Rear Window

Paul Howes – the offshoring double agent

Sep 17, 2024 – 6.34pm

If there’s one thing everyone knows about Paul Howes it’s that he fights for Australian jobs. In fact, he made such a career of it – as the pugnacious former head of the Australian Workers’ Union – it was, some years back, the only thing he was known for.

On Tuesday, this masthead revealed KPMG’s 2025-26 plans involve halving the amount of consulting work done by the firm’s local employees. Instead, the firm wanted to promote the use of lower-cost workers in Australia and offshore in places such as India and Malaysia.

KPMG’s head of consulting, Paul Howes, at the Australian Open this year. Jesse Marlow

These leaked plans were laid out last month to its consulting division, led by Howes. Those in the division are worried it’ll mean halving the 4000-strong unit in the long term (the firm denies there’s plans for more cuts than already announced earlier this year).

Sublimating Australian workers in favour of efficiencies in the lower-wage south Asian market. Gee, what exactly did Howes realise on his offshore road to Damascus?

As if it could get any worse, the briefings included the planned increase of “digital labour”. Wholly unsurprising, yes, but does CEO Andrew Yates have to be so weird about it?

Rather than just bank the savings of AI and ChatGPT, Yates and his literal-minded autists are expanding what they call “digital FTEs” – that is, digital full-time equivalents. There’s 20 “digital FTEs”, with plans to add 100 more.

There’s something very weird about taking the robots (or software) replacing jobs and then wrapping them in a humanoid employment skin. “Sorry Derek, your pivot tables haven’t been the same since she came along.” Andrew, you’re pointing to a computer.

That doesn’t mean jobs can’t be protected elsewhere.

Last month, the federal government formed a seven-person panel to advise its Future Made in Australia boondoggle on “green metals”, that is, sustainably produced iron, steel, alumina and aluminium.

It includes three lobby heads: Rebecca Tomkinson from the Chamber of Minerals and Energy WA, Mark Cain at the Australian Steel Institute and the Australian Aluminium Council’s Marghanita Johnson. There’s union bosses like Paul Farrow from the AWU and Steve Murphy at AMWU, plus Jenny Selway, from the government-backed, preposterously named Heavy Industry Low-Carbon Transition Co-operative Research Centre.

And then, there’s Howes. Putting a unionist-cum-consultant on there is one thing. But isn’t the Jim Chalmers lab experiment with winner-picking all about insulating Australian manufacturing from the free markets and the efficiency-hunting paradigms of big four consultants?

Maybe Howes is a sleeper agent, doing to KPMG what it did to low-wage workers for decades. Rip open that MJ Bale shirt, and a bomber jacket is still there!

Or this is his latest metamorphosis in his constant pursuit of career advancement. Your guess is as good as ours.

PwC tax evidence called into question

By David Ross, The Australian

Saturday 21 September 2024

PwC Australia's new chief executive Kevin Burrowes consulted on who to remove from the firm in response to its tax scandal, parliament has heard, as a key former leader of the audit and consulting giant warned evidence given by a previous CEO to an inquiry may have been misleading.

Appearing before the parliamentary joint committee on corporations and financial services, PwC's former general counsel Meredith Beattie said Mr Burrowes, the firm's imported CEO, took a key role in deciding who to sack in response to the scandal surrounding the firm.

PwC has been criticised over revelations the firm's former head of international tax Peter Collins shared confidential government tax briefings with other members of the firm ahead of the introduction of new laws in 2016.

Ms Beattie said Mr Burrowes, before being formally installed as CEO, consulted with interimboss Kristin Stubbins and the firm's local governance board as well as the global general counsel Dianna Weiss about who should bear the consequences of the tax scandal.

Several of the partners removed from the partnership have since launched legal action against PwC, including Neil Fuller, Richard Gregg, and Paul McNab.

PwC has settled with Mr Fuller, whom some way was key to the firm's “Rover” model, where it sold tax strategies to major US clients using the confidential information.

Politicians have been angered by PwC's refusal to provide details of PwC partners outside Australia who are alleged to have misused the confidential information.

