Monday, August 05, 2024

The Luke and Tom show: Inside the undoing of PwC

 PWC Parliamentary Q&A - Tom Sayers


Kevin Burrowes Serving Two Masters: Meredith Beattie - You should be sorry’: Former PwC GC slammed for role in tax leaks


Barbara Pocock



The Luke and Tom show: Inside the undoing of PwC

For the first time, the Financial Review tells the story from the perspective of the people inside PwC and the Tax Office, based on interviews with more than 40 insiders. This is part 1: the Luke and Tom show.

Edmund Tadros Professional services editor

Aug 5, 2024 – 5.00am

Tom Seymour appeared relaxed and confident. Sitting on his own in a meeting room in Brisbane, wearing a dark jacket and no tie, the PwC Australia chief executive was about to explain to partners how the firm was dealing with what has become known as the tax leaks scandal.

To the 900 partners tuning in to the webcast, from meeting rooms, client sites and offices around the country, Seymour did not appear panicked about the controversy engulfing the firm.

Two days earlier, a bombshell report in The Australian Financial Review revealed the firm’s former head of international tax, Peter Collins, had shared with fellow partners confidential details about federal tax changes designed to combat multinational tax avoidance.

PwC’s tax advisers had used the information to win new clients and then develop structures that sidestepped the very tax laws that Collins was helping the federal government to design. The government was outraged, clients were asking awkward questions, and partners were demanding answers from the firm’s leaders.

The webcast was their first chance to hear from the CEO. On a split screen to Seymour’s right was then-chairwoman Tracey Kennair; she said little, but cycled through various glum expressions.

It started at 1pm on Friday, May 5, 2023. Seymour began by apologising, admitting it was a mistake to have “missed the issue”. He announced an internal inquiry, saying he expected to be fined by the firm because he helmed the tax practice at the time of the leaks.

He faltered as he delivered his own bombshells: “six to eight” partners who shared the confidential tax information were still at the firm and, worse, Seymour himself had received some of the emails. The disclosures were not well received.

“We thought Tom was going to go,” says one attendee. “We couldn’t believe it, he was quite cocky … when he said he was on the emails, that’s when I knew we were f---ed.”

A second says: “Everyone couldn’t believe he had lied to us. Nobody wanted him as leader. A third says: “Tom was in a really bad state … [he] knew he was toast.“

Despite the growing uproar, Seymour’s tone was defiant. This was really a lot of fuss over a “legal technicality”, the media reports were “wildly exaggerated”, and the PwC staff who received the emails didn’t know the material was secret. And no, he wouldn’t be resigning.

Seymour’s manner suggested he felt he still had the support of the majority of the partnership. At the time, PwC was the pre-eminent professional services firm in the country, partners took home an average $930,000 a year and were on track for another bumper payday thanks to the sharp rebound in business post-COVID.

By the time the webcast was done 30 minutes later, the bewildered partners were aware of the depth of the crisis. But they had no idea just how it would upend the firm over the next 12 months, triggering a media storm and tough new regulation for the whole professional services industry.

That weekend, partners tried to come to grips with events. By Monday, Seymour would be out of the top job. Within two months, PwC would be under the “supervised remediation” of the global firm. Within a year, the Australian firm would be broken up, its government consulting arm sold in a $1 firesale.

Today, PwC has been reduced by a third to 650 partners, its revenue now the smallest of the big four firms, behind long-time laggard KPMG. It remains a target for regulators and the federal police, and a punching bag for politicians.

For the firm and everyone in it, the tax leaks scandal has been a disaster. But PwC’s journey from hero to zero begins long before investigative reporter Neil Chenoweth’s first report in January 2023.

Over the past four months, The Australian Financial Review has pieced together that story from the perspective of the people inside PwC and the Australian Taxation Office. Based on interviews with more than 40 insiders, we reveal the rise of a sales-driven culture that allowed the tax leaks to happen, why the firm bungled its response, and why it is still struggling to break clear of the fallout.

