning Mackenzie comes from the activities of its former employees. We mentioned that they have a noticeably significantly higher chance of becoming CEOs of very prestigious companies, but they do end up having their hands in a lot of pots, their
fingers in a lot of pies. And most of the time that you hear someone criticizing this organization, they're going to be talking about one of any number of scandals. As we explore this, to be absolutely fair, we have to point out that Mackenzie can make an argument where they say, well, this was happening because some member of our company or some group within our company did this, but the company overall did not know about this.
We are unaware.
Yeah, when you have all those tendrolls, fourteen thousand of them or so, it's hard to point the finger, and especially if they're a consultant for or somebody else.
Right, and that that is a valid argument to make. They'll also say that, look, we just advise these clients, we don't decide things for them. And while that is true, it is also true that since for years Mackenzie has either been directly involved in or closely associated with a number of huge scandals. Reuters even described these incidents entire as indicative of not a few bad apples, not a couple of unscrupulous people in the company, but instead as
a culture of corruption. So we can we can look through a few of these and.
We'll give.
Let's give the bare bones, the one oh one, because each of these subjects that we're about to mention, each one is the tip of a much larger iceberg, right, and then there's a lot going on under the water.
Let's start with South Africa, is that okay?
Yeah?
Talking about Eskom, the power company that was kind of in dire straits at the.
Time, and Transnet as well. So the story starts with the Gupta family, no relation to the former head of McKinzie, a guy who also had the last name Gupta, totally unrelated. This Gupta family's a wealthy Indian born South African family who are best known for owning a business empire that spans computer equipment, media mining and so on, and it had close ties to Jacob Zuma during his presidency.
Here's what happened.
They found out the Gupta family had strategically placed corrupt people in various parts of the South African government and if it's infrastructure and its utility sectors, and the idea is that McKenzie was complicit in this corruption and they were using their connection with this family to get consulting contracts from places like s Com and Transnet, these are
state owned companies. And then they provided they worked with someone called Trillion Capital Partners tr ll an to provide like seventy five million dollars worth of services, and then Trillion got a commission off that for facilitating the business. And then they were found I don't want to say caught red handed, but caught pink handed, light red handed in the midst of acts of bribery and corruption and
payments to the capital partner. And eventually South Africa's government in early twenty eighteen found that mackenzie and Trillion had been involved in fraud, theft, corruption and money laundering. So dang, yeah, so this is this is a big time financial crime, right if if it's true and the like, Okay, Mackenzie has hired legal teams to defend them. Surprised they can afford a ton of lawyers, right.
I know that they when they were first getting in bed with a lot of these companies, specifically with the s Com one, they were looking at a contract for like seven hundred million dollars for the firm to come
in And that's just one piece of it. Working with the people that the Gupta family was involved with, Like the money that was was at stake, and I'm thinking about that connected up to their values about only doing things that they know they can do and you know, telling the client the truth all the time and all this stuff and not putting the money above everything else. This feels like maybe this was a slip up where the money was above everything else.
Is it a thing where it's not about the money though, it's about sending a message? Because what if they felt it was necessary to purposely cripple s Com which is an electricity provider and Transnet, which is the rail and pipeline firm. What if they felt it was not only necessary to do that, but what if they felt they.
Could do it?
Well, whoa, you know what I mean.
So there was an even higher level of the playing field that was going on.
Yeah, I don't think they accidentally did this, Matt. At this level, it's a really tall milkshake to say that someone just consistently screwed the pooch. Yeah, multiple times at the perfect time to make things terrible, you.
Know what I mean.
Yeah, so maybe that was part of it. But that's just one example, and we could probably do a whole episode on that one. There's also the Gallean insider trading scandal. This is where the different GROUPDA comes in. So there's a guy named Rajat Gupta who was a former McKenzie senior executive who was running the ship no relation again to the Gupta family in South Africa, and a guy
named Aneil Kumar. These two guys and some others were convicted in a government investigation into insider trading for sharing inside information with a hedge fund owner. The owner of a hedge fund called Galian Group a guy named raj Raja Natrum. Although McKenzie itself the company was not accused of any wrongdoing, the convictions were incredibly embarrassing for the firm because it prides itself on not telling its client's business right on client confidentiality.
There's the senior partner Anil Kumar, who described or he has been described as the protege of Gupta. He left the firm after these allegations started servicing in two thousand and nine, and then he ended up pleading guilty in January twenty ten. And it's well, okay, so while this guy and some of the other partners had been pitching Mackenzie's like services, they're consulting services to this Gallean group, Kumar and this Rajaratnam fellow. They reached this, they reached
a private consulting agreement, which I'm interested in. So just kind of behind closed doors, they reached an agreement that violated Mackenzie's policies on confidentiality, which, okay, again we see them kind of maybe breaking their own rules a little bit.
