January 25, 2019 • 61 mins
In recent history more and more analysts have been concerned about the rise of privately-owned, multinational corporations wielding the type of geopolitical power once relegated to states and nations. These concerns usually name drop the best known large companies, such as Nestle, Unilever, Halliburton and so on -- but many more companies operate just as effectively in relative obscurity. Tune in to learn more about the controversies surrounding the prestigious and murky world of the global management consulting group McKinsey and Company, an organization so powerful it's often referred to as, simply, "the Firm".
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Episode Transcript
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Speaker 1 (00:00):
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. M Hello,
(00:24):
welcome back to the show. My name is Matt Our
co host Noel Is on Adventures they called me Ben.
We are joined with our super producer Paul Mission controlled
dec and 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
(00:48):
you ever think of, uh, 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
(01:10):
jumped timelines sometime in that all of Earth jumped the
timeline and somehow we 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 the whole Mandela effect thing, where our memories
(01:30):
are are a little different but in this timeline, it's
all been this way forever, and that's that's an interesting argument,
but 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. Um. I
guess my timeline question for you and for you listeners
(01:53):
today is hinging on these these sorts of thought. It
experiments that we have these Walter Mitty 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.
(02:14):
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.
(02:37):
What's you met Carter? No, not the main drummer, No, No,
one of the like one of the bongo guys. Oh yeah,
the percussionist guy. So way back in a different version
of my own life. I was on track to be UH,
an employee of something very much like the company that
(03:02):
we're examining today. Thankfully, this is just my opinion. Thankfully
I didn't do it, and my thoughts and prayers go
out to whatever Ben Bull and lives in an a
version of the timeline where the cards felt differently, and
instead we got into this, and instead we ended up
doing this. Yes, when we think of global powers, we
(03:27):
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,
(03:48):
right on paper, And you don't need to or maybe
a certain segment of their citizenry. You don't need to
be a priest, patriarch or a pope to understand that
religions typically strive to make new converts and spread their teachings,
their philosophies and save souls, yeah, depending on the religion.
(04:08):
While a corporation will work to expand its market share
and ultimately it's 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
(04:29):
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 nonbelievers that may be the best way to
save their souls, according to some teaching or interpretation thereof.
(04:51):
And as we know, some corporations may read tremendous havoc
chasing that bottom line and even ultimately shoot themselves in
the foot, you know what I mean. But today's stories
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
(05:12):
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. Oh, I like that movie with Tom Cruise, right, Yeah,
there's also a book, a book the Firm. There's yea,
(05:32):
and there's a documentary about McKenzie called The Firm. So
let's let's look at the history first. Here are the facts.
This thing is very, very old. The McKenzie Group was
founded in nineteen six by a fellow named James O. Mackenzie.
He was a University of Chicago professor and an expert
on what's known as management accounting. He worked his way
(05:56):
up from the bottom. Okay, management accounting, So I guess
a manager of sorts, or I guess in this case
he is a consultant high level accounting. Right, how do
we how do we best understand a budget for an organization? Right?
How do we streamline that budget? How do we grow
(06:16):
certain parts of it? And so on? He was born
way back in eighty nine. He grew up in fairly
modest means, in the three room house and 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
(06:38):
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. His grip
on his his bootstraps very strong. This is this is
very popular. This is um This is an iteration of
(07:00):
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 you started as a professor. That that
fascinates me. He's a learned man who's already teaching people
something there. I feel like this maybe just completely naivete
(07:23):
on my heart, 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 or 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
(07:44):
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 fake discipline, or even a specific
subset of a specific discipline. You know, and then not
(08:06):
necessarily using all of that hard work for your own means,
you're using it to teach other people to do what
you are you have learned so much about. I don't
know that 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
(08:28):
to the idea of uh 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 which hill they want to die
(08:54):
on in this debate, And it can sound dry and academic,
but we have to remember 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,
(09:15):
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
(09:35):
get impacted by these beliefs. Mackenzie's original I guess breakout
single was, uh, the principles of what's called scientific management.
He was an early practitioner of 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.
(09:59):
So we have X amount of employees, why amount of task?
How do we translate this into uh, 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.
(10:22):
And we all know when we heard that date ninety six,
we all know that there was a context, Uh, there
was a disaster looming on the on the horizon, just
a few years after the foundation of the Mackenzie Group.
It's not really a great time to found something, right,
the Great Depression occurred. But here's the deal. Under Mackenzie's leadership,
(10:45):
this group, this this organization that he created. It didn't
just survived the depression. It didn't just make it through.
This sucker thrived. When the founder, James O. McKenzie died
in nineteen seven, gentleman named Marvin Bauer the firm, and
he took it basically beyond what James had been able
(11:05):
to take it to some would say glory over the
next thirty years. In part though, uh, 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
(11:26):
Mackenzie Group would be, and a pretty specific, right and
pretty um 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
(11:47):
your take? Mr? Mr Bauer? Mr Bauer once forbade all
junior consultants from wearing argyle socks because he thought they
would distract clients. And and uh, the firm's consultants were
all required to wear fedoras at this time. We were all, um,
we're all probably dudes, uh until President Kennedy stopped wearing them.
(12:11):
Wow that I don't know why. It just reminds me.
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 is creating
a uniform, right, he is creating a uniform, not just
a fabric, but also of minds. Marvin Bauer is can
(12:32):
be considered the head UH 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,
whatever you want to call it, that the employees would
use going forward. One example would be the all employees
(12:53):
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 corporate culture that continues. By all reports today,
(13:17):
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, they believe it. Yeah,
this kind of loyalty, fervent loyalty and um belief in
the company is is baked into every single employee. Uh.
(13:40):
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 Mackenzie's revenues.
That's a big change, at least if you're a corporation
that is for profit. You were. You were basically saying,
(14:02):
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
(14:27):
a large beverage company and they want to make a
new kind of product that you know as a Mackenzie partner,
it's just not gonna work. Then it's your job to
instead of just taking their money, it's your job to
tell them that this um ranch dressing flavored soda is
(14:47):
a terrible idea. But I'm going to stop you there.
Um that is one of the most disgusting things I've
heard in a while. It's also a real thing. Oh,
it's a real thing. So did you do that in
the Natural Flavorings episode? Now, I was. I went to
visit our friends Lauren and Annie over at Savor to
(15:09):
do an episode with them about Ranch. So check that
out if you are, if you are, like of the
American public, a die hard fan of Ranch, can you
believe that my son's in there? No, neither like my
(15:29):
buttermilk and man a separate I'm kidding. I mean that's
what it was originally. Anyway, just you could check out
that episode. Another example, it's let's say you're a mckensey
partner working for a strongman or dictator an authoritarian regime,
and they say, look, the best way to uh subjugate
(15:53):
this ethnic minority is to, um, 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 that's the stuff you're
(16:15):
supposed to do as a Mackensey 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 Mackenzie can do. Well, Okay,
(16:38):
only stuff that's necessary. I wonder what, I wonder why
that one is so important, But I guess that's the
idea of we're only going to outwardly show good work.
