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Last week’s hearing of the joint committee on corporations and
financial services was chock-full of conflict-of-interest disclosures. |
The ongoing series on the undoing of PwC by is nothing short of brilliant. It's nuanced, it's fair, and some of the details are excruciatin
The emails that almost destroyed PwC Australia Part 2
Insiders thought it was a “joke” for PwC to both advise the government on tax reform while helping clients exploit those reforms. One meeting sent the Tax Office over the edge.
The inside story of how PwC transformed from dull accountant into a sales-driven firm that would tear itself apart.
Three PwC partners, Paul McNab, Michael Bersten and Helen Fazzino, had spent the last hour explaining a new tax structure the firm had developed for ride-share giant Uber. McNab was coming to his point.
His conclusion was the structure was not caught by new tax laws that aimed to force the local divisions of global tech giants, like Uber, to restructure so they paid more tax in Australia. The laws had only started eight months earlier.
His conclusion was the structure was not caught by new tax laws that aimed to force the local divisions of global tech giants, like Uber, to restructure so they paid more tax in Australia. The laws had only started eight months earlier.
Konza was infuriated. He felt Uber’s new structure directly subverted the intention of the laws and McNab’s look of “such self-satisfaction” as he delivered his verdict was the final straw.
The tax officer felt that Uber’s new structure went against the intention of the new laws and that this was yet another example of the firm’s tax experts trying to subvert the will of the parliament.
PwC sources say Konza was upset because he had realised McNab was right; there was a loophole in the legislation, one the government would end up legislating away in 2018. But others agreed with Konza’s concern about a structure that had been put in place by PwC nine months earlier, in December 2015. Fazzino, an expert on multinational profit shifting, was brought onto the account after the structure was already in place. She now says she raised concerns within PwC about the Uber structure in early 2016. And former PwC boss Tom Seymour told parliament last week that the firm was concerned and had “proactively” disclosed it to the Tax Office around the same time.
As for McNab and Bersten, both were “tax controversy” partners – typically called in to provide legal opinions on structures that have already been put in place. Both men have left the firm and have denied any wrongdoing.
These different interpretations are a microcosm of the battle that would rage for the next few years between the PwC and the Tax Office. On one side, the Tax Office wanted PwC to provide conservative advice that took into account the intent of the law and the public good. On the other side, the instinct of the advisers was to seize on every loophole available.
Konza, now a tax adviser at MinterEllison, ended the August 2016 meeting by storming out, and in a later interview described what he did straight afterwards. “As soon as I got back to the office I started an audit on that company and others that have been using that scheme.”
Within days, PwC was sacked as Uber’s tax adviser. The meeting would have other consequences for the firm. It was the final trigger for an all-out war between PwC and the Tax Office – a war we will retell in the next part of The Australian Financial Review series telling the PwC saga from the inside.
In this instalment, we detail the events that put PwC and the regulator on a collision course. They include how the firm used confidential information to market its services to the multinationals targeted by the new tax the firm was helping design, how its operatives provided advice to Uber and Adobe, which sidestepped that same tax, and the Tax Office’s repeated attempts to rein in these aggressive tax advisers.
It wouldn’t be until 2017 that the ATO had its first inkling that PwC had used confidential information to market its advice to clients like Uber, the leaks scandal that has sent PwC Australia into a downward spiral last year that it is yet to recover from. Instead, tax officials at the time were more fixated on the firm once again providing advice that they felt went against the intent of the country’s tax laws.
There had been “a view of PwC had been building for several years”, says Jason*, who was familiar with the firm’s dealings with the ATO. “There had been a welling up of concern about their activities over many years. And this [‘foreign partnership scheme’] was seen as over the top … a scheme is designed to avoid tax.”
The problem was rooted in the firm’s tax division and a “small group of people who thought they were superheroes”. “Those guys had become so brazen that they thought it was normal behaviour,” Jason says.
Peter Collins was the first of this group to become public. Financial Review investigative reporter Neil Chenoweth broke the story in January 2023, revealing Collins had been banned by a little-known regulator for sharing confidential government briefings with partners and clients.
