Former PwC partner Paul McNab alleges PwC International Washington National Tax Services partner Matthew Chen received allegedly confidential Australian government tax information in 2014 in part of a suite of emails detailing reform plans.
Striking back in his court filings, Mr McNab alleges PwC's attempts to pin the blame for the tax scandal on himself is deeply flawed, warning he did not know information shared by PwC's head of international tax Peter Collins was confidential.
But he warns if Mr Collins was sharing confidential information with others in the firm, a number of current and former partners in PwC Australia and its global arms were also given access to internal government secrets.
This comes as PwC and Mr McNab prepare to face down in the NSW Supreme Court, after the firm settled claims from three other partners linked to its response to the tax scandal.
Mr McNab was removed from PwC's partnership retirement scheme in the wake of public revelations about the tax scandal, and he launched legal action in an attempt to clear his name and restore his benefits.
In a post on social media Mr McNab said PwC had attempted to suggest “that I, a single partner in the Australian firm operating under direct instruction from senior PwC partners in Australia and internationally, am solely responsible for the significant reputational damage caused by the ‘PwC tax scandal' over the past two years”.
“That damage was caused by allegations of breach of confidentiality obligations by partners who had them, and the utter failure of significant parts of the firm's management to properly respond to these allegations and related issues,” he said.
“For the record, I did not sign a confidentiality agreement with the Australian Treasury or the Australian Tax Office, I always operated as directed by senior management within PwC, and I have never provided a single client with advice that was contrary to Australian taxation law or was unprofessional.”
Mr McNab, who worked at PwC for 23 years, said he trusted information shared with him was “not subject to confidentiality”, noting although he received a number of emails from Mr Collins, he “believed that Collins was not disclosing, and would not disclose, to McNab any information that Collins was obliged to keep confidential”.
Mr McNab notes if this information was confidential, then a string of other PwC staff could be embroiled in the tax scandal after being shared inside information.
Responding to PwC's claims, Mr McNab identifies at least 15 emails and a string of partners at the firm, including for the first time several members of the international arm of the firm, who allegedly received confidential information. The Australian is not suggesting these PwC staff received confidential information, only that an allegation has been made by Mr McNab.
Mr McNab points the finger at Mr Chen, saying he received an email in February 2014 detailing “possible options for addressing the tax challenges raised by the digital economy” in response to the Base Erosion and Profit Shifting changes in play in Australia.
This came as PwC was targeting new business with American tech giants, including Uber and Facebook owner Meta, that would be affected by looming new taxes.
Mr McNab said this email was one of a string sent by Mr Collins to other partners at PwC America and UK in which allegedly confidential information was shared.
Detailing his response to PwC's attempts to launch a counter claim against him, Mr McNab notes a July 2015 email from Mr Collins to PwC Australia transfer pricing and international tax partner Nick Houseman, as well as former partners Pete Calleja and Michael Bersten that detailed an update on the “Google tax”.
Mr McNab says an email about the Google tax was also sent to two PwC internal mailing lists of staff, as well as Mr Bersten and Nick Middleton, around this time. He also notes an email sent to then tax partner Lyndon James, who previously worked in the transfer pricing business before retiring in March this year.
Mr McNab details a string of other emails sent by Mr Collins to US and UK partners as well as several other Australians in the firm, including Robert Hines, Greg Weickhardt, Michael Bona, Michael Taylor, and Stuart Landsberg.
However, Mr McNab notes “only limited documents available to him regarding the tax scandal, the confidential information that was provided to Collins, the confidential information that was shared by Collins or others”.
Two parliamentary committees that investigated the PwC tax scandal have previously called for information about who was connected to the breaches of confidentiality by Mr Collins.
PwC has previously admitted at least six members of the international arm of the firm received information from Mr Collins connected to the tax scandal, but noted they did not know it was confidential.
The firm said these staff “should have raised questions as to whether the information was confidential”, noting some had been disciplined but they remained with the firm.