This account, to be published in multiple parts, starting today, digs into PwC’s history of aggressive tax advice; the years-long war with the Tax Office that followed; who was behind the advice that so upset tax officials; and why the firm’s leaders took so long to rein in the small group of advisers.

But fundamentally, this is a story about two people: Luke Sayers and Tom Seymour.


Luke Frederick Sayers was born in country Victoria in 1969. The middle of three children, his father was a school principal and his mother was a teacher. The family moved to Canada, and upon returning to Melbourne he attended Coomoora High (later to become Keysborough Secondary College), a state school in Melbourne’s south-east.

When he graduated, his parents presented him with a round-the-world airline ticket on the condition that he finish a year of a combined commerce-computer science degree at Monash University. He spent a year doing “the backpacker thing” around Europe and north and South America.

After graduation, in 1991 Sayers joined the Melbourne office of the firm that would become PricewaterhouseCoopers and quickly began climbing the ladder. His big break came in August 1996 when he swung a job as consultant for the firm’s Washington DC office at the dawn of the internet age.

He set about helping build out the telecoms consulting business, and within two years, at just 29, became the second-youngest partner in the US firm. When he returned to Australia in August 2001, he was put in charge of the Telstra account, one of PwC’s top 20 clients.

It was obvious to all that Sayers had been marked as a potential leader. “He came out of the US; he was a highly regarded young technology partner. He’s dynamic, he’s affable, he’s energetic. He’s a good relationship guy, he knew his technical stuff,” says Jonathan*, a former senior leader.

(*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.)

Thomas “Tom” Richard Seymour, seven months younger than Sayers, had taken a different route. One of three children, he was born in London. His late father, Richard, was a heart surgeon. After attending St Joseph’s Nudgee College in Brisbane, he did a Bachelor of Commerce at Queensland University of Technology and a Bachelor of Laws, with honours, at the newly established Bond University on the Gold Coast.

Seymour was 23 when he started as an accountant at PwC’s Gold Coast office in 1994. The office was considered a satellite compared with the larger Brisbane operation, which was staffed mainly by male private school alumni, often commerce/law graduates from the local sandstone university, the University of Queensland.

By 1998, Seymour was a manager in the firm’s Brisbane office. This was the same year Coopers & Lybrand merged with Price Waterhouse to form what was then the world’s largest accounting and consulting firm, PricewaterhouseCoopers, and later PwC. Seymour proved particularly effective at developing and selling tax structuring advice, and by July 2002 he had been made partner. He was 32 years old.

Around 2006, an unexpected move brought Sayers and Seymour together for the first time. Then-PwC boss Tony Harrington was looking to appoint a new head of tax and legal. He gave the job to Sayers, a partner who was good with clients but, controversially at the time, had no background in tax. It was a decision that would resonate for years.

Putting Sayers in the leadership position was part of a push to “blood” a range of ambitious partners in areas beyond their core expertise. It was part of ensuring PwC had a broad range of potential leaders. Others say, only half-joking, that Harrington – an old-school leader with a dominant personality – was actually trying see which partners could cope with the torture of being put in charge of businesses they didn’t understand.

“The fundamental piece is: Can you manage teams? Can you deal with clients? You’re not in the role to give technical advice,” says Jonathan*, the former senior leader. “There is a whole team of highly capable technical people, and whenever those partners needed to check, the technical team got involved.”

Sayers knew his promotion was a risky move. It was also unprecedented in the organisation to have someone who was not a tax expert running such a deeply technical domain.

He was confident in his ability to win new work, but he needed someone close who understood tax, was organised and was across the detail. Young and keen, Seymour ticked those boxes, and he quickly became Sayers’ closest lieutenant.

The unlikely pair settled into a productive partnership that developed into an abiding loyalty that lasts to this day. Personable Sayers did the people work, while details man Seymour made sure the jobs got done. By mid-2009, Seymour was national corporate tax leader.

*Alexander, another former senior leader at the firm, says Sayers “had a strong market focus, an aversion to boffins. He was looking for performance.”