Yeah, Yeah, that's that's the thing.
If they really are breaking the rules. If they are breaking the rules, are the rules just out facing, I don't know.
So in October of twenty eleven, Gupta was arrested by the FBI on criminal charges of sharing insider information from these confidential board meetings with Rajaratnam. Gupta was convicted in June of twenty twelve on four counts of conspiracy and securities fraud, and then was acquitted on two counts. So he did ultimately get found guilty of some stuff. And the big questions here are things like how aware was mackenzie and company of this activity? Were they somehow complicit?
Were they?
Was he relying on the network in to some degree? The answer is probably yes, yeah.
I would, I would think so. And it's a weird great, it's not great, but it feels like a gray area here. Insider trading this idea that if you have these close connections between the company that is valued at a certain amount that you're betting on is going to increase in value, and then you're a hedge fund owner that is placing those values, and somehow you've got this consultancy group that
perhaps touches both things. I don't know that it puts tremendous power in that third party that has that connection, because if you want to, you can pull those strings, or you can threaten to pull those strings. I don't know that. Hmm. They just got caught, that's it. They got caught doing what what? Maybe they're kind.
Of set up to do Ben, That's the thing. So insider trading is so atast at least in our country here in the United States, insider trading is such a hazy concept.
Yeah, you know, yeah, because it's not you sharing anything necessarily in this setup. You know, in a way, it's a consultancy group, it's a partner that it's connected, but really not that connected.
And at this level the laws are pretty rigorous about this, but they can also be fairly complicated. So insider trading occurs all the time in the United States. For a while, for long time, actually, members of the US Congress were not subject to the same insider trading laws that everybody else was in theories subject to.
That checks out. Man. Sure, if you're in the Senate, you gotta be able to grease those poems somehow, and if you could do it on your own time, and it's not somebody else greasing your palm. Wait, nope, it is somebody else. Oh wait, oh it's corruption. Oh god, oh no.
Some of us are more well than others.
Right, yeah, So let's pause here for a word from our sponsor and return to some more tales from the Black Book of the McKenzie Company.
Get ready for Enron. It's coming.
We're back in how pressing And yes, you are correct, my friends, en Ron. So Enron was the creation of a guy named Jeff's Skilling. Jeff's Skilling was a McKenzie consultant for twenty one years, and when Enron collapsed, he actually went to jail. Yes, he did, relatively rare for
a lot of financial crimes. McKenzie reportedly fully endorsed the dubious accounting methods that caused the company to implode in two thousand and one, and Enron reportedly used McKenzie for twenty different projects, and it became a situation where McKenzie consultants would say, you know what, and Ron is kind of a sandbox for us. Let's just let's shake things up. Let's roll the dice, make it interesting. Vegas, baby, Yeah, let's see what we can do we can get away with.
Does this make money if we just say this or we just do this. It's pretty brilliant.
And if you've ever seen the documentary it's called Enron The Smartest Guys in the Room. I would recommend it highly. Go check it out if you get a chance. Find it somewhere. We have we done an Enron episode, I don't think. I don't know if we have. We've talked about it a lot. I think it's worth it, like just taking this, expanding it out in a whole episode, just because there are a lot of details in here about the weirdness that occurred there.
Right, Okay, so the a high level, quick and dirty look at this. Enron was the largest bankruptcy reorganization in American history at its time. It was also called the biggest failure of an audit. The scandal went public in October two thousand and one. Enron was an energy company based in Houston, Texas, and it was formed in nineteen eighty five.
See, you're doing the whole episode right now. This is a whole episode, bet Yeah. Sorry, it's like the hero of the Facts section. Yeah, I can feel it.
Yeah, Well, a lot of people went to jail.
It had.
Until I think until WorldCom went bankrupt the very next year. Enron was the largest corporate bankruptcy in history because I think it was valued at sixty three point four billion dollars and then it all went could put.
Yeah, just.
So maybe we'll do an run episode. Yeah, that should be worth it.
It might be dry a little bit, but I think we can pull some stuff out of there, just from I in the insanity of our financial systems, like as they were with the energy companies and the actual energy prices and just all of these the way it's all interconnected.