The Australian Federal Police is investigating the confidentiality breaches, recently revealing four former partners, including some overseas, were facing probes over the leaks.
PwC tax scandal: Firm sues ex-partner Paul McNab in cross-suit over entitlements claim
Edmund Tadros Professional services editor
Nov 20, 2024
PwC has responded to a former
partner’s claim that he was denied entitlements due to the firm’s tax leaks
scandal by suing him back and claiming he was personally responsible for the
massive financial damage the scandal has wrought on the accounting giant.
PwC Australia’s claim against
ex-partner Paul McNab was revealed in a counterclaim lodged in the NSW Supreme
Court, in a dramatic escalation of the legal dispute over his retirement
income.
Former PwC partner Paul McNab has
denied any wrongdoing and said the blame for much of the losses was down to the
firm’s mishandling of the matter.
Mr McNab on Wednesday denied any
wrongdoing and said it was implausible to blame him alone for losses the firm
has incurred as a result of the scandal, which has engulfed PwC since last year
and may have cost it at least $1 billion so far. He says the blame for much of
the losses is down to the firm’s mishandling of the matter.
Mr McNab – one of four people PwC has named as
appearing in emails associated with the leak – sued PwC in January in an
attempt to force it to restore his retirement payments, which were cut off
after he left the firm and then cancelled completely once the extent of the
scandal was revealed.
New documents revealing the firm’s cross-suit allege Mr McNab failed to follow rules he had agreed to abide by as a long-time partner of the firm by failing to report misconduct by the main player in the scandal, senior tax partner Peter Collins, to PwC higher-ups.
Claim and cross-claim
PwC’s cross-claim, filed in August,
comes after a failed mediation session between the parties in April. The firm
now alleges that when Mr Collins shared confidential information with Mr McNab
between 2014 and 2015, Mr McNab did not report Mr Collins’ conduct to PwC’s
board of partners or its risk and quality team. The firm also alleges that Mr
McNab then shared confidential information obtained from Mr Collins with PwC
clients.
PwC’s cross-claim states that the
firm suffered loss and damage because of Mr McNab’s “breaches of the
Partnership Deeds” and “breaches of his equitable duties”.
The alleged losses include “the
costs and expenses incurred in dealing with internal and external
investigations; damage arising from the [Tax Practitioners Board]
investigation, [the Australian Taxation Office] investigation and Senate
inquiry and reports … exposure to civil and criminal liabilities; and the loss
of all value in PwC AU’s government business which was sold to private equity
fund Allegro Funds in a $1 distressed sale.”
The firm’s public sector consulting
arm, sold to Allegro last year, generated an estimated annual income of $600
million at the time of the tax leaks scandal and would have been sold for at
least that amount, if not multiples of that figure, under normal conditions,
the counter-claim asserted.
‘Implausible’ claim
Mr McNab, a tax partner at the firm
for 22 years, denied any wrongdoing in his legal response to the new PwC
action. The document stated it was “implausible that the conduct alleged by PwC
against [him] could be the cause of the tax [leaks] scandal loss”.
Separately, he wrote on LinkedIn
that the cross-claim showed the firm was unfairly trying to hold him alone
responsible for the loss suffered by the firm due to the tax leaks matter.
PwC’s “remarkable position is that
I, a single partner in the Australian firm operating under direct instruction
from senior PwC partners in Australia and internationally, am solely
responsible for the significant reputational damage caused by the ‘PwC tax
scandal’ over the past two years,” Mr McNab posted on Wednesday afternoon.
Mr McNab said the damage to the firm
“was caused by allegations of breach of confidentiality obligations by partners
who had them, and the utter failure of significant parts of the firm’s
management to properly respond to these allegations and related issues.”
He wrote that he had not signed a
“confidentiality agreement with the Australian Treasury or the Australian Tax
Office” and had “always operated as directed by senior management within PwC,
and I have never provided a single client with advice that was contrary to
Australian taxation law or was unprofessional.”