So if we 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,
(16:59):
it's there's some health preservation there, right, And it makes
sense when you think about it. The 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.
(17:23):
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 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.
(17:45):
I think we keep painting this picture here. Um and
and so far since what what was the year, it's
it's just been working for them. Yeah, they keep a
very very low profile. They did it expand there um
the restriction on CEOs to include CEOs of subsidiaries and
(18:08):
divisions of larger companies. Don't that nice? Yeah, So it's
a it's a little bit of a bigger poll 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
(18:29):
has been a winning formula. There was a profile story
on McKenzie in and said mackenzie 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, Loveday threw that most disliked
(18:53):
in there right at the end. I wonder who dislikes it?
A lot of people competitors dislike it, U victims or
I guess you would say unsatisfied clients, right, or people
who as a result of a project maybe lost their livelihood. Yeah.
(19:17):
I bet there's some uh, 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, there, you can't be
this large without having critics as well as fans, right,
(19:38):
opponents as well as supporters. Yeah. According to Business Week,
the firm is ridiculed, reviled, and 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
(20:01):
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, it
was just saying that you can't be fired for hiring Mackenzie. Well,
so they also seem to be dependable, at least in
certain circles. Let's talk about some of these statistics. They
(20:23):
have over a hundred and twenty offices. Uh, they have
a force of fourteen thousand consultants. Uh. 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
(20:46):
alumni who are a hugely influential force. More current and
former fortune five hundred CEOs are alumni of Mackenzie than
any other company. I think they have the highest chance
to become CEOs in general. It's like one and six ninety,
which sounds like tough odds, but that's a hugely favorable number. Okay,
(21:08):
so two things here, Um, 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,
(21:30):
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 guess 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
(21:51):
up at the Mackenzie 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. Uh. They have a churn of
about one fifth of their workforce a year because they
practice something called upper out, which means that you're either
(22:13):
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. They're just GTFO or you're
hired and promoted. If you search on YouTube now you'll
see a lot of pretty fascinating videos from people we're
(22:38):
talking about how to get through the Mackensey hiring process.
That's those are the number one hits. More so, than
the any idea of a McKenzie cover up, first step
hack the 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, well, let's look at the official stance. Officially,
(23:01):
mackenzie describes itself as what you said, met a quote
global management consulting firm that serves a broad mix of private, public,
and social sector institutions. So they're active and 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
(23:24):
its alumni actions. It's 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 working
virtually every business sector in a hundred and twenty countries.
Through formal events and informal networking, former McKenzie consultants make
(23:44):
and sustain professional relationships. This dynamic network is a lasting
benefit of a McKenzie career. So once you're in, you're in.
And there's there's another thing that's weird here. The clients
were not meant to be recruited, uh, in like a
cold call situation. As a McKenzie person, you are expected
(24:08):
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
(24:29):
social relationships are a huge part of the process of
the workflow of the management accounting. Yeah, do you think
we've ever run into somebody from the Mackenzie group. I have, Yeah,
you have had had one of these things from your
past life or your current life. So at first Mackenzie
(24:52):
appears to be a powerful multinational company. Right. They have
interest in everything from cancer research to nonprofit initiative. It
is agricultural and stuff and much much more. This is
not particularly unusual in the modern day. Mackenzie is not
the only game in town here. But the thing is,
critics alleged there's much much more to Mackenzie than its
(25:15):
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 Mackenzie 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
(25:41):
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 we mentioned that they have uh noticeably
significantly higher chance of becoming CEO s of very prestigious companies,
(26:02):
but they do end up having their hands in a
lot of pots, their fingers and 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
(26:23):
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 tendrils, fourteen thousand of them or so, you
(26:45):
you it's hard to point the finger, especially if they're
a consultant for somebody else, right, and that that is
a valid argument to make. They'll also say that, look,
we just advise as these clients, we don't decide things
for them. And while that is true, it is also
(27:07):
true that since UH 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
(27:27):
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 we'll give let's give the
bare bones, the one oh one, because each of these
UH subjects that we're about to mention, each one is
(27:52):
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, I'm talking about
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 UH, the
(28:13):
former head of Mackenzie, a guy who also had the
last time Gupta totally unrelated. This Gupta family, it'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
(28:34):
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 and if
it's infrastructure and its utility sectors. And the idea is
that mackenzie was complicit in this corruption and they were
(28:57):
using their connection with his 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 t R I L L I
A N to provide like seventy five million dollars worth
(29:21):
of services and then Trillion got a commission off that
for facilitating the business. And then uh, they were found
I don't want to say caught red handed, but caught,
uh pink handed light red handed with in the midst
(29:44):
of acts of bribery and corruption and payments to this
capital partner. And eventually South Africa's government in early two
thousand eighteen found that McKenzie and Trillion have been involved
in fraud, theft, corruption and money laundering. So yeah, so
(30:08):
this is this is a big time financial crime. Right
if if it's true and the 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
(30:30):
of these companies, specifically with the s Com one, they
were looking at a contract for like seven 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
(30:51):
can do and only 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 too purposefully cripple s Com,
(31:17):
which is an electricity provider and trans Net, 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 what
if I don't think they accidentally did this? Man, at
(31:37):
this level, it's a really tall milkshake to say that
someone just consistently screwed the pooch multiple times at the
perfect time to make things terrible, you know what I mean.
So maybe that was part of it. But that's that's
just one example, and we could probably do a whole
(31:58):
episode on that one. Uh. There's also the Galleon insider
trading scandal. This is where the different group that comes in.
So there's a guy named Rajat Gupta who was a
former mackenzie senior executive. He was running the ship no
relation again to the group, to family in South Africa.
And a guy named a Neil Kumar. These two guys
(32:21):
and some others were convicted in a government investigation into
insider trading for sharing inside information with hedge fund ownor
UH the owner of a hedge fund called Galleon Group,
a guy named Raj Raja not Rum. Although McKenzie itself
the company was not accused of any wrongdoing, the convictions
were incredibly embarrassing for the firm because it prides itself
(32:44):
on not telling its clients business right on client confidentiality.
