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BUCHALTER

A PROFESSIONAL CORPORATION

IRVINE

BN 38115359v1

JEFFREY K. GARFINKLE (SBN 153496)

BUCHALTER 

A Professional Corporation

18400 Von Karman Avenue, Suite 800

Irvine, California 92612-0514

Telephone: (949) 760-1121

Email: jgarfinkle@buchalter.com

 

Attorneys for JAY ALIX

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

 -andPACIFIC GAS AND ELECTRIC 

COMPANY,

 Debtors.

Case No. 19-30088 

Chapter 11

(Lead Case)

(Jointly Administered)

STATEMENT OF JAY ALIX

Non-party Jay Alix, through his attorneys, hereby submits this Statement and the attached 

Declaration, annexed hereto as “Exhibit A,” to address and correct certain statements regarding 

Mr. Alix that were made in the Application of Debtors Pursuant to 11 U.S.C. §§ 363(b) and 105(a) 

for Authority to Enter into, Perform under and Make Payments under Certain Consulting Contracts 

with McKinsey & Company, Inc. United States (the “Application”), filed in the above-captioned 

proceedings on September 17, 2019 (Dkt. 3919). 

The purpose of the attached Declaration is to correct certain misstatements in the 

Application regarding Mr. Alix and litigation proceedings involving McKinsey. Mr. Alix takes 

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BUCHALTER

A PROFESSIONAL CORPORATION

IRVINE 2

BN 38115359v1

no position on whether the Application should be granted. Nor does Mr. Alix seek any relief from 

the Court.

Dated: October 23, 2019 BUCHALTER

A Professional Corporation

/s/ Jeffrey K. Garfinkle

Jeffrey K. Garfinkle 

18400 Von Karmen Avenue

Irvine, CA 92612

Tel: (949) 760-0182

jgarfinkle@buchalter.com

Attorneys for JAY ALIX

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EXHIBIT A

EXHIBIT A

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UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

 -andPACIFIC GAS AND ELECTRIC 

COMPANY,

 Debtors.

Bankruptcy Case

No. 19-30088 (DM)

Chapter 11

(Lead Case)

(Jointly Administered)

DECLARATION OF JAY ALIX

JAY ALIX, pursuant to 28 U.S.C. § 1746, declares under penalty of perjury, as follows:

1. I respectfully submit this Declaration to address and correct certain misstatements 

made regarding myself and various litigation proceedings involving McKinsey & Company, Inc. 

and its subsidiaries (collectively, “McKinsey”) in the Application of Debtors Pursuant to 11 

U.S.C. §§ 363(b) and 105(a) for Authority to Enter into, Perform under and Make Payments under 

Certain Consulting Contracts with McKinsey & Company, Inc. United States (the “Application”), 

filed in the above-captioned proceedings on September 17, 2019 (Dkt. 3919). This Declaration is 

based on my personal knowledge.

2. I am a non-party to this proceeding. I take no position on whether the Application 

should be granted, nor do I seek any relief from the Court. Rather, as noted above, the purpose of 

this Declaration is simply to correct and address certain misstatements made regarding myself and 

various litigation proceedings involving McKinsey.

I. Introduction

3. The Application asserts that McKinsey & Company, Inc. United States 

(“McKinsey US”) has performed and/or is performing certain services for the Debtors pursuant to 

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two pre-petition contracts and one post-petition contract. See Dkt. 3919 at 5-7. The Application 

asserts that McKinsey US has performed its services as an ordinary course professional and thus, 

under Sections 327(a) and 363(b) of the Bankruptcy Code, no Court approval is required for the 

Debtors to employ or pay McKinsey. See id. at 1. The Application appears to seek an order from 

the Court finding that McKinsey US is an ordinary course professional and that no disclosures are 

required. See id. at 13. The Application indicates that if such an order is not granted, McKinsey 

will file retention disclosures. Id.