*Sebastian, a retired Melbourne-based tax adviser who worked with Sayers and Seymour, says tax advisory can be split into two parts: “There’s the recurring work, filing tax returns and filing [business activity statements] – that sort of stuff that you tend to keep once you’ve got it. Then there’s consulting work; you have to fight for it, and once you’ve finished it, you’ve got to go out and get more work.”

The tax consultants were the “guns”. The “top guns” were the international tax advisers who came up with the edgy cross-border structures. *Sebastian describes Sayers as a salesman who came into tax to boost revenue. “What do salespeople want? Growth growth growth.”

And grow it did. Sayers has said running tax taught him that he didn’t have to be a subject-matter expert to do well, as long as everyone was broadly moving towards the same goal.

In retrospect, that wasn’t the best lesson to take from the experience.


Senior tax officials believe the cultural issues that eventually led to the tax leaks scandal can be traced back to the change in business model as Sayers pushed a sales-driven approach to tax advice. It was a shift that, at the time, married nicely with Seymour’s technical and legalistic approach to advice. “The way I’d describe Tom is, he’s a direct guy,” says *Timothy, a Sydney-based former partner and tax adviser at the firm.

“What you see is what you get. He’s a strong personality. If he thinks something is bullshit, he’ll call it out.

“How did Tom see the world? He would say the law’s the law. We’ve got to advise the client of what the law is. Our job is not to moralise. That’s the client’s choice.”

This idea, that it was the tax advisers’ role to present clients with tax schemes that could plausibly work, was commonly held across the wider tax advice industry at the time.

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Sayers and Seymour did well. The practice grew rapidly, and by 2008 – and not yet 40 – Sayers was considering a tilt at chief executive. In the end, however, he didn’t run. Recollections vary about why, but the consensus was that he was seen as a bit “loose” by more conservative parts of the firm and needed to “grow up”.

Instead, partners voted in Mark Johnson, the head of audit, as Harrington’s successor. About a year into his term, Johnson – encouraged by the firm’s governance board – appointed Sayers national managing partner.

In 2012, Johnson opted out of a second four-year term. After three years “growing up” in the managing partner role, it was now Sayers’ time. The firm’s partners elected Sayers as CEO, making him, at 42, the youngest ever leader of the Australian firm. Seymour moved smoothly into Sayers’ former role as head of tax and legal.

Sayers had taken the reins of a powerhouse firm that had revenue of more than $1.4 billion, about 450 partners, and about 6000 staff. At the time, auditing generated almost 40 per cent of revenue. Consulting brought in almost 30 per cent, tax and legal about 23 per cent, and the balance came from the firm’s private clients division.

But under Sayers, the balance of power was about to shift decisively to the always sales-driven consultants. Never again would the firm’s highly regulated auditors, who thought of themselves as the heart of the PwC brand, be the dominant division.

In the relentless search for growth and sales, the conservative culture built by audit was about to be swept away.


Having reached the top, Sayers got straight to work. He moved quickly to clear up a long-running class action brought against the firm and its audit client, shopping centre giant Centro. He sat in on talks that led to a then-record $200 million settlement. PwC’s share was about $66 million, or one-third of the total, likely the largest audit-related legal settlement in Australian history.


The PwC leadership team in 2010. Tom Seymour, back row, third from right, was managing partner of finance and operations. Luke Sayers, bottom row, fourth from left, was CEO and senior country partner.  

The Centro case demonstrated that errors made within the firm’s heavily regulated services – audit and taxation – had inherent long-term risks. It was also a demonstration that the firm’s instinct was to always aggressively fight threats, legal or otherwise – and that its experts sometimes kept fighting when the wisest move would have been to settle.

Sayers would later tell friends that he had pushed the settlement with Centro through in spite of the firm’s lawyers.

He also cut underperforming business lines and sacked about 200 staff. The purge included “a clean-out of the partners”, with dozens – “the bottom 10 per cent” – shown the door, according to *Sebastian, the retired Melbourne partner.

When senior partners he knew well walked into a room, Sayers would smile and announce, ‘the big dog’s here!’

