Article 4F430 The Country That Exiled McKinsey

The Country That Exiled McKinsey

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by Ian MacDougall, ProPublica, and Anand Tumurtogo
from Articles and Investigations - ProPublica on (#4F430)

by Ian MacDougall, ProPublica, and Anand Tumurtogoo for ProPublica

In 2010, amid a historic commodities boom fueled by the explosion of China’s economy, international companies began turning their attention to Mongolia as it opened its vast deposits of coal and copper to commercial exploitation. Mongolia, which is located on China’s northern border, stood to make prodigious sums of money if it could sell that copper and coal to its resource-hungry neighbor.

To make that happen, Mongolia concluded that it needed to lay thousands of miles of railroad tracks. Such a project would cost billions of dollars and throw off hefty fees for construction companies, banks, law firms and consultants of various stripes. The consulting contracts alone could be worth tens of millions over a decade. And if the railroad expansion worked out, there’d be even more opportunities after that.

20190514-mckinsey-mongolia-3x2.jpgMcKinsey & Co.’s logo at an office building in Zurich, Switzerland. (Arnd Wiegmann/Reuters)

McKinsey & Co., the global consulting behemoth, was interested. In the fall of 2010, Jimmy Hexter, a senior partner at the firm, began talking with Mongolia’s government about the railroad project. Hexter had spent decades in the region, at one point running McKinsey’s office in Beijing. He was a veteran of multiple infrastructure projects in Asia, a global leader of the firm’s infrastructure practice and enthusiastic about Mongolia’s potential.

Operating there required unusual caution. Earlier in 2010, the U.S. State Department had issued a warning. Corruption was on the rise in Mongolia, the State Department explained, and U.S. enterprises needed “measures in place to detect and prevent” it. In a section titled “current views on Mongolian corruption,” the first problem cited was a “blurring of the lines between the public and private sector brought about by systemic conflicts of interest at nearly all levels.”

A year after that warning was published, Hexter and McKinsey did exactly what American diplomats had cautioned could be risky: The firm signed a consulting agreement with a government entity even as the government adviser who brought McKinsey into the project also landed a piece of the same contract for his own private company.

McKinsey acknowledges that it did not vet the adviser or his company in any formal way. The adviser, Chuluunkhuu Ganbat, played a central role in shaping the country’s rail expansion. Mongolia’s state-owned rail company hired a team assembled by Ganbat, with McKinsey playing the leading role, to conduct an analysis of whether the railroad plan was feasible. McKinsey’s payment was little more than an introductory fee by the firm’s standards — $4 million — but the contract spelled out that McKinsey would be eligible for more lucrative multiyear contracts if the project progressed.

The railroad expansion quickly went bad. Construction stalled amid financial problems and political uncertainty. By 2015, Mongolian police were investigating claims of widespread embezzlement and fraud. McKinsey was drawn into the investigation, with authorities ordering the firm to hand over records related to the project.

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The scrutiny rattled McKinsey enough that its then-head of Asia operations, Kevin Sneader, went above the heads of investigators. Shortly after police approached the firm, he wrote to Mongolia’s prime minister without copying the investigators. He insisted the firm had done nothing wrong and is “committed to the highest professional and ethical standards.” The letter suggested that Mongolia’s commercial prospects might be better served if McKinsey were a partner. It cited the prime minister’s “strong interest in promoting U.S.-Mongolian business ties and growing third-neighbor investment in Mongolia.” Later in the letter Sneader offered to “discuss with you in more detail our firm’s desire to further contribute to the Mongolian economy or our work in Mongolia to date.” McKinsey says its letter had no inappropriate purpose. Sneader has since become the global managing partner of McKinsey, the firm’s highest position.

Mongolian prosecutors did not charge McKinsey. But the case and the events that led up to it, which have never been reported apart from limited articles in the Mongolian press, are part of a disturbing pattern for the consulting giant. The Mongolia episode bears a striking similarity to the firm’s actions in South Africa, where McKinsey reaped a global wave of bad press, parliamentary scrutiny, client defections and criminal referrals after briefly working alongside an unvetted company that had close ties to scandal-plagued associates of that country’s president. The firm’s operation in Saudi Arabia was also criticized in recent years for hiring the children of government officials, an act that could potentially run afoul of American anti-corruption laws. McKinsey has denied wrongdoing in both cases.

