McKinsey's Client Projects

To the Ministry and Back again

Katrin Suder, who will be interrogated today (Thursday) by the Bundestag's committee of inquiry, is the focus of the Bundeswehr's so-called "Consultant Affair." Germany's Defense Minister at the time, Ursula von der Leyen had hired her as State Secretary in the ministry on August 1, 2014, primarily for the purpose of breaking through the reigning nepotistic structures existing between the military and the arms industry, which were seen to be the main reason for the nearly endemic delays and skyrocketing costs in the procurement of the Bundeswehr's new war machinery. Suder had previously been employed by McKinsey Consultants. Since 2007, she had been in charge of the company's Berlin office, where, since 2009, she had been coordinating cooperation with official administrations. In the defense ministry, she was in charge of the Cyber/IT Sector, and particularly in charge of armaments. Suder appointed her former McKinsey colleague Gundbert Scherf as her representative for the strategic supervision of armament procurement. In early 2017, Scherf returned to McKinsey, where "client projects in … aerospace and security industry" are among his current responsibilities. McKinsey explicitly advertises with its "Bundeswehr experience."[1]

"A Gold Mine"

The impact of ex-McKinsey employees Suder and Scherf has become the focus of the Bundestag's commission of inquiry, because obviously a new nepotism was established under their leadership, one comprised this time of consultant networks. For example, contracts for consulting firms have skyrocketed. They have risen into the triple-digit millions since 2014. As is now known, many of those contracts had been awarded illegitimately, bypassing particularly the strict rules of competitive public bidding. In addition, some of the consultants' wages have risen to more than €2,000 per day. It won the reputation of being a "gold mine" for consulting firms' employees.[2] McKinsey has also been able to rake in large profits, while the ex-McKinsey employees were at work in top positions in the defense ministry. To avoid suspicions of corruption, the profits were economically dissimulated. For example, in the time frame from 2014 to 2018, according to German government information, McKinsey had been awarded contracts valued at around €7.5 million. In addition, according to research made by the journal "Capital," the formerly state-owned IABG arms company had granted subcontracts to McKinsey or McKinsey subsidiaries valued also at €7.5 million. Observers were referring to a "triumvirate" made up of the defense ministry, IABG and McKinsey.[3]

Godfathers and Cellphones

McKinsey and other consulting firms' highly lucrative business with the Bundeswehr were transacted, at times, under unusual circumstances. For example, the activities of Timo Noetzel, an employee of the Accenture consulting firm, which had increased its business payload with the Bundeswehr from around €459,000 in 2014 to about €20 million in 2018, is raising eyebrows. Noetzel, who claims to have met Suder, in 2013 when he was on the election campaign staff of the SPD chancellor candidate, Peer Steinbrück, and subsequently worked with Suder at McKinsey, has maintained contacts to leading officials in the Defense Ministry for Accenture since 2015. He claims that he and Suder are "friends," and take "trips with their families together."[4] When, on September 10, 2016, Noetzel had his five children baptized, Suder's armament strategist Gundbert Scherf and Bundeswehr General Erhard Bühler - head of planning in the defense ministry, at the time - were among the godfathers and his "friend" Suder was one of the guests.[5] The close relationships between leading ministerial officials and private contractors are also incriminating for Ursula von der Leyen. For von der Leyen, it is embarrassing that, for example, text messages on her cellphone had been deleted in the ministry - after the Bundestag's commission of inquiry had explicitly demanded to be able to examine her cellphone and was informed initially that the phone was PIN locked. Therefore, the first step in the ministry, after obtaining the PIN number, was to delete all potential evidence incriminating von der Leyen.[6]

"Contempt of Parliament"

This procedure implicates not only Germany but also the EU as a whole - in two ways. On the one hand, Germany's former minister, whose possibly incriminating text messages had been conveniently deleted by her former subordinates, is, today, at the helm of the EU Commission. She had brought her top ministerial aides in Berlin with her to Brussels. Björn Seibert, for example, who, most recently, had been head of the Executive Staff of the Ministry of Defense, is today head of the President of the EU Commission's cabinet. His testimony November 7, 2019, before the Bundestag's commission of inquiry enraged the parliamentarians. After admitting having informed himself by studying the written evidence through access to the files, Seibert, who had been called as a witness to explain the ministry's method of awarding contracts, claimed that he could not remember anything. A governing party parliamentarian was livid with outrage, and spoke of "blatant contempt of parliament."[7] Jens-Alexander Flosdorff, who, as the minister's spokesperson, had defended the ministry in face of the press, is today von der Leyen's director of communications in Brussels. Recently, he was described as someone who was "almost always able to spin even the most embarrassing situation to his minister's advantage."[8]

"Making its way in" at the EU Level

There is also the impact the McKinsey consulting firm and its employees have on the military policy of the EU and its member nations. Wolfgang Ischinger, Chair of the Munich Security Conference (MSC), wrote already back in 2017 that for nearly five years, the Munich Security Conference had been cooperating with McKinsey & Company, a "knowledge partner," to work on "European defense cooperation." The common goal was to add "fact-based, extensively researched, and accessible analysis" to this area, and subsequently have our analysis "make its way" into the core of the European debate on defense [9] - with success, the German diplomat notes. The results of the McKinsey studies have been widely used in "official documents by defense ministers and other European leaders." Ischinger provides the example of findings complaining of an alleged "fragmentation of European defense capabilities" as well as that of an eventual "savings potential" if European countries organized defense procurement jointly. The idea that such a concentration is necessary, is becoming more popular within the EU and lays the groundwork for plans for the arms buildup of an "Army of the Europeans," as von der Leyen, first as German minister and now as President of the EU Commission promotes - not least of all for the benefit of the armaments companies in Germany being advised by McKinsey.

[1] Gundbert Scherf. mckinsey.com.

[2], [3] Thomas Steinmann: Wie McKinsey bei der Bundeswehr Millionen verdiente. capital.de 28.01.2020.

[4] Sven Becker, Matthias Gebauer: Der Berater und seine Freunde. spiegel.de 28.06.2019.

[5] Berateraffäre: Freundschaften und Bekanntschaften unter der Lupe. vergabeblog.de 15.11.2019.

[6] Thorsten Jungholt, Christian Schweppe: Von der Leyens Handydaten wurden gelöscht, gesteht die Regierung. welt.de 19.12.2019.

[7] Thomas Schmoll: Zeuge "leidet unter Amnesie". n-tv.de 08.11.2019.

[8] Mike Szymanski: "Befremdet und entsetzt". sueddeutsche.de 17.01.2020.

[9] Stiftung Münchner Sicherheitskonferenz (Hg.): More European, More Connected, More Capable: Building the European Armed Forces of the Future. München 2017. See also Optimierte Kriegsführung.