He was one of Seymour’s “rovers”, a group of the firm’s best technical partners who “roved” around devising tax structures for other partners. A contemporary described him as “technically self-contained. He didn’t think he needed help.”
Inside PwC, Collins was seen as a quiet achiever. “Collins was no swashbuckler. He was grey, a technically competent tax adviser,” says Jonathan*, a former senior leader at PwC Australia. Sebastian*, a long-retired tax partner, says Collins “was a very nice bloke as far as I can remember. Exceptionally good at tax. My recollection was a lot of big corporates were very confident in his skill set and in his person. He was around the top of the A-list. Not flashy. He was the type of person who would have saved a lot of his pay packet.”
Renowned for his ability to come up with ingenious tax structures, Collins was known by the Tax Office as an aggressive adviser with strong views and a distaste for tax in any form. In 2001, Orica called in Collins to set up round-robin loans that offset Australian profits against US earnings, a structure that in 2015 was found to be a tax avoidance scheme. One former official who knew Collins describes him as “a bit of an introvert. Reserved. Struck you as being a little aggressive.”
Collins was exited from the firm in 2022 after the Tax Practitioners Board found he had shared confidential information. He did not respond to requests for comment.
Seymour told parliament last Friday “a large amount of the issues the firm’s tax practice had with the tax office [emanated] from international tax practice” – made up of about 15 of the firm’s roughly 200 tax partners. He added: “There was one or two very clear partners that were a challenge, that were exited and had conversations, ‘you need to retire from the firm’.”
One of those partners referred to by Seymour is Neil Fuller. He is more of an enigma than Collins. He created the Uber structure that infuriated Konza and had travelled to the United States in 2015 to pitch PwC Australia’s structures to big tech companies. Internally, he was seen as strong-willed and technically knowledgeable, and known for contacting clients without telling other partners.
Alexander*, a former senior partner, described Fuller as “like an investment banker who did tax. Charming when he needed to be, and then he’d forget about you when he didn’t.” Sebastian, the long-retired tax partner, described Fuller as “a bit flasher and brasher than Collins”. Seymour told parliament that Fuller was “probably the most problematic partner that was exited” from the firm relating to the Tax Office’s concerns.
Former PwC partners say Fuller now lives in the resort town of Whistler in Canada. He has never responded to requests for comment since the tax leaks matter emerged and could not be reached for comment for this series.
Collins’ road to the tax leaks scandal started in November 2013. He was one of 15 tax experts invited to a low-key, and confidential, meeting with Treasury and Tax Office officials. At the time, concern over aggressive profit shifting by multinationals had reached fever pitch around the world. The worry was the schemes – which came to be called base erosion profit shifting, or BEPS – were eating away the tax base of countries around the world. Australia was at the forefront of the fight as the Treasury worked on a series of new laws that targeted multinationals who were paying little tax on their Australian profits.
The meeting would discuss initiatives being developed by the Organisation for Economic Co-operation and Development (OECD), including ensuring tech companies could be taxed in the countries where they made their revenue and closing loopholes in the interaction of different countries’ tax laws.
Today’s international tax advice industry had its origin in two events. In the late 1980s Apple Corporation pioneered the Double Irish Dutch Sandwich. PwC Ireland’s managing partner, Feargal O’Rourke, is popularly credited with developing the Double Irish, which later allowed multinationals like Google to flip their overseas earnings back and forth between Dublin and Bermuda, cutting taxes to as low as 0.5 per cent. This didn’t change much at first, because US companies still ended up paying US tax.
But all that changed in December 1996 when the US Treasury waved through a remarkable ruling that allowed US companies to “check a box” on their tax returns. That meant all their offshore earnings were no longer taxable in the US, as long as the profits remained offshore. Ostensibly this would simplify the US tax code and stop multinational companies being taxed twice on their offshore profits. But when used together with the Double Irish, US companies were paying no tax at all.
Suddenly companies could save billions of dollars in offshore tax bills. And firms like PwC that set up and ran these schemes were ready to take a cut. This was all particularly important to Australia’s tax base because of its higher reliance on corporate tax than other similar countries.
