Why PwC global put its own man in to run PwC Australia / This sad saga says a lot about how the APS works

PwC bosses caught in sham “complaint” against top professor

Christians & Magalhães: Why Data Giants Don’t Pay Enough Tax

Rotten To The Core: The EU's Court Of Justice Decision In Apple

Why PwC global put its own man in to run PwC Australia 

By Edmund Tadros 

1 Dec 2024

PwC International decided to parachute in its own man, then-senior UK partner Kevin Burrowes, to run the Australian firm in June 2023 because local leaders had repeatedly failed to co-operate with its internal investigation into the tax leaks matter after being warned to do so a month earlier.

The leaders of PwC International were also furious that PwC Australia’s then-leaders had failed to obtain approvals for parliamentary responses and had failed to adhere to previously agreed-upon media comments.

Global leaders also complained that in the five weeks following the main May 2023 leaks revelations, the local firm’s standing in the public eye had become even worse.

The letters were sent from both PwC’s global general counsel Diana Weiss and current global chairman Lisa Sawicki and copied in the top global leaders in the firm as of mid-2023: global chairman Bob Moritz (from left), Asia Pacific and China chairman Raymund Chao, UK senior partner Kevin Ellis, senior US partner Tim Ryan and Europe chairman Petra Justenhoven. Only Ms Justenhoven remains in the Network leadership team. Bloomberg, LinkedIn

The details of the falling out – and eventual patching up – of the relationship between the firm’s all-powerful global leaders and its Australian leadership are outlined in a series of remediation letters between PwC International and PwC Australia, which were handed over to the joint parliamentary inquiry into the structure of the big four consulting firms and made public last month.

The letters, from May and June 2023 and March 2024, provide an unprecedented, and world-first, insight into the extent of the power that PwC International has over its member firms, which includes PwC Australia. PwC International is the London-based company that runs the PwC brand and polices the member firms that operate within its global network.

The three full letters (which you can read at the end of the article) were released after The Australian Financial Review published excerpts from the June 2023 letter showing PwC International had used its secretive network rules to put PwC Australia under its control after ruling the tax leaks scandal was causing “ongoing reputational and global brand damage” to the firm.

In September this year, PwC International used these same powers to install another senior UK partner, Hemione Hudson, as CEO of PwC China – a member firm that has been punished by the Chinese government over its failures related to its audits of now-collapsed real estate company Evergrande.

The PwC Australia tax leaks scandal involved former partner Peter 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 to develop.

PwC Australia has previously denied that there were ongoing problems in its relationship with PwC International. In a November statement, the local firm said PwC global “continues to support PwC Australia’s transformation and efforts to shape a future where our firm’s trust is rebuilt.”

‘Remedial actions’

The initial May 2023 letter from PwC International to PwC Australia outlined the “remedial actions” the Australian firm had to take due to a range of problems including the tax leaks scandal, its problematic tax division and consulting issues such as the firm’s involvement in Robodebt debacle.

The actions included obliging the firm’s Australian leaders to co-operate with PwC International’s investigation into the local firm’s operations and to obtain approval from global PwC representatives when responding to parliament, regulators and the media. The cost of the remedial action, which included paying for the time of senior PwC global representatives, would be borne by PwC Australia partners.

The second letter, sent about five weeks later on June 2023, shows that the international PwC representatives believed that events had spiralled out of control.

By this stage, PwC Australia CEO Tom Seymour had stepped down as leader and head of auditing Kristin Stubbins had been appointed interim CEO. The firm’s new local leaders tried to take control of the problem by commissioning a detailed investigation into the leaks matter and by taking other unprecedented steps, such as forcing nine senior partners to step down from their leadership roles.

Outside of the firm, Treasury had referred the leaks matter to the Australian Federal Police for investigation, the firm was cut off from winning new work from the Commonwealth, and a Senate committee looking into consultants was constantly criticising the firm.