The Mongolian project raises questions about McKinsey’s compliance with the Foreign Corrupt Practices Act, or FCPA, according to legal experts. One red flag was a government official doubling as a profit-seeking business partner. Then there’s the allegation by Mongolian prosecutors that the contract value was increased to $5.65 million from the $4 million they say the McKinsey team had requested. Assuming the prosecutors are right, said Alexandra Wrage, president of TRACE International, which works with companies to help them comply with anti-corruption laws, “the only reason government officials and their cronies do that is so money can be kicked back to them.”

20190514-mckinsey-mongolia-sneader.jpgKevin Sneader, McKinsey’s global managing partner, speaks onstage in Oxfordshire, England, in November. (John Phillips/Getty Images for The Business of Fashion)

McKinsey’s absence of due diligence wouldn’t necessarily shield it from potential culpability, experts say. The FCPA “specifies that engaging in willful avoidance is the same as an affirmative act,” said Thomas Fox, a veteran lawyer who advises companies on how to comply with the law.

McKinsey has not been accused of violating the FCPA. It says it acted legally. “We took legal advice throughout the course of the negotiations and project,” a spokesman said. “We have seen no evidence that McKinsey personnel were involved in or aware of any corruption in connection with this project.” The firm says its work “delivered significant value and impact to our client” and was “important for the country’s development.” In a separate statement, the firm added, “This project was completed nearly a decade ago. Since then, consistent with our commitment to continuously improve our approach to risk and governance, we have strengthened a number of our policies at a global level, including those governing how we serve public sector and state-owned clients and where we partner with other firms in client work.”

Corruption charges were ultimately filed against three people involved in the railroad project: the country’s former transportation minister, the ex-director of the state-owned railway company and Ganbat. The men misused their positions to profit illegally off the McKinsey contract, prosecutors alleged: steering the contract to McKinsey’s team, ensuring that the consulting team include Ganbat’s private company and then increasing the contract’s value by $1.65 million. Ganbat also faces corruption charges tied to a later contract where his company was paid to help raise financing for the railroad. The three men have denied the allegations and called them politically motivated.

In two lengthy interviews, Ganbat insisted that his relationship with the Transportation Ministry was at arm’s length. “Even though we were inside the ministry, we were really the external team,” he said. “And that, I think, has caused a lot of confusion. They were perceiving that I was a government employee.”

This account of McKinsey’s Mongolia dealings is based on hundreds of pages of government, financial and McKinsey documents reviewed or obtained by ProPublica and interviews with more than two dozen current and former Mongolian officials, ex-McKinsey consultants and people familiar with the firm’s work in the country.

Officially, the railroad-related corruption case remains open. But a key change occurred in the summer of 2017: One of the three men charged in the case, former Transportation Minister Khaltmaa Battulga, was elected president of Mongolia. Viewed by critics as autocratic, he has taken steps to torpedo the case.

The political change has also benefited McKinsey. The firm had found itself unofficially barred from doing business in Mongolia for more than a year as a result of the railroad case. The government has since permitted it to operate in the country again, and Battulga’s election ensures that will continue. He remains a devoted fan of McKinsey.

Before he ran for office, Battulga, now 56, was one of Mongolia’s wealthiest businessmen and a distinctive personage. A barrel-chested sambo wrestling champion, he has long cultivated a tough-guy persona. He was so taken with Francis Ford Coppola’s “Godfather” films that he took to wearing a Borsalino fedora and named his holding company Genco, after the front company set up by Vito Corleone. The Mongolian Genco owned a nightclub, a taxi service, a lottery and a meat-processing plant, among other things.

Battulga’s swagger would prove appealing to Mongolian voters, but it could come across as thuggish and off-putting to international investors. Ganbat became a key ambassador to that world. He had returned to Mongolia after eight years in the United States, where he had attended graduate school and worked at Commerzbank in New York. Ganbat offered business polish and finance bona fides. He was young and handsome, with a charismatic smile. He dressed in sleek suits, spoke excellent English, and came across as savvy and refined. He would quickly become a close and trusted confidant to the minister.

20190514-mckinsey-mongolia-battulga.jpgMongolian President Khaltmaa Battulga addresses the Eastern Economic Forum on Sept. 12, 2018, in Vladivostok, Russia. (The Asahi Shimbun via Getty Images)

Then-Transportation Minister Battulga appointed Ganbat, 35 at the time, as an adviser in September 2009 and tasked him with laying the groundwork for constructing the new railroad and other infrastructure projects. By spring 2010, Ganbat was flying to Europe as a government representative to drum up interest in the railroad among investors.