4. At pages 11-12, the Application states:

As the Court may be aware, Jay Alix has pursued litigation against 

McKinsey in certain bankruptcy and non-bankruptcy courts 

unrelated to these Chapter 11 Cases. All courts to date have ruled 

in McKinsey’s favor but the expectation is that this party will 

continue to pursue litigation against McKinsey, including possibly 

in this matter. For its part, McKinsey Recovery & Transformation 

Services U.S., LLC (‘McKinsey RTS’), an affiliate of McKinsey, 

has developed and adopted a new protocol developed by Jan Baker 

and Paul Singerman for review of its connections in bankruptcy 

cases. Specifically, on February 21, 2019, the Westmoreland Court 

granted a joint motion of Westmoreland and McKinsey RTS to defer 

consideration of Westmoreland’s application to retain McKinsey 

RTS while McKinsey RTS worked with an expert on developing the 

new disclosure protocol, applied the new protocol to its Rule 2014 

disclosures, and filed Rule 2014 disclosures based on the new 

protocol.

The final proposed protocol, the Houston Disclosure Protocol, was 

filed with the Westmoreland Court on May 31, 2019 (the 

‘Protocol’). On July 3, 2019, McKinsey RTS and certain of its 

affiliates filed a new retention application with updated Rule 2014 

disclosures in accordance with the Protocol.

Dkt. 3919 at 11-12 (internal citations omitted). 

5. The Application further states that “in light of the process that McKinsey recently 

undertook in Westmoreland to prepare and file its disclosures in accordance with the Protocol, 

McKinsey has indicated to the Debtors that it wishes to delay consideration of this Application 

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until such voluntary disclosures can be prepared and file its disclosures with the Protocol” and that 

“[t]hese are the same delayed retention procedures that the Westmoreland Court approved in 

connection with McKinsey RTS’s retention application under section 327(a) of the Bankruptcy 

Code.” Dkt. 3919 at 12 & n.4.

6. I am the beneficial owner of Mar-Bow Value Partners, LLC (“Mar-Bow”), an 

entity which is fully controlled by me. 

7. For purposes of full disclosure, I am a minority shareholder and a member of the 

board of directors of AlixPartners LLP (“AP”), which has been hired as a professional in this case. 

However, I am neither an officer nor an employee of AP, and I have no involvement in the dayto-day operations of AP, including having no involvement in this case. All views expressed in this 

Declaration and the accompanying Statement are my personal views, not the views of AP. 

8. All litigation that I have pursued against McKinsey, whether personally or through 

Mar-Bow, has been directed, controlled, and funded by me in my personal capacity, with no 

involvement by AP. 

9. Since 2016, Mar-Bow, in the position of creditor or as a non-party seeking amicus, 

has litigated or is currently litigating against McKinsey in six Chapter 11 bankruptcy proceedings 

in which McKinsey has been approved to act as a bankruptcy professional under Section 327 of 

the United States Bankruptcy, 11 U.S.C. § 101, et seq. (the “Bankruptcy Code”) (or, in one 

instance, pursuant to Section 363 of the Bankruptcy Code):

a. In re Edison Mission Energy, No. 12-BK-49219(JPC) (Bankr. N.D. Ill.) 

(“Edison Mission”);

b. In re NII Holdings, Inc., No. 14-BK-12611(SCC) (Bankr S.D.N.Y.) 

(“NII”);

c. In re SRC Liquidation LLC, No. 15-BK-10541(BLS) (Bankr. D. Del.) 

(“Standard Register”);

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d. In re Alpha Natural Resources, Inc., No. 15-BK-33896(KRH) (E.D. Va.) 

(“ANR”);

e. In re SunEdison, Inc., No. 16-BK-10992(SMB) (Bankr. S.D.N.Y.) 

(“SunEdison”); and

f. In re Westmoreland Coal Co., No. 18-BK-35672(DRJ) (Bankr. S.D. Tex.) 

(“Westmoreland”).

10. Additionally, as assignee of AP, I have brought non-bankruptcy litigation against 

McKinsey and related individuals, alleging violations of the Racketeer Influenced and Corrupt 

Organizations Act, 18 U.S.C. §§ 1961, et seq. (“RICO”) as well as state claims, in an action 

captioned Alix v. McKinsey & Co., Inc., et al., No. 18-CV-04141(JMF) (S.D.N.Y.) (the “RICO 

Action”).