Potential witnesses
If this cross-claim goes to court,
it could lead to the PwC Australia chief executive, Kevin Burrowes, PwC
international global general counsel Diana Weiss and the firm’s global strategy
and corporate development leader, Christopher Kelkar, being called to testify.
Ms Weiss, who is based in New York,
has visited the Australian firm four times since the extent of the tax leaks
scandal was made public last May for a total of more than 35 days, while Mr
Kelka, based in the US, has visited 19 times for a total of more than 140 days,
or more than four months during the same period.
PwC Australia has already entered
into settlements worth millions of dollars with two of the eight partners
forced from the firm over allegations they were involved or did not adequately
address the firm’s tax leak scandal or failed to meet their professional
responsibilities.
The tax leaks scandal involved Mr
Collins sharing confidential tax
information with PwC personnel to market the firm’s tax advice
services. The firm then designed schemes to help clients sidestep the new
multinational tax laws he was helping Treasury develop.
Related
PwC Australia settles with three former partners for millions
Ex-PwC partner sues firm over retirement payments
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Ex-PwC Partner Blames Tax Scandal Fall-Out on Leaders' Failures
Deborah Nesbitt
A former Pricewaterhouse Coopers Australia tax partner has hit back against a claim brought by the firm which alleged he was responsible for the tax scandal that has plagued PwC for two years.
It’s the latest in a legal fight between Paul McNab and PwC over post-termination payments denied to him, which was filed in the New South Wales Supreme Court in January.
PwC’s cross-claim in the case, filed Nov. 14, alleged McNab caused “identifiable loss and damages” for the cost of investigations and inquiries into the leaking of confidential government tax information, “and the loss of all value in PwC’s government business which was sold to private equity fund Allegro Funds in a $1 distressed sale”.
PwC’s cross-claim alleged the damage McNab caused the firm outweighed any partnership payments it may owe him.
McNab breached the firm’s partnership agreement by knowingly receiving and sharing confidential information provided by former partner Peter Collins about consultations on government plans for a multinational anti-avoidance tax law, PwC’s claim alleged. Collins was barred from working as a tax agent by regulators in 2022, for breaching his government confidentiality agreement.
“PwC’s remarkable position is that I, a single partner in the Australian firm operating under direct instruction from senior PwC partners in Australia and internationally, am solely responsible for the significant reputational damage caused by the ‘PwC tax scandal’ over the past two years,” McNab said in a LinkedIn post on Wednesday.
“That damage was caused by allegations of breach of confidentiality obligations by partners who had them, and the utter failure of significant parts of the firm’s management to properly respond to these allegations and related issues,” he said.
McNab said he had not signed a government confidentiality agreement and had never provided a client with advice contrary to Australian tax law.
McNab’s dispute with the firm over partner post-termination payments began when he left PwC in 2020 for law firm DLA Piper.
PwC named McNab as being involved in the leak in June 2023 and, after he resigned from DLA Piper the following month, denied him the payments.
“It is implausible that the conduct alleged by PwC against McNab could be the cause of the tax scandal loss,” his Nov. 14 response to the firm’s claim said.
His statement partly reproduced emails from Collins to him and other recipients including “persons from PwC Australia, PwC UK and PwC US” as evidence he was not alone in receiving and sharing the information. It indicates his lawyers will be seeking disclosure of more documents related to the leak by PwC.
A directions hearing in the case will be held on Friday, Nov. 22. PwC said it would not comment on ongoing legal matters.
To contact the report responsible for this story: Deborah Nesbitt in Canberra at correspondents@bloomberglaw.com
To contact the editor responsible for this story:
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22 Nov |
10:00 am |
2024/00032214 |
Paul Joseph McNab v Kevin Burrowes trading as
PricewaterhouseCoopers |
Civil |
Supreme Court |
Directions (Commercial) |
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Justice J Stevenson |
Supreme Court Sydney |
Law Courts Building |