Sayers has no regrets about this. In his mind, he was getting rid of the time-servers, the partners who weren’t performing, and who had relied on their tenure to avoid accountability. “We were probably the first to drive performance,” he has said of this period.

Many of the partners subjected to this treatment over the years have never forgiven him. For them, being ejected from the partnership was like being kicked out of their family. In his mind, Sayers was changing PwC from being a boring audit and tax firm into an audit, tax and advisory firm. He never used the word “accountant”. They were now “business advisers”.

A big part of the change was Sayers’ blokey personal style. He would use sporting metaphors to compliment partners on “shooting the lights out” when they did well. There were other ways it all became a bit like a footy club. When senior partners he knew well walked into a room, Sayers would smile and announce, “the big dog’s here!”

In his first year as leader, he held an online values “jam” with the firm’s staff and partners. The resulting values – performance matters, have a go, hunger for growth, be open and authentic, embrace differences and care – thrilled younger staff members and provoked eye-rolling in other quarters. The professionalism that was meant to underpin the entire firm – really the entire sector – took a back seat to this hybrid of feel-good pop psychology, progressive politics, and sales motivation.

The firm’s new values and strategy were distilled into a children’s cartoon book featuring coloured block creatures. The idea, according to a former partner involved in its development, was to create a storybook that could explain the firm’s strategy to a five-year-old.

The sales-driven changes upset many, particularly the firm’s old guard. “The nerds didn’t like him,” says *Rosannah, a former consulting partner. It didn’t help that Sayers was OK with challenging the thinking of partners, regardless of their seniority, in front of others. “He’d put people on the spot,” she says.

Sayers was known to walk up to partners and ask, “have you seen a client today?“, or, “what have you sold today?” He has told others that those resistant to his leadership were people who didn’t want to change – and just to make clear, he will tell anyone who asks him: “I love nerds!”

The firm loosened up in other ways, too. There was a lot more celebrating – PwC regularly held events for partners and staff. In some respects, this was happening across the sector. The consulting divisions of the big four firms (which also includes Deloitte, EY and KPMG) were all growing rapidly, and weaving their way into every aspect of the economy. So, it followed that they started to develop a hard-charging drinking culture – akin to that of a sales-driven company or a finance outfit – to match their new hard-charging corporate cultures.

Harrington, the firm’s CEO between 2000 and 2008, once said leading PwC required enough spleen to handle the partners who would “challenge every directive”.

Sayers’ view was that the partners were in business together, part of a family that was trying to do something sensational. Another way of thinking about it, is that the fast-growing partnership was like an extended, and tribal, wealthy family. It was the partners versus the world.

Luke Sayers was CEO of PwC Australia for more than eight years, between April 2012 and May 2020. Darrian Traynor

Sayers, through a spokeswoman, declined to comment for this series. Instead, the spokeswoman referred the Financial Review to Sayers’ previous comments that he had no knowledge of the confidentiality breach involving Collins, and had tried to resolve the ATO’s issues with the firm.

The Financial Review called Seymour repeatedly, left messages and then sent an extensive list of queries and points relating to his career at PwC and the tax leaks matter. Seymour instructed a law firm to provide a response, without allowing the Financial Review to publish any of it.


Until the tax leaks scandal happened, PwC’s tax advisory business liked to say it was twice as big as the combined tax advisory practices of Deloitte, EY and KPMG. In truth, the business has always been bigger than Deloitte and KPMG. Until recently, EY had a practice either bigger or of similar size, but this may have changed with multiple tax partners moving to upstart Alvarez and Marsal.

The several hundred-strong PwC tax advisers “consistently outperformed their peers outside the firm”, says *Alexander, the consulting partner who left last year. “It’s a regulated business, like auditing, so you get above-market returns.”

When many people hear “tax exploitation scheme”, they understand it as a loophole in the tax laws, whereas for PwC partners, it meant their intellectual property.

This long-term outperformance stemmed from the simple insight that once they developed a successful tax scheme, it could be sold over and over to existing and new clients.