Right, the way that sometimes to turn a larger profit. We will have tankers of oil waiting just off the coast right. Yes, that's happening before, full of them. I mean that's you know, during the depression, people were starving to death in urban areas while farmers were just slaughtering pigs wholesale and then throwing milk in a creek in an attempt to raise the prices.
Burn that wheatfield. Man.
This is the point where a consultant would come in and say, hey, we can improve this workflow.
Oh, and they might be right, you know what I mean.
There's a reason that the consultancy industry exists.
If only the peaky blinders excuse me, the McKenzie group were around back then. Wait not.
So in two thousand and eight, do you remember the financial crisis?
Oh do I You.
Have a tattoo of it?
Yeah, yeah, I really do think that just everything that happened, and there's that's crazy because the tattoo, it's just nothing because nothing changed. Bleak.
I love it.
So McKenzie. Mackenzie gets accused of being a prime mover in the financial crisis, which because they were allegedly promoting the securitization of mortgage assets and asking banks to fund their operations with a lot of debt, and according to you know, their critics, this led to a poisoning of the global financial system and created ultimately that two thousand
and eight meltdown. There's a great article on this. There are several great articles on this, but one that will mention the financial crisis a little bit more detail is mackenzie How does it Always get Away with It? By a guy named Ben Cheu writing for The Independent, And what the eventually came out in the wash about this was something incredibly despicable that ties in with their activities
with insurance. So McKenzie and company sold major insurers at places like Ulstate a new business model that was designed to turn claims into profits. Their strategy was known as good hands or boxing gloves, and yeah, this really came into the public eye during some during Hurricane Katrina.
The idea was that.
Internally we would aim to make the process of filing for claims too difficult for people who were policyhols holders and too expensive and time consuming for lawyers to want to take the case leaving insurance firms undisputed as they delayed or denied claims. Here's how the model worked. This is incredibly unethical. They would offer a deliberately lower settlement to any policyholder who files a claim, much lower than they're actually entitled to according to what their insurance agreement is.
If you accept the lower payment, then boom, your claim is resolved lickety split. If you say, hey, this says that I'm supposed to have X amount of cash. Why did you give me why amount of money, they will say we have to. If you're denying the settlement, we have to process this claim, and that will be delayed and delayed and delayed forever until the policy holders are finally forced to accept the payment or just give up all together.
That's brutal.
In addition to this, a guy named nov Deep Aurora was convicted for a legally depleting state farm of over five hundred thousand dollars over a period of eight years in cahoots with a state farm employee. So, in addition to creating this model that says, hey, you're an insurance company, don't do your job and try to build people out of it and then pay us for telling you to do that. Certain employees were also stealing money from the company.
In addition, God no thank you, Yeah, no thanks.
They've also been associated with pharmaceutical I don't know if you call them scandals but controversies. There's a company called Valiant, a Canadian pharmaceutical company that was investigated by the SEC. They've been accused of cooking their books and of using predatory price hikes to boost growth. The Financial Times an intriguing statement here, Matt. They said Valiant's downfall is not exactly McKenzie's fault, but its fingerprints are everywhere.
Geez okay, yeah, I mean what do you do with that?
Three out of six of the senior execs were recent McKenzie employees, and the chair of the talent and compensation committee was also an ex McKenzie.
It feels like McKenzie has this like part time upright citizens Brigade gig where they go around like the Move, like the TV show, not like just the improv group, where they're just wreaking havoc everywhere in chaos on purpose, just to see what they can get away with.
Yeah, it sounds like that, and we have to ask if we're just hearing about the bad cases that made it to court.
We most certainly are, I think that's without a doubt. But the bad cases are pretty.
Bad, and would the cases that are can considered successful for the client and the company be considered successful for other people where they publicized because this kind of company can do multiple things. But one of the things a consultancy is often going to be associated with is quote unquote streamlining fire the workforce, pay the pay the upper level management more or give them a sweetheart, golden parachute walkaway deal kind of thing. And their competitors have also
complained about unfair business practices. There was a court case in twenty eighteen Mackenzie went to Quart of allegations from competitors that was purposely misleading or misinforming clients by not telling the whole truth essentially or as little of the truth as they could get away with, because it wouldn't it wouldn't disclose conflict like conflicts of interest, and this comes into play later, right, So like if you are what's the easiest way to put it, Okay, let's say that.
I'm McKenzie group, and.
You are a.