Multiple failures

By this stage, PwC International leaders had grown more restless, complaining in the second remediation letter that PwC Australia had “failed to consistently comply with the Supervised Remediation requirements set out in the” first May 2023 letter.

“These failures have included: 1) incomplete and untimely responses to requests for documents and information that are reasonably required in order to properly conduct the Network Investigation … 2) failures to fully co-operate with and supply information to the Network Representative … 3) failure to timely comply with the review requirements of [any communications and media inquiries] … and 4) failure to obtain approvals for all [regulatory] submissions.”

PwC International then directed PwC Australia to install Mr Burrowes as CEO in the letter.

The first two letters show that PwC global was clearly “not happy about the way the Australian firm handled the initial issues,” said Francine McKenna, a US-based accounting expert, academic and writer of The Dig substack, which covers accounting, audit and corporate governance issues.

Ms Mckenna said that it was also clear that the global firm was saying it no longer trusted the Australian firm “to look out for the interests of all the other member firms” and the interests of the firm’s all-important multinational clients.

PwC International also wanted to contain the scandal to Australia because it had the potential to “potentially create liability, regulatory and client reputation” issues for the firm around the world, she said.

By the time the third letter was sent in March of this year, Mr Burrowes was being congratulated by PwC International for the positive steps that he and the other new leaders had taken to “restore trust and confidence in PwC Australia”.

The steps included pushing through wide-ranging reforms to the governance of the firm, installing an independent chairman and directors, and replacing most of the senior leadership within the firm.

Despite these actions, the joint parliamentary committee concluded in November that PwC International and PwC Australia were engaged in an ongoing cover-up of the extent of the firm’s tax leaks scandal and the potential involvement of current and past overseas partners. In a response to that report, PwC Australia issued a statement outlining the reforms made at the firm after Mr Burrowes took over as CEO.

“While a challenging time for our firm, we have confronted and apologised for past failings and commenced our comprehensive transformation journey … the actions of the past do not reflect the firm we are today. We have more than 6000 committed, hard-working people and partners who come to work to deliver the best outcomes for our clients, communities, and each other,” the statement read.

LinkedIn - Associate Professor Andy Schmulow  

ALL VIEWS STRICTLY MY OWN AND NO ONE ELSE’S. 

Internationally recognised expert in conduct risk in financial services. Consultant, advisor to governments, academic

Here’s what this article exposes:

(1) Bob Moritz and Diana Weiss should have an Interpol warrant issued for their arrest.

(2) PwC International installed Kevin Burrowes in order to ensure that PwC Australia would prioritise obtaining permission from PwC International before it cooperated with demands for disclosure by our regulators and Parliament. Burrowes has been congratulated for his achievements in this regard. PwC International defying Australia’s authorities is outrageous and unacceptable. Burrowes should have his work visa cancelled and he should be deported. And,

(3) this quote: “PwC International also wanted to contain the scandal to Australia because it had the potential to “potentially create liability, regulatory and client reputation” issues for the firm around the world, she said.” That’s code for maintain the cover-up lest the rest of the global criminal cabal called PwC is exposed. 

PwC is a cancer. They are a threat to Australia. I’ve been taken to task for using that term (by lightweights like Peter van Onselen), but the evidence is overwhelming. Shut PwC down. It’s the only safe thing to do. 

This sad saga says a lot about how the APS works By Denis Moriarty

 By Denis Moriarty November 30 2024 

One of the reasons Donald Trump got elected is that he was able to persuade half of the US that the government wasn't working in their interests.

In Australia, I can fight against that belief in one of two ways: I can try and persuade you that the government is working in your interests, or I can kick the government up the arse until it is.

Case in point. The Australian Taxation Office (ATO) has made a change to the way it deals with not-for-profit organisations (NFPs), basically demanding that most organisations lodge a special self-review to show that they are indeed exempt from paying income tax. 

You don't really need to know the details of the change, not here; just accept that the scheme was originally intended to apply only to the bigger organisations and was somehow expanded to apply to the whole lot, and after that there was enough pushback to bring on a Senate inquiry.

