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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Donald Trump in February sparked international condemnation with his plan to turn the shattered remnants of Gaza into the “Riviera of the Middle East”, while moving its 2.2mn population elsewhere. Yet as the Financial Times has reported, Israeli businessmen later shared with the US administration a postwar plan for Gaza that envisaged resuscitating the strip’s economy with a “Trump Riviera” complete with an “Elon Musk Smart Manufacturing Zone”. It proposed paying half a million Palestinians to leave and attracting private investors to develop the territory — using financial models developed by employees of Boston Consulting Group, one of the world’s most prestigious consulting firms.
BCG has said the team that modelled the Gaza reconstruction was contravening an order to the lead partner not to do so, and this was “not a BCG project”. Two partners were “exited” last month. But the fact that BCG staff came to be involved in such work — on top of design work on a highly controversial aid effort in Gaza — is the latest in a series of reputational blows to one of the world’s top consulting firms. It raises serious questions over controls and risk management inside BCG.
The consulting firm last month apologised to staff and publicly disavowed the work done in helping to establish the Israel- and US-backed Gaza Humanitarian Foundation. Secured by the Israeli military and private contractors, the GHF has been criticised by the UN for breaking with traditional humanitarian models. Since its launch in May, Israeli forces have killed more than 400 Palestinians trying to reach its sites, according to health officials in Gaza.
The FT has now disclosed that a BCG team also created a financial model for Gaza’s postwar reconstruction that included cost estimates for relocating hundreds of thousands of Palestinians. One scenario estimated that more than 500,000 Gazans would leave, with “relocation packages” worth $9,000 per person, totalling about $5bn.
BCG portrayed the involvement of its staff in such ethically and politically contentious work as driven by two senior partners who did not follow approval processes. It has said a US BCG team last October provided pro bono support to an aid organisation “intended to operate alongside other relief efforts in Gaza”. But it says the partners did not disclose its full nature and misled senior management into believing the effort had broad multilateral support. Subsequent work was unauthorised. BCG has added that the lead partner was explicitly told not to work on Gaza reconstruction, and the firm will receive no payment.
Many both outside and inside BCG will question, however, how top management could have been unaware of the nature of work on the GHF and Gaza reconstruction that together stretched over seven months, including a US team working out of Tel Aviv. No business can entirely protect itself from employees concealing actions and misleading superiors. But given the sensitivities of any work involving Gaza, the team surely should have had high-level BCG oversight from the start. Getting to the bottom of how controls failed must be central to an internal probe now under way by an external law firm.
The firm’s “Big Three” consulting rivals McKinsey and Bain & Co have both had to make major governance changes after ethical scandals. BCG itself was given credit for improvements in its risk and compliance functions last year, when the US Department of Justice agreed not to press charges over millions of dollars in bribes to win government contracts in Angola in 2011-17. Since then, amid a more demanding environment, governments have cut lucrative contracts and clients have paused mandates. The last thing BCG, or its competitors, needs is to add unnecessary reputational risk to the mix.
