New claim follows earlier report by the committee accusing the firm of a ‘calculated’ breach of trust
“It remains my goal to ensure that PwC’s desire to minimise its losses does not come at the cost of full transparency with respect to their wrongdoing,” Senator Deborah O’Neill said in a warning that could inflict further damage on PwC’s dwindling corporate business.
“Unless PwC shows this commitment to accountability and reform, the firm’s government and corporate clients cannot be confident that the firm can be considered a trusted entity.”
PwC cover-up of tax leaks scandal ‘worsens the crime’: report
PwC International’s refusal to release a report into the overseas aspects of the tax leaks scandal is part of an ongoing cover-up by the firm that “worsens the crime” of a case that has rocked its local operations, a damning parliamentary report has found.
A Senate committee said the global organisation’s use of “legal professional privilege” was “symptomatic of its problematic engagement with the committee”. It said PwC Australia had yet to demonstrate that it reformed its operations “beyond superficial commitments to change”.
Liberal senator Richard Colbeck, Labor senator Deborah O’Neill and Greens senator Barbara Pocock.
The 48-page interim report, titled PwC: The Cover-up Worsens the Crime and tabled in the Senate on Wednesday afternoon, again demanded that PwC International provide the committee with the report by law firm Linklaters into “the dirty six” overseas PwC partners linked to the leaked tax information.
The committee said PwC Australia had provided “vague at best” information about which specific current and former partners were “responsible for the misuse of confidential government information”. The local firm had also failed to provide enough evidence to prove it had reformed its “structure, practices, and culture” following the tax leaks scandal.
It is the second time the Senate committee into consulting, chaired by Liberal senator Richard Colbeck, has published an interim report into the scandal. The final report was originally scheduled to be issued on Thursday, but has been extended to the end of May.
The committee’s first report found PwC Australia 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.
Failure to ‘genuinely change’
“The failure of PwC to be completely open and honest as per the committee’s recommendations in its first report is reflective of PwC’s failure to genuinely change,” the report tabled on Wednesday concludes.
“The committee does not see how PwC can recover [its] reputation while it continues to cover up because the two are incompatible. Indeed, the cover-up worsens the crime.”
The report was handed down after PwC’s global chairman, Bob Moritz, wrote to the committee saying he was declining its request to provide the Linklaters report, on the grounds it was legally privileged and confidential to PwC International.
It also comes after The Australian Financial Reviewrevealed that PwC International put PwC Australia into “supervised remediation” last June, forcing the firm to “take all necessary steps” to appoint global partner Kevin Burrowes as interim chief executive.
“[PwC International] continues to use legal professional privilege as a reason not to provide the Linklaters report to the committee,” the report states.
“In this regard, the committee reminds PwC [International] that PwC [Australia] consistently hid behind the incorrect application of thousands of legal professional privilege claims to prevent the ATO from accessing potentially incriminating evidence.”
‘Failure to take responsibility’
The report criticises PwC Australia’s former “leadership [for] consistently fail[ing] to take responsibility for the problems within the organisation that led to this situation occurring.”
Labor Senator Deborah O’Neill said the report highlighted “the immense failures of leadership, professionalism and ethics which enabled the tax leaks scandal to occur in the first place, and the gross failures of professional accountability which saw it go unacknowledged and unpunished for so long”.
Greens senator Barbara Pocock said the evidence in the report showed PwC Australia’s initial response to the scandal “was appalling, and its attempts to mislead the Australian public and to thwart any investigation into the tax leaks remains a stain on the firm’s reputation not only here in Australia, but globally”.
A spokesman for PwC said the company was aware the Senate had released an interim report and it was digesting the contents.
“However, we note the report’s detailed description of the findings of Dr Switkowski’s independent review and the actions PwC is taking to address its culture and governance since the review’s release,” they said.
“We have taken considerable steps to transform our firm and rebuild trust, making significant progress on our comprehensive transformation program and implementation of our Commitments to Change. These include: the endorsement of a major governance reform package which will see PwC become the first of the big four firms in Australia to have an independent chair of its board; an improved enterprise-wide risk management function; and the implementation of cultural change from the top down.
“We would highlight again that meaningful change takes time and that we will continue to cooperate with the Senate and regulators in an effort to enact transformative, structural change to our firm and industry.”
