Consultants tell Senate they face prison for aiding probe into Saudi Public Investment Fund

Record ID: 1765378

  • Title: Consultants tell Senate they face prison for aiding probe into Saudi Public Investment Fund
  • Date: 8th February 2024
  • Summary: WASHINGTON, D.C., UNITED STATES (FEBRUARY 7, 2024) (SENATE TV) PERMANENT SUBCOMMITTEE ON INVESTIGATIONS SWEARING IN WITNESSES (SOUNDBITE) (English) DEMOCRATIC SENATOR FROM CONNECTICUT, RICHARD BLUMENTHAL, SAYING: "It's simply staggering to me that American companies are not only willing to accept this claim allowing the Saudi government to determine what is permitted to provide this subcommittee, but also that they would use it to justify their refusal to comply with a duly issued congressional subpoena." WHITE FLASH (SOUNDBITE) (English) DEMOCRATIC SENATOR FROM CONNECTICUT, RICHARD BLUMENTHAL, SAYING: "A congressional subpoena is not a request. It carries the full weight of the law. The failure to respond to it carries with it serious consequences. It's even more staggering that Saudi Arabia is threatening employees of your companies with imprisonment if the documents we're seeking are not produced. Staggering to me. Outrageous." WHITE FLASH (SOUNDBITE) (English) REPUBLICAN SENATOR FROM WISCONSIN, RONALD JOHNSON, SAYING: "I do have sympathy for the position the consultants find themselves in, but I have no sympathy for the Saudi claims of sovereign immunity in this inquiry. Any foreign entity wishing to do business in the U.S. must comply with U.S. law and be responsive to congressional subpoenas." WHITE FLASH (SOUNDBITE) (English) GLOBAL MANAGING PARTNER OF MCKINSEY & COMPANY, BOB STERNFELS, SAYING: "Now, shortly after receiving the subcommittee subpoena, a Saudi court issued an injunction prohibiting the disclosure of our materials. We've opposed that injunction and continue to do so vigorously. This includes disputing any claim that our employees or public officials under Saudi law. This is very serious to me because from what I understand, the violation of Saudi law can result in civil and criminal penalties. So this has put us in a difficult position." WHITE FLASH (SOUNDBITE) (English) MANAGING PARTNER AT M. KLEIN & COMPANY, MICHAEL KLEIN, SAYING: "What the court order that we received states is that if we are to provide either in a written form or in this form information that we're to breach the specific injunction, we could be held criminally, criminally liable. And that criminal liability, as I understand it, is as much as 20 years imprisonment as well as monetary fines. It is not defined as to which individuals. It is addressed directly to the firm." WHITE FLASH (SOUNDBITE) (English) MANAGING PARTNER AT M. KLEIN & COMPANY, MICHAEL KLEIN, SAYING: "This represents aberrant behavior for our client and quite frankly, for the PIF, who has historically been a client that has operated with best practices of governance, with us." WHITE FLASH (SOUNDBITE) (English) GLOBAL CHAIR FOR BOSTON CONSULTING GROUP, RICH LESSER, SAYING: "We advise on fund strategy and investments, operating models and value creation opportunities. We also advise clients on how to accelerate the success of their portfolio companies. I also want to be clear on the work we have not done. We have not work for the PIF on LIV Golf. We have not worked for the PIF on its investments in sports in the United States. We have not worked for the PIF on its direct investments in U.S. companies other than Uber and Magic Leap as we shared with the subcommittee last week. And we have not supported the PIF on any U.S. lobbying efforts." WHITE FLASH (SOUNDBITE) (English) GLOBAL MANAGING PARTNER OF MCKINSEY & COMPANY, BOB STERNFELS, SAYING: "Our support on the topic of golf was limited and occurred in 2021. Our work looked at the potential revenues for a new golf tour and what would make such a tour economically viable. We also analyzed ways to structure a new golf tour, including organizational and staffing models. McKinsey did not assess the strategic viability of a new tour, nor did we advocate or advance the interests of the tour with any external audience. Our work predated the launch