II. CORRECTIONS TO THE APPLICATION’S STATEMENTS 

A. The Nature of My Litigation with McKinsey

11. First, the Application suggests without any basis that I might seek to litigate against 

McKinsey in this case.1

 However, I have no intention to intervene in this case, nor have I ever 

indicated otherwise. As noted above, I take no position on whether the Application should be 

granted. 

12. Moreover, none of the above-referenced litigation matters in which I have

proceeded against McKinsey have involved work by McKinsey as an “ordinary course 

professional.” Rather, in each of the bankruptcy proceedings, McKinsey was hired (or, in the case 

of Westmoreland, is seeking to be hired) as a bankruptcy professional pursuant to Section 327 of 

the Bankruptcy Code or, in the case of Standard Register, was hired pursuant to Section 363 of 

 1 See Dkt. 3919 at 11 (“Jay Alix has pursued litigation against McKinsey in certain bankruptcy and nonbankruptcy courts . . . the expectation is that this party will continue to pursue litigation against McKinsey, 

including possibly in this matter.”). While the Application refers to me as “this party,” I am, of course, not 

a party to these proceedings.

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the Bankruptcy Code. And the sole non-bankruptcy case, the RICO Action, involves my RICO 

and state law claims against McKinsey.

B. The Results of My Litigation with McKinsey

13. Second, the Application states misleadingly that in all cases in which I have 

litigated against McKinsey, “[a]ll courts to date have ruled in McKinsey’s favor[.]” Dkt. 3919 at 

11. In reality, no court has ruled against me or Mar-Bow on the merits. All rulings “in McKinsey’s 

favor” have been on technical grounds of standing in bankruptcy matters and the proximate cause 

standard under RICO. Several courts have, however, ruled against McKinsey or made statements 

on the record calling into question McKinsey’s bankruptcy disclosure practices. Those rulings are 

briefly summarized below.

i. ANR

14. In ANR, McKinsey’s initial Rule 2014 disclosures, as well as its first and second 

supplemental disclosures, failed to name a single connection between McKinsey and any of the 

interested parties in ANR. On May 3, 2016, after I brought deficiencies in McKinsey’s bankruptcy 

disclosures to the attention of the Office of the United States Trustee (the “U.S. Trustee”), the 

U.S. Trustee brought a motion to compel McKinsey to comply with the disclosure requirements 

of Federal Rule of Bankruptcy Procedure 2014 (“Bankruptcy Rule 2014” or “Rule 2014”) in the 

ANR bankruptcy.2

 In response to the U.S. Trustee’s motion to compel, McKinsey filed a third 

supplemental Rule 2014 declaration, naming 17 connections for the first time.3

 

 2 ANR Dkt. 2308 (Motion of the United States Trustee to Compel McKinsey Recovery & Transformation 

Services U.S. [LLC], Turnaround Advisor for the Debtors, to Comply with the Requirements of Bankruptcy 

Rule 2014). McKinsey Recovery & Transformation Services U.S., LLC (“McKinsey RTS”) is a whollyowned subsidiary of McKinsey US.

3 ANR Dkt. 2464 (Third Supplemental Declaration of Kevin Carmody in Support of Application of the 

Debtors, Pursuant to Sections 327(a), 328(a) and 1107(b) of the Bankruptcy Code, Bankruptcy Rule 2014(a) 

and Local Bankruptcy Rule 2014-1, for an Order Authorizing Them to Retain and Employ McKinsey 

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15. On June 6, 2016, Mar-Bow, as an unsecured creditor in ANR, brought its own 

motion to compel McKinsey to comply with Bankruptcy Rule 2014.4

 On July 1, 2016, after a 

hearing, the ANR Court ruled against McKinsey and granted Mar-Bow’s motion to compel and 

required McKinsey to disclose, inter alia, 121 undisclosed connections; connections arising from 

McKinsey’s captive investment firm MIO Partners, Inc. (“MIO”), and information concerning 

McKinsey’s disclosure process.5

 The ANR Court also ruled, over McKinsey’s objections, that 

McKinsey, was indeed a bankruptcy professional just like a law firm, and was, therefore, a 

fiduciary for the estate.