Credit here, a financier, and you hire me to bail out. Let's say Noel has a bankrupt headphone company. The headphone mill is in trouble and it's bankrupt. You're in charge of how this bankruptcy happens. You go to me McKenzie and say, here's a couple mil, here's a cool, cool few mil. What's the best way to restructure this? How
do we determine who gets paid what? And I say, all right, I've got the perfect plan, but I don't tell you that as you and I were cracking this deal, I went through a different company and bought up a ton of this debt. So now what I'm doing is saying, well, you got to pay that or not been incorporated first.
You know what I mean?
Definitely?
And then so like, okay, well you're the expert, and so you have not been incorporated first. Then on top of that, cool mill, I've got all this other money with you know. That's that's a very very very oversimplified version of how that kind of thing would work. It's also illegal.
Then you can see why, yeah it is. I'm just having this thought here. This is such a rich person's thing, this idea of a consultant in this way, this type of partner. And that's why it exists at these higher levels with only CEOs, only the top levels of the white collar amongst the world. Here of paying somebody a lot of money to figure out how you need to structure your payments for something because you've got this massive amount of money that needs to go out in these
different places. You've got this massive amount of money that needs to be shuttled along in some way. But I don't have time for that with all this money. I'm going to bring somebody else in to do it. And no wonder like corruption, even just to the amount we're discussing here, occurs when you're talking about that level of money my got, somebody is going to think about themselves.
And again this is a huge company. So yeah, in their defense, they're saying, well, look if something happens and it's illegal or it's incorrect, then we will we will fix it.
Yeah. No, absolutely, not speaking against the company. I just think it's that is human nature when you're dealing with this kind of thing. Oh yeah, yeah, yeah yeah.
So just for an example, they said that they wanted to they overhauled their South Africa office apparently after US dealing such debilitating damage to es Common and Transnet and then the stories continued. So in the case of the US Immigrations and Customs Enforcement or ICE, mackenzie stopped working with them after it was disclosed the firm had done more than twenty million dollars worth of consulting work for
the agency. And this is where we hear an explicit version of that defense, a managing partner said the contract, which was not widely known until The New York Times reported it to people in the company itself. According to them, he said, it had rightly raised concerns, so they're not going to do it anymore.
That is odd for ICE to be having a relationship with McKenzie.
Why is it?
Why PR? They're not a PR firm. It could be workflow, I guess. So it could be something along the lines of how do we move the most people?
How do we uh, oh, that's interesting, like monitoring of a border or something, or what is our process for It could be something as innocuous as how do we handle records?
You know what I mean? And so any number of things. It could be and just setting up facilities that kind of thing. I wonder if that had anything to do with interesting.
So one. One other one that we would be.
Remiss if we didn't touch on is McKenzie's work with authoritarian regimes and business and policy support for regimes. It comes in the news every so often, and again, longtime listeners, you'll recall that regime is the word people use instead of government when they don't want to, when they don't want you to think another country's government is legitimate. Yeah, so North Korea calls the US government the US regime, and the US calls North Korea the North Korean regime.
Absolutely.
So if you ever want to know how your country feels about another country, just see who they see who.
They call a regime.
It is.
It is such.
A simplistic shortcut, but I guarantee you it works.
It's very true. And now I'm seeing it in my head. Oh god.
It doesn't mean those countries are automatically I legitimate. No, you know how your rulers feel about them, the Iranian regime for sure. Right, these are the phrases they get
thrown around. And I'm sure there's plenty of we were always at war with East Asia kind of stuff going on there too, But in Mackenzie's case, they popped up in the news quite recently in Somember of twenty eighteen, because there was this big company retreat in China and it was held next to the Chinese government and tournament camps where thousands of wigers are being detained as we speak. And we did an episode on this earlier in modern concentration camps.
Yeah, that's an odd place to have your lavish retreat. Oh, and we also have a list here of I guess some prominent clients that McKenzie's worked for. Let's see the Saudi Arabia regime. No, I'm just kidding, it's the monarchy there, Turkey's autocratic leader erdign And let's see, Oh, the president of Ukraine who was ousted as a former president, Victor Yanokovich. I believe at Yankovich. That's it. And then several other Chinese and Russian companies who are under or were under sanctions,
heavy sanctions at the time. People. So mackenzie just sweeps in and says, you guys need some help. Well, guess what this hand. It's very helpful.
And don't worry. It doesn't know what the left hand does, right.
Or at least it doesn't talk to the left hand.
Oh, Marita my friends. Yeah, so let's.
Its say trading. If it's a trading thing, then we can make something happen.
Right.