of LIV Golf and was well before the PGA Tour's proposed merger with LIV Golf." WHITE FLASH (SOUNDBITE) (English) MANAGING PARTNER AT M. KLEIN & COMPANY, MICHAEL KLEIN, SAYING: "One of the issues that I understand has been central to the committee is the potential investment partnership between the PGA Tour and the PIF. As you know, the PGA Tour has recently announced a transaction establishing a commercial entity controlled by the Tour with a stated goal to grow the Tour through an investment of in excess of 1.5 billion dollars from a group of American sports investors not affiliated with the PIF. The tour has stated publicly that negotiations with the PFA are ongoing and that any investment by the PIF will be subject to appropriate regulatory approvals. This is consistent with the framework agreement struck in June 2023 to unify and grow the game of golf between the PIF and the PGA." WHITE FLASH (SOUNDBITE) (English) CO-FOUNDER AND CEO OF TENEO, PAUL KEARY, SAYING: "We know that payoffs, potential investments in professional golf in the U.S. is of particular interest to the subcommittee. We were engaged by PIF on their initial consideration of a possible investment in golf. We helped evaluate this opportunity and advised on potential communications strategies if an investment went forward. I would note we have never represented LIV Golf." WHITE FLASH (SOUNDBITE) (English) DEMOCRATIC SENATOR FROM CALIFORNIA, LAPHONZA BUTLER, SAYING: "If you have a client, you've chosen to have a client in the PIF. They have displayed not normal, out of character behavior and aggressive behavior towards you, threatened your company, your livelihood, the security of your employees and you remain in business with them. Sounds incredibly curious to me and I again associated myself with the comments of the chair, I wonder what is actually going on here, because I've not seen a U.S. business choose a foreign, any client, foreign or otherwise, that would behave so aggressively towards your overall bottom line." HEARING IN PROGRESS
  • Embargoed: 22nd February 2024 03:06
  • Keywords: Boston Consulting Group LIV Golf M. Klein & Company McKinsey & Company PGA Permanent Subcommittee on Investigations Saudi Arabia’s Public Investment Fund Senate Teneo
  • Location: WASHINGTON, D.C., UNITED STATES
  • City: WASHINGTON, D.C., UNITED STATES
  • Country: US
  • Topics: Lawmaking,North America,Government/Politics
  • Reuters ID: LVA001877508022024RP1
  • Aspect Ratio: 16:9
  • Story Text:Speaking before the Senate's Permanent Subcommittee on Investigations on Wednesday (February 7) consultants said their firms face prison time for fully disclosing their involvement in advising the Saudi Arabia's Public Investment Fund.
    Representatives from Boston Consulting Group, M. Klein & Company, McKinsey & Company, and Teneo told Senators a Saudi court had issued an injunction prohibiting the disclosure of materials, a violation of which, according to the consultants, could carry penalties of up to 20 years imprisonment and monetary fines.
    The executives also said they oppose the court's injunction.
    Bob Sternfels, from McKinsey & Company, said the firm's involvement on the topic of golf predates the launch of LIV Golf, which is mainly financed by Saudi Arabia's Public Investment Fund.
    Rich Lesser, the global chair of Boston Consulting Group, said they had not work with the PIF on LIV golf or its investments in sports in the United States.
    Last June the PGA Tour announced the "framework agreement" for a shock merger with the PIF, which funds new rival league LIV Golf, as well as with the DP World Tour. While the PGA Tour has taken on a new investment partner made up of U.S.-based sports ownership groups, called Strategic Sports Group, it is said to still be in negotiations with the PIF.
    It remains to be seen if the PGA merging with its only rival will be allowed under federal antitrust law.
    (Production: Gerardo Gomez)
  • Copyright Holder: SENATE TV (USA)
  • Copyright Notice: (c) Copyright Thomson Reuters 2024. Open For Restrictions - http://about.reuters.com/fulllegal.asp
  • Usage Terms/Restrictions: None
Register