And there's a senior partner, Neil Kamar, who described or
he has been described as the protege of Gupta. He
he left the after these allegations, started servicing in two
thousand nine, and then he ended up pleading guilty in
(33:05):
January two thousand ten. And um, it's well, okay, So
while this guy and some of the other partners had
been pitching Mackenzie's like services, their consulting services to this
Galleon group, Kumar and this uh Rajar Rottenham fellow, they
reached this, they reached a private consulting agreement, which I'm
(33:27):
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 if.
If they really are breaking the rules. If they are
breaking the rules, are the rules just outward facing, I
(33:50):
don't know. So. In October of two thousand 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 two thousand twelve on four
counts of conspiracy and securities fraud and then was acquitted
(34:11):
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 was he
(34:32):
relying on the network in some to some degree? The
answers probably, yes, yeah, I would, I would think so.
And it's a weird great and it's not great, but
it feels like a gray area here. Insider trading this
idea that if you have these close connections between um,
(34:52):
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 that has that connection,
(35:16):
because if you want to, you can pull those strings,
or you can threaten to pull those strings I don't
know that. Mmm. 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
(35:37):
is so at least at least in our country here
in the United States, insider trading is such a a
hazy concept, you know, yeah, because it's not you sharing
anything necessarily in this setup, you know, in a way,
(35:57):
it's a consultancy group, it's a partners 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
(36:18):
in the United States. For a while. For a long time, actually,
members of the US Congress were not subject to the
same insider trading laws that everybody else was, in theory
subject to. That checks out, man. Sure, if you're in
the Senate, you've gotta be able to grease those palms somehow,
(36:39):
and if you could do it on your own time,
and it's not somebody else greeezing your palm. Wait, no,
it is somebody else. Oh wait, oh it's corruption, Oh god,
oh no, some of us are more equal 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
(37:01):
of the Mackenzie Company. Get ready for Enron. It's coming.
We're back in how pressy And yes, you are correct,
my friends. And Ron. So Enron was the creation of
a guy named Jeff Skilling. Jeff Skilling was mackenzie consultant
(37:24):
for twenty one years and when Enron collapsed, he actually
went to jail. He did relatively rare for a lot
of financial crimes. Uh. Mackenzie reportedly fully endorsed the dubious
accounting methods that caused the company to implode in two
thousand and one, and Enron reportedly used Mackenzie for twenty
(37:46):
different projects. And it became a situation where mackenzie 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, vague, it's baby, Yeah,
let's see what we can do, like we can get
away with does this make money if we just say
this or we just do this. It's pretty brilliant. And
(38:08):
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. Um, 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. Um. I think it's worth it,
like just taking this, expanding it out in the whole episode,
(38:28):
just because there's there are a lot of details in
here about the weirdness that occurred there. Right, Okay, so
it's the high level, quick and dirty look at this. Uh.
Enron was the largest bankruptcy reorganization in American history at
its time. It was also called the biggest failure of
(38:49):
an audit. UH. The scandal went public in October two
thousand one. Enron was an energy company based in Houston, Texas,
and it is formed five. Uh. So you're doing the
whole episode right now? This is a whole episode. Yes,
it's like the hero of the facts sections. I can
(39:09):
feel it. Well. A lot of people went to jail. Uh.
It had until I think until world Com went bankrupt
the very next year. And Ron was the largest corporate
bankruptcy in history because I think it was valued at
sixty three point four billion dollars and then it all
(39:32):
went to put. Yeah, just so maybe we'll do an
en 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 the
insanity of our financial systems, like as they work with
the energy companies and the actual energy prices and just
(39:55):
all of these the way it's all interconnected, the way
that sometimes to turn a law to profit. Uh, we
will have tankers of oil waiting just off the coast, right,
That's happened before. I mean that's you know, during the depression,
people were starving to death in urban areas while farmers
(40:18):
were just slaughtering pigs wholesale and then throwing milk in
a creek in an attempt to raise the prices. Burn
that wheat field man. This is the point where a
consultant would come in and say, hey, we can improve
this workflow, 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 mckensey group.
(40:41):
We're 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, everything that
happened and there's that's crazy because the tattoo, it's just
(41:01):
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
(41:22):
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 eight meltdown.
(41:43):
There's a great article on this. There are several great
articles on this, but one that will mention the financial
crisis littleple war detail is Mackenzie how does it always
get away with it? By a guy named Ben Chew
writing for The Independent and what what they eventually came
(42:05):
out in the wash about this was something incredibly despicable
that ties in with their activities with insurance. So mackenzie
and company sold major insurers at places like all State
a new business model that was designed to turn claims
into profits. Their strategy was known as good hands or
(42:29):
boxing gloves, and yeah, uh, this really came into the
public eye during some during Hurricane Katrina. Uh The idea
was that internally, we would aim to make the process
of filing for claims too difficult for people who were
policy holders and too expensive and time consuming for lawyers
(42:52):
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 deliberately lower settlement
to any policy holder who files a claim, much lower
than they're actually entitled to according to what their insurance
(43:14):
agreement is. If you accept the lower payment than boom,
your claim is resolved liquid e 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
(43:37):
delayed and delayed and delayed forever until the policy holders
are finally forced to accept the payment or just give
up altogether. That's in addition to this, A guy named
nave Deep Aurora was convicted for illegally depleting state farm
of over five d thousand dollars over a period of
(43:59):
eight years in cahoots with a state farm employee. So
in addition to creating this model that says, hey, you're
an insurance company, Uh, don't do your job and try
to build people out of it and then pay us
for telling you to do that, Uh, certain employees were
also stealing money from the company. In addition, God, no
(44:23):
thank you, Yeah, no thanks. Uh. They've also been associated
with pharmaceutical I don't know if you call them scandals
but controversies. Uh. There's a company called Valiant, Canadian pharmaceutical
company that was investigated by the SEC. They've been accused
of cooking their books and of using predatory price hikes
(44:46):
to boost growth. The Financial Times had an intriguing statement here, Matt.
They said, Valiance downfall is not exactly Mackenzie's fault, but
it's fingerprints are everywhere. Jeez okay, yeah, I mean, what
are you doing that? Three out of six of the
senior exex were recent Mackenzie employees, and the the chair
(45:11):
of the Talent and Compensation committee was also an ex Mackenzie.
It feels it feels like Mackenzie has this like part
time upright citizens brigade gig where they go around like
the Move, like the TV show, not like just the
emperorv Group where they're just wreaking havoc everywhere and chaos
on purpose just to see what they can get away with. Yeah,
(45:34):
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 pretty bad.