The sector responded with a flood of complaints including the lack of communication from the ATO, the complexity of the self-review process, the additional stress for small volunteer-run organisations, and the increased costs to NFPs forced to seek expert legal advice.

The ATO responded and stonewalled (as all good bullies do) that no, the changes were simple to execute, had been well communicated, had been introduced after widespread consultation, and were designed to ensure transparency and integrity, not to raise revenue.

He said, she said, right? Except for the numbers. The ATO thinks 155,000 NFPs are affected. How many of them have in fact followed the new rules? Eleven-thousand. All of the large organisations, basically, and virtually none of the small ones.

The ATO has flatly no idea of how the volunteer sector works. They can get a handle on the ones that have government contracts, but beyond that they can't get their finely trained economics minds around the plight of a country dancing club secretary staring helplessly at an online form trying to decide whether the club should come under "ballet" or "other".

If you held a school sports carnival and only one in 13 of the kids made it to the finish line, you'd say the hurdles were too damn high. And if the sports co-ordinator argued with that, you'd say they had absolutely no idea about how their students operated, and absolutely no idea of what the point of the exercise was, and they should probably throw in their career and go and join the ATO.

The Australian Taxation Office building in Canberra. Picture by Karleen Minney

And why should you care? Because this debacle says a lot about how the public service works, or doesn't, and how ministers are being white-anted and deluded by the bureaucrats.

The public service tries to standardise everything with the same set of rules, because it's deeply afraid of the consequences of anything - anything - going wrong. 

I know this because I've been the deputy secretary of a government agency as well as a commissioner. The difference is that that was 30 years ago, when ministers were in charge and told bureaucrats what to do. Times have changed.

Governments believe that people don't care about policies, they care about scandals, and every time there is a scandal they add another rule to the rulebook. They dislike, above all things, risk - any risk. And if you're against risk you're against innovation, and experiment, and variation, and everything that the NFP sector is good at, and you're in favour of legal opinions, and chartered accountants, and forms, and all the things that give small volunteer groups collective panic attacks.

The new policy isn't going to bring in more money; small NFPs don't have any. It'll cost money - the ATO has already added 25 new staff, who have, one imagines, quite a lot of time on their hands waiting for those other 144,000 NFPs to check in.

The ATO knew this would happen, because a review of Australian Charities and Not-for- profits Commission (ACNC) legislation in 2017 recommended a $1 million threshold to filter out the minnows, and they ignored it, probably because the review also recommended that the responsibility for the scheme be shifted from the ATO to the ACNC, where it should be. (The bloody ATO recently cut the not-for-profit section from its website home page and hid it behind all its other guff.)

READ MORE:

• We could ease cost-of-living pain on poorer households, but it would be awkward
  
• Child support system becoming a new tool for abusive ex-partners
• Yes, a small number die from vaccines. We can't let it play into anti-vax hands

Taking a decision based on first principles rather than looking for the minimum possible change goes against everything the public service has been trained for, which is why the NFP sector is such a rubbish tip of outmoded legal definitions and unworkable governance structures.

The poet William Blake said: "The same law for the lion and the ox is tyranny." Forcing groups with different needs, different interests and different capacities into the same grid simply serves to convince people that the system is designed to serve its own interests, not ours.

The bottom line is that we have something like 155,000 of these NFP groups, and we want more. A vibrant civil sector is a good thing. That's what we're aiming for. The more we turn the screws procedurally, the more volunteers are going to drop out. And the fact that the ATO and the minister and the government can't focus on that is a sign that something's very wrong with our institutions.

Dean Smith, the opposition charities spokesperson, knows what should be done. Maybe we do need a Trumpian reform agenda to stop all the nonsense and purge the useless bureaucrats.

ATO - your time is up.

• Denis Moriarty is group managing director of OurCommunity.com.au, a social enterprise that helps the country's 600,000 not-for-profits.