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Canada’s new ambassador to China is being drawn deeper into a legal battle between the global consulting giant McKinsey and Co., which he formerly ran, and a billionaire corporate-turnaround specialist.

On Dec. 3, Dominic Barton turned over notebooks of conversations he had with Jay Alix, founder of the restructuring firm AlixPartners, to a Texas court at the request of the judge presiding over the bankruptcy case of a coal company. Mr. Barton, former global managing partner of McKinsey, is also being asked to testify in that case.

Mr. Alix has a financial stake in several cases in which McKinsey has acted as bankruptcy adviser, and has sought standing as a creditor, arguing in court that the consulting firm has not properly disclosed potential conflicts.

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The court wants to hear Mr. Barton’s side of the legal dispute on whether McKinsey violated U.S. bankruptcy laws while he was in charge from 2009 to 2018. Mr. Barton stayed on as global managing partner emeritus until Sept. 4 this year, when Prime Minister Justin Trudeau named him ambassador to China.

A lawyer for McKinsey told The Globe and Mail that Mr. Barton will likely make a sworn deposition when the bankruptcy case of Westmoreland Coal Co. is heard in U.S. Bankruptcy Court for the Southern District of Texas in February, 2020.

“Mr. Barton has said he will find a way to make himself available,” Faith Gay said.

Mr. Alix has pursued McKinsey, including Mr. Barton, in courts throughout the United States for the past three years. He has accused the consulting firm of improperly concealing potential conflicts when it sought court approval to advise companies dealing with bankruptcy.

Mr. Alix has said in court documents that Mr. Barton failed to take corrective action.

Mr. Alix alleged in a statement under oath that in 2014, he brought his concerns that McKinsey’s disclosure practices broke the law to Mr. Barton and that the then-global managing partner dismissed them.

“Mr. Barton told me these weren’t serious laws," Mr. Alix said in a deposition last year. "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.”

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Mr. Alix also alleged in the deposition that Mr. Barton promised McKinsey would get out of the bankruptcy business, and later reneged and offered to steer consulting business to AlixPartners – which Mr. Barton has denied.

Gary Pinkus, chairman for McKinsey in North America, told The Globe that in the Texas coal case, “McKinsey produced all pages of Dominic Barton’s notebooks related to the Barton/Alix communications."

“The notebooks and other documents are entirely consistent with Mr. Barton’s characterization of the meetings,” Mr. Pinkus said.

In a statement to several U.S. media outlets earlier this year, Mr. Barton said Mr. Alix was mistaken. “I would never say to anyone that bankruptcy laws are unimportant or that McKinsey doesn’t care about these laws,” he said.

Dan Lemisch, a lawyer for Mr. Alix, said his client will ask the Houston judge to call Mr. Barton to testify in person and under oath about his conversations with Mr. Alix.

“Under the federal rules, witnesses normally sit for a deposition and then testify live in court at trial. We are asking that Barton be treated the same as any other witness at trial,” he said.

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Mr. Lemisch also called the notebooks “incomplete at best.”

“The truth in federal court is determined by witnesses taking the stand and testifying under oath live and in person. Self-serving notebooks by themselves are proof of nothing,” Mr. Lemisch said.

The New York Times and Wall Street Journal have reported that McKinsey is under criminal investigation for violating Chapter 11 bankruptcy laws by concealing conflicts of interest while advising bankrupt companies.

The newspapers say the investigation by U.S. federal prosecutors and a separate one by the U.S. Trustee Program, a unit of the Justice Department that oversees the administration of bankruptcy cases, cover the period when Mr. Barton was in charge of McKinsey. There is no indication Mr. Barton is under investigation.

The U.S. Department of Justice declined to confirm whether McKinsey is under criminal investigation. Mr. Pinkus said the company addressed an inquiry from the U.S. Attorney’s Office in New York City in November, 2018. “Since then we have received no additional requests . . . [and] we have received no inquiry from DOJ headquarters in Washington."

Mr. Pinkus said Mr. Alix is waging “a relentless legal and media campaign based on false allegations to drive McKinsey out of the bankruptcy advisory space in order to advantage his firm, AlixPartners.”

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“Not a single court has ruled in his favour of his claims,” Mr. Pinkus added.

However, court battles over bankruptcy cases have cost McKinsey millions of dollars in penalties imposed by the U.S. bankruptcy watchdog, including a US$15-million settlement in February over “disclosure deficiencies.” Late last year, McKinsey paid another US$17.5-million in a bankruptcy settlement involving renewable energy company SunEdison Inc. and promised to improve its disclosure protocols.

With reports from Reuters

Editor’s note: An earlier version of this story suggested the U.S. Attorney's Office in New York contacted McKinsey in November, 2019. In fact, it was in November, 2018.

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