And would the cases that are considered successful for the
client and the company be considered successful for other people
(45:57):
where they publicized because this 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 walk
(46:20):
away deal kind of thing. And their competitors have also
complained about unfair business practices. There was a court case
in two thousand eighteen uh Mackenzie went to court over
allegations from competitors that was purposely misleading or misinforming clients
by not telling the whole truth essentially or as little
(46:42):
of the truth as they could get away with because
it wouldn't it wouldn't disclose conflicts 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, Um, I'm Mackenzie Group and you are
(47:09):
a credit here of financier and you hire me to
bail out. Uh. Let's say nol has Um a bankrupt
headphone company. The headphone mill is in trouble and it's bankrupt. Uh,
(47:31):
you're in charge of how this bankruptcy happens. You go
to me, Mackenzie and say, here's a couple of mill,
here's a cool, cool few mill. 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
(47:51):
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 gotta pay that
or not been incorporated first. You know what I mean.
And then so like, okay, well you're the expert, and
so you pay not been incorporated first. Then on top
(48:12):
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, and you can see why it is. I'm
just having this thought here. This is such a a
rich person's thing, this idea of a consultant in this way,
(48:37):
this type of partner, and that's why it exists at
these higher levels. Only CEO is only um 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
(49:00):
out in these different places. You've got this massive amound
money that needs to be um shuttled along in some way.
But I don't have time for that with all this money.
I'm gonna 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.
(49:22):
My god, somebody is going to think about themselves. And again,
this is a huge company. So 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,
(49:43):
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 they overhauled their
South Africa office, apparently after after US dealing such debilitating
(50:06):
damage to s 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
(50:27):
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 Mackenzie. Why is it? Why PR and
(50:54):
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,
that's interesting, like monitoring of a border or something, or
what is our process for it could be something that's
(51:16):
innocuous is how do we handle records? You know what
I mean? Any number of things it could be and
just setting up facilities that kind of thing. I wonder
if that had anything to do it interesting. So one
one other one that we would be remiss if we
didn't touch on is Mackenzie's work with authoritarian regimes and
(51:38):
business and policy support for regimes. It comes in the
news every so often, and again, long time listeners, you
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. So North
Korea calls the U. S Government US regime, and the
(52:01):
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. It doesn't mean
(52:25):
those countries are automatically a legitimate you know how your
rulers feel about them. The Iranian regime for sure, right. Uh,
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
(52:48):
recently in December of eighteen because there was this big
company retreat in China and it was held next to
the Chinese government internment camps where thousand of wagers are
being detained as we speak. And we did an episode
on this earlier in modern concentration camps. Yeah, that's an
(53:08):
odd place to have your lavish retreat. Oh, and we
also have a list here of I guess some prominent
clients that mackenzie has worked for. Um, let's see the
Saudi Arabia regime. No, I'm just kidding. It's the monarchy there, Um,
Turkey's autocratic leader or the gun And let's see, Oh,
the president of Ukraine who was ousted. It's a former
(53:31):
president Victor Um. Yeah, Yanokovich, I believe i Kovich that's it.
And then several other Chinese and Russian companies who are
under or were under sanctions, heavy sanctions at the time.
People to Mackenzie just swoops in and says, you guys
need some help. Well, guess what this hand. It's very helpful.
(53:52):
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,
my friends. Yeah, so let's just trading. If it's a
trading thing, then we can make something else of right.
So what what we're exploring then, or what we have
explored today, is the story of a company that operates
(54:13):
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 um companies, corporations, countries in power,
and many times it comes into conflict with the law,
(54:37):
with various countries legal systems. So the question is are
we seeing just the bad stuff are we? Are we
only hearing about Mackenzie when there's a problem. Well, we
are hearing a lot about Mackenzie's problems when they pop up,
and there does seem to be a pattern. Are we
being unfair when we say that this or organization is
(55:01):
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, Mackenzie 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.
(55:24):
They advise clients. The clients take it from there, but
not everyone's buying this. One last note. In January this month,
a bankruptcy case just got reopened here in the US,
alleging Mackenzie was illegally making money off bankruptcy cases it
became involved with, and more so than it has established
(55:45):
a pattern of doing this, that this is not a
one off thing but something more akin to a business practice.
I'm just putting this out here. This whole story reminds
me of a movie that I saw way back when,
I say, way back in the day, over ten years ago,
called Michael Clayton that it's stars, I want to say,
(56:08):
George Clooney and oh god, I can't remember. I think
Tilda 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 in my head. That's
how I'm how I'm choosing to view Mackenzie, which I'm
sure is just a a shallow view of what it
(56:31):
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 a look,
and also, consultant firms aren't inherently bad right now, you're
just getting something done efficiently. I think that's it. Well,
you're getting someone's opinion. Yeah, that's what it consulted. Like,
(56:52):
here's my opinion based on my experience. This is what
I advise, right Uh. And plenty of people have done
can salting work before I've done it, not on this level, um,
but it you know. I just want to emphasize that
we're not saying all these firms are are terrible. We're
not saying that everyone involved is a bad guy. But
(57:14):
we are saying that Mackenzie 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 uh state sector industries, it goes into tons
of dirty money. And this is you know, at that point,
(57:37):
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?
Al Right, well, hey find us yeah on social media. Yeah,
you can find us on Instagram, Facebook, and Twitter. Meet
(57:57):
your fellow listeners and talk about talk about Mackenzie Group
until they buy our corporation to shut us down. Where
here's where he gets crazy. That's our community page on Facebook.
You can find me on Instagram. I'm at them bowling.
Then that's not a Dora right, No, no, just making sure.
(58:18):
And these are not our gyles socks, these space socks.
Those are awesome, dude, I just have boring ones on
right now. They're awesome things. That makes you a better consultant.
I'm not distracting you. This is where we find out
that Paul Decond works for Mackenzie. Oh. I could totally
see Paul him doing it. Oh man, he cleans up,
(58:40):
He cleans up so nicely, and he's just like rolling
under the radar when he's in here as mission control.
I can 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.
H Paul, I don't know how you're going to feel
about this. And fellow listeners, you haven't heard Paul on
the air, but I was watching stand up from one
(59:02):
of uh one of my favorite comics, John Mullaney. I 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 Tellton some of
(59:23):
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, that's true.
That's so if anything goes wrong with that, it's not
(59:44):
it's not your fault. Matt, Matt and co. Uh So,
thank you so much for tuning in. 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
(01:00:05):
just being alarmist. You know, there's definitely stuff they want
you know, and everything indicates that several of those secrets
are secrets because they are a legal activity. But again,
a few bad apples, there's a whole bad orchard. Um,
I don't know. You can always can always argue the
bad apple thing in almost every situation. And you can
(01:00:27):
call us directly with your take one eight three three
st d w y t K. That's stuff they don't
want you to know, by the way, in letters. Uh
so call us, leave a message you may get on
the show. Okay, I guess that's it. And if you
don't want to do any of those things, send us
a good old fashioned email. We are conspiracy at how
(01:00:50):
stuff Works dot com.