To be fair, this attitude wasn’t limited to PwC. By the early 2000s, all the major auditing firms had realised that everyone could make a lot more money if they shared their IP because this was the key to monetising the product.

“They used to have an online database full of tax schemes, hundreds of them, with a dollar value attached of indicative fees for PwC that could be used as a guide for any tax staff to use and market the scheme to their clients,” says a junior tax adviser who worked at the firm from 2001 to 2006.

For a decade at least, the firm maintained an annual list – sometimes called a “pitch book” – of the top 10 tax schemes that it looked to sell to current and prospective clients. A former tax adviser described it in more anodyne terms, as simply a repository of “known tax problems that have been solved”, or, even more benignly, as a “marketing document”.

Some tax people were good at delivery, others were good at selling. The Rovers could turn a small job into a big job.

When a scheme was challenged by the Tax Office, as was becoming increasingly common as the years rolled on, the firm would say PwC’s lawyers could represent the client in court. An ATO officer describes this as the firm that got you into trouble, offering to get you out of trouble. All for a handsome three- or four-figure hourly fee for the tax partners involved, of course.

Under Sayers and then Seymour, the firm’s tax advisers became better at selling than anyone else. They achieved this in a number of ways.

Cross-selling was encouraged. Audit partners were encouraged to put their differences with tax advisers aside and introduce them to their clients. For conservative auditors, requests to introduce clients to aggressive tax advisers could be uncomfortable. The goal, of course, was revenue maximisation.

In a firm full of very confident individuals, a handful of tax advisers were unusually brash and typically couldn’t help but let others know just how clever they were. When tax managers with conservative clients worried about anything edgy because they dealt directly with the ATO, PwC’s advisers would target the CFO, implying their tax people were not being aggressive enough.

The firm was also a big political donor, and its advisers were not afraid to attack the ATO in public forums. They were there for the client.

Another innovation, introduced by Seymour in 2009,  was known internally as the “Rover” model. Partners thought to be technically brilliant were asked to relinquish their client book and instead assist their fellow tax partners win more work.

The idea was to have the firm’s best and brightest tax advisers “rove around the market supporting those doing the delivery,” says former consulting partner *Alexander. “Some tax people were good at delivery, others were good at selling. The rovers could turn a small job into a big job.”


David Maister: progenitor of the Rover model.  Penny Bradfield

The Rover idea was inspired by the teachings of David Maister, a now retired Harvard Business School professor and guru on how to manage professional service firms. Instead of partners competing with each other, the program was about increasing collaboration in the name of increasing sales.

*Timothy, the former partner and tax adviser, says the firm’s more conservative tax advisers and its “tax controversy” experts (the lawyers called in after a structure had been put in place to negotiate with the ATO), learnt not to kick up a fuss when their colleagues came up with something particularly edgy unless they could definitively blow the idea “out of the water”.

By 2015 there were almost a dozen Rovers out of the firm’s 110 tax partners. Within the firm it became a prestigious and sought-after role that was also highly profitable for the Rovers and the wider firm. For Australian taxpayers, it was a very different story.


It’s possible to see just how much PwC’s runaway tax advisory culture has cost Australian taxpayers and the broader society by looking at some of the big numbers that came out of it. Consider just two of the tax controversies involving the firm: the $88 million loan structure for Orica that the Federal Court found was tax avoidance; and the huge loans that energy companies such as Chevron loaded onto their Australian operation to reduce taxable income.

In 2015, Justice Tony Pagone in the Federal Court ruled the Orica loans were a $900 million tax avoidance scheme.

And in 2017, Chevron lost the landmark legal case brought by the ATO over its tax practices. Immediately at risk for the energy giant was roughly $340 million in taxes, penalties and interest on a 2003 loan. Chevron later told a parliamentary inquiry that the true amount in dispute over all years was $1.062 billion.

In late 2022, the ATO estimated the successful case against Chevron helped it reduce deductions in the resources sector by about $40 billion – yes, billion. Put another way, the court decisions rejecting PwC’s Chevron tax structure delivered, by October 2022, about $12 billion in extra revenue to the federal budget.

