The DOJ Is Letting McKinsey Opioid Consultants Off the Hook

ByFreddy Brewster

JACOBIN
12.23.2024


The Biden administration’s Justice Department is allowing global consulting firm McKinsey to defer prosecution for its extensive role in fueling the opioid epidemic.

McKinsey & Company building in Toronto, Canada, on May 2, 2008. (David Cooper / Toronto Star via Getty Images)

Joe Biden’s Justice Department just handed a sweetheart deal to a global consulting firm with deep ties to the Biden administration, letting the firm off the hook for its role in helping “turbocharge” sales of the highly addictive prescription pain pill OxyContin.

The development is one of the Justice Department’s first major moves since adopting a new policy three weeks ago to go even softer on corporate crime, and will allow McKinsey & Company to defer prosecution for its extensive role in fueling the opioid epidemic that has devastated millions of American lives.

The new Justice Department policy is meant to provide leniency to corporations that cooperate with federal investigations and self-report crimes. But now McKinsey is benefiting from the new policy, even though prosecutors said that the consulting firm worked to obstruct their investigation.

The McKinsey settlement comes as federal prosecution of white-collar crimes hits historic lows, signaling that corporate malefactors can likely expect lenient treatment moving forward, no matter the extent and heinousness of their alleged crimes.

Many top Biden officials have previously received paychecks from the consulting firm. WestExec Advisors, a consulting firm founded by Secretary of State Antony Blinken and which employed Deputy Attorney General Lisa Monaco, worked on behalf of McKinsey. Transportation Secretary Pete Buttigieg was previously employed by McKinsey, as was Ryan Harper, Biden’s deputy chief of staff and deputy executive secretary at the National Security Council. Additionally, Commerce Secretary Gina Raimondo’s husband was a longtime partner at McKinsey.

Although federal contracts with McKinsey for consulting work have shrunk recently, payments to consulting firms make up a massive portion of federal spending. The Biden administration requested more than $70 billion in federal funds for consulting work in the 2024 budget, with the Defense Department requesting nearly half of those funds, according to an analysis by antitrust expert Matt Stoller.

On December 13, the Justice Department announced that McKinsey will be able to pay $650 million and enter into a five-year deferred-prosecution agreement in order to settle criminal and civil investigations into the firm’s role in helping Purdue Pharma “turbocharge” sales of OxyContin. According to prosecutors, the company was accused of “knowingly destroying records, documents, and tangible objects with the intent to impede, obstruct, and influence the investigation.” A former senior partner at McKinsey agreed to plead guilty to destroying documents and other evidence that investigators sought.

McKinsey, which generated $16 billion in revenue last year, worked with Purdue Pharma from 2004 to 2019 to help the pharmaceutical company boost its sales in part by targeting doctors who wrote OxyContin prescriptions at alarmingly high rates and for “medically unnecessary” reasons, the Justice Department said.

Numerous academic studies and news reports have found that Purdue’s OxyContin business played a significant role in the opioid epidemic.

Between 1999 and 2022, nearly 727,000 Americans died from overdoses related to opioids, including both prescription drugs and illegal versions such as heroin, according to the Centers for Disease Control and Prevention. More than five million people nationwide struggle with addiction related to the drug, according to federal data.

McKinsey’s settlement comes just three weeks after a new Justice Department policy update allows corporations accused of crimes to receive lenient sentences for cooperating with investigators, even if those corporations are the target of multiple overlapping investigations and consistently break the law.

A 2021 report conducted by the Biden Justice Department found that between 10 and 20 percent of federal deals allowing companies to avoid or defer prosecution involved firms that have previously received similar agreements. This means the Justice Department regularly enters into prosecution agreements with corporations that routinely break the law and have already received lenient sentences.

In a separate Justice Department settlement announced on December 5, McKinsey agreed to pay more than $122 million and enter into a three-year deferred-prosecution agreement to settle an investigation into a McKinsey subsidiary’s role in allegedly bribing South African officials to obtain lucrative consulting contracts.The Justice Department’s settlements with McKinsey fall in line with its new soft-on-corporate crime policy.

The Justice Department’s settlements with McKinsey fall in line with its new soft-on-corporate crime policy and are a “disgrace,” said Rick Claypool, a corporate crime expert from the government watchdog group Public Citizen.