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. M Hello,
(00:24):
welcome back to the show. My name is Matt Our
co host Noel Is on Adventures they called me Ben.
We are joined with our super producer Paul Mission controlled
dec and 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
(00:48):
you ever think of, uh, 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
(01:10):
jumped timelines sometime in that all of Earth jumped the
timeline and somehow we 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 the whole Mandela effect thing, where our memories
(01:30):
are are a little different but in this timeline, it's
all been this way forever, and that's that's an interesting argument,
but 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. Um. I
guess my timeline question for you and for you listeners
(01:53):
today is hinging on these these sorts of thought. It
experiments that we have these Walter Mitty 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.
(02:14):
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.
(02:37):
What's you met Carter? No, not the main drummer, No, No,
one of the like one of the bongo guys. Oh yeah,
the percussionist guy. So way back in a different version
of my own life. I was on track to be UH,
an employee of something very much like the company that
(03:02):
we're examining today. Thankfully, this is just my opinion. Thankfully
I didn't do it, and my thoughts and prayers go
out to whatever Ben Bull and lives in an a
version of the timeline where the cards felt differently, and
instead we got into this, and instead we ended up
doing this. Yes, when we think of global powers, we
(03:27):
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,
(03:48):
right on paper, And you don't need to or maybe
a certain segment of their citizenry. You don't need to
be a priest, patriarch or a pope to understand that
religions typically strive to make new converts and spread their teachings,
their philosophies and save souls, yeah, depending on the religion.
(04:08):
While a corporation will work to expand its market share
and ultimately it's 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
(04:29):
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 nonbelievers that may be the best way to
save their souls, according to some teaching or interpretation thereof.
(04:51):
And as we know, some corporations may read tremendous havoc
chasing that bottom line and even ultimately shoot themselves in
the foot, you know what I mean. But today's stories
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
(05:12):
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. Oh, I like that movie with Tom Cruise, right, Yeah,
there's also a book, a book the Firm. There's yea,
(05:32):
and there's a documentary about McKenzie called The Firm. So
let's let's look at the history first. Here are the facts.
This thing is very, very old. The McKenzie Group was
founded in nineteen six by a fellow named James O. Mackenzie.
He was a University of Chicago professor and an expert
on what's known as management accounting. He worked his way
(05:56):
up from the bottom. Okay, management accounting, So I guess
a manager of sorts, or I guess in this case
he is a consultant high level accounting. Right, how do
we how do we best understand a budget for an organization? Right?
How do we streamline that budget? How do we grow
(06:16):
certain parts of it? And so on? He was born
way back in eighty nine. He grew up in fairly
modest means, in the three room house and 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
(06:38):
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. His grip
on his his bootstraps very strong. This is this is
very popular. This is um This is an iteration of
(07:00):
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 you started as a professor. That that
fascinates me. He's a learned man who's already teaching people
something there. I feel like this maybe just completely naivete
(07:23):
on my heart, 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 or 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
(07:44):
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 fake discipline, or even a specific
subset of a specific discipline. You know, and then not
(08:06):
necessarily using all of that hard work for your own means,
you're using it to teach other people to do what
you are you have learned so much about. I don't
know that 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
(08:28):
to the idea of uh 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 which hill they want to die
(08:54):
on in this debate, And it can sound dry and academic,
but we have to remember 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,
(09:15):
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
(09:35):
get impacted by these beliefs. Mackenzie's original I guess breakout
single was, uh, the principles of what's called scientific management.
He was an early practitioner of 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.
(09:59):
So we have X amount of employees, why amount of task?
How do we translate this into uh, 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.
(10:22):
And we all know when we heard that date ninety six,
we all know that there was a context, Uh, there
was a disaster looming on the on the horizon, just
a few years after the foundation of the Mackenzie Group.
It's not really a great time to found something, right,
the Great Depression occurred. But here's the deal. Under Mackenzie's leadership,
(10:45):
this group, this this organization that he created. It didn't
just survived the depression. It didn't just make it through.
This sucker thrived. When the founder, James O. McKenzie died
in nineteen seven, gentleman named Marvin Bauer the firm, and
he took it basically beyond what James had been able
(11:05):
to take it to some would say glory over the
next thirty years. In part though, uh, 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
(11:26):
Mackenzie Group would be, and a pretty specific, right and
pretty um 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
(11:47):
your take? Mr? Mr Bauer? Mr Bauer once forbade all
junior consultants from wearing argyle socks because he thought they
would distract clients. And and uh, the firm's consultants were
all required to wear fedoras at this time. We were all, um,
we're all probably dudes, uh until President Kennedy stopped wearing them.
(12:11):
Wow that I don't know why. It just reminds me.
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 is creating
a uniform, right, he is creating a uniform, not just
a fabric, but also of minds. Marvin Bauer is can
(12:32):
be considered the head UH 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,
whatever you want to call it, that the employees would
use going forward. One example would be the all employees
(12:53):
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 corporate culture that continues. By all reports today,
(13:17):
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, they believe it. Yeah,
this kind of loyalty, fervent loyalty and um belief in
the company is is baked into every single employee. Uh.
(13:40):
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 Mackenzie's revenues.
That's a big change, at least if you're a corporation
that is for profit. You were. You were basically saying,
(14:02):
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
(14:27):
a large beverage company and they want to make a
new kind of product that you know as a Mackenzie partner,
it's just not gonna work. Then it's your job to
instead of just taking their money, it's your job to
tell them that this um ranch dressing flavored soda is
(14:47):
a terrible idea. But I'm going to stop you there.
Um that is one of the most disgusting things I've
heard in a while. It's also a real thing. Oh,
it's a real thing. So did you do that in
the Natural Flavorings episode? Now, I was. I went to
visit our friends Lauren and Annie over at Savor to
(15:09):
do an episode with them about Ranch. So check that
out if you are, if you are, like of the
American public, a die hard fan of Ranch, can you
believe that my son's in there? No, neither like my
(15:29):
buttermilk and man a separate I'm kidding. I mean that's
what it was originally. Anyway, just you could check out
that episode. Another example, it's let's say you're a mckensey
partner working for a strongman or dictator an authoritarian regime,
and they say, look, the best way to uh subjugate
(15:53):
this ethnic minority is to, um, 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 that's the stuff you're
(16:15):
supposed to do as a Mackensey 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 Mackenzie can do. Well, Okay,
(16:38):
only stuff that's necessary. I wonder what, I wonder why
that one is so important, But I guess that's the
idea of we're only going to outwardly show good work.
