Senate panel warns legal play by Saudi investment fund could erode investigative power

A Senate subcommittee grilled executives from Boston Consulting Group, McKinsey & Company, M. Klein & Company and Teneo Tuesday on their company’s compliance with congressional subpoenas related to their work with Saudi Arabia’s Public Investment Fund (PIF).

The PIF filed lawsuits in Saudi Arabia against each of the four U.S.-based contractors last fall in what the leaders of the Senate Permanent Subcommittee on Investigations described as an attempt to “hamper” their inquiry, which they warn could weaken powers of congressional oversight.

“Saudi Arabia has laws protecting that type of information and apply serious criminal penalties on those who disclose it without permission. We risk criminal and financial penalties for the firm and for individuals working or living in Saudi Arabia,” said Rich Lesser, global chair at Boston Consulting Group, during his opening statement.

Executives from all four companies — Lesser; Bob Sternfels, global managing partner McKinsey & Company; Michael Klein of M. Klein & Company; and Paul Keary, chief executive officer at Teneo — said the PIF remains a client even after it sued their companies in Saudi court.

But Sen. Richard Blumenthal (D-Conn.), who chairs the subcommittee, wasn’t buying it.

“The position that I’ve heard expressed today is essentially that you will comply with the subpoena but only and solely so far as Saudi Arabia allows you to do so, which is not compliance with this subpoena,” Blumenthal (D-Conn.) said.

“You’ve chosen the Saudi side, not the Americans’.”

PIF officials have repeatedly refused to testify before the subcommittee.

In a statement released ahead of the hearing, the PIF said, “We have been and are committed to working with the Subcommittee in good faith in a manner that is consistent with PIF’s status and obligations as an instrumentality of Saudi Arabia. We have made, and are continuing to make, significant efforts to facilitate the production of requested information from our advisors consistent with the laws of Saudi Arabia, which should be recognized like those of any other country.”

Blumenthal acknowledged the companies have shared thousands of pages of documents with the subcommittee, but noted that many of them are press clippings or public documents. 

At one point, he held up almost entirely redacted documents shared with the subcommittee, which he called “laughable.”

“At the end of the day, what the American people want to know is whether American companies will put American national interests before anyone else’s. And the reason you are all here today is because your response to these subpoenas seems to really call that into question,” Sen. Maggie Hassan (D-N.H.) said.

The PIF said that it has “invested nearly $60 billion in the United States since 2017” in the statement.

The committee has been investigating Saudi investments in the U.S. as a tool of influence in the wake of the surprising announcement last spring that the PIF-backed LIV Golf and the PGA Tour were pursuing a deal to create a new golf monolith.

The PIF has disputed the subcommittee’s characterization of their engagement with the investigation, which they argue is overly broad.

“The need to safeguard these interests only grew when the Subcommittee significantly changed course and began an inquiry far broader than the Framework Agreement, or golf, or sports investment. Rather, the Subcommittee seeks access to any and all records prepared in connection with every interest, investment and even contemplated investment the PIF has outside the Kingdom of Saudi Arabia,” Raphael Prober, a partner at Akin Gump Strauss Hauer & Feld who serves as counsel to the PIF, said in a previously undisclosed letter dated Feb. 2.

Prober accused the committee of “attempting to end run around well-established principles of extraterritoriality, sovereignty, and international comity by seeking access to the PIF’s information through its U.S.-based advisors and consultants.”

In a letter to PIF Governor Yasir Al-Rumayyan dated Jan. 29, Blumenthal and Ranking Member Ron Johnson (R-Wisc.) argued subpoenaing U.S. businesses as part of a congressional inquiry is a “common investigative practice.”

Johnson, who has been skeptical of the subcommittee’s role in investigating the proposed deal, said he had “sympathy” for the consultants but “no sympathy for the Saudi claims of sovereign immunity in this inquiry.”

If the PIF’s legal push succeeds, “the PSI’s ability to access records weakens, the power of the subcommittee will be reduced and congressional oversight will atrophy further,” Johnson said.

The subcommittee “has never ever ceded to blanket, sweeping claims of foreign sovereign immunity over commercial documents in the possession of an American company,” Blumenthal emphasized during the hearing.

Teneo was the only company represented at today’s hearing that is registered under the Department of Justice’s Foreign Agent Registration Act (FARA) for work on behalf of the PIF.

Blumethal told The Hill after the hearing that “we probably need to strengthen” FARA.

“That’s one of the committee findings that is emerging from this investigation,” he said.