“It’s beyond shameful to see the Justice Department bending over backward to protect one of the corporate masterminds behind this devastating game explicitly for profit,” Claypool told the Lever, adding that he has had friends and family affected by the opioid crisis.

But the Justice Department may have had its hands tied, thanks to a lack of resources and the uncertainty of Donald Trump’s incoming administration, said corporate compliance consultant Matt Kelly.

“It is another example of the difficult position the Justice Department is in,” Kelly told the Lever. “What they’re making McKinsey do right now is good, but I don’t know that a lot of people who suffered in the opioid crisis would be entirely satisfied with this.”
Prosecution of Corporate Crime at Historic Lows

The new Justice Department soft-on-corporate crime policy announced by deputy assistant attorney general and former corporate lawyer Nicole Argentieri on November 22 outlines how even if corporations have committed multiple crimes and earned massive profits from their wrongdoing, top executives can avoid jail time if they cooperate with investigators.

“Those that make good faith efforts to self-report [wrongdoing], even if they do not qualify for a [full prosecution shield], could still receive substantial benefits,” Argentieri wrote in the Justice Department’s November 22 update. These potential benefits include agreements in which corporations are not prosecuted, being credited for cooperating with the Justice Department’s investigations.

Critics say the policy could make it easier for federal prosecutors to dole out lenient sentences in the upcoming Trump administration, including in the ongoing investigation of potential securities fraud by billionaire and Trump-acolyte Elon Musk.

Federal cases against corporations have fallen steadily since 2000, when the Justice Department prosecuted more than three hundred corporations for wrongdoing. In 2021, under President Biden, corporate prosecutions reached a quarter-century low of just ninety cases. That number has marginally increased since then, with 113 corporate prosecutions in 2023.

Prosecutions against individuals for white-collar crimes have also dramatically plummeted. In 2011, Barack Obama’s administration filed white-collar crime charges against more than ten thousand people over matters like fraud, antitrust violations, and banking crimes. From October 2023 to September 2024, the Biden administration prosecuted only 4,332 people for similar charges.

The Justice Department’s new corporate-leniency policy comes three years after the agency urged corporations to strengthen their legal compliance programs — a self-reporting system that, if enacted by corporations, can lead to leniency from federal prosecutors.

“What [this policy] says to me is that there’s a significant strain of the Justice Department that doesn’t believe in taking an adversarial stance against corporate crime,” Claypool previously told the Lever about the new leniency policy.

The Justice Department has a history of offering deals to corporations with a history of extreme malfeasance. For example, earlier this year, Argentieri and other federal prosecutors struck a deal with Boeing executives that allowed the airplane manufacturer to plead guilty to defrauding the Federal Aviation Administration and pay $487 million for breaching a 2021 deferred prosecution agreement related to two plane crashes that killed 346 people. No executives at Boeing faced jail time in exchange for paying the fines and agreeing to new reporting standards set by government officials.

Additionally, the Justice Department struck a deal with General Motors’s robotaxi company Cruise earlier this year that allowed the company to avoid prosecution in exchange for paying a $500,000 fine after one of Cruise’s cars struck and dragged a pedestrian more than twenty feet. The deal was reached even after Cruise admitted to falsifying traffic safety reports on the incident to try to influence the federal investigation. General Motors, which reported $171.8 billion in revenue for 2023, has dumped more than $10 billion into Cruise since 2016, but recently announced it would stop funding the robotaxi company.

According to Argentieri, the new corporate-leniency policy is supposed to provide “another incentive for companies to do the right thing.” But it now appears that these sweetheart deals are also being given to companies like McKinsey that actively tried to hide their crimes from investigators, said Claypool.These sweetheart deals are being given to companies that actively tried to hide their crimes from investigators.

“One of the charges against the company is obstruction of justice, and they are still getting this settlement, which is supposed to only be meant for corporations who act in good faith,” he said.

But according to Kelly, the compliance consultant, federal prosecutors could have agreed to the McKinsey deal to avoid ending up with an even more lenient sentence if the case had dragged out in court proceedings.

“I don’t like that answer, but it’s foolish to ignore that reality,” he said. “We also have to remember if McKinsey had dragged this out to the Trump administration, it’s entirely possible you would have seen an even weaker settlement.”