As part of the Treasury group, confidential OECD papers were shared for discussion and comment. Collins also joined the Treasury group, signing the first of three confidentiality agreements on December 11, 2013. PwC was so used to being in the loop that no one seemed to consider that it might present a conflict of interest given both men were, in the language of consultants, “client-facing partners” at the time they were taking part in the confidential consultations. Almost no one outside this small group of tax advisers knew about the confidentiality agreements. At the time, the firm didn’t have a centralised list of confidentiality agreements and didn’t train staff in how to manage such conflicts.
PwC was now in a position where it was helping develop the laws the government would use in its fight against multinationals while advising its clients about how to respond to those same laws. It put the firm on course for a head-on confrontation with the Tax Office. “It was a joke that we advised Treasury and then advised the private clients on [multinational anti-avoidance],” said one former consulting partner, summarising the view of many of her fellow disaffected partners.
It’s worth taking a look at the standard playbook of PwC – and tax advisers in general – when it comes to tax reform. This playbook starts with a warning that any changes that could lead to increased tax bills for clients would create “uncertainty” and “deter investment”, followed by lobbying aggressively to water down proposed laws. Either way, any changes made to the tax code mean more demand for their advice.
Seymour, PwC’s then head of tax, was critical of the push to curb multinational profit shifting. He said in September 2014 that creating local laws to consider the OECD’s base erosion measures would be an “incredibly complex, detailed and slow process” that might never be resolved.
The reality of what was really going on burst forth occasionally. One example was a speech at a PwC “Tax Reform Forum” in Melbourne in July 2015. Then-treasurer Joe Hockey, who was pushing the tax reforms as an important part of the Coalition government’s agenda, said: “I make no apologies for going after 30 multinationals that are particularly engaging in the Double Irish Dutch Sandwich,” before adding, “which I would hope you’re not familiar with at PwC.”
Seymour quickly responded: “We thought it was something you got for lunch”. Hockey: “Exactly. Let’s pretend you guys don’t know about it … I think it [the tax structure] is appalling.”
Within a year of Collins joining the Treasury group, PwC’s advisers were already thinking about how to advise clients about the changes.
The 144 pages of internal firm emails – which were released to the Senate late May 2023 and showed the true extent of the tax leaks scandal – are candid in a way that shows no one ever expected them to become public.
In September 2014, an Australia PwC partner copied in two US partners about potential tax advisory work stemming out of the impending tax changes.
“As you know Australia is at the forefront of attacking BEPS and seems to have particular affection for US companies! Do you know if we have any relationship with them in the US? They can expect a [redacted] style ATO review down here and we would like to reach out to them.”
On November 9, an Australian partner sent a reply in the same chain of messages to partners in the US, PwC International and Australia, outlining the firm’s relationships in Silicon Valley. It summarises the outcome of meetings with the tax teams of what appears to be six companies about how PwC Australia could help them navigate their dealings with the Tax Office.
These emails appear to be one of the initial discussions of what would become PwC Australia’s North American project – a systematic plan to “market services to clients” helped along by the “intelligence” that Collins fed back to the firm.
Three days earlier, on November 6, 2014, the International Consortium of Investigative Journalists had unveiled its LuxLeaks investigation revealing PwC helped more than 30 large companies negotiate secret tax deals with Luxembourg to reduce their taxes by routing profits through tax havens.
The Financial Review reported how nearly 28,000 pages of leaked documents showed that 343 Australian and foreign corporations had used PwC to slash their tax bills to nearly zero in some cases.
The investigation was particularly eye-opening given PwC’s history with Treasury and the ATO dealing with the issue.
That history involved PwC, six years earlier in 2008, helping conduct an outside review into how the ATO unit handled advance pricing arrangements, which were the basis for how international profits were taxed. At the time, the ATO had become alarmed at ballooning tax avoidance by multinationals. Treasury’s solution was to hire PwC Legal, then under the control of Luke Sayers, to conduct the review. Sayers, of course, would go on to lead the firm between 2012 and 2020.