‘Coup d’etat’
Senator Pocock said that the firm’s interim CEO, Kristen Stubbins, had been “unilaterally replaced by PwC International who quietly took control of the Australian firm in what appears to be a coup d’etat against local leadership”. This meant that “PwC Australia is nothing more than a puppet on a string that stretches all the way back to head office in London”.
The tax leaks scandal involved former partner Peter Collins sharing confidential tax information with PwC personnel, who then used it to help clients sidestep tax laws he was helping Treasury develop.
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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
Senate committee report accuses PwC of trying to cover up tax leaks scandal
Senate committee lashes PwC over tax scandal, alleges cover-up
The Senate committee that uncovered the PwC tax scandal has accused the consulting firm’s leadership of failing to co-operate with the inquiry in an attempt to minimise damage to its reputation and questioned whether the problems which caused the scandal are being addressed.
A second interim report by the Senate inquiry into the consulting industry released on Wednesday says PwC has continued to frustrate its investigations, and was scathing about the evidence provided by former chief executive Luke Sayers, now the president of AFL club Carlton.
“The committee has found it impossible to reconcile the different versions and recollections of events provided by the witnesses. The committee is concerned about the truthfulness of some of the evidence it has received and is left questioning the credibility of Mr Sayers’ evidence,” said the report, titled PwC: The Cover-up Worsens the Crime.
The committee also criticised the continuing use of legal professional privilege to protect PwC’s global business, which was involved in using the confidential tax information via Project North America.
“PwC has attempted to reassure the committee that it has already taken the appropriate actions in relation to Project North America. And yet, PwC continues to use legal professional privilege as a reason not to provide the Linklaters report (into PwC Global’s role in the scandal) to the committee,” it said.
“PwC’s continued refusal to provide the Linklaters report is symptomatic of its problematic engagement with the committee.”
While current PwC management have recognised the need for change to the firm’s culture, leadership and governance, the committee questioned its progress on that front.
“The committee is not convinced on the evidence provided to it at this point that such substantive change is forthcoming,” it said.
The tax scandal first came to light more than a year ago, but the scale of it was not revealed until May last year when the Senate committee released a cache of emails revealing the brazen attempt to use confidential government tax plans to cultivate fresh business from notorious corporate tax avoiders.
Senator Deborah O’Neill said the latest report highlighted the ongoing failures of leadership and accountability by PwC Australia chief executive Kevin Burrowes and global chairman Bob Moritz, for their failure to come clean with the Senate committee about important matters.
Those failures included clarifying details of the specific nature of interventions by PwC Global in the Australian firm, and the Linklaters legal report into the misconduct of international partners.
“It remains my goal to ensure that PwC’s desire to minimise its losses does not come at the cost of full transparency with respect to their wrongdoing,” O’Neill said in a warning that could inflict further damage on PwC’s dwindling corporate business.
“Unless PwC shows this commitment to accountability and reform, the firm’s government and corporate clients cannot be confident that the firm can be considered a trusted entity.”
Greens senator Barbara Pocock emphasised the lack of consequences for former boss Luke Sayers.
Sayers has claimed ignorance of the transgressions that were happening right under his nose “which our committee finds simply implausible”, she said.
PwC Australia highlighted its progress in a reply to the report.
“We have taken considerable steps to transform our firm and rebuild trust, making significant progress on our comprehensive transformation program and implementation of our Commitments to Change.”
“We would highlight again that meaningful change takes time and that we will continue to co-operate with the Senate and regulators in an effort to enact transformative, structural change to our firm and industry.”
Sayers has been approached for comment.
The Senate committee’s final report is due to be released at the end of May.
Read more:
- The high price of PwC’s failed redemption story
- PwC slashes 329 more staff, up to 37 partners face early retirement
- PwC faces further scrutiny over tax scandal as global boss hits town
Senate drubbing for PwC over tax leaks ‘cover-up’
PwC Australia has failed to be open and honest, a Senate Committee has warned, as the firm was told it cannot hope to recover its reputation “while it continues to cover up” the tax scandal haunting the audit and consulting giant.
In a report released on Wednesday, a Senate committee took aim at the professional services heavyweight over its responses to revelations its senior leadership and tax partners misused confidential information in a bid to make money.
The Finance and Public Administration committee warned PwC in a report titled “The cover-up worsens the crime”, calling on the firm and its local and global leadership to co-operate rather than continue to stymie attempts to understand the scandals surrounding the firm.
