Navdeep Arora, who had been a senior partner in McKinsey's Chicago office, was arrested on Sunday by the Federal Bureau of Investigation after arriving in New York following a flight from London, according to court papers.
He was named in an indictment filed in federal court in Chicago along with a former internal State Farm consultant, Matthew Sorensen, who the indictment said participated in the scheme.
His arrest was detailed in papers filed in federal court in Brooklyn, New York. Arora, 51, who joined KPMG in 2014 after leaving McKinsey, lived in London.
A spokesman for U.S. Attorney Zachary Fardon in Chicago confirmed Arora's arrest. A court-appointed lawyer for Arora had no immediate comment.
It was unclear if Sorensen, of Bloomington, Illinois, was also arrested. Sorensen, 44, did not respond to requests for comment.
The indictment said Arora oversaw services that McKinsey provided State Farm, while Sorensen assisted State Farm in determining whether to hire outside consultants.
The indictment said that beginning in 2004, Arora fraudulently charged McKinsey and State Farm for expenses in order to reward Sorensen and an unnamed co-schemer for helping McKinsey get State Farm consulting work.
Fraudulent invoices to McKinsey, State Farm and another McKinsey client for unperformed work resulted in $490,975 in fees being paid, the bulk of which Sorensen retained, the indictment said.
Arora also submitted fraudulent expenses to McKinsey, State Farm and other clients for domestic and international trips for himself, Sorensen and others to cities including Miami, Las Vegas, New York, Prague and London, the indictment said.
In total, Arora obtained $400,000 in fraudulent expenses, which also covered personal hotel, meal and theater tickets in Chicago that he claimed were business expenses, the indictment said.
McKinsey spokeswoman Rachel Grant said the firm discovered the situation in 2011, notified the client, "terminated the employee involved" and cooperated with authorities.
State Farm spokesman Phil Supple said the insurer also cooperated with investigators. He said State Farm had not employed Sorensen in more than three years and had not had a contractual relationship with McKinsey since April 2012.
The case is U.S. v. Arora, U.S. District Court, Northern District of Illinois, No. 15-cr-486.
© Thomson Reuters 2016