6

16. In 2018, Mar-Bow moved to re-open ANR after evidence emerged indicating

McKinsey had reaped millions in profits from an undisclosed investment interest in the 

reorganized debtor.7 McKinsey failed to disclose that investment interest to the ANR Court despite 

a clear order requiring McKinsey do so in camera in July 2016.8 McKinsey held that investment 

through MIO, while at the same time concealing from the Court and the U.S. Trustee that 

 

Recovery & Transformation Services U.S., LLC as Turnaround Advisor for the Debtors, Effective as of the 

Petition Date, filed May 9, 2016).

4 ANR Dkt. 2603 (Motion of Creditor Mar-Bow Value Partners, LLC to Compel McKinsey Recovery & 

Transformation Services U.S., LLC, Turnaround Advisor for the Debtors, to Comply with the Requirements 

of Bankruptcy Rule 2014).

5 ANR Dkt. 2895 (Order Compelling McKinsey Recovery & Transformation Services, U.S., LLC, 

Turnaround Advisor for the Debtors, to Comply with the Requirements of Bankruptcy Rule 2014).

6 See ANR Dkt. 2834 (6/29/2016 Hearing Tr.) at 158:11-13 (THE COURT: “Section 327 talks about 

professionals. McKinsey’s a professional. Mr. Rhodes is exactly right. They’re a fiduciary.”).

7 See ANR Dkt. 4122 (Mar-Bow Value Partners, LLC’s Motion to Reopen Case, filed Jul. 18, 2018); 

ANR Dkt. 4128 (Mar-Bow Value Partners, LLC’s Amended Motion for Relief from Judgments and for 

Indicative Ruling and Reply to the United States Trustee’s Response to (I) Motion to Reopen the Case and 

(II) Motion for Relief from Judgments and for Indicative Ruling, filed Aug. 9, 2018); see also, e.g., 

Gretchen Morgenson & Tom Corrigan, McKinsey Investments Weren’t Disclosed in Bankruptcy Cases, 

Wall St. J., Jun. 19, 2018, available at https://www.wsj.com/articles/mckinsey-investments-werentdisclosed-in-bankruptcy-cases-1529423138. 8 See ANR Dkt. 2895 (Order); ANR Dkt. 4164 (Comments of United States Trustee Regarding McKinsey 

RTS’s Opposition to Mar-Bow Partners, LLC’s (I) Motion to Reopen Case and (II) Motion for Relief from 

Judgments and for Indicative Ruling, filed Nov. 30, 2018); ANR Dkt. 4182 (1/9/2019 Hearing Tr.) at 25:1-

2.

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McKinsey RTS’s founder and President, Jon Garcia, was simultaneously on MIO’s board of 

directors and a member of its Investment and Audit Committees from 2006 to 2017.9

 

17. Mar-Bow’s motion to reopen ANR was supported by the U.S. Trustee, which asked 

the ANR Court to reopen the case and order McKinsey to disgorge the more than $15 million it 

had received in fees.10 The U.S. Trustee concluded that McKinsey had misled it in both the ANR 

and SunEdison cases by claiming that MIO was a “blind trust,” and stated that McKinsey had never 

answered the U.S. Trustee’s questions regarding MIO in a forthright and satisfactory manner.11

18. Calling the allegations against McKinsey “some of the most serious allegations 

I’ve ever seen,” the ANR Court reopened ANR.

12 

19. McKinsey subsequently agreed to pay $15 million, including $5 million for the 

benefit of the ANR estate, to settle disputes with the U.S. Trustee over whether McKinsey had 

violated Bankruptcy Rule 2014 (the “UST Settlement”).13 However, the settlement explicitly 

carved out any claims based on fraud, lack of distinterestedness under 11 U.S.C. § 327, or for any 

criminal liability.