Mr Burrowes told parliament he had no knowledge of a report which “found no evidence that any PwC personnel outside of Australia used confidential information from PwC Australia for commercial gain”.

PwC's review found six international staff members “should have raised questions as to whether the information was confidential”, noting some remained with the firm.

Ms Beattie said Mr Burrowes was involved in directing PwC prior to taking on the top job at the firm from his former base in Singapore.

Mr Burrowes, who is paid $2.8m as CEO, is also paid a further $1.2m from PwC International for services linked to providing advice to other senior members of the global arm of the firm about the tax scandal.

The PwC boss did not reveal the extra payments to other partners at the business until just days prior to it being disclosed at a parliamentary inquiry.

Ms Beattie said she was surprised Mr Burrowes had not disclosed the extra payments, warning it was not possible to determine if the extra cash presented a conflict of interest for the firm's boss without knowing more about the deal, something PwC has refused to divulge.

“As a partner of the Australian firm he has to act in the best interest of the Australian firm. He has obligations to the Australian firm,” she said.

Ms Beattie shed light on the extent of PwC International's control of the Australian firm in the wake of the scandal, telling the parliamentary committee she believed the firm's former boss Tom Seymour was seeking advice on how to handle the scandal from former PwC North America boss Tim Ryan.

Mr Ryan has since resigned from PwC.

Ms Beattie also directly contradicted evidence previously given by Mr Seymour, warning the tax scandal was “not an issue that came out of the blue in 2018” and claiming the former CEO was aware of the issue for some time.

“Mr Seymour was well aware of the notices that were served because they were served on Mr Calleja, who reported to Mr Seymour,” she said.

“It was a source of great pressure for Mr Calleja that he had these obligations to respond to the notices and Mr Seymour was fully briefed on a regular basis in relation to this process.”

Mr Seymour previously told the committee he had not “condoned” the confidentiality breaches and was not aware of it.

Ms Beattie said she had intervened to override PwC's handling of legal claims over documents, while discovering the Australian Taxation Office was growing increasingly frustrated and concerned over the behaviour of senior members of the tax practice.

She told the committee the ATO wrote a very pointed letter to PwC and met former CEO Luke Sayers to discuss the scandal.

Ms Beattie said Mr Sayers called her, after his meeting with ATO second commissioner Jeremy Hirschhorn, in a “quite agitated” state. She took a note of his concerns in an internal email.

She said the handling of the issue so concerned her she told PwC's governing board not to go forward with Mr Seymour's selection as CEO.

“There was a call ... Mr Sayers was on the call and the chairman (Peter van Dongen) ... I remember it as quite a forceful discussion about the matter and as a result of that the call ended on the basis that Mr Sayers would go and speak to Mr Seymour,” Ms Beattie said.

“My understanding of Mr Sayers' position was that he was urging the chair to consider this very carefully because of the issues that have been raised by Mr Hirschhorn, and that he also raised a consideration about how this could, in fact, be managed if Mr Seymour were to become the CEO, and if the conflict position that Mr Hirschhorn had foreshadowed were to arise.”

A lawyer for Mr van Dongen, Robert Magnioni, previously told The Australian the former chair was not warned about Mr Seymour, did not appoint him as CEO, and was not warned of potential problems

Former PwC general Counsel contradicts former CEOs Sayers, Seymour

Edmund Tadros Professional services editor

Sep 20, 2024

A former senior leader at PwC Australia has contradicted former chief executive Luke Sayers about whether he was directly warned that allowing Tom Seymour to succeed him would cause the firm problems in future.

Mr Seymour, who was voted in as PwC CEO in March 2020, had previously led the firm’s tax division when it became embroiled in a years-long fight with the Australian Tax Office over advice it felt was overly aggressive.

Former PwC general counsel Meredith Beattie testifying at the joint inquiry into the structure of the big four consulting firms in Canberra on Friday.

The firm’s botched response to what became known as the PwC tax leaks scandal under Mr Seymour forced the firm to sell off its public sector consulting division for $1 and fire hundreds of staff after it was banned from selling to the federal government.