So if we 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,
(16:59):
it's there's some health preservation there, right, And it makes
sense when you think about it. The 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.
(17:23):
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 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.
(17:45):
I think we keep painting this picture here. Um and
and so far since what what was the year, it's
it's just been working for them. Yeah, they keep a
very very low profile. They did it expand there um
the restriction on CEOs to include CEOs of subsidiaries and
(18:08):
divisions of larger companies. Don't that nice? Yeah, So it's
a it's a little bit of a bigger poll 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
(18:29):
has been a winning formula. There was a profile story
on McKenzie in and said mackenzie 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, Loveday threw that most disliked
(18:53):
in there right at the end. I wonder who dislikes it?
A lot of people competitors dislike it, U victims or
I guess you would say unsatisfied clients, right, or people
who as a result of a project maybe lost their livelihood. Yeah.
(19:17):
I bet there's some uh, 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, there, you can't be
this large without having critics as well as fans, right,
(19:38):
opponents as well as supporters. Yeah. According to Business Week,
the firm is ridiculed, reviled, and 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
(20:01):
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, it
was just saying that you can't be fired for hiring Mackenzie. Well,
so they also seem to be dependable, at least in
certain circles. Let's talk about some of these statistics. They
(20:23):
have over a hundred and twenty offices. Uh, they have
a force of fourteen thousand consultants. Uh. 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
(20:46):
alumni who are a hugely influential force. More current and
former fortune five hundred CEOs are alumni of Mackenzie than
any other company. I think they have the highest chance
to become CEOs in general. It's like one and six ninety,
which sounds like tough odds, but that's a hugely favorable number. Okay,
(21:08):
so two things here, Um, 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,
(21:30):
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 guess 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
(21:51):
up at the Mackenzie 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. Uh. They have a churn of
about one fifth of their workforce a year because they
practice something called upper out, which means that you're either
(22:13):
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. They're just GTFO or you're
hired and promoted. If you search on YouTube now you'll
see a lot of pretty fascinating videos from people we're
(22:38):
talking about how to get through the Mackensey hiring process.
That's those are the number one hits. More so, than
the any idea of a McKenzie cover up, first step
hack the 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, well, let's look at the official stance. Officially,
(23:01):
mackenzie describes itself as what you said, met a quote
global management consulting firm that serves a broad mix of private, public,
and social sector institutions. So they're active and 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
(23:24):
its alumni actions. It's 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 working
virtually every business sector in a hundred and twenty countries.
Through formal events and informal networking, former McKenzie consultants make
(23:44):
and sustain professional relationships. This dynamic network is a lasting
benefit of a McKenzie career. So once you're in, you're in.
And there's there's another thing that's weird here. The clients
were not meant to be recruited, uh, in like a
cold call situation. As a McKenzie person, you are expected
(24:08):
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
(24:29):
social relationships are a huge part of the process of
the workflow of the management accounting. Yeah, do you think
we've ever run into somebody from the Mackenzie group. I have, Yeah,
you have had had one of these things from your
past life or your current life. So at first Mackenzie
(24:52):
appears to be a powerful multinational company. Right. They have
interest in everything from cancer research to nonprofit initiative. It
is agricultural and stuff and much much more. This is
not particularly unusual in the modern day. Mackenzie is not
the only game in town here. But the thing is,
critics alleged there's much much more to Mackenzie than its
(25:15):
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 Mackenzie 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
(25:41):
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 we mentioned that they have uh noticeably
significantly higher chance of becoming CEO s of very prestigious companies,
(26:02):
but they do end up having their hands in a
lot of pots, their fingers and 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
(26:23):
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 tendrils, fourteen thousand of them or so, you
(26:45):
you it's hard to point the finger, especially if they're
a consultant for somebody else, right, and that that is
a valid argument to make. They'll also say that, look,
we just advise as these clients, we don't decide things
for them. And while that is true, it is also
(27:07):
true that since UH 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
(27:27):
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 we'll give let's give the
bare bones, the one oh one, because each of these
UH subjects that we're about to mention, each one is
(27:52):
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, I'm talking about
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 UH, the
(28:13):
former head of Mackenzie, a guy who also had the
last time Gupta totally unrelated. This Gupta family, it'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
(28:34):
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 and if
it's infrastructure and its utility sectors. And the idea is
that mackenzie was complicit in this corruption and they were
(28:57):
using their connection with his 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 t R I L L I
A N to provide like seventy five million dollars worth
(29:21):
of services and then Trillion got a commission off that
for facilitating the business. And then uh, they were found
I don't want to say caught red handed, but caught,
uh pink handed light red handed with in the midst
(29:44):
of acts of bribery and corruption and payments to this
capital partner. And eventually South Africa's government in early two
thousand eighteen found that McKenzie and Trillion have been involved
in fraud, theft, corruption and money laundering. So yeah, so
(30:08):
this is this is a big time financial crime. Right
if if it's true and the 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
(30:30):
of these companies, specifically with the s Com one, they
were looking at a contract for like seven 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
(30:51):
can do and only 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 too purposefully cripple s Com,
(31:17):
which is an electricity provider and trans Net, 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 what
if I don't think they accidentally did this? Man, at
(31:37):
this level, it's a really tall milkshake to say that
someone just consistently screwed the pooch multiple times at the
perfect time to make things terrible, you know what I mean.
So maybe that was part of it. But that's that's
just one example, and we could probably do a whole
(31:58):
episode on that one. Uh. There's also the Galleon insider
trading scandal. This is where the different group that comes in.
So there's a guy named Rajat Gupta who was a
former mackenzie senior executive. He was running the ship no
relation again to the group, to family in South Africa.
And a guy named a Neil Kumar. These two guys
(32:21):
and some others were convicted in a government investigation into
insider trading for sharing inside information with hedge fund ownor
UH the owner of a hedge fund called Galleon Group,
a guy named Raj Raja not Rum. Although McKenzie itself
the company was not accused of any wrongdoing, the convictions
were incredibly embarrassing for the firm because it prides itself
(32:44):
on not telling its clients business right on client confidentiality.
And there's a senior partner, Neil Kamar, who described or
he has been described as the protege of Gupta. He
he left the after these allegations, started servicing in two
thousand nine, and then he ended up pleading guilty in
(33:05):
January two thousand ten. And um, it's well, okay, So
while this guy and some of the other partners had
been pitching Mackenzie's like services, their consulting services to this
Galleon group, Kumar and this uh Rajar Rottenham fellow, they
reached this, they reached a private consulting agreement, which I'm
(33:27):
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 if.