So what we're exploring then, or what we have explored today, is the story of a company that operates largely out of the headlines the halls of power. It's it's a power behind the throne, you know, sort of this corporate vizier that advises companies, corporations, countries and power, and many times it comes into conflict with the law, with various countries legal systems. So the question is are we seeing just the bad stuff or we are we only hearing
about McKenzie when there's a problem. Well, we are hearing a lot about McKenzie's problems when they pop up, and there does seem to be a pattern. Are we being unfair when we say that this organization is committing crime or our journalists being unfair when they say that we'd like to We'd like to hear from you, So let us know what you think of this in the meantime,
For conclusions, McKenzie is not going away anytime soon. We are not kicking someone while they're down in any way, and from their perspective again, they don't actually do these things. They advise clients, the clients take it from there, but
not everyone's buying this. One last note in January of twenty nineteen, this month, a bankruptcy case just got reopened here in the US allegid McKenzie was illegally making money off bankruptcy cases it became involved with, and more so than it has established a pattern of doing this, that this is not a one off thing but something more akin to a business practice.
Yeah. Absolutely, I'm just putting this out here. This whole story reminds me of a movie that I saw way back well when I say, way back in the day, over ten years ago, called Michael Clayton that it stars I want to say, George Clooney and oh god, I can't remember, I think till the Swinton's in it too. It's this fantastic movie where there's this what they called a fixer would come through. And that's what this whole thing feels like to me. Fixers, that's what it is.
I think, Nah, in my head, that's how I'm choosing to view mackenzie, which I'm sure is just a shallow view of what it is and what it actually is. But that's what it feels like to me, and I wonder if you feel that same way.
Let us know, yeah, and art look and also, consultant firms aren't inherently bad right.
Now, you're just getting something done efficiently. I think that's it.
Oh, you're getting someone's opinion. Yeah, that's what I consulted. Like, here's my opinion based on my experience. This is what I advise, right, And plenty of people have done consulting work before. I've done it, not on this level, but it you know, I just want to emphasize that we're not saying all these firms are terrible. We're not saying that everyone involved is a bad guy. But we are saying that McKenzie has a lot of stuff they don't
want you to know. And it goes way beyond just who their clients are and what they do for those clients. It goes into court cases, it goes into collapsing state sector industries, it goes into tons of dirty money, and this is you know, at that point, those statements are not our opinion. They're the opinion of legal systems of courts. So it's not even us saying it at this point, you know, what I mean?
No, all right, well hey find us yeah on social media.
Yeah, you can find us on Instagram, Facebook and Twitter. Meet your fellow listeners and talk about talk about mackenzie Group until they buy our corporation to shut us down. Oh here's where it gets crazy. That's our community page on Facebook. You can find me on Instagram. I'm at them, Bowlin Ben.
That's not a f Dora right, No, no, okay, just make it sure.
And these are not our gyle socks. These are space socks.
Those are awesome, dude, I just have boring on eszone right now. Those are awesome.
That makes you a better consultant.
I'm not distracting you.
This is where we find out that Paul Decad works for McKenzie.
Oh. I could totally see Paul doing it. Oh man, he cleans up, He cleans up so nicely, and he's just like rolling under the radar when he's in here as mission control.
I could see it doing a great job with it too.
Oh.
Also, this has nothing to do with anything other than maybe ending on a little bit of a lighter note. Paul, I don't know how you're gonna feel about this, And fellow listeners, you haven't heard Paul on the air, but I was watching stand up from one of uh, one of my favorite comics, John Mullaney.
Dude, I thought Mullaney as you said that.
And super producer Paul Deckett, do you remind me of John Mullaney in the coolest way?
Oh?
Yeah, yeah, yeah, I could see, I could see.
I could see Paul telling some of those stories.
Oh man, I hope you grew up to be like his character that he played on the Broadway show that he did. I hope you. I hope you come into that one day.
But you're not making the decision for him.
You're advising him, right.
True, So if anything goes wrong with that, it's not it's not your fault.
Matt, Matt and co.
So thank you so much for Tunian and please do let us know what your take is on these things. Are these companies something that should be in the world?
Are they.
Are they criminal organizations? Or are the opponents and critics just being alarmist? You know, there's definitely stuff they'll once you know, and everything indicates that several of those secrets are secrets because they are legal activity. But again, a few bad apples, there's it a whole bad orchard.
No, no, you can always you can always argue the bad Apple thing in almost every situation, and you can call us. And that's the end of this classic episode. If you have any thoughts or questions about this episode, you can get into contact with us in a number of different ways. One of the best is to give us a call. Our number is one eight three three STDWYTK. If you don't want to do that, you can send us a good old fashioned email.
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