McKinsey Helps “Turbocharge” OxyContin Sales

In 2009, McKinsey consultants advised Purdue executives that “driving a more impactful OxyContin franchise should be your top priority,” and that the pharmaceutical company should “ensure everything is done to optimize and protect OxyContin’s positioning,” according to legal documents reviewed by the Lever.

This advice came two years after a Purdue subsidiary pleaded guilty in federal court in 2007 to understating how addictive OxyContin can be.

“Even in the face of warnings from health care professionals, the media, and members of its own sales force that OxyContin was being widely abused and causing harm to our citizens, Purdue, under the leadership of its top executives, continued to push a fraudulent marketing campaign that promoted OxyContin as less addictive, less subject to abuse, and less likely to cause withdrawal,” Justice Department officials said in 2007.

And yet, according to the Justice Department, McKinsey proceeded to help Purdue Pharma “turbocharge” their sales of OxyContin in 2013 by advising Purdue to establish sales strategies that targeted “High Value Prescribers” who were issuing prescriptions for “uses that were unsafe, ineffective, and medically unnecessary,” the Justice Department wrote in its press release announcing the deferred-prosecution agreement.

According to prosecutors, McKinsey consultants also conducted ride-alongs with Purdue salespeople to visit pharmacists and doctors prescribing OxyContin. After one ride-along, a McKinsey consultant noted that a “pharmacist [had] a gun and was shaking; abuse is definitely a huge issue.”

McKinsey’s marketing strategy — which stated that Purdue “must drive the OxyContin franchise” — helped Purdue steer OxyContin sales to doctors and pharmacists who were at times prescribing twenty-five times more OxyContin prescriptions than their standard industry peers, prosecutors found.McKinsey’s marketing strategies were ‘a road map to boost sales of highly addictive opioids.’

“Prescribing OxyContin for illegitimate purposes fueled the opioid crisis and continues to be a public health problem in the United States,” prosecutors wrote in legal documents.

McKinsey’s marketing strategies were “a road map to boost sales of highly addictive opioids” and was a “financial success” for Purdue, prosecutors wrote. McKinsey’s strategies helped increase sales of OxyContin at a time when Purdue was experiencing declining sales of its flagship drug.

Purdue started selling OxyContin in 1996, generating more than $35 billion in revenue for the company by 2023.

The Justice Department said that McKinsey “knew the risks and dangers associated with OxyContin” and that McKinsey “chose to continue working with Purdue Pharma to improve sales of OxyContin.” Purdue paid McKinsey $93 million for its work from 2004 to 2019.

McKinsey’s consulting work for Purdue also included helping the pharmaceutical giant pressure the Food and Drug Administration to weaken opioid-safety programs. At the time, McKinsey was also advising the Food and Drug Administration on how to regulate pharmaceutical companies, according to an investigation by ProPublica.

The agreement between McKinsey and federal prosecutors will force the consulting firm to stop working with companies that produce controlled substances during its five-year deferred prosecution agreement and pay multiple fines totaling $650 million. The consulting firm posted a record-breaking $16 billion in revenue last year.

Additionally, Martin Elling, a former senior partner at McKinsey, agreed to plead guilty to destroying documents and other items with the “intent to impede, obstruct, and influence the investigation,” according to legal documents.

According to prosecutors, on July 4, 2018, Elling emailed another senior partner about plans to delete documents and emails related to McKinsey’s work with Purdue Pharma.

“It probably makes sense to have a quick conversation with the risk committee to see if we should be doing anything other [than] eliminating all our documents and emails,” prosecutors claim Elling wrote in an email. “Suspect not, but as things get tougher there, someone might turn to us.”

Elling is scheduled to appear in court on January 10, 2025, and is facing up to twenty years in prison.

“We are deeply sorry for our past client service to Purdue Pharma and the actions of a former partner who deleted documents related to his work for that client,” McKinsey said in a public statement. “We should have appreciated the harm opioids were causing in our society and we should not have undertaken sales and marketing work for Purdue Pharma. This terrible public health crisis and our past work for opioid manufacturers will always be a source of profound regret for our firm.”

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Contributors

Freddy Brewster is a freelance reporter and has been published in the Los Angeles Times, NBC News, CalMatters, the Lost Coast Outpost, and other outlets across California.