While the ATO may have reined in many of PwC’s most aggressive tax schemes during the past decade, settlements by their nature never recoup the total amount of tax that would have been owed with a more conservative structure. There is also the enormous cost to the public sector of the ATO having to constantly battle the firm’s advisers.

And all this while the firm’s hyper-confident advisers were telling themselves and the wider public that the firm was “contributing to the health, wellbeing and sustainability of Australian communities”.

PwC argues that the tax division provides diverse services and the international tax advisory work in question is only a small part of the practice. But in a culture that had evolved to value revenue above all else, it was an important part.

“There was absolutely no doubt that revenue, and profitable revenue, was important,” says *Timothy, the former partner and tax adviser at the firm. “The revenue KPI was far and away the most important part of the conversation [as a partner]. Keeping your nose clean was great, but what kept you as a partner was your revenue.”

The Financial Review’s reporting found those at PwC who knew how the tax advisers operated were split on their conduct. The positive view was the tax division was performing well, going from strength to strength. The more circumspect view acknowledged there were a handful of tax advisers, particularly the international advisers, who were cowboys.

Either way, the assumption within the broader partnership was that someone – presumably the firm’s leaders and the internal legal and risk experts – were overseeing it all and protecting their interests. They were wrong.

It would take until Seymour’s webcast in May 2023 for the wider partnership to finally understand what a small group of advisers had been doing for years. By then, it was all too late.

Tomorrow, part 2: Sharing government secrets

Read more about the PwC tax leaks scandal


Former PwC leaders point fingers over legal privilege abuse

05 August 2024
Christine Chen

A parliamentary committee on Friday heard the firm falsely claimed privilege to obstruct the ATO’s investigations into tax partners’ misconduct.
A fresh round of finger-pointing over the PwC tax debacle broke out on Friday as a parliamentary committee grilled former chief executives and general counsel about the disgraced firm's stonewalling during Tax Office inquiries.
Past and present employees fronted a bipartisan committee on corporations and financial services to answer more questions about the firm's internal dynamics and decision-making processes after learning tax partners leaked confidential tax briefings to clients.
Conflicting accounts from key figures including former CEOs Tom Seymour, Luke Sayers and general counsel Meredith Beattie quickly emerged when committee members pressed them on PwC's legal professional privilege (LPP) claims.
Beattie, speaking publicly for the first time since the scandal broke, said PwC had abused LPP to prevent the ATO from accessing key documents as part of its investigations but insisted she was the one “rattling the can” and alerting the executive board.
"Certain parts of the tax group had not been following the protocols, they had not been following the legal engagement letters, and the effect of that meant that the privilege claims that had been made ... were not valid,” he said.
Beattie said the ATO had raised “very serious allegations” about PwC using privilege in a way designed to hide matters from the Tax Office, causing a “a very, very tense relationship”.
Labor senator Deborah O’Neill asked: “Whose brilliant idea was it then to institute this as a strategy? Because it was clearly a strategy – who was responsible for signing off and determining that PwC would seek to frustrate the ATO by claiming LPP in a manner that you’ve described as not following protocols?”
In response, Beattie alleged Seymour, the head of financial advisory and tax at the time, was responsible for tax partners abusing LPP. “The leader of the tax group at the time was Mr Seymour,” she said, adding that she recommended against Seymour's elevation to CEO as a result of her concerns.
But Seymour said Beattie alone was responsible for the document production process.
“I reject [Beattie’s] propositions … there was significant tension between myself and Ms Beattie about the fact that we were not getting documents delivered in satisfaction of the Tax Office. I have a view that our legal response was not run well, and that we were too legalistic,” he said.
Sayers, who was in charge of the firm at the time of the tax leaks, said he did not recollect Beattie’s version of events.
“She may have provided it to the governance board, but I do not recall any legal advice being provided,” he said.
However, he added that if Beattie said she did, “then I’m sure she did "