What PwC didn’t mention was that between 2004 and 2008 it had negotiated secret tax deals in Luxembourg for 30 Australian companies. In 2008, the year PwC Legal was advising the Tax Office how to best monitor offshore tax avoidance, it set up 10 Luxembourg schemes. Business as usual for the firm.
LuxLeaks was front and centre during the Senate’s corporate tax avoidance inquiry that opened on April 8, 2015.
Seymour told the inquiry: “I have the utmost faith in the ethical standards of the people we employ. I certainly would be shocked and hugely disappointed if anyone in our firm is breaching laws.”
Less than a week after the hearing, Collins was sending out emails referring to his supposedly confidential consultation with Treasury on the base erosion measures.
“I am helping the Govt think about the proposals that I expect will be released in our budget on 12 May … I just wanted to check if there is anyone you know in our network who I should chat to in relation to these measures.
A week later, on April 22, an Australian partner sent another message outlining the firm’s progress with what appears to be six US clients.
“Guys. Its been a couple of months since I gave an update on how this was going. It is messy and complex but showing good results.”
The exposure draft of the multinational avoidance laws – championed by the Abbott-Hockey government and a centrepiece of that 2015 budget – was released with that year’s federal budget on May 12, 2015. PwC’s advisers were so prepared they sent pitches to 23 US tech companies warning of the new law with a “suggested work plan” that evening. The hustle worked. In a separate email, a PwC partner noted:
“We have already heard back from a number and have several calls lined up.”
The reason PwC’s tax advisers were so well prepared was simple. Their man on the inside, Collins, had been supplying his fellow tax partners with confidential information sourced from the Treasury consultations about creating the laws, which took the name the Multinational Anti-Avoidance Law, or MAAL. For his stellar work, Collins was promoted to head of international tax at PWC Australia on July 1, 2015.
Collins “sent an email to two internal email distribution lists confirming the 1 January 2016 start date of the MAAL”, according to PwC’s own legal investigation into the tax leaks matter. On the same day, McNab “sent an email to at least one [multinational company] noting that ‘January 2016 remains likely with Treasury pushing for October passage through Parliament to law. Various other updates we can chat about if you get a moment.’ ” The firm also informed another PwC client about the start date of the MAAL. (McNab later said he didn’t know the start date information was confidential.)
About a week later, August 11, 2015, Collins called up Treasury to confirm other details about the timing of the new laws to a fellow partner.
“Spoke to Treasury. Plan is for legislation in parliament on 15 or 16 October. Won’t be shown publicly before them.”
Collins also shared many other pieces of confidential information, often with the equivalent of an electronic wink, with other partners.
That September 2015 Collins also let others in on confidential information from a separate Board of Taxation consultation about a base erosion-related law he was assisting. He was part of the Board of Taxation’s now-disbanded advisory panel, made up of business representatives and tax advisers. The purpose of the panel was to provide the government advice on tax policy, but it was dissolved in the wake of the tax leaks scandal.
In one exchange, Collins made a punny reference to the board’s then chief executive, Karen Payne. It seemed to summarise his dim view of those he deemed to not understand tax issues at the level he was operating at. On September 17, 2015, Collins wrote:
“Little real chance of anti hybrid rule anytime soon. I spent 3 payneful hours today. BoT has zero idea. The only thing they get (now) is that it is complicated and perhaps we should not rush. No need to share this because all supposed to be secret.”
This was an example of how PwC’s tax advisers – particularly the “rovers” – showed off to each other. In a November 2016 email, Collins shared updates on more base erosion-related rules, but warned the recipient:
“Please don’t circulate this note and please treat as rumour and expectation.”
Collins was held in such regard by Treasury that if he needed information he just had to call. When an unnamed Australian partner asked Collins about whether certain tax amendments might be delayed on the morning of July 21, 2015, he replied: “Let me check with someone who will know.”
By midday, he had found out. Collins emailed back: “Treasury tells me defer is very unlikely although there are plenty pushing for it. Plan is still to get this through in spring. There will be some amendments circulated in next week or so.”
The North American project was picking up steam after the initial pitches were sent on budget night. An August 2015 email from a PwC Australia partner to the Australian partners group details the tax advisers’ plan.