Even as Ganbat undertook his public role, he also formed his own company, Liberty Partners, on the side. Ganbat assembled a small staff of young Mongolians like himself, educated abroad, with backgrounds in finance. They, too, had dual roles, serving both the Transportation Ministry and Ganbat’s profit-making endeavors. “The ministry did not have the necessary talent and skill set to develop these projects,” he said. “The ministry was basically piggybacking on us getting the government job done.”

In the fall of 2010, a mutual acquaintance introduced Ganbat to Hexter. The interests of the two men aligned. Hexter was hunting for infrastructure consulting contracts in Mongolia. Ganbat and Liberty Partners were putting together a team with an eye toward obtaining consulting contracts from the MTZ, the Mongolian government-owned company responsible for building the new railroad. Ganbat had already recruited the U.S. law firm Pillsbury Winthrop Shaw Pittman and the French bank BNP Paribas. (Pillsbury and BNP did not respond to requests for comment. Hexter, who left McKinsey in 2014, did not reply to interview requests and questions emailed to him.)

The first contract up was for a feasibility study, an analysis of whether and how the railroad could be built and operated in a cost-effective way. It was four months of work, but more important, a chance to build an ongoing relationship. The contract specified that McKinsey could become a general adviser for the railroad project after the feasibility study was complete.

A small initial assignment followed by an ongoing role is typical, according to “The Firm,” Duff McDonald’s 2013 history of McKinsey. “Once they get the wedge end of a relationship into a company in the form of one engagement, they usually manage to hammer in the rest,” he wrote. “To wit: They never leave.”

For much of its 93-year existence, McKinsey was a modest-sized partnership focused on its role as counselor of top executives at giant multinational corporations. Partners prided themselves on turning down business they felt was beneath the firm.

But as the Cold War’s end opened new markets worldwide, McKinsey reoriented its priorities toward aggressive expansion. Between 1989 and 2019, the firm vastly enlarged its global footprint, from offices in 44 cities across 23 countries to offices in more than 130 cities spread across 66 countries today. McKinsey reported $10 billion in revenues last year.

To sustain that kind of growth, McKinsey had to push into less familiar territory, like Mongolia, and into sectors, like government contracting, that the firm had traditionally eschewed. Government contracts often require more disclosure, bring more scrutiny, and are subject to more rules than corporate ones. “McKinsey has grown to the point that it is taking on work that prior incarnations of the firm would have turned down due to the political risk involved,” a former McKinsey consultant wrote in an anonymous recent essay in the magazine Current Affairs.

Mongolia offered opportunities in two sectors: infrastructure and mining. The country had recently undertaken to excavate massive coal and copper deposits buried beneath the Gobi Desert. Headlines in the international press were trumpeting what they called “Minegolia,” and the government was planning several major infrastructure projects to capitalize. McKinsey had already found its way into the mining sector, advising the Mongolian government on privatizing state-owned mines. Now, Ganbat offered a foothold in infrastructure.

The railroad project would take years to complete. The plan envisioned laying nearly 3,500 miles of rail across an area more than twice the size of Texas. It was harsh and undeveloped terrain, a plateau of desert and steppe roamed by Bactrian camels and yurt-dwelling herders.

Even apart from the U.S. government warning, there were reasons to proceed with extra caution. Government infrastructure projects in resource-rich nations are notorious hotbeds of corruption, and Mongolia already had a bad reputation. It earned poor marks on Transparency International’s Corruption Perceptions Index. On a scale ranging from 10 (“very clean”) to 0 (“highly corrupt”), Mongolia scored a 2.7, making it a tiny notch more pristine than Azerbajian, but dirtier than Kazakhstan.

The greatest source of concern for McKinsey, legal experts say, ought to have been Liberty Partners, a new company run by a government adviser. According to a U.S. Justice Department manual on the FCPA, a prospective local partner owned by a foreign official raises “red flags that warrant significant scrutiny.” Even a local partner “closely associated with” a foreign official is a red flag.

Liberty came with a second warning sign, experts say. It wasn’t paid upfront for assisting the government in the railroad project. In exchange for that, the ministry gave Ganbat’s company the right to obtain pieces of the contracts awarded to foreign consultants, which is what ended up happening when Liberty partnered with McKinsey. “I have not ever seen that situation, where someone is representing a government and not being paid, with the expectation of receiving contracts on the backend,” said Fox, the FCPA specialist.