14 

20. When the ANR Court later dismissed Mar-Bow for lack of standing, the Court made 

clear that he was not making any findings on the merits of “Mar-Bow’s very serious fraud 

allegations” and noted that “the United States Attorney retains the ability to institute an action 

[against McKinsey] under title 18 of the United States Code if so warranted.”15

 9 ANR Dkt. 4164 at 10 ¶ 15.

10 Id. 11 Id. at 9 ¶ 13.

12 ANR Dkt. 4182 (1/9/2019 Hearing Tr.) at 31:20-21 (emphasis added).

13 In re Old ANR, LLC, No. 19-302(KRH) (Bankr. E.D. Va.) (“Old ANR”) Dkt. 45 (Corrected Order 

Approving Settlement Agreement Between United States Trustee Program and McKinsey & Company, Inc. 

and Certain of Its Affiliates, filed Apr. 19, 2019) at 2 ¶ 4.

14 Id. at 4-5 ¶ 6; id. at 6 ¶10.

15 Old ANR Dkt. 54 (Mem. Op.) at 12 (emphasis added).

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ii. Westmoreland

21. The second case in which Mar-Bow appeared, Westmoreland, is the only case to 

date in which Mar-Bow has purchased a claim and filed an objection before approval of 

McKinsey’s employment. Far from having been decided “in McKinsey’s favor,” McKinsey’s 

employment still has not been approved in Westmoreland, despite the passage of nearly a year 

since the filing of the initial application to hire McKinsey and plan confirmation on March 2, 2019. 

22. On November 30, 2018, after Mar-Bow filed an objection, the Westmoreland Court 

issued an Order sua sponte, stating:

The objection alleges conduct by McKinsey in this case and at least 

one other case pending before the Court [GenOn] that, if true, 

could violate Title 18 and otherwise impugn the integrity of the 

bankruptcy process. The Court requests the United States Trustee 

to review the allegations set forth in the Mar-Bow objection and 

make a written recommendation to the Court on how best to 

proceed.

Westmoreland Dkt. 632 (Order) (emphasis added). 

23. The U.S. Trustee followed with objections of its own.16 During a preliminary 

hearing, the Court again emphasized that the allegations against McKinsey “clearly implicated 

certain sections of Title 18 applicable to bankruptcy cases[.]”17

24. After both I and McKinsey’s initial Rule 2014 declarant, Mark Hojnacki, were 

deposed on December 31, 2018, the Westmoreland Court called the transcript of Mr. Hojnacki’s 

deposition “one of the most frustrating reads that I’ve had in a long time” and stated: “He 

 16 Westmoreland Dkt. 785 (Acting United States Trustee’s (1) Objection to Debtors’ Application for Entry 

of an Order Authorizing the Retention and Employment of McKinsey Recovery & Transformation Services 

U.S., LLC as Performance Improvement Advisors to the Debtors Nunc Pro Tunc to the Petition Date; and 

(2) Response to Court’s Order Dated November 30, 2018, filed Dec. 14, 2018).

17 Westmoreland Dkt. 868 (12/18/2018 Hearing Tr.) at 164:15-18 (emphasis added).

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[Hojnacki] won’t do, on the stand, what he did in that deposition. I will get candor and I will get 

honesty.”18 

25. In contrast, my deposition confirmed that my allegations were made in good faith 

and based on long, extensive research coupled with my first-hand knowledge obtained from four 

decades in the restructuring industry. Regarding my deposition, the Court stated that “unless he’s 

totally making some things up, he’s got a reason for thinking there’s something wrong.”19 The 

Court also stated: “If what Mr. Alix alleges is true, then McKinsey has a Title 18 problem.”20

26. Although its employment has not been, and perhaps never will be, approved in 

Westmoreland, McKinsey agreed to pay $5 million for the benefit of the Westmoreland estate in 

the UST Settlement, which explicitly carves out claims for fraud and lack of disinterestedness 

under Section 327 and for any criminal liability.

21

27. On August 20, 2019, the U.S. Trustee filed an objection to McKinsey’s third and 

final attempt at disclosure in Westmoreland, stating: “After multiple filings in aid of its 

employment, [McKinsey’s] employment must be denied.”22 

28. On October 29, 2019, the Westmoreland Court will hold a hearing on whether it 

should deny the application to hire McKinsey in that case as a matter of law or whether the matter 

should proceed to discovery and trial.