“In response to demand drivers from our clients, in FY16 we are investing in an AU teaming and alignment program around the North American market from a client and industry perspective.”
The core Australian team would be led by a rover, Fuller, whose “main focus” would be on the North American market. Also on the team were Collins and three other partners whose names were redacted.
“The goal is to provide a transparent, collaborative model all of our Partners can access to strengthen existing relationships, and unlock new growth, while maximising our return on investment. The team supplement existing relationships held by Partners, and provide additional support in the market.”
“Great work guys!! Very exciting sectors to be in at the moment.”
In the lead-up to the MAAL becoming law, the ATO made it clear they wanted the roughly 30 large multinational companies targeted by the MAAL and their tax advisers to hold off on restructuring so tax officials could first approve the approach. In exchange the ATO would not enforce the January 1, 2016, start date of the new laws.
Most firms and their clients co-operated with the Tax Office. But not PwC. Its advisers were instead telling clients not to hold off restructuring and to only tell the ATO what they had done after the fact.
In one telling 2015 exchange with ATO officers, PwC’s McNab explained that the firm’s clients needed to restructure before the laws came into effect to comply with US audit rules. The reason given was the multinationals needed to book the expected cost of the MAAL in their US financial accounts. The firm’s advisers were also suspicious of the Tax Office’s motivations – come and talk to us and we’ll be nice – and told some clients that the ATO approach was simply a negotiating tactic.
ATO officials didn’t think much of the US auditing excuse. They suspected the real reason PwC’s advisers hated the idea of co-operation was it got in the way of them winning more work. Helping clients deal with the Tax Office was not a great pitch for tax advisory work, especially to US companies accustomed to exploiting every tax loophole. Co-operating with the ATO would have rendered PwC’s tax IP, their unique selling point, ineffective.
Both sides thought the other was being arrogant and high-handed.
PwC clients – such as Uber and Adobe – who put new structures in place before the MAAL ended up being forced to restructure again by the ATO.
Less than a week after the law came into effect, McNab emailed Seymour, copying in Fuller and another PwC Australia partner, with an update on the North American project. The message was sent on Wednesday afternoon, January 6, 2016.
“I wanted to give you a summary of where the MAAL work landed as at 31 December. Most of these clients will now have future work in dealing with the ATO, documenting their positions and systems, preparing transfer pricing analysis and modifying these models as US and other international BEPS planning proceeds over the next year. We will work to get as much of this as we can.
“The team [redacted] have been very busy over the last couple of months and we are assisting 14 clients with their efforts to comply with the MAAL. In doing so, we have been working under desperately tight timelines (some clients having only decided to go ahead with changes two weeks ago), across multiple time-zones and have worked with some ‘brand-defining’ clients.”
He outlined how many of the clients were not previously PwC Australia clients and many had not even allowed PwC US to do this type of work before.
“- we identified US tech two years ago as representing a significant (at least for controversy!) upside sector for the Australian firm as the ATO reacted to problems it had with their structures, and diligently built relationships with key offshore buyers- we were aggressive in telling these relationships they needed to act early (heavily helped by the accuracy of the intelligence that Peter Collins was able to supply us and our analysis of the politics) [Emphasis in original email] - we were first to them with innovative approaches to the problem [redacted] was critical in stimulating their thinking and presenting ideas no one else had, especially in relation to the first draft of the law)”
He also noted that PwC Australia was able to win work by criticising their competitors’ advice. The firm’s advisers had “aggressively explained the defects” in the counsel of rival firms.
“In total, we expect (based on fee estimates that we have agreed with clients) that revenue from this first stage of the MAAL projects will be approximately $2.5 million.”
McNab made clear the North America project had been a cross-service and international exercise. Its success involved PwC experts in transfer pricing, GST, customs, legal and capital markets, accounting advisory and structuring.
“We have also worked with other PwC network firms extensively (notably, PwC US, PwC Singapore and PwC Netherlands). Our work has been efficient and seamless - we have received some excellent client feedback as to responsiveness, the quality of our work and the dedication of the team. I hope I haven’t missed anyone who was part of this great effort.”
