Sunday, May 28, 2023

At PwC partners’ meeting, a firm in civil war

PwC's tax leak scandal spreads to the UK as Australian government orders police to launch probe By James Salmon In Perth For The Daily Mail

PwC facing calls to clarify what it knew about confidental tax information leak 

Employee at Irish office of Big Four accountancy firm was in contact with a former partner in Australian office who has now been banned from acting as a tax agent

UK Natalie Bennett - What could go wrong with allowing big accounting firms to advise on and staff to be seconded into government (and opposition) policymaking?

Extract Gow and Kells in the London Times on the big four accounting firms and the tensions deep in their business model.

Replying to
How can two of the members of the TPB who were tax partners at PwC at the time Peter Collins was leaking confidential information for the commercial benefit of PwC remain on the TPB? It’s farcical.

A look into a partners meeting held at

on Friday.

At PwC partners’ meeting, a firm in civil war

Many among the 900-strong partnership fear the firm is descending into a civil war that could take years to recover from

There was a sense of anticipation as PwC Australia partners tuned into a private meeting at midday on Friday. In the days just gone the tax leaks scandal that has embroiled the firm for a month had been referred to the Australian Federal Police, while the Albanese government had effectively cut it off from winning new work from the Commonwealth. It had been a horror week.

Partners had been encouraged to attend the meeting, hastily scheduled the previous day, and acting chief executive Kristin Stubbins did her best to strike a positive tone. She reassured them the firm continued to have lots of support from clients, blamed complex legal reasons for the firm’s inability to correct what she called inaccurate media stories and said that the firm would co-operate with the AFP investigation.

A former partner said: “Morale is rock bottom.” Eamon Gallager

It was when she flagged that the firm would make a “meaningful announcement” this week that many partners twigged she wasn’t going to be unveiling the firm’s big plan to get out of the mess just yet. For PwC’s strong Canberra office, that was a blow. Even though it had nothing to do with the breach of confidentiality that kicked off the scandal, the brand damage and potential financial fallout has been felt hardest in the nation’s capital, and is beginning to hurt its wider commercial and state-level operations.

“[The] Canberra office [is] on fire...we are still going through it,” said a current partner. A second watching the meeting described it as a farce with little new information beyond that there would be more to say in the coming week.

Not helping was when Ms Stubbins told partners that the attendance of former Prime Minister Julia Gillard for a lunchtime speech at the firm’s Sydney offices on Wednesday was another sign of support for the firm. The comment showed “just how tone deaf” the firm’s leadership has been throughout the crisis in dealing with the public, the first partner said.

A representative for Ms Gillard said the appearance had been arranged last year and related to a speech about women in leadership and her book Not Now Not Ever.

The leaks scandal, which involved then PwC tax partner Peter Collins sharing confidential government information that was used to advise clients how to sidestep new tax laws, has led to a level of bewilderment, fury and sadness throughout the firm.

Those emotions are being increasingly directed at the firm’s new executive board that many feel is taking an overly legalistic and slow approach to the crisis. So far, the main personnel action taken by leadership is to announce that former CEO Tom Seymour will leave the firm early and that two other partners have stepped down from leadership positions.

Some of the firm’s 900-strong partnership, always a hyper-political body, fear the firm is descending into a civil war that could take years to recover from.

One former partner now at a rival big four firm divides PwC partners into three groups.

“There’s a lot of unsatisfied people,” he said. “Junior partners are worried about the financial consequences”, “the mid-career [ones] are looking to jump” and the senior partners – “think they can ride it out, they’ve had good years.”

The former partner also said “a group of government partners was shopping [themselves] around to other firms.” A similar tactic was attempted in mid-2020 by eleven partners from PwC but was stymied, in part, by concern about whether the partners or their new firm would bear the cost if PwC took legal action against them based on a clause in their partnership deed covering group departures.

Potential partners are also hesitant to tie their financial future to PwC, a career step previously considered one of the pinnacles in the professional services sector. “A lot of candidates have baulked at becoming partners,” the former partner said.

A second former partner said: “Morale is rock bottom.”

“They had this big initiative ‘The New Equation’, it’s all about public trust,” he said. “If I was a big corporate client in Australia, do you want these guys reappointed?”

Friday meeting, Senate inquiry

During the Friday partners meeting Ms Stubbins said the firm now intended to release the full Ziggy Switkowski report into the scandal when it is completed in September. This is a marked backdown from the firm’s original plan to only release a summary of key findings from the report.

Greens senator Barbara Pocock has previously called the inquiry “totally inappropriate for what is needed” and commented that the firm promising to release a summary of findings was “not the same thing as making the findings available to the public”.

Ms Stubbins also revealed that the firm has been called to appear at a public hearing of the Senate inquiry into consulting firms on June 7, and that the confidentiality breaches were confined to a “small cohort” of partners.

The committee running the inquiry decided on Friday to not call former tax partner Peter Collins or former CEO Tom Seymour over concerns that their evidence might interfere in the ongoing AFP investigation.

That means PwC will be able to select the representatives it sends to the high-stakes event.

One question during the briefing was if the firm had made provisions for the cost – legal and otherwise – of the tax leaks scandal. The response was a provision hadn’t yet been made but that the firm’s finances remained okay.

At the heart of the delay in the firm’s response, despite global PwC executives watching over multiple workstreams, is that the firm’s executive must wade through a legal minefield of bad choices with the consequences for delay rising by the day.

The first current partner said that while there were more than 50 names are emails discussing the tax marketing plans, most of the recipients didn’t know that the endeavour was based on confidential information.

“We are trying to a way to clear everyone else,” he said.

The Australian Financial Review has been told the firm’s legal representatives have created a list of about 35 Australian partners that are colour coded by level of involvement and knowledge that confidential information was used. It excludes staff and the various mailing lists within the emails, and other senior figures within the firm that would have known about the matter due to the nature of their role.

This iterative process has identified four Australian partners that were “most involved” in the tax leaks scandal, the partner said. After the meeting on Friday, Senator Pocock made an attempt at publishing a list of 36 PwC partnersnamed in the cache of emails during a Senate estimates hearing.

The hearing was suspended and the committee decided to refer the matter to the clerk of the Senate for further advice. That advice is not expected until Tuesday. But the implications for PwC are stark: a version of a list has escaped beyond the two agencies with the original documents (the ATO and the Tax Practitioners Board) and PwC. That means it will inevitably begin to trickle out in the coming days and weeks.

Current and former partners say the current approach, described by all as failing, highlights the firm’s ongoing reluctance to publicly punish those at the heart of the scandal – and the executives who should have acted once they knew.

“Everyone is totally confused. Everyone is waiting for transparency,” said the second former partner. “The longer they stay silent the worse it gets.”

He said the firm’s instinct is to “go to ground. They’ve got to expose the partners who received the emails. If you got an email and it says ‘please don’t disclose anything because its confidential’, it implies you (are) in a bit of shit. Then you are as culpable as the first guy. If you are on a blind [courtesy copy] email that you got, then you can’t help it.”

On Friday afternoon, embattled personnel at the 400-strong Canberra office were given the option of going home early, at 2pm, or “floating” the hours off at another time.

The office, which has had a succession of the most senior partners in the firm visit since the email cache was published at the start of May, was told the early mark was part of an ongoing wellness initiative.

Other sources say that the move was related to the scandal and the fact the firm had been earlier informed they had lost out on a government contract worth more than $10 million.

Either way, there was little to achieve by staying at the office.

At PwC partners’ meeting, a firm in civil war

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