The heads of consulting giants McKinsey and BCG told US lawmakers on Tuesday that their employees in Saudi Arabia could face jail if the firms handed over details of their work for the country’s sovereign wealth fund without approval from the kingdom.
Bob Sternfels of McKinsey and Rich Lesser of BCG had been summoned to appear before Congress, along with the chief executive of smaller consultancy Teneo and the dealmaker Michael Klein, after the four firms failed to comply with a subpoena demanding information about their work for the $700bn Public Investment Fund.
A Senate committee is investigating how Saudi Arabia is using “soft power” such as sports investments to extend its influence in the US, and lawmakers assailed the consulting groups for their work in the kingdom at a hearing on Tuesday.
“We want to determine what work these companies have done and are doing that allows a foreign sovereign to use instruments of commerce in the United States to increase its influence within our shores, and rebrand its tarnished image after years of horrific human rights abuses,” said Richard Blumenthal, the Democratic senator and chair of the permanent subcommittee on investigation.
“You say you are between a rock and a hard place but you have chosen sides; you have chosen the Saudi side, not the American side.”
The PIF sued the four firms in Saudi Arabia, claiming that documents demanded in the US were classified. It has allowed only a fraction of the requested material to be handed over, often with substantial redactions.
A PIF spokesperson said: “We have made, and are continuing to make, significant efforts to facilitate the production of requested information from our advisers consistent with the laws of Saudi Arabia, which should be recognised like those of any other country.”
Klein, a long-time PIF adviser who helped broker an agreement last year between the fund and the US PGA Golf Tour, said the Saudi court orders “exposé me and my employees to not just civil liability, but criminal penalties, including a potential 20 years in prison. As I hope the committee can understand, that is simply not a risk I can take for myself or for my employees.”
Under fire from subcommittee members, the executives insisted they were fighting in the Saudi courts and pressing PIF to allow fuller disclosures. Only Teneo, however, responded to a request to reveal any of the fees they have made in Saudi Arabia. The firm said it made a little less than $10 million (€9.3 million) in 2022 from work for the PIF.
Lesser said BCG was a private firm and would not reveal revenue numbers, while Sternfels said McKinsey only broke out its financials regionally and would provide the committee with figures for the Middle East, Africa and eastern Europe at a later date. These amounted to less than 10 per cent of McKinsey’s global revenue, he said.
Saudi Arabia has leant heavily on foreign consultants to help accelerate its ambitious plan to diversify its oil-dependent economy, creating a lucrative market that London-headquartered Source Global Research estimated was worth more than $2 billion in 2022. – Copyright The Financial Times Limited 2024
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