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PwC’s international arm furious over failure to halt scandal contagion, papers reveal
The PwC international arm’s fury at the failure of the local leadership to halt the tax scandal contagion has been laid bare in papers published by a parliamentary committee.
DAVID ROSS
The international arm of audit and consulting giant PwC read the riot act to the local arm of the firm, warning it that it faced expulsion from the network if it shared information with investigators or inquiries without its approval.
It also blasted the local arm of the firm for exposing clients and the global network “to potential risk and reputational harm”.
A string of missives sent to PwC Australia in the wake of the tax scandal, which broke last year, were on Friday published by a parliamentary inquiry, and reveal the effort the firm went to in order to stop the crisis infecting other parts of the global partnership.
The letters, sent by PwC’s global general counsel, Diana Weiss – one of several key figures at the firm who seized control of the Australian partnership in the wake of the tax scandal – show PwC hierarchy’s anger over the failure by the local leadership to cauterise the crisis.
Ms Weiss’ letter reveals PwC twice told the local firm it was falling short of the expectations of the international leadership to respond to the crisis – first in May of last year and again in June.
Ms Weiss told PwC the local leadership and former chief executive Tom Seymour had allowed the scandal relating to the improper sharing of government tax policy to “now become the focus of the Senate Inquiry and intense public criticism”.
Ms Weiss said PwC’s attempts “improperly downplayed the severity of the TPB matter and minimised the significance of the underlying behaviours, which have given rise to significant adverse media, both domestically and globally”.
Mr Seymour characterised the scandal as a “perception issue” after former head of international tax Peter Collins was banned by the Tax Practitioners Board for breaching confidentiality deeds.
Mr Collins shared confidential tax information from private government consulting sessions with others in the firm, allowing them to concoct aggressive tax schemes ahead of 2016 laws.
Ms Weiss said evidence produced by the TPB and released to the Senate “indicates that members of the firm’s leadership had information that should have caused them to question the conduct of the partners involved but that they did not do so”.
“The publication of this evidence and the firm’s public response have further eroded trust and confidence in the firm,” she said.
Ms Weiss also took the local PwC to task for “little to no accountability for the actions and inactions of those responsible for these matters, and the actions that have been taken were unduly delayed”.
She said the hierarchy was concerned over “consulting engagements that have been beset by poor risk management”, pointing to “a matter in which the firm was engaged by a government agency to evaluate a debt recovery practice, determined that the agency had overstated the benefits of the practice and then allegedly acceded to the agency’s request not to produce a critical report (while still collecting its engagement fees)”.
PwC was contracted to provide an external review of the so-called Robodebt recovery scheme by Department of Human Services secretary Kathryn Campbell.
However, no report was ever provided.
Ms Weiss also questioned the credibility of PwC’s interim CEO, Kristin Stubbins, after a NSW inquiry raised alleged potential conflicts of interest over her former position with the South East Sydney Local Health District.
In response to Ms Weiss’ missives, PwC inserted senior figures across the firm to control the operations of the Australian partnership, saying “the firm’s acts and omissions have exposed multiple member firms and clients across the network to potential risk, regulatory inquiry and reputational harm”.
She demanded PwC run all communications and responses through the global arm.
Kevin Burrowes was installed at chief executive locally in response to the scandal, and initially was presented as a cleanskin in the crisis.
Documents released by parliament show the English PwC partner first came to Australia on May 23 last year, and returned again in June.
Ms Weiss has visited Australia on at least four occasions since May 2023.
Labor Senator Deb O’Neill said the documents reveal the extent PwC International went to block attempts to unmask the scandal, under which there was deliberate misuse of confidential Australian government tax information to sell new strategies to clients.
Senator O’Neill said the documents showed PwC International threatened the Australian arm with expulsion from the global franchise “if it dared to freely co-operate with the legitimate inquiries of this parliament”.
“This is a blatant and deeply inappropriate form of intimidation,” she said.
“The full implications of PwC International’s clear intent to interfere with Australian parliamentary, regulatory and legal authorities must be determined.”
The release of the documents comes after days of legal tussles in which PwC attempted to claim their confidentiality.
Senator O’Neill said “these efforts are reminiscent of PwC Australia’s initial claims of legal professional privilege, through which they sought to evade Australian regulators and escape accountability for the tax leaks scandal itself”.
“Details of PwC’s misconduct, and the steps taken by PwC International to firewall itself from the Australian firm and protect its global reputation, are of significant public interest.”
Greens Senator Barbara Pocock said the letters raised questions about “who is really pulling the strings behind the veil here, and whose interests are being served?”