The arrangement aroused suspicions in the Mongolian government at the time. “It felt shady,” said one former official. “If you’re an adviser to the minister, you have to deal on behalf of the country. You shouldn’t be fronting for some company.”

Ganbat says he resigned his position as Battulga’s adviser in the fall of 2010, before the government’s contract with Liberty and McKinsey became effective. But a letter accepting the resignation is dated months after they teamed up and two weeks after the MTZ was authorized to hire McKinsey’s team. People who worked and dealt with Ganbat at the time say he continued to operate as the top railroad adviser. (Initially, McKinsey told ProPublica it couldn’t tell what its consultants knew about Ganbat’s government role. But after ProPublica raised questions about his resignation, the firm said Hexter believed Ganbat had resigned before work began on the feasibility study.)

Documents and interviews confirm that Ganbat was, in fact, a government official. The Mongolian law under which Ganbat was appointed designates advisers like him public servants responsible to the Transportation Ministry. He had a Transportation Ministry email address and phone number. He introduced himself as “Minister Battulga’s chief representative on railway,” according to Mark Fung, an American lawyer who represented a group of Chinese investors.

Michael Koehler, a law professor at Southern Illinois University specializing in anti-corruption law, said, “If he had a government email address and was acting on behalf of the Mongolian government, DOJ would consider that person to be a Mongolian official himself.”

Despite the risks Ganbat’s government role posed, McKinsey made no effort to investigate him and his company before embarking on the project together. “Under standard best practices, what McKinsey would do is take a deep dive into” Ganbat, given his mix of public and private roles, said Fox, the FCPA lawyer. That would include a review of business and tax records and likely interviewing people familiar with Ganbat’s work.

McKinsey admits it didn’t conduct any formal due diligence on Ganbat and Liberty Partners. The firm says it felt comfortable working with them in part because other foreign companies, like the law firm Pillsbury, had worked with Ganbat before.

McKinsey’s lawyer acknowledges that the firm could’ve been more careful and says it would do better today. “With the enhanced policies McKinsey has today, I do think McKinsey would have taken a different approach to diligence,” said Charles Duross, who represents the firm in FCPA-related matters and led the Justice Department’s FCPA unit from 2010 to 2014. “But that doesn’t mean, at the end of the day, that because there are red flags or risks related to a particular partner, that the conduct itself was corrupt or improper or a violation of the FCPA.”

As the contract proposal came under review, even more warning signs cropped up. Battulga abruptly replaced the director of the MTZ, the entity that would hire the Liberty-McKinsey team, with his former bodyguard, Baasandorj Batzaya.

Then there was the absence of competitive bidding. That, prosecutors allege, violated Mongolian law. (Criminal charges aren’t generally public in Mongolia, but a 2017 document from the prosecutor general’s office, which ProPublica obtained, quotes at length from the charges.)

Lastly, the price for the feasibility study contract was increased in a suspicious way, according to the prosecutors. McKinsey, Liberty Partners and their team had offered to conduct the study for $4 million, prosecutors allege, but just before the agreement was finalized, Ganbat and Battulga persuaded the MTZ to raise the figure to $5.65 million. (McKinsey’s cut was $4 million before taxes. Liberty Partners got $800,000. The remainder went to BNP Paribas and Pillsbury.)

If prosecutors are correct, legal experts say, that would constitute a significant red flag, given the risk the extra money might serve as a kickback. The FCPA makes it illegal for an American company to give anything of value to a foreign government official, directly or indirectly, in order to secure an improper advantage in obtaining business.

McKinsey said it has seen no evidence that the contract’s price increased. Ganbat described it differently. He said the contract’s value did rise during negotiations but only by about $400,000 and for a legitimate reason: the MTZ had asked Liberty to hire subcontractors to analyze the soil along the proposed railroad route and survey the terrain.

McKinsey and Ganbat contend that a series of resolutions and directives permitting the MTZ to hire their team led them to believe the contracting process was legal.

But here, too, there were irregularities. The head of the State Property Committee, which oversees state-owned companies, declined to approve the contract unless Battulga co-signed the relevant resolution. The SPC chief “was not feeling comfortable signing alone” because of political issues around the railroad project, Ganbat recalled.

