Ed Rust must have muttered, "you’ve got to be kidding," after learning that a McKinsey & Company consultant and State Farm employee were accused of siphoning about $900,000 in consulting fees and expenses.

Check out the funny line about this story in the Chicago Tribune story:

It’s a question many businesspeople have quietly asked themselves: Just what do consultants do for their money?

According to a federal indictment unsealed Monday, the answer for one former partner at McKinsey & Company’s Chicago office and his colleague at State Farm was "not much."

McKinsey partner Navdeep Arora, 51, allegedly teamed up with former State Farm employee Matthew Sorensen, 49, to bilk McKinsey and State Farm out of nearly $500,000 in bogus consulting fees for work that was never done over an eight-year period beginning in 2004.

Arora received another $400,000 from McKinsey, State Farm and other McKinsey clients by making false expense claims for personal travel to cities including Vail, Miami, Las Vegas, New York, London, Prague and Munich, as well as for hotel, dining and theater expenses in Chicago, according to the eight-count wire fraud indictment.

Navdeep Arora’s name came up in the Katrina litigation, and tangentially with Jeff Marr’s litigation in Oklahoma involving Xactimate. Ironically, he was a Panel Attendee for the Coalition Against Insurance Fraud & Chief Claims Officer Roundtable in 2005. I wonder if the Coalition will include this sum when adding up its statistics of insurance fraud?

Per the Tribune, McKinsey has not worked with State Farm since 2012:

Phil Supple, a spokesman for Bloomington-based State Farm, said that State Farm alerted federal investigators in 2012 when it discovered the alleged fraud. Sorensen has not worked for State Farm since then, Supple said, adding that State Farm has not had any "contractual relationship" with McKinsey since 2012.

And I am left with two thoughts:

  1. If the person was so unethical to conspire a way to rip off his employer and State Farm for $900,000, what kind of unethical schemes did he help implement when consulting on claims practices?
  2. Did McKinsey or State Farm have insurance for this loss?
  • Jett Thomas

    Too bad SF (since 2012) hasn’t gone back to their pre-McKinsey days when they actually paid claims. I guess after 20 years or so you don’t need your Darth Vader mentor anymore.

  • Lawrence Meyerhofer

    Karma!

  • shirley heflin

    Dear Chip:

    What is the adage? “A LEOPARD NEVER CHANGES ITS STRIPES.”

    Shirley Heflin
    Tampa, FL

  • E. Richard Simon

    How many times have we witnessed the transition of the insurance business (particularly, claims) where the water balloon gets squeezed to cut costs and expenses, only to open up a new field of expertise, which, in turn, inflates the other end of the balloon.