 18 Westmoreland Dkt. 981 (1/3/2019 Hearing Tr.) at 30:23-31:1.

19 Id. at 30:16-18. 20 Id. at 28:6-7 (emphasis added).

21 See Old ANR Dkt. 45.

22 Westmoreland Dkt. 2273 (Acting United States Trustee’s Response to WLB Debtors’ Application for 

Entry of an Order (I) Authorizing the Retention and Employment of McKinsey Recovery & Transformation 

Services U.S., LLC and Certain of Its Affiliates as Performance Improvement Advisors for the WLB 

Debtors Effective Nunc Pro Tunc to the Petition Date and (II) Granting Related Relief (Dkt. 2119), filed 

Aug. 20, 2019) at 3 (emphasis added).

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iii. SunEdison

29. In the third case in which Mar-Bow appeared, SunEdison, it was revealed after the 

fact that on December 27, 2018, McKinsey entered into a secret settlement in which it agreed to 

pay the SunEdison Litigation Trust $17.5 million – over $2 million more than McKinsey received 

in fees in that cases.

23 

30. McKinsey also paid another $5 million for the benefit of the SunEdison estate as 

part of the UST Settlement in February 2019, which, again, explicitly carves out fraud, issues of 

disinterestedness under Section 327, and any criminal liability.

24 

31. In his opinion finding that Mar-Bow lacked standing, the SunEdison Court echoed 

the ANR and Westmoreland Courts, stating that “the United States Attorney retains the ability to 

prosecute any crimes under title 18.”25 

iv. NII 

32. During a hearing in NII, the Court sought and obtained the U.S. Trustee’s 

assurances that it will investigate the allegations of McKinsey’s fraud on the court in that case and 

it “will liaise, as [] appropriate, with other branches of the Department of Justice, including 

applicable US Attorneys’ offices[.]”26 

v. Standard Register

33. In its opinion finding that Mar-Bow lacked standing, the Court in Standard Register

noted that “the settlement between the UST and RTS contained a carve-out for fraud and the UST 

remains free to pursue those claims.”27

 23 See SunEdison Dkt. 5884 at 4.

24 See Old ANR Dkt. 45.

25 SunEdison Dkt. 5999 at 24 (emphasis added).

26 See NII Dkt. 1040 (7/31/2019 Hearing Tr.) at 53:13-55:4 (emphasis added).

27 Standard Register Dkt. 2448 (9/12/2019 Op.) at 14.

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vi. Edison Mission Energy

34. In Edison Mission Energy, the Court has not yet made any findings. A hearing is 

scheduled for November 6, 2019 on Mar-Bow’s motion for leave to file as an amicus and MarBow’s motion to reopen that case.

vii. RICO Action. 

35. In the RICO Action, in an opinion dismissing my RICO claims on proximate cause 

grounds, the Court stated: “If Alix’s allegations in this case are true (as the Court has assumed 

they are for purposes of this motion), they are certainly troubling.”28 The Court further stated 

that I “may well have good reason to be upset about Defendants’ alleged misconduct and may 

indeed have genuinely public-spirited reasons for seeking to deter it going forward.”29

C. McKinsey’s “Houston Disclosure Protocol”

36. Finally, the Application emphasizes what it calls McKinsey’s “Houston Disclosure 

Protocol.” See Dkt. 3919 at 11-12. To be clear, however, McKinsey’s protocol has not been 

approved or promoted by any court. Indeed, the Westmoreland Court has made clear that it will 

not approve McKinsey’s protocol.30 Another United States Bankruptcy Judge in the Southern 

District of Texas has described it as “really confusing” and stated: “No one’s ever adopted that 

protocol. I’m not adopting it right now.”31

 28 RICO Action Dkt. 104 (Op. and Order, filed Aug. 19, 2019) at 23 (emphasis added).

29 Id. (emphasis added).

30 See Westmoreland Dkt. 1762 (4/16/2019 Hearing Tr.) at 41:12-42:18.

31 In re Legacy Reserves Inc., No. 19-BK-33395(MI) (Bankr. S.D. Tex.), 8/1/2019 Hearing Tr. at 55:13-

16, 62:23; id. at 55:12-13.

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