McNab, who previously worked at the ATO, has explained to others that his January 2016 congratulatory email about the North American project had been taken out of context. He argued it was sent as part of an annual push by partners to pump up their bonus by highlighting the great work they had done during the year. The shout-outs to other partners were about increasing their collaboration scores, while the use of the word “intelligence” was actually about trying to sex up the whole package. In any case, McNab says his bonus that year wasn’t memorable.
Questioned about the email in parliament last week, Seymour said he had only skimmed it and had read it in the way McNab intended – “an email of a partner trying to tell me what a great job they’ve done”. The former CEO says he didn’t interpret the “intelligence” comment as referring to confidential information. Instead, Seymour said he thought the word referred to technical smarts about the tax, “how it works, how it interacts with other countries”.
Unfortunately for everyone involved, this email was seized upon when it was released publicly because it appeared to show that PwC’s personnel knew they had an edge on the MAAL thanks to the flow of information from Collins and that international partners were clearly part of the project.
No“Mr Seymour replied to the [McNab] email the following day,” according to the PwC legal report, “copying in additional PwC personnel, congratulating Messrs McNab and Fuller for the outcomes and ‘strategic thinking and market hustle’ outlined in Mr McNab’s email.”
Seymour was unapologetic about his response. “We wanted our partners to be out winning clients, that was our business model ... we wanted partners to have market hustle, we wanted partners to build relationships in the market. That’s actually I’d be amazed if any professional services firm could sit here and say that wasn’t something you asked your partners to do. And I responded saying that I read the email is we’ve done a great job winning all these new clients for the firm.”
Former ATO commissioner Chris Jordan says the schemes to avoid the MAAL, which the Tax Office stopped after they had been put in place by PwC, had put at risk an estimated $180 million in annual tax revenue.
The intervention also represented lost revenue for the firm. Or, as a former ATO bureaucrat says, “they would have made a shitload more than $2.5 million” if the ATO hadn’t intervened so quickly.
For the ATO, the Uber partnership structure was the final straw. A cold war that had been simmering for years was about to turn hot. But like so many protagonists before them, neither the ATO or PwC could know just how destructive that war would turn out to be.
(*Current and former PwC staff still refuse to speak publicly against the firm, fearing it will affect their ongoing relationships, legal obligations and, often, their retirement benefits. It is an obsession with, ironically, confidentiality. All interviewees have requested that their names not be used. In place, we have used pseudonyms and, where required, short descriptions of the speaker.)
Later this week, part 3: The ATO goes to war against PwC
Read more about the PwC tax leaks scandal
Part one | ‘We couldn’t believe it’: Insiders reveal how PwC unravelled as scandal broke The inside story of how PwC transformed from dull accountant into a sales-driven firm that would tear itself apart. Part one charts the rise of the two men who have defined the firm for the past twelve years: Luke Sayers and Tom Seymour.
PwC leaders at war over tax scandal PwC’s former general counsel says she repeatedly advised then chief Luke Sayers and the governance board that legal professional privilege was being misused.
Sayers, Seymour round on Burrowes’ global role Kevin Burrowes’ second role with PwC International was the focus of the joint parliamentary inquiry into consulting on Friday morning.
Chanticleer | PwC hasn’t paid full price for eight years of risk failure Exactly who deserves the most blame for the PwC scandal remains a subject of fierce debate. But it’s the systemic failures of risk management that really matter.
Opinion | Penitence, bravado and rattling the PwC can The firm’s alumni deploy the “I take full responsibility, it was all the other guy’s fault” defence.
‘This may not end well for you’: The secret war behind the PwC inquiry Documents tabled by three federal agencies raise questions about whether the ATO tried to shut down the investigation into the PwC tax leaks and targeted the man leading it, Michael O’Neill.
How confidential tax information was shared at PwC At least six former PwC partners were involved in leaking confidential information from Treasury, the Tax Office and Board of Tax, legal reports concluded.
‘Shadow’ culture of profit first blamed for PwC tax leaks scandal A scathing report into the big four consultancy laid bare the brutal, uncompromising culture at the top that led to the firm’s tax leaks scandal.
