Tuesday, May 09, 2023

Senators demand names - Picking the wrong side: Why the PwC scandal just gets juicier

 Tom Seymour, PwC’s fall guy

Senators demand names in PwC leaks scandal

Neil Chenoweth and Edmund Tadros


  • Why it matters: PwC used secret government info to advise clients how to sidestep new tax laws
  • Ex-PwC tax partner Peter Collins was helping Treasury and ATO develop tax law
  • He was also sharing confidential information he gleaned with colleagues
  • The firm advised 14 clients how to sidestep the new tax laws, booking $2.5m in fees
  • There are growing calls for those involved to leave the firm and for PwC to be banned from government contracts

PwC is facing a new wave of Senate scrutiny as politicians across the spectrum demand further details of the firm’s tax leaks scandal that led chief executive Tom Seymour to step down on Monday after revealing three days earlier that he had received emails related to the leaks.

Labor senator Deborah O’Neill, who helped reveal the extent of the leaks, said both Mr Seymour, who is remaining at PwC, and the former head of international tax, Peter Collins, were scapegoats for a wider problem that led the firm to use confidential Treasury information about planned tax changes to pitch for new clients.

Former PwC Australia CEO Tony Seymour with the international head of tax Peter Collins at the Senate tax avoidance inquiry in April 2015. 

“We can’t have just a couple of scapegoats when it’s clear that it’s a cultural problem,” Senator O’Neill said on Radio National on Tuesday, calling for PwC to disclose the names of all personnel involved in the scheme.

“No more obfuscation, no more hiding the people, no more blacked out identities,” she said. “Let’s get to the truth of who’s involved. And let’s see where they are.”

Greens senator Barbara Pocock told The Australian Financial Review the case showed “systemic corruption which may well go much deeper than the two PwC partners [whose roles in the scandal] have so far been exposed”.

“This scandalous breach of trust with the Australian people must be fully investigated by a government inquiry,” said Senator Pocock, who is chairing an inquiry into government consultants.

Liberal senator Andrew Bragg, who is chairing an inquiry into corporate law enforcement, suggested the leaks scandal could be a case study in the inquiry’s report, and asked for submissions on the matter.

Last week the Senate published internal PwC emails that showed exchanges between 53 redacted email addresses, discussing a marketing project to target US tech companies and offering a “work plan” to deal with new tax laws for which Mr Collins was providing advice to Treasury.

Last Friday, Mr Seymour told PwC partners that six to eight PwC partners shared the leaked information, while another 30 to 40 partners, including Mr Seymour and other senior figures in the firm, received the emails and were aware of the scheme to use the information to pitch to clients.

But he said that he and others in this second group were not aware the information was confidential.

PwC’s plan to commission its own independent inquiry 

The idea that the people who perpetrated a massive betrayal of trust should be allowed to mark their own homework by appointing an independent investigator, is ludicrous,” Senator Pocock said.

Senator O’Neill told the Financial Review that acting CEO Kristin Stubbins and chairman of PwC’s board of partners, Tracey Kennair, “as a first act of building trust need to confirm and reveal publicly the identity of all involved partners and staff whose names are currently blacked out in the Collins-Seymour scheme emails”.

“Then the next question: what are they doing to remove those individuals from the firm and/or the profession?” she said. “Failure to do these things makes it impossible to believe that Seymour’s resignation is anything more than another sacrificial lamb.”

PwC is believed to be resisting calls to appear before the Senate consultants inquiry when it resumes next month.

There is also speculation that the Tax Practitioners Board, which cancelled Mr Collins’ registration as a tax agent for two years last November, will be summoned to estimates later this month to face questions about its investigation of PwC.

The left-leaning Australia Institute said PwC, which won $537 million in government contracts in the last two years, should be banned from receiving new government contracts and new guidelines issued on the use of consultants, including a standing order in the Senate to produce consultant reports.

Senator O’Neill said: “It’s a little breathtaking to think that people might think that it’s business as usual. There can’t be any business as usual until these matters are properly attended to.”

Neil Chenoweth is an investigative reporter for The Australian Financial Review. He is based in Sydney and has won multiple Walkley Awards. Connect with Neilon Twitter. Email Neil at nchenoweth@afr.com.au
Edmund Tadros leads our coverage of the professional services sector. He is based in our Sydney newsroom.Connect with Edmund on Twitter. Email Edmund at edmundtadros@afr.com.au

Two question show why the pwc-scandal won’t go away

Seymour’s move raises two serious questions for acting chief executive Kristin Stubbins.

 The first is how can any of the tax partners involved in the scandal remain at the firm? The second is how can the firm credibly run a so-called independent review into its own operations? 

Ever noticed that when a major scandal engulfs big companies - from banks to resources to casinos - that it’s the large auditing/advisory firms that are usually enlisted to dig into the bowels of the miscreant organisation to investigate the behavioural and cultural tumours?

We have just been given a rare glimpse under the hood of one of the big four accounting firms, PwC, and how it used its privileged position as a government adviser on tax policy to turbocharge a drive for new clients.

The Duco finish may look pristine, but the inner workings reveal the opposite.

PwC CEO Tom Seymour has stepped down from his leadership role in response to the firm’s tax leaks scandal.

PwC CEO Tom Seymour has stepped down from his leadership role in response to the firm’s tax leaks scandal.CREDIT: MICHAEL QUELCH

Not only did PwC breach government confidentiality, but it used the information to circumvent the government’s attempts to stem multinational tax avoidance. PwC did this all while enjoying the sweet sounds of the dollars rolling in.

It’s a classic gamekeeper turned poacher scenario, and unsurprisingly PwC is now in damage control. And you have to wonder how PwC can be relied on to fix the cultural issues of its clients when its own culture has been exposed as desperately wanting.

PwC has been under fire after it emerged in January that a former partner, Peter Collins, had been banned by the Tax Practitioners Board for leaking confidential government tax plans – which included new rules to stop multinationals avoiding tax – to other staff and partners at the firm.

Any hopes of branding this scandal as the fault of one rotten apple disappeared last Friday when a series of emails demonstrated how far the information had spread throughout the firm, and how it had been misused to drum up business from various and notorious multinational tax avoiders.

The firm’s Australian boss, Tom Seymour, has now left his post after confirming he was one of the dozens of partners who received emails relating to the government’s confidential information.

The six to eight partners who shared the emails have apparently now all gone, but this scandal is far from over.

If those running PwC believe that undertaking some kind of internal investigation into the culture of the organisation is enough of a get out of jail free card, it is woefully mistaken.

It is hard to see how the firm is now qualified to undertake such introspection.

Relationships between client and adviser are built on trust - which once broken is tremendously difficult to restore. The external push for accountability and payback has picked up a lot of momentum.

It has bled into the broader industry and spurned a larger Senate inquiry into the conflicts of interest between the governments and the big four accounting firms that provide it with expert advice.

Politicians (particularly the Greens) are placing PwC in the middle of their dartboards - and getting plenty of publicity mileage while the demoted Seymour is handing out profuse apologies.

But this is a side-show.

The PwC debacle raises questions about the use of private accounting firms to help formulate tax laws, when they are also serving their clients’ interests by ensuring they pay as little tax as is legally required.

This model is intrinsically flawed. It is the equivalent of having the same adviser on both sides of a takeover bid - acting for the bidder and for the defence.

From the government’s perspective, the use of these firms has always come with risk, but one which successive governments have been willing to take because these firms employ the best of the best. Who better to advise on the tax framework than the experts from the top accounting firms?

But these big accounting firms that have lucrative government work need to pick a side.

PwC in this instance thought it could play both sides. And it’s a decision for which it will pay dearly.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.