Canada’s ambassador to China spent most of Tuesday in Manhattan – 11,000 kilometres from his post in Beijing – giving a deposition in a case that will determine whether the firm he ran for nine years has violated U.S. bankruptcy laws.
Dominic Barton gave a deposition for more than five hours at a boutique law firm in midtown Manhattan. He did not speak to media when entering or leaving the building.
In a statement to The Globe and Mail, the diplomat said his sworn testimony will “refute … repeated false allegations about me and McKinsey.”
Mr. Barton, who was named Canada’s envoy to Beijing last September, has been drawn into a battle between McKinsey and Co., the world’s largest management consulting firm, and Jay Alix, the billionaire founder of AlixPartners, which made a name for itself as a specialist in turning around bankrupt or near-bankrupt companies.
Mr. Alix has pursued McKinsey and Mr. Barton in courts throughout the United States for the past three years. He acquired a financial stake in several companies, including Westmoreland Coal Co., for which McKinsey has acted as a bankruptcy adviser and has sought standing as a creditor, arguing in court that the consulting firm did not properly disclose potential conflicts.
McKinsey’s legal team in this dispute includes John Gleeson, a former judge and U.S. attorney known for prosecuting Mafia cases, such as that of Gambino family boss John Gotti. Later, as a New York district judge, Mr. Gleeson oversaw the prosecution of former stockbroker Jordan Belfort, the self-styled “Wolf of Wall Street” made famous in a Hollywood film.
Mr. Barton’s lawyer, Catherine Redlich, said McKinsey, not the Canadian government, covered the cost of his trip to New York from Beijing.
The diplomat has his hands full in China seeking the release of two Canadians jailed in what is widely seen as retaliation for Canada’s arrest of Meng Wanzhou, an executive of Huawei Technologies Co. Ltd., on a U.S. extradition order. Former diplomat Michael Kovrig and entrepreneur Michael Spavor have been incarcerated for more than 13 months, held in facilities with the lights on 24 hours a day.
Mr. Barton’s deposition – which is being videotaped – took place behind closed doors, and portions of it will be used when the Westmoreland case is heard before the U.S. Bankruptcy Court for the Southern District of Texas in February.
Mr. Alix has alleged in court that McKinsey improperly concealed potential conflicts when it sought court approval to advise companies dealing with bankruptcy.
The court wants to hear Mr. Barton’s side of the legal dispute, including allegations Mr. Alix made under oath that he brought his concerns about McKinsey’s disclosure practices to Mr. Barton in 2014, when he was global managing partner, and he dismissed them.
“Mr. Barton told me these weren’t serious laws," Mr. Alix said in a deposition in late 2018. “He told me McKinsey didn’t like these laws. He also admitted they were breaking the laws, but he didn’t think they were serious."
Mr. Alix also alleged in his deposition that Mr. Barton promised McKinsey would get out of the bankruptcy business, but later reneged, offering instead to steer consulting business to AlixPartners – all assertions Mr. Barton has denied.
McKinsey rejects Mr. Alix’s accusations. “Jay Alix has recklessly and repeatedly made unsupported allegations of fraud and other misconduct against McKinsey,” Gary Pinkus, chairman for McKinsey in North America, said in a statement.
Mr. Barton said in his statement to The Globe that he looks forward to setting the record straight with his testimony, which he predicted will “refute Jay Alix’s repeated false allegations about me and McKinsey” and the company’s bankruptcy consulting business, McKinsey RTS.
The ambassador, who was managing director of McKinsey between 2009 and 2018, said in the statement on Tuesday that he “was fully supportive of McKinsey RTS’s bankruptcy practice, and I was confident that we were acting in accordance with the law. Mr. Alix’s claim that I said bankruptcy laws are unimportant or that McKinsey doesn’t care about these laws is a total fabrication, as is any suggestion that I promised to close down RTS.”
John Pottow, a professor at the University of Michigan law school, and an expert in bankruptcy and commercial law, said the judge adjudicating this dispute will have to decide who is telling the truth.
“It’s basically going to be a credibility contest. It will have to be resolved as a credibility contest,” said Prof. Pottow, who was hired by Mr. Alix to provide an opinion earlier in the dispute with McKinsey.
Court battles over bankruptcy cases have cost McKinsey millions of dollars in penalties imposed by the U.S. bankruptcy watchdog.
Chief U.S. Bankruptcy Judge David R. Jones is presiding over the Westmoreland case.
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