Every fresh piece of intel that further illuminates PwC’s egregious breach of trust, the firm’s brazen avarice and its cover up of the tax leak scandal adds weight to the view that the Australian arm of this big four services company may not recover.
PwC tax leaks scandal: A timeline
Why the PwC scandal now has a second wind
The walls are closing in. Can PwC survive in Australia?
Chanticleer
Senate report shows PwC still doesn’t get it
A committee is asking whether the firm’s response to the tax leaks scandal shows it “lacks the capacity to act in an honest, open, and straightforward manner”.
If there is a simple message in the Senate standing committee on finance and public administration’s first report into the PwC tax leaks scandal, it is this: it’s always the cover-up that gets you.
The report, A Calculated Breach of Trust, is unusual in that it was released while the committee’s inquiry continues. It appears the committee is determined to try to get it through the thick skulls of those running PwC that the firm is still failing to meet the standards of accountability, governance and culture that it says it holds dear.
PwC Australia acting chief executive Kristin Stubbins is still yet to conduct media interviews on the scandal. David Rowe
As the committee notes, PwC has known for more than six months that the Tax Practitioners Board had sanctioned partner Peter Collins and the firm over the use of confidential information to help multinational clients get around the new tax introduced in 2016.
But what has the firm really done to reassure the public? It took until late last month for acting PwC chief executive Kristin Stubbins to release an open letter apologising for the matter.
But even this “conspicuously avoids addressing the key issues at the heart of the matter: the obvious conflict in an accounting, auditing, and consulting firm providing tax consultancy advice to government and at the same time providing tax advice to private sector clients; and the unlawful misuse of confidential tax information obtained through a process of providing advice to government, which was monetised for the benefit of the firm and its clients.”
The committee also notes that for all PwC’s words about transparency and openness, Stubbins or anyone else from PwC is yet to hold a news conference or conduct a media interview.
Since then, PwC has stood down nine partners, but chose not to name them. It has identified four former partners whom it says received Collins’ confidential information via email. But the Senate remains furious about how PwC handled the full list of 63 names included in the Collins emails.
‘An invidious position’
Although PwC has provided these to the committee, this put the committee in “an invidious position” because PwC has given it no guidance as to who was intimately involved in the use of confidential information, and who was an innocent email recipient.
The committee is baffled PwC won’t publish the names of those actually involved “in the interest of the transparency and accountability it claims to be working towards” and to protect its own partners and staff from being “unfairly tarnished by association”.
“The question therefore arises: given the extent of the breach and subsequent cover-up now revealed on the public record, when is PwC going to come clean and begin to do the right thing?
“This leaves a further question unanswered: is PwC’s internal culture so poor that its senior leadership does not recognise right from wrong, and lacks the capacity to act in an honest, open, and straightforward manner?”
A dark warning to all accounting firms
Way back at the start of this scandal, Chanticleer noted the cautionary tale of Arthur Andersen. That firm collapsed in no small part because its leadership failed to cauterise a scandal in its US audit business caused by the spectacular fall of client Enron.
Clearly, this current tax scandal will not be existential for PwC. But the Australian firm has similarly failed to stop the bleeding, and the Senate report hints at further profit-smashing pain when it talks about PwC’s “fundamentally conflicted position” as tax agent and consultant to the government.
PwC’s “failure to recognise and manage this conflict speaks to poor corporate culture and a lack of decent governance and accountability”.
But in a dark warning to all accounting firms who find themselves in a similar position, it’s notable that the committee says it will return to the “structural and dishonest nature of these conflicts”.
PwC strips two ex-partners ‘involved’ in tax leaks of retirement payments
PwC Australia has stripped retirement payments from two former partners that it says were “involved” in the breach of confidential tax information, but declined to reveal why.
The firm told a Senate committee that four former partners – Peter Collins, Neil Fuller, Michael Bersten and Paul McNab – who were “involved in the breach of confidential Australia Tax Office information” had left the firm.
Former PwC partners Paul McNab, Michael Bersten and Peter Collins.
It said two of the partners had “previously received payments under PwC’s post-termination payments schemes. PwC has ceased making, and does not intend to make, any future payments to any of the four individuals.”
Eligible former PwC partners are paid on average $140,000 per year, but this amount can be reduced if profits fall under a certain level. The firm did not specify which partners had been receiving the payments, nor the size of payments being made.
The Tax Practitioners Board, which regulates the country’s tax agents, terminated the registration of Mr Collins for sharing confidential information about the government’s tax plans with other staff at PwC, and ordered the firm to run additional training about managing conflicts of interest.
Senate report into the leaks scandal
In its response to questions on notice from the Senate committee examining the use of consultants in the public sector, PwC said Mr Fuller, Mr Bersten and Mr McNab had left the firm for “reasons unrelated to the involvement” in the tax leaks matter.
While PwC had previously released the four names in an email to partners, it has not clarified why the three men left the firm.
In contrast, the firm’s Senate response said that “Mr Collins retired as a partner of PwC on 20 October 2022, for reasons connected with the Tax Practitioners Board investigation”.
Mr Collins and Mr Fuller have yet to respond publicly to the matter. Mr Bersten declined to comment on the Senate report, while Mr McNab did not respond to a request for comment. Mr Bersten and Mr McNab have earlier denied any wrongdoing and both have denied they knew the information was confidential.
The PwC letter was published in the appendix of a Senate report into the firm’s handling of the tax leaks scandal, tabled on Wednesday evening. The report concludes PwC engaged in a deliberate multi-year strategy to cover up the breach of confidentiality in the tax leaks scandal, as company personnel worked to monetise the information.
The firm’s Senate response said the four men “received confidential information related to the MAAL [Multinational Anti-Avoidance Law]“.
PwC’s response states Mr McNab emailed an employee the start date of the MAAL but at that time that was already public information, and that there was no evidence he had provided this information to any companies.
Names redacted
The firm also provided the names of five of the nine partners put on leave over the tax leaks and the 63 current or former partners and staff who also received emails related to the matter. The firm had earlier requested the Senate not release the list of 63 names because it said those individuals were not aware the emails were based on confidential Treasury information.
In a statement after the release of the Senate report, Greens senator Barbara Pocock demanded that former PwC Australia chief executive Luke Sayers “be held to account”.
“We need Luke Sayers, who was CEO of PwC Australia throughout this debacle, and the head of taxation at the time, Tom Seymour, along with others in senior leadership to answer questions and be held to account,” she said.
A spokesman for Mr Sayers said the Senate report only contained a single mention of Mr Sayers, noting that he was the former CEO of PwC.
“Mr Sayers, who was elected Australian CEO by his fellow partners, was not aware of the confidentiality issues that have since emerged within the international tax practice at PwC,” the spokesman said. “Mr Sayers, as he has already stated publicly, will of course co-operate with and assist any inquiry into PwC.”
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