If they really are breaking the rules. If they are
breaking the rules, are the rules just outward facing, I
(33:50):
don't know. So. In October of two thousand 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 two thousand twelve on four
counts of conspiracy and securities fraud and then was acquitted
(34:11):
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 was he
(34:32):
relying on the network in some to some degree? The
answers probably, yes, yeah, I would, I would think so.
And it's a weird great and it's not great, but
it feels like a gray area here. Insider trading this
idea that if you have these close connections between um,
(34:52):
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 that has that connection,
(35:16):
because if you want to, you can pull those strings,
or you can threaten to pull those strings I don't
know that. Mmm. 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
(35:37):
is so at least at least in our country here
in the United States, insider trading is such a a
hazy concept, you know, yeah, because it's not you sharing
anything necessarily in this setup, you know, in a way,
(35:57):
it's a consultancy group, it's a partners 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
(36:18):
in the United States. For a while. For a long time, actually,
members of the US Congress were not subject to the
same insider trading laws that everybody else was, in theory
subject to. That checks out, man. Sure, if you're in
the Senate, you've gotta be able to grease those palms somehow,
(36:39):
and if you could do it on your own time,
and it's not somebody else greeezing your palm. Wait, no,
it is somebody else. Oh wait, oh it's corruption, Oh god,
oh no, some of us are more equal 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
(37:01):
of the Mackenzie Company. Get ready for Enron. It's coming.
We're back in how pressy And yes, you are correct,
my friends. And Ron. So Enron was the creation of
a guy named Jeff Skilling. Jeff Skilling was mackenzie consultant
(37:24):
for twenty one years and when Enron collapsed, he actually
went to jail. He did relatively rare for a lot
of financial crimes. Uh. Mackenzie reportedly fully endorsed the dubious
accounting methods that caused the company to implode in two
thousand and one, and Enron reportedly used Mackenzie for twenty
(37:46):
different projects. And it became a situation where mackenzie 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, vague, it's baby, Yeah,
let's see what we can do, like we can get
away with does this make money if we just say
this or we just do this. It's pretty brilliant. And
(38:08):
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. Um, 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. Um. I think it's worth it,
like just taking this, expanding it out in the whole episode,
(38:28):
just because there's there are a lot of details in
here about the weirdness that occurred there. Right, Okay, so
it's the high level, quick and dirty look at this. Uh.
Enron was the largest bankruptcy reorganization in American history at
its time. It was also called the biggest failure of
(38:49):
an audit. UH. The scandal went public in October two
thousand one. Enron was an energy company based in Houston, Texas,
and it is formed five. Uh. So you're doing the
whole episode right now? This is a whole episode. Yes,
it's like the hero of the facts sections. I can
(39:09):
feel it. Well. A lot of people went to jail. Uh.
It had until I think until world Com went bankrupt
the very next year. And Ron was the largest corporate
bankruptcy in history because I think it was valued at
sixty three point four billion dollars and then it all
(39:32):
went to put. Yeah, just so maybe we'll do an
en 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 the
insanity of our financial systems, like as they work with
the energy companies and the actual energy prices and just
(39:55):
all of these the way it's all interconnected, the way
that sometimes to turn a law to profit. Uh, we
will have tankers of oil waiting just off the coast, right,
That's happened before. I mean that's you know, during the depression,
people were starving to death in urban areas while farmers
(40:18):
were just slaughtering pigs wholesale and then throwing milk in
a creek in an attempt to raise the prices. Burn
that wheat field man. This is the point where a
consultant would come in and say, hey, we can improve
this workflow, 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 mckensey group.
(40:41):
We're 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, everything that
happened and there's that's crazy because the tattoo, it's just
(41:01):
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
(41:22):
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 eight meltdown.
(41:43):
There's a great article on this. There are several great
articles on this, but one that will mention the financial
crisis littleple war detail is Mackenzie how does it always
get away with it? By a guy named Ben Chew
writing for The Independent and what what they eventually came
(42:05):
out in the wash about this was something incredibly despicable
that ties in with their activities with insurance. So mackenzie
and company sold major insurers at places like all State
a new business model that was designed to turn claims
into profits. Their strategy was known as good hands or
(42:29):
boxing gloves, and yeah, uh, this really came into the
public eye during some during Hurricane Katrina. Uh The idea
was that internally, we would aim to make the process
of filing for claims too difficult for people who were
policy holders and too expensive and time consuming for lawyers
(42:52):
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 deliberately lower settlement
to any policy holder who files a claim, much lower
than they're actually entitled to according to what their insurance
(43:14):
agreement is. If you accept the lower payment than boom,
your claim is resolved liquid e 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
(43:37):
delayed and delayed and delayed forever until the policy holders
are finally forced to accept the payment or just give
up altogether. That's in addition to this, A guy named
nave Deep Aurora was convicted for illegally depleting state farm
of over five d thousand dollars over a period of
(43:59):
eight years in cahoots with a state farm employee. So
in addition to creating this model that says, hey, you're
an insurance company, Uh, don't do your job and try
to build people out of it and then pay us
for telling you to do that, Uh, certain employees were
also stealing money from the company. In addition, God, no
(44:23):
thank you, Yeah, no thanks. Uh. They've also been associated
with pharmaceutical I don't know if you call them scandals
but controversies. Uh. There's a company called Valiant, Canadian pharmaceutical
company that was investigated by the SEC. They've been accused
of cooking their books and of using predatory price hikes
(44:46):
to boost growth. The Financial Times had an intriguing statement here, Matt.
They said, Valiance downfall is not exactly Mackenzie's fault, but
it's fingerprints are everywhere. Jeez okay, yeah, I mean, what
are you doing that? Three out of six of the
senior exex were recent Mackenzie employees, and the the chair
(45:11):
of the Talent and Compensation committee was also an ex Mackenzie.
It feels it feels like Mackenzie has this like part
time upright citizens brigade gig where they go around like
the Move, like the TV show, not like just the
emperorv Group where they're just wreaking havoc everywhere and chaos
on purpose just to see what they can get away with. Yeah,
(45:34):
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 pretty bad.