The tax leaks scandal involved a former partner tax sharing with other partners confidential details about federal tax changes designed to combat multinational tax avoidance. Those partners then used that information to win new clients. Partners also developed structures that sidestepped the very same tax laws that the firm was helping the federal government to design.

During almost two hours of testimony on Friday, PwC’s former general counsel Meredith Beattie not only contradicted Mr Sayers’ earlier evidence, but also accused Mr Seymour of giving incorrect evidence to a previous hearing.

The former general counsel also told the joint parliamentary inquiry examining the structure of the big four consulting firms that current PwC Australia CEO Kevin Burrowes should “very much regret” not telling partners he was getting paid an extra $1.2 million by PwC global.

‘Agitated’ and concerned

Ms Beattie’s new testimony differs from Mr Sayers’ and Mr Seymour’s evidence at the same inquiry from the start of August. Mr Seymour said he stood by his testimony. Mr Sayers, via a spokesman, declined to comment.

At the August hearing of the inquiry, Mr Sayers downplayed suggestions that ATO second commissioner Jeremy Hirschhorn was concerned about Mr Seymour’s fitness to become PwC chief executive due to long-running issues in the tax division.

Mr Sayers said that Mr Hirschhorn’s views on Mr Seymour were “not black or white” and that the ATO officer had “also said that since 2018 to 2020 he’d seen a significant change in Tom as a leader and that he had grown through the difficult period and was now being seen as a system-wide thinker”.

In contrast, Ms Beattie on Friday said that Mr Sayers had been “quite agitated” by “the extent of the issues that had been raised” after meeting Mr Hirschhorn in February 2020.

“[Mr] Sayers called me shortly after the discussion that he had with Mr Hirschhorn and he expressed he was surprised at the tenor of the discussions he had had with Mr Hirschhorn … [about] Mr Seymour,” she said.

“And that in that discussion, Mr Hirschhorn had raised the fact that it would be problematic if Mr Seymour were to become the CEO of PwC because he would have a conflict issue that [rival CEO candidate] Mr [Sean] Gregory would not have”.

‘Forceful discussion’

Ms Beattie said Mr Sayers had also been in a “forceful discussion” with the firm’s former chairman, Peter van Dongen, during which he pointed out that allowing Mr Seymour to become the firm’s new leader could cause problems because of the tax division’s battles with the regulator.

“There was then a call on a Saturday, it was around the middle of the day. I was on the call, Mr Sayers was on the call, and the chairman [Mr van Dongen] was on the call,” Ms Beattie said.

“I remember it as quite a, I suppose, a forceful or forceful discussion about the matter … And as a result of that, the call ended on the basis that Mr Sayers would go and speak to Mr Seymour.”

The firm’s governance board allowed Mr Seymour to remain a candidate in the 2020 CEO vote, despite its members knowing about the tax division’s long-running battles with the regulator. Mr Sayers had also told them of Mr Hirschhorn’s concerns about the “culture in the firm’s tax practice” and Mr Seymour’s record as head of that division.

Mr van Dongen did not respond to a request for comment.

Legal privilege claims

The former general counsel also contradicted earlier evidence by Mr Seymour that he was not aware of Tax Office concerns about the way the firm’s tax advisers were applying legal professional privilege.

“[It] had become apparent that the ATO was raising issues in relation to privilege,” Ms Beattie said. “This was not an issue that came out of the blue in 2018, it had been raised throughout the process, and it was reviewed, and issues were raised that this is problematic. There is a problem, and Mr Seymour was made aware of it.”

The document production process was triggered by the Tax Office becoming frustrated with the way the firm’s tax operation was being run from 2016. In response to what became dozens of document requests for information relating to the firm’s tax advice to clients, PwC repeatedly claimed legal professional privilege, but many of these claims turned out to be incorrect.

Ms Beattie said she intervened to override incorrect claims of professional privilege that were made by the firm’s tax advisers and accepted by the firm’s external lawyers King & Wood Mallesons.

“[I] looked at two productions in relation to either two or three clients that had been given,” she said. “I worked back and I worked out whether it was a privileged engagement. I went and looked at all of the source information ... as a result of that there were additional productions given to the ATO so that the firm was compliant with Its obligations to meet the notices.”

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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

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