KPMG’s ‘wolves’ have not finished yet - If Corporations Are People, They Should Be Subject to the Death Penalty
Workplace investigations R Us: Allens paving the legal road to nowhere
Look around corporate Australia and you will see a panoply of these contrivances, where the secret to success is not to look at all.
Allens partners Ross Drinnan and Chris Kerrigan, plus managing partner Marc Kemp front the Parliamentary Joint Committee on Corporations and Financial Services, in Canberra last month. Alex Ellinghausen
The KPMG audit scandal continues to reverberate through corporate Australia. Macquarie Group is only the latest to dump the firm as auditor. Macquarie non-executive director Michelle Hinchliffe – a conflicted former KPMG audit partner who concerned herself unduly with the company’s recent audit tender process – is now on professional deathwatch, likely to follow former Westpac director Peter Nash (and former KPMG chair) into the NED knackery. Macquarie chairman Glenn Stevens, meanwhile, is enormously diminished by his condescending dismissal of disquiet about the tender process as “silly talk”.
KPMG’s primary misconduct was, of course, the gross breaches of trust committed against the firm’s clients by its senior audit leaders. Yet the secondary – and, as always, more damaging – misjudgement was the attempted cover-up, and the egregious treatment of the internal whistleblower whose complaint has now been proven spectacularly factual.
The blockbuster parliamentary hearing three Fridays ago brought into sharp relief the critical enabling role played by law firm Allens last year in whitewashing the whistleblower’s complaint.
Despite agreeing with KPMG on a scope of work that included “targeted searches and extraction of emails and other documents stored on KPMG’s systems”, Allens’ investigating partners Ross Drinnan and Christopher Kerrigan elected not to conduct those searches at all.
After interviewing KPMG audit partners Eileen Hoggett, Paul Rogers and Kim Lawry (all of whom have now left – or are in the process of leaving – the firm in disgrace), Allens’ report found them to be “candid and credible”. On the explicit basis that all three admitted to Allens they had improperly shared Lendlease board papers, Drinnan “formed a view… that the forensic searches of [their] emails were disproportionate in the circumstances.” They admitted they were dodgy, therefore we can trust them. Say what?
The Seyfarth Shaw associates who trawled through Ricky Le Blanc’s WhatsApp photo roll are still on stress leave, undergoing groundbreaking PTSD therapies in Switzerland.
Drinnan is always forming a view, and isn’t it a terrific expression? To form a view is to imply the erudite outworking of a sage. It is to say Ross stroked his chin behind his mahogany desk and were you his equal – respectfully – you’d see things the same way.
In truth, when Drinnan professes to have formed a view, he is verbally overcompensating for his tendentiousness; that is, for arriving at his desired conclusion quite in spite of the entire gamut of information available to him.
Former KPMG chief operating officer Eileen Hoggett. Alex Ellinghausen
KPMG eventually got around to those forensic searches, and they turned up Eileen Hoggett’s immortal email inviting a colleague to “sensitively” inspect confidential Lendlease documents stored in her office locker “without letting too many people know”. What followed at KPMG closely resembled the Red Wedding on Game of Thrones.
The 360-degree feedback on Allens’ performance here is wholly bipartisan. Labor Senator and inquiry chair Deb O’Neill compared the firm’s partners to Pulp Fictioncharacter Walter Wolf (played by my old mate Harvey Keitel). She wondered, “I don’t know how this system… allows lawyers to be paid to come in and allow their names to be used as investigators when what you’re being asked to do is something totally at odds with what ordinary Australians think is an investigation.”
“It’s pretty clear that there were manifest inadequacies,” said Liberal Senator Dave Sharma, “and you failed to take steps that I would think a regular investigator would take in the ordinary course of affairs. What assurance can we have that we should ever accept an Allens investigation of this sort again as credible and trustworthy?”
“I regard those comments as unfair and I disagree,” Drinnan protested, though fell silent for the first time this millennium when invited by Sharma to make his case.
Unlike in other types of legal work, rarely is the methodology of these investigations unmasked. The Parliament has done us all an enormous favour here by laying bare Allens’ incurious workmanship, which would otherwise have remained obscured by legal professional privilege. It alone had the power to rub out the large sightscreen Drinnan had wheeled into place.
Sightscreen attendant: Allens partner Ross Drinnan at a parliamentary inquiry in June. Getty
Allens’ work for KPMG is only the latest unedifying case study of law firms’ lucrative sideline in the dark art of workplace investigations. Crane your neck around corporate Australia and you will see a panoply of these contrivances, all directed at the pretence of being objective and thorough, and of providing moral cover under the most important cover of all: LPP. Yet we can all plainly see they are less inspector general than Inspector Gadget.
Seyfarth Shaw was once doing a roaring trade, brought in by the Fortescue board to investigate the behaviour of executive chairman Andrew Forrest (“None of the matters [raised by the complainant] were substantiated”) before investigating the conduct of Richard White for WiseTech’s board. The Seyfarth Shaw associates who trawled through Ricky Le Blanc’s WhatsApp photo roll are still on stress leave, undergoing groundbreaking PTSD therapies in Switzerland.
White threatened to sue WiseTech’s independent directors for defamation if they released the report, so the directors all resigned. Even the sanitised summary of Seyfarth Shaw’s findings included that White misled the board about his sexual relationships with both an employee and a supplier, and with the latter consummated a service contract for services that to this day remain unascertainable to anyone but him. Can you imagine the full version of the report?