The report warned the tax scandal, which saw PwC international tax head Peter Collins share confidential tax briefings within the firm, showed “internal management and audit controls failed or were broken”.
The committee warned they were concerned PwC would struggle to change its “structure, practices, and culture”, noting they were “not convinced on the evidence provided to it at this point that such substantive change is forthcoming”.
The Senators also took aim at PwC’s current and former leadership, stating past chief executive Luke Sayers’ evidence to the committee was “implausible”, noting the veteran consultant risked having his “truthfulness” and credibility questioned.
The Sayers founder and chair of Carlton has attempted to steer clear of the scandal, which took place under his watch.
The committee said it was “impossible to reconcile the different versions and recollections of events provided by the witnesses”.
“Taken together, the evidence points to the unethical behaviour in PwC being ignored by senior leadership during Mr Sayers term as CEO and subsequently,” the report noted.
The report comes after months of hearings in the Senate, amid an ongoing investigation into the tax leaks by the Australian Federal Police as well as nine probes from the Tax Practitioners Board into the scandal.
The Senate committee warns PwC’s attempts to investigate the tax leaks have fallen flat, taking aim at the firm’s failure to share a report into the scandal prepared by law firm Linklaters on behalf of PwC international.
“PwC’s continued refusal to provide the Linklaters report is symptomatic of its problematic engagement with the committee,” the report said.
“A first step to restoring trust with the Australian parliament would be for PwC to provide the committee with the full Linklaters report at the first opportunity and to be open and honest with the Australian parliament and people.”
The committee said it had seen “nothing of real substance” from PwC showing the firm’s commitment to change or investigating the scandal.
“Rather, their ongoing approach appears to be to hide behind legal professional privilege and hope it will all go away,” the report said.
“The failure of PwC to be completely open and honest as per the committee’s recommendations in its first report is reflective of PwC’s failure to genuinely change.”
“The committee does not see how PwC can recover their reputation while it continues to cover up because the two are incompatible. Indeed, the cover-up worsens the crime.”
Greens Senator Barbara Pocock took aim at PwC, warning the firm’s response to the scandal had been “appalling” and noting “those who have held key leadership roles at PwC continue to evade any real consequences, particularly the former CEOs Luke Sayers and Tom Seymour”.
“The fact that a locally elected interim-CEO, Kristen Stubbins, was unilaterally replaced by PwC International who quietly took control of the Australian firm in what appears to be a coup d’etat against local leadership, means that PwC Australia is nothing more than a puppet on a string that stretches all the way back to head office in London,” she said.
Ms Pocock lobbed questions at finance minister Katy Gallagher in question time on Wednesday over the scandal, asking why the government did not take more severe action against PwC.
Senator Gallagher said the government was looking at potential reforms to the partnerships scheme in response to the scandal, as well as developing a code of conduct for suppliers to the public service.
Labor Senator Deb O’Neill said the commitee’s report highlighted the failures of leadership at PwC, singling out the firm’s new Australian boss Kevin Burrowes and global CEO Bob Moritz.
“It is disappointing that PwC remains unwilling to demonstrate a genuine commitment to reform,” she said.
“The release of the Linklaters report is essential, as is an assurance that all those who received and attempted to utilise confidential Australian government information have been held accountable and appropriately sanctioned.”
PwC has refused to release the Linklaters report, claiming it was confidential and legally privileged.
The report, which identified six PwC staff who received the confidential information, noted the firm’s overseas partners who were privy to the tax leaks had been sanctioned and did not benefit from the scandal. A PwC spokeswoman said the firm had taken steps to transform and “rebuild trust”.
“These include: the endorsement of a major governance reform package which will see PwC become the first of the big four firms in Australia to have an independent chair of its board; an improved enterprise-wide risk management function; and the implementation of cultural change from the top down,” she said.
Report on PwC as at 27 March 2024
On 9 March 2023, the Senate referred an inquiry into the management and assurance of integrity by consulting services provided for the Australian Government to the Senate Finance and Public Administration References Committee for inquiry and report by 26 September 2023.
On 16 June 2023, the Senate agreed to extend the presentation of the final report until 30 November 2023.
On 18 October 2023, the Senate agreed to extend the presentation of the final report until 28 March 2024.
On 18 March 2024, the Senate agreed to extend the presentation of the final report until 31 May 2024.
Terms of Reference for the inquiry are available at Terms of Reference – Parliament of Australia (aph.gov.au)
