Screenshot from C-SPAN
- Leaders at McKinsey and other major consulting firms testified before Congress this week.
- US lawmakers grilled the executives over their work in Saudi Arabia.
- "We are between a rock and a hard place," McKinsey partner Bob Sternfels said.
US Congress this week questioned the loyalties of some of the country's biggest consulting firms.
American consulting shops like McKinsey & Co., BCG, Teneo, and M. Klein & Co. are helping Saudi Arabia diversify its oil-dependent economy through its lucrative Public Investment Fund. They are also advising the fund on its engagement with the United States.
That fund is worth some $700 billion and is perhaps best known for trying to invest in sports leagues like the PGA Golf Tour and buying major stakes in several Saudi soccer teams, including Al-Nassr (which boasts superstar players like Cristiano Ronaldo). Saudi's Public Investment Fund is also backing a slate of ambitious development projects under a government initiative known as Vision 2030.
Saudi Arabia, though, has imposed strict rules on what information the American consulting companies can share with the US government, and that's irked some American lawmakers.
So much so that Congress forced the heads of McKinsey, BCG, Teneo, and M. Klein & Co. to testify this week about their failure to comply with subpoenas regarding their firms' work with Saudi Arabia.
"The records sought by these subpoenas are critical to the ongoing inquiry into efforts by authoritarian governments, like Saudi Arabia, to deploy soft power or use other influence strategies inside the United States, including the PIF's use of investments in US entities and cultural institutions to exert influence," Sen. Richard Blumenthal, the chair of the Senate Subcommittee on Investigations, said in a statement before the hearing.
Bob Sternfels, global managing partner at McKinsey, said at Tuesday's hearing that his company was "between a rock and a hard place."
Rich Lesser, the global chair of BCG, described the tension as "an unprecedented disagreement where a Senate subpoena is in direct conflict with the laws of another country that views the information to be confidential."
Lawmakers argued that the firms were helping the Saudi government exert influence on the United States.
"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," Blumenthal shot back.
Michael Klein, managing partner of M. Klein & Co., said their employees could face serious penalties — including up to 20 years in jail — for violating Saudi Arabia's law. That didn't garner much sympathy from US lawmakers, however.
"Don't you have second thoughts about doing business with a client, a country, that says it's going to throw your employees in jail for obeying American law?" Blumenthal asked.
The executives told lawmakers they were fighting the restrictions in Saudi courts and urging the Public Investment Fund to remove the limits it imposes on what information the companies can share with the United States.
A spokesperson for McKinsey noted that the firm had already submitted more than 4,000 pages of documents in compliance with the subpoena and directed Business Insider to Sternfels' written testimony.
BCG, Teneo, and M. Klein & Co. did not respond to a request for comment from Business Insider.