Seyfarth Shaw made the rookie error of looking properly, and that’s the last time its phone will ever ring. Don’t they know the secret to success in this game is not to look at all? The boys at Allens must’ve looked at them askance, saying, Strip them of their practising certificates, they don’t have the ticker for this kind of work.
The game that’s being played here by Australian companies – and being played very well – is, Let’s look like we’re doing something… *ruffles papers*… let’s announce an investigation by a prestigious law firm. Meanwhile, they’ve isolated the complainant and cut off their income.
These companies know corporate whistleblowers are not your typical unfair dismissal types. They are people with the photo negatives of misconduct but also people with bills to pay. Their consciences have been activated but they are deep in lifestyle creep with their multimillion-dollar mortgages and school fees. So along comes Mr Wolf and says, Which of my oppressive deeds would you like to sign in lieu of my thorough investigation?
Sometimes it all goes to shit and you end up with a highly credible complainant like Super Retail Group’s general counsel Rebecca Farrell, who says, F--- it, I’m professional toast, Super Sally Pitkin’s cadre is seeking to crush me, but I’ve got nothing to lose, so I’m going to stand and fight.
Brett Heading of Hamilton Locke – Super Sally’s fellow grandee of the Australian Institute of Company Directors' Queensland chapter – conducted a thorough investigation into the multiple whistleblower complaints that CEO Anthony Heraghty was having an affair with HR boss Jane Kelly. The pair was exonerated in a jiffy and Super Retail then engaged in outrageously aggressive legal tactics against Farrell and her co-complainant Amelia Berczelly (may I humbly commend to you my column on this for Rampart).
Honestly, what the f--- would these lawyers know about investigating anything? They’re not hard-bitten old cops who assume everyone is lying, even the people paying them. They’ve hung out their shingle Workplace Investigations R Us and it’s raining cash, but they certainly don’t know how to interview people. They don’t know how or where to look. Their principal objective is keeping sweet with the people who commissioned them.
Heraghty was lying through his teeth and Sally Pitkin concluded her pitiful career as a laughing stock. The affair blew up the board and management team of a $3 billion company and handed it $30 million in legal expenses, including the fees of Super Retail’s legal advisers – wait for it – Ross Drinnan, Sonia Millen and the team at Allens. Who ya gonna call?
Get Allens on the phone: Corporate Travel Management chairman Ewen Crouch and founder Jamie Pherous. David Rowe
Then there’s Corporate Travel Management, chaired ingloriously by former Allens partner Ewen Crouch. The company has been devastated by a slowly unravelling fraud (about which I’ve previously said plenty), but never fear, Crouch is on the case. He’s been Corporate Travel’s chairman for seven and a half years, and was warned at the outset about the gremlins in the company’s financial accounts, but today is a new day. When its shares traded for the first time in 12 months on Thursday – itself a miracle – 86 per cent of their value was incinerated.
Like clockwork, Crouch has commissioned a governance review. Who ya gonna call? Asking which law firm conducted that review is like asking which consulting firm Jayne Hrdlicka just brought in to shadow-run her latest company (hint: it rhymes with Jayne).
Allens’ findings on Corporate Travel were a masterclass in euphemism and even gaslighting. “A genuine commitment to governance uplift was evident,” it found, when the exact opposite has been overtly true for years.
“There was a gap between governance on paper and governance in practice,” was my personal favourite, and what Allens was really saying there about its star alumnus is that he doesn’t know the difference between substance and form. Ewen needs a little uplift.
The open secret here is that lawyers doing governance reviews and workplace investigations are completely out of their lane. A numerate lawyer is a rare lawyer. One who understands accounting is rare, one with commercial acumen is rare, and Ewen Crouch has shown the nation in technicolour that he is not a rarity. There is a case to be made for lawyers in the boardroom, but Crouch is not supporting evidence.
The worst lawyers are myopically enslaved to the process at the expense of their solemn commitment to the administration of justice. They form many a view, respectfully, when, in fact, they’ve never really been there at all.
Law firms are labour hire firms with influence operations across the top. They trade influence in large corporations and they flog warm bodies. That’s the model. The idea that this qualifies them in any way to appraise governance or conduct forensic investigations or form a view on workplace culture is complete nonsense.
When chairman Chris Roberts conducted his own investigation at Amcor, he chose a new CEO in Ken MacKenzie. Illustration: David Rowe
Here’s a little piece of contrast: when the Amcor board learnt from a whistleblower that its CEO and Australasia boss were potentially implicated in a packaging cartel in 2004, newly installed chairman Chris Roberts took a weekend to get to the bottom of it. He personally verified what had gone on and decided immediately to clean house, to go to the Australian Competition and Consumer Commission and fall on its mercy.
Roberts and the board accepted the immediate resignations of the CEO and his lieutenant because there had to be a better option than the blokes allegedly running side-deals to juice Amcor’s margins. He rummaged around in the cupboard for a replacement, found this young fella named Ken MacKenzie, and the rest is history.
I’ve said this too many times to count, but when you boil it down, governance is judgement, which is the only thing company directors are being paid for yet the only thing they never want to be judged on.
That is the job. It involves a little bit of work, getting your elbows out, and even forming a view – not asking Ross Drinnan to form it for you.
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