And top officials at the Ministry of Finance were unusually deferential to Battulga during the approval process, according to a former ministry official. “My bosses were frightened to ask him questions,” the former official recalled. He never quite understood why. “That was a very secretive process.”

Eventually, the contract received formal approval and McKinsey and Liberty undertook the feasibility study.

From mid-April to mid-August 2011, McKinsey consultants flew into Mongolia each week. Battulga was closely involved, meeting frequently with Hexter and Ganbat.

Liberty Partners served as a local liaison for the foreign consultants. They arranged meetings, supplied translations and helped McKinsey’s team collect data and prepare presentations. Ganbat himself provided something more, people familiar with the project said: His ties to Battulga were so close that he was a conduit to the transportation minister and his thinking.

Neither Hexter nor a second McKinsey partner on the project, both based in Beijing, had worked in Mongolia before, and the firm leaned on Liberty for local intelligence.

They weren’t the only ones dependent on Ganbat and his staff. “MTZ was heavily, heavily reliant on Liberty for all of its decisions,” Ganbat said. Its employees didn’t speak English and lacked experience in finance. “So we basically almost had to play in the shoes of the client on one hand and then also the adviser on the other hand, since they didn’t have the capacity.”

McKinsey’s team ultimately concluded that constructing and operating the first phase of the new railroad could be done in a cost-effective manner. In all, according to the team’s slide deck, the project would cost several billion dollars. McKinsey predicted that, with increased coal exports and other revenue streams, Mongolia could pay back investors within nine and a half years.

The government used the feasibility study mainly to raise more than $1.5 billion to fund the railroad and other infrastructure projects, a person familiar with the process said. In retrospect, that would be the high point of the endeavor.

Within a couple of years, “Minegolia” was already starting to look like an example of the resource curse: The railroad project stalled amid a welter of misfortunes, as the government squandered funds on dubious handouts and subsidies. “Like a number of other large infrastructure projects in Mongolia, the railroad project got stuck in a quagmire of competing domestic political and economic interests, fluctuations in commodity prices, questionable policy decisions, corruption and plain theft,” said Julian Dierkes, a Mongolia expert and professor at the University of British Columbia.

As boom collapsed into bust, financial crimes and anti-corruption investigators in Mongolia began to pursue allegations of graft in failed infrastructure projects. In the fall of 2015, the investigation reached McKinsey. Police began to request information about the feasibility study. At the same time, they raided the offices of the MTZ and Liberty Partners, where they seized contracting records, financial documents and Ganbat’s computers, according to police records and people familiar with the investigation. They issued subpoenas for Liberty’s banking records.

“McKinsey wasn’t the principal object of the investigation, but the police did investigate them quite seriously,” said a person with direct knowledge of the investigation. “It got quite aggressive.”

The firm says it cooperated with investigators’ requests. McKinsey also says it investigated the matter internally. But even as that process continued, McKinsey wrote directly to the prime minister. In a letter dated Nov. 24, 2015, Sneader began: “Given your strong interest in promoting U.S.-Mongolian business ties and growing third-neighbor investment in Mongolia, I’m writing to you today to inform you of a current situation facing McKinsey & Company related to past work in Mongolia.” He asserted that the firm operated with “highest levels of probity” and invited the prime minister to visit McKinsey’s U.S. offices. McKinsey submitted a statement to ProPublica that read, “As its text makes clear, this letter was sent to address misconceptions about our firm’s work, including those appearing in the local media, to explain to the prime minister that McKinsey had conducted itself with the utmost integrity, and to express our commitment to assist the ongoing investigation. Before sending the letter, we consulted with outside advisors on how to appropriately convey this message. To suggest that this letter was intended for any inappropriate purpose would be false.”

Around the same time, prosecutors charged Batzaya and Ganbat with manipulating the feasibility study contract to enrich themselves. Police arrested Batzaya. Ganbat was traveling abroad at the time and decided not to return, believing he wouldn’t receive a fair trial. Prosecutors charged Battulga as a co-conspirator in 2017, after he lost his seat in Parliament and was no longer shielded by governmental immunity.

The three men have denied the charges. Although Batzaya and Battulga did not respond to requests for comment, Ganbat and his allies say the case is part of a smear campaign orchestrated by Battulga’s enemies.

“Yes, there was the situation” with McKinsey, Ganbat said, “how exactly McKinsey was hired and whether we had any conflict of interest. There were fine points to it. Yes, we were in a peculiar situation. But in my mind, at least, I tried to do as much as possible to remove myself out of conflict and do what’s best for the country.”