“Certainly not those who want to see large Australian entities robustly governed, with public accountability and transparency,” she said.
“PwC operatives – whether local or global – are sadly all too consistent in a pattern of withholding critical information about the scandal within their walls.”
As recently revealed to a parliamentary inquiry, Mr Burrowes is being paid more than $1.2m extra for a consulting role with the global firm in addition to his Australian wage.
This is despite earlier telling a Senate inquiry he was paid $2.8m.
Senator Pocock said PwC “resist requests for information, push for confidentiality and manipulate legal professional privilege where they can”.
A PwC Australian spokeswoman said it “continued to co-operate with parliamentary committees and ongoing investigations”.
The documents on Friday also reveal internal notes made by PwC’s former general counsel, Meredith Beattie, of a phone call with former chief executive Luke Sayers.
The call came immediately after a February 2020 meeting with Australian Taxation Office second commissioner Jeremy Hirschhorn, who took issue with PwC’s breaches of confidentiality and its aggressive tax advice, and attempts to block tax office investigations.
Mr Sayers has repeatedly told parliament he cannot remember much of his conversation with Mr Hirschhorn nor with Ms Beattie and has no documents from his time as CEO.
But Ms Beattie’s notes show she was told by Mr Sayers he was met with an aggravated and aggressive Mr Hirschhorn.
The notes allege Mr Hirschhorn told Mr Sayers PwC was not co-operating with investigations and its legal professional privilege claims “amounted to breaches of false and misleading statute”.
PwC had used legal professional privilege claims to attempt to block the release of thousands of documents tied to the aggressive tax schemes shopped around by Mr Collins.
Ms Beattie writes Mr Sayers “said that he never thought he would say this but he actually believes (redacted) more that PwC”.
Senator Pocock said the notes from MS Beattie “also further undercut former CEO Luke Sayers’ account of his engagements with ATO officials”.
“These notes would seem to highlight the ethical apathy and failures of accountability for the misconduct which occurred on his watch,” she said.
A spokesman for Mr Sayers said he “addressed each of these issues extensively, including the actions he took, and had nothing further to add”.
Documents reveal PwC International threatened to expel local firm if it co-operated with scandal investigation without permission
PwC has been accused of interfering in Australia’s political and regulatory affairs after documents revealed the Big Four accounting group warned its local firm against co-operating with investigations into a damaging tax leaks scandal without permission.
The Australian Senate published documents on Friday that included a letter from Diana Weiss, PwC’s global counsel, sent to PwC Australia last year. She wrote that the local firm needed to comply with a set of remedial actions or face suspension, or expulsion, from the global network.
A drastic move by PwC International to take control of PwC Australia last year followed the publication of internal PwC emails by the Senate in May. They revealed a partner in its tax practice had used confidential information from government meetings to assist his colleagues in winning new business from multinational technology companies.
The Weiss letter, sent in May two weeks after PwC launched a review of its Australian firm, stipulated that PwC Australia should not provide “any regulator or other governmental or legal authority any formal, significant or substantive submissions or responses” without approval from Weiss and a representative of PwC International’s leadership team.
The letter said Weiss and the network’s representative also had to sign off any decisions related to the accountability of individuals regarding the tax leaks scandal.
Deborah O’Neill, chair of the Senate committee conducting the inquiry into the consulting industry, said on Friday that the Weiss letter demonstrated, “in crystal-clear detail, the lengths to which PwC International went in its attempt to inhibit transparency and accountability in the wake of the tax leaks scandal”.
“The full implications of PwC International’s clear intent to interfere with Australian parliamentary, regulatory and legal authorities must be determined,” she said, adding that the Australian public deserved to know how PwC International had acted to “firewall itself from the Australian firm” to protect its global reputation.
The Weiss letter was also sent to the firm’s global chair Bob Moritz and partner Kevin Burrowes, who was named as chief executive of PwC Australia in June last year, a month after it was sent. It said the tax leaks scandal had caused “ongoing reputational and global brand damage” to PwC.
PwC Australia declined to comment on the senator’s statement, and PwC International was not immediately available for comment.
The scandal provoked an ongoing investigation into the actions and culture of PwC Australia — and the wider consulting industry — and led to repeated calls for the global unit to release details of its own investigation detailing which international partners used the confidential information.
Despite the release of the Weiss letter, the Senate documents revealed that two subsequent letters related to the remediation process were not provided to the Senate, as they contained “commercially sensitive” and “personal sensitive” information.
PwC this week said Asia-Pacific profits declined nearly 13 per cent in the year to June, as it lost market share as a result of scandals in Australia and China.