And would the cases that are considered successful for the
client and the company be considered successful for other people
(45:57):
where they publicized because this 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 walk
(46:20):
away deal kind of thing. And their competitors have also
complained about unfair business practices. There was a court case
in two thousand eighteen uh Mackenzie went to court over
allegations from competitors that was purposely misleading or misinforming clients
by not telling the whole truth essentially or as little
(46:42):
of the truth as they could get away with because
it wouldn't it wouldn't disclose conflicts 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, Um, I'm Mackenzie Group and you are
(47:09):
a credit here of financier and you hire me to
bail out. Uh. Let's say nol has Um a bankrupt
headphone company. The headphone mill is in trouble and it's bankrupt. Uh,
(47:31):
you're in charge of how this bankruptcy happens. You go
to me, Mackenzie and say, here's a couple of mill,
here's a cool, cool few mill. 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
(47:51):
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 gotta pay that
or not been incorporated first. You know what I mean.
And then so like, okay, well you're the expert, and
so you pay not been incorporated first. Then on top
(48:12):
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, and you can see why it is. I'm
just having this thought here. This is such a a
rich person's thing, this idea of a consultant in this way,
(48:37):
this type of partner, and that's why it exists at
these higher levels. Only CEO is only um 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
(49:00):
out in these different places. You've got this massive amound
money that needs to be um shuttled along in some way.
But I don't have time for that with all this money.
I'm gonna 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.
(49:22):
My god, somebody is going to think about themselves. And again,
this is a huge company. So 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,
(49:43):
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 they overhauled their
South Africa office, apparently after after US dealing such debilitating
(50:06):
damage to s 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
(50:27):
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 Mackenzie. Why is it? Why PR and
(50:54):
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,
that's interesting, like monitoring of a border or something, or
what is our process for it could be something that's
(51:16):
innocuous is how do we handle records? You know what
I mean? Any number of things it could be and
just setting up facilities that kind of thing. I wonder
if that had anything to do it interesting. So one
one other one that we would be remiss if we
didn't touch on is Mackenzie's work with authoritarian regimes and
(51:38):
business and policy support for regimes. It comes in the
news every so often, and again, long time listeners, you
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. So North
Korea calls the U. S Government US regime, and the
(52:01):
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. It doesn't mean
(52:25):
those countries are automatically a legitimate you know how your
rulers feel about them. The Iranian regime for sure, right. Uh,
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
(52:48):
recently in December of eighteen because there was this big
company retreat in China and it was held next to
the Chinese government internment camps where thousand of wagers are
being detained as we speak. And we did an episode
on this earlier in modern concentration camps. Yeah, that's an
(53:08):
odd place to have your lavish retreat. Oh, and we
also have a list here of I guess some prominent
clients that mackenzie has worked for. Um, let's see the
Saudi Arabia regime. No, I'm just kidding. It's the monarchy there, Um,
Turkey's autocratic leader or the gun And let's see, Oh,
the president of Ukraine who was ousted. It's a former
(53:31):
president Victor Um. Yeah, Yanokovich, I believe i Kovich that's it.
And then several other Chinese and Russian companies who are
under or were under sanctions, heavy sanctions at the time.
People to Mackenzie just swoops in and says, you guys
need some help. Well, guess what this hand. It's very helpful.
(53:52):
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,
my friends. Yeah, so let's just trading. If it's a
trading thing, then we can make something else of right.
So what what we're exploring then, or what we have
explored today, is the story of a company that operates
(54:13):
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 um companies, corporations, countries in power,
and many times it comes into conflict with the law,
(54:37):
with various countries legal systems. So the question is are
we seeing just the bad stuff are we? Are we
only hearing about Mackenzie when there's a problem. Well, we
are hearing a lot about Mackenzie's problems when they pop up,
and there does seem to be a pattern. Are we
being unfair when we say that this or organization is
(55:01):
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, Mackenzie 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.
(55:24):
They advise clients. The clients take it from there, but
not everyone's buying this. One last note. In January this month,
a bankruptcy case just got reopened here in the US,
alleging Mackenzie was illegally making money off bankruptcy cases it
became involved with, and more so than it has established
(55:45):
a pattern of doing this, that this is not a
one off thing but something more akin to a business practice.
I'm just putting this out here. This whole story reminds
me of a movie that I saw way back when,
I say, way back in the day, over ten years ago,
called Michael Clayton that it's stars, I want to say,
(56:08):
George Clooney and oh god, I can't remember. I think
Tilda 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 in my head. That's
how I'm how I'm choosing to view Mackenzie, which I'm
sure is just a a shallow view of what it
(56:31):
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 a look,
and also, consultant firms aren't inherently bad right now, you're
just getting something done efficiently. I think that's it. Well,
you're getting someone's opinion. Yeah, that's what it consulted. Like,
(56:52):
here's my opinion based on my experience. This is what
I advise, right Uh. And plenty of people have done
can salting work before I've done it, not on this level, um,
but it you know. I just want to emphasize that
we're not saying all these firms are are terrible. We're
not saying that everyone involved is a bad guy. But
(57:14):
we are saying that Mackenzie 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 uh state sector industries, it goes into tons
of dirty money. And this is you know, at that point,
(57:37):
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?
Al Right, well, hey find us yeah on social media. Yeah,
you can find us on Instagram, Facebook, and Twitter. Meet
(57:57):
your fellow listeners and talk about talk about Mackenzie Group
until they buy our corporation to shut us down. Where
here's where he gets crazy. That's our community page on Facebook.
You can find me on Instagram. I'm at them bowling.
Then that's not a Dora right, No, no, just making sure.
(58:18):
And these are not our gyles socks, these space socks.
Those are awesome, dude, I just have boring ones on
right now. They're awesome things. That makes you a better consultant.
I'm not distracting you. This is where we find out
that Paul Decond works for Mackenzie. Oh. I could totally
see Paul him doing it. Oh man, he cleans up,
(58:40):
He cleans up so nicely, and he's just like rolling
under the radar when he's in here as mission control.
I can 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.
H Paul, I don't know how you're going to feel
about this. And fellow listeners, you haven't heard Paul on
the air, but I was watching stand up from one
(59:02):
of uh one of my favorite comics, John Mullaney. I 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 Tellton some of
(59:23):
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, that's true.
That's so if anything goes wrong with that, it's not
(59:44):
it's not your fault. Matt, Matt and co. Uh So,
thank you so much for tuning in. 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
(01:00:05):
just being alarmist. You know, there's definitely stuff they want
you know, and everything indicates that several of those secrets
are secrets because they are a legal activity. But again,
a few bad apples, there's a whole bad orchard. Um,
I don't know. You can always can always argue the
bad apple thing in almost every situation. And you can
(01:00:27):
call us directly with your take one eight three three
st d w y t K. That's stuff they don't
want you to know, by the way, in letters. Uh
so call us, leave a message you may get on
the show. Okay, I guess that's it. And if you
don't want to do any of those things, send us
a good old fashioned email. We are conspiracy at how
(01:00:50):
stuff Works dot com.
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