McKinsey never faced charges. But the affair left its consultants unwelcome in Mongolia. The banishment was a blow, shutting the firm out of a potentially lucrative market.

Meanwhile, things went from bad to worse for Mongolia. Politicians there misspent or stole hundreds of millions of dollars raised to fund the railroad’s construction, and in 2017, the government was forced to seek a bailout package from the International Monetary Fund to avoid defaulting on its bond obligations.

In the wake of criticism for its problems in South Africa and elsewhere, McKinsey has begun announcing new procedures in the past year.

Prospective local partners will now be subjected to “a rigorous pre-screening.” Projects for state-owned enterprises will now face the same in-depth risk review government projects receive. In recent interviews with CNBC and Fortune, Sneader said the firm is planning further changes to how it oversees its consultants’ work and vets its clients and partners.

20190514-mckinsey-mongolia-barton.jpgDominic Barton, McKinsey’s former global managing partner, speaks during a Global Business Summit in New Delhi in February. (Money Sharma/AFP/Getty Images)

But there are structural barriers at McKinsey to making these changes effective, according to former consultants and observers. The firm is a partnership; it lacks the top-down control of a corporation. “McKinsey has always been a decentralized organization,” McDonald wrote in “The Firm.” “The actual business of consulting” tends “to be left to the consultants themselves.”

That has bred a culture of partner autonomy. People who have worked or dealt with the firm’s previous chief, Dominic Barton, recall instances where senior partners openly rejected his requests. “You have to realize that most McKinsey partners are at McKinsey because they don’t want to be told what to do,” Angus Dawson, the new head of the firm’s operations in Australia and New Zealand, told a local newspaper in March.

A diffuse operating style worked for McKinsey when it had 300 partners or so, as it did 30 years ago. But the firm now has over 2,100 partners, and oversight of their engagements remains limited. Sneader told the Financial Times that he would like to see the entire partnership weigh in on more decisions. But corralling 2,100-plus partners who cherish their independence is no easy task.

Past efforts at central management have fared poorly. One past managing partner, for example, assigned a senior partner to instill discipline within the financial institutions group, a rainmaker division with a habit of disregarding wider firm interests, according to “The Firm.” The group shrugged off its would-be master. After four months, the senior partner gave up and resigned from McKinsey.

McKinsey’s exile from Mongolia was a grave enough matter that the firm’s leaders attempted high-level diplomacy at the ultimate conclave of the elite: the World Economic Forum in Davos, Switzerland. In January 2017 at the Alpine conference, then-managing partner Barton and Sneader met with Mongolia’s president at the time, Tsakhia Elbegdorj.

Sneader followed up with a letter to a top presidential aide. Calling the conversation “warm” and “productive,” he wrote: “As we discussed at our meeting, I’d be very grateful if we could receive an assurance at your earliest convenience that our consultants would be welcome in Mongolia. An official letter to that effect would help us make arrangements to reestablish our presence in the country.”

It’s not clear whether McKinsey ever received such a letter. But the firm was ultimately allowed to return to Mongolia.

Battulga’s election to the presidency, in July 2017, has only improved the outlook. He retained a soft spot for McKinsey. On the campaign trail, he recalled having “proudly worked” with its consultants, whom he called “the smartest business thinkers in the world.”

Battulga’s election may have benefited McKinsey. But its effect on Mongolia is an open question. His critics have decried what they call his authoritarian moves. In March, Battulga rushed through Parliament a law that makes it easier for him to dismiss senior prosecutors and the leadership of the anti-corruption agency that investigated the railroad project. In a statement at the time, he justified the new statute as targeting corruption among the nation’s law enforcement leadership, and in particular those who investigated and charged him. Battulga and his allies promptly fired the country’s top prosecutors, who had supervised the case against him, Ganbat and Batzaya and threw out the leaders of the anti-corruption agency.

Meanwhile, construction of the railroad remains halted indefinitely, the project far from complete. In the Gobi Desert, eroding earthen berms — unfinished rail beds — rise like burial mounds. “We really needed this railroad,” one former Mongolian official said. “We have one of the biggest coking coal deposits in the world, and we’re sitting right next to China,” a major coal consumer. He doesn’t know what happened to much of the money raised while he was in government. But he knows where a few million dollars went. McKinsey’s legacy, he said, “is just a pile of dirt.”

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