‘Growth at all costs’: what PwC report found The mindset was said to have been “growth at all costs” with a spotlight on “revenue, revenue, revenue”.
‘We are deeply sorry for that behaviour and the culture’ The full text of the open letter from PwC Australia CEO Kevin Burrowes.
PwC partner leaked government tax plans to clients The former head of international tax for PwC Australia, Peter Collins, has been deregistered by the Tax Practitioners Board for dishonesty and for sharing confidential government briefings with PwC partners and clients.
AFR journalists win Gold Walkley for PwC story Neil Chenoweth and Edmund Tadros broke one of the biggest stories of the year, which ultimately led to the break-up of the accounting firm in Australi
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
With friends like PwC, who needs enemies? Kristin Stubbins
With friends like PwC, who needs enemies?
Kristin Stubbins does not seem assured her former employer necessarily has her best interests at heart. Max MasonSenior reporter
At the rate PwC Australia partners and alumni are throwing each other under the bus, we’re going to need a new depot just outside the Australian parliament.
Quietly taking precautions, it appears, is former acting PwC Australia chief executive Kristin Stubbins, who does not seem assured her former employer necessarily has her best interests at heart. At least, that’s what we’re taking out of the fact that she’s hired her own lawyers.
While common in some types of civil proceedings, it certainly isn’t normal in defamation proceedings.
PwC Australia and Stubbins are the subject of defamation and breach of contract proceedings brought by former partner Richard Gregg.
Gregg, who successfully sued the firm last year for failing to follow proper process in its attempt to sack him, alleges that PwC and Stubbins’ statements in the fallout of the tax scandal severely damaged his reputation by incorrectly linking him to the improper sharing of confidential government tax information.
These statements include open letters penned by Stubbins that were posted on PwC’s website and widely published across the media.
Stubbins was elevated to acting PwC Australia chief executive in mid-May last year as part of the attempt to deal with the tax leaks scandal. She was ousted just a few months later when PwC International took control and installed two-wage sensation Kevin Burrowes.
To defend against Gregg, PwC has tapped Corrs Chambers Westgarth to defend it in what seems like a spectacular own goal.
PwC actually tried to oust Gregg over earlier misconduct that had nothing to do with the tax leaks case and which he’d already been disciplined for. After a court ruled his sacking improper, Gregg ended up resigning of his own accord. He launched defamation action in May this year.
It’s this action in which Stubbins is no longer taking PwC’s legal advice. She’s tapped Clayton Utz instead.
Stubbins was PwC’s most senior auditor before being roped in to steer the ship after Tom Seymour’s abrupt departure. When she was informed by PwC global chairman Bob Moritz that she was being replaced by Burrowes because of an international “brand crisis” created by the tax leaks scandal, she wasn’t surprised, just disappointed. She’s recently started a new consultancy.
If Gregg is successful, it is likely Stubbins will be indemnified by PwC, given she was acting on behalf of the firm. PwC will probably be on the hook for her legal costs in any case.
PwC Australia chief risk and ethics leader Jan McCahey revealed to the joint committee last Friday that it is a standard term in the partnership agreement for legal costs incurred in connection with one’s PwC role to be covered by the firm, should the partner seek this.
PwC has been shelling out for legal matters for most of the year. It was ordered to pay $250,000, plus interest, for Gregg’s legal costs in the case to stop it from firing him. It has also settled, on unknown terms, with another partner, Neil Fuller, who was pushed out after the tax leaks scandal.
With a potentially more substantial defamation claim from Gregg, PwC is unlikely to fight Stubbins’ legal fees in the manner we’ve grown used to from watching Network Ten’s battles with Lisa Wilkinson. But just in case, we’ll keep the popcorn ready.
Max Mason covers insolvency, courts, regulation, financial crime, cybercrime and corporate wrongdoing. A Walkley Award winner, Max's journalism has also received awards from the National Press Club of Australia, the Kennedy Awards and Citibank. Message Max on Signal https://tinyurl.com/MaxMason Connect with Max on Twitter. Email Max at max.mason@afr.com