Ashurst denies investigating KPMG allegations, contradicting firm
Ashurst has denied investigating allegations made by a former KPMG executive, despite the accounting and audit giant telling parliamentarians, independent directors and the public it had engaged the law firm.
The firm’s handling of the allegations – including that partners used confidential information from clients to win audit work at other companies including Westpac – is under scrutiny after KPMG ultimately admitted to some the claims despite previously clearing itself of wrongdoing.
Ashurst partner Jane Harvey appears at the parliamentary inquiry on Friday. Getty Images
KPMG said that Ashurst had been called in to investigate the allegations, first formally made in May 2024, and had not found wrongdoing. The Ashurst investigation came after the firm’s own internal probe and was followed by another probe, according to KPMG, run by Allens last year.
However, Ashurst partner Jane Harvey told a Senate inquiry into the scandal on Friday the law firm had never been asked to investigate the whistleblower’s allegations. “We were not engaged to undertake an investigation and we did not conduct one,” she said.
Senator Deborah O’Neill, who is chairing the parliamentary inquiry into the matter, asked whether the lawyers were concerned that their company’s name “has been used to present erroneous information”.
Ashurst global managing partner Paul Jenkins said KPMG may have made a mistake before conceding that the information was simply untrue.
Former NSW premier Mike Baird quit the KPMG board after becoming dissatisfied with how accounting giant had handled the matter. He and two other independent directors who remain at the firm – Jane Hemstritch and Patty Akopiantz – demanded the review by Allens which ultimately substantiated some of the claims and led to the current crisis.
Those findings – and the commissioning of yet another review of the allegations – have upended the firm and led to the resignations of KPMG chief executive Andrew Yates and head of audit Julian McPherson.
Ashurst told the Senate inquiry that it had been brought in to advise on an employment matter connected to the allegations, but not the claims themselves. Between June and August last year, the law firm reviewed KPMG’s own investigation into the allegations before Allens was ultimately called in to revisit the claims made by the former employee.
Despite this, KPMG told Hemstritch that Ashurst was itself investigating the claims. Hemstritch went on to inform the former employee that Ashurst had “commenced an external investigation into your concerns”.
“So this email was sent to the whistleblower just before they signed a deed of release saying that an external investigation ... had already been commenced by Ashurst. That was not correct, is it?” asked Coalition senator Paul Scarr. “No, that was not correct,” Harvey said in response.
The first two investigations did not interview the whistleblower or request evidence from him, and he refused to participate in the third, which he described as a “sham” and “choreographed” to cover up the issues.
Allens is KPMG’s law firm of choice for partner litigation and audit negligence work, and its investigation found most of the allegations were unsubstantiated or lacked evidence. The investigations involved partners Christopher Kerrigan and Ross Drinnan. KPMG is also Allens’ auditor.
There is no suggestion Allens have not carried out their roles professionally.
The new Allens investigation will be overseen by a subcommittee of KPMG’s regional board led by deputy chairwoman Carmel Mortell, along with Hemstritch, Akopiantz and former SBS chief executive Michael Ebeid.
Last month, KPMG said that the earlier three investigations – by the firm itself, Ashurst and Allens – had “shortcomings” in their “rigour”.
“Has KPMG sought damages for botched investigations? Because basically they’re blaming you,” O’Neill asked Allens partners. “I actually don’t accept that they’re blaming us,” Allens managing partner Richard Spurio said.
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KPMG and Allens open the ‘legal privilege’ playbook
If anyone needed further proof the beleaguered firm has learnt nothing from PwC’s tax leaks scandal, Martin Sheppard has delivered.
It takes bravado to look Labor senator Deborah O’Neill in the eye and tell her that her parliamentary committee’s constitutional powers are cute, but ultimately unconvincing.
Yet that’s what KPMG and Allens plan to try at Friday’s audit leaks hearing.
Former KPMG CEO Andrew Yates, current chairman Martin Sheppard and former chief operating officer Eileen Hoggett will all face parliament’s questions on Friday. Bethany Rae
They plan to claim legal professional privilegeover essentially every requested document, according to a letter KPMG’s miraculously-still-employed chairman, Martin Sheppard, sent O’Neill this week. Even though privilege doesn’t apply in parliamentary hearings, and PwC’s identical strategy failed spectacularly.
In a five-page missive, Allens’ Andrew Maherand James Campbell assert that “substantially all of the documents” requested – relating to investigations into a whistleblower’s misconduct allegations at KPMG – are privileged.
It’s “not self-evident to us” that the committee’s order to produce them overrides Allens’ obligations to KPMG, they continue, and the Senate should join it in seeking clarity from a judge.
The committee doesn’t need any such clarity. Senate clerk Richard Pye has advised it that the Constitution and common law grant them this power.
Why rely on a judge to dismantle the law firm’s claims when it can just read Maher’s own marketing material instead?
In 2023, the Federal Court rejected an attempt by Ashurst (also caught up in the KPMG saga) to claim privilege over a Deloitte review into the Optus breach.
Maher promptly penned an Allens website column calling it “the latest in a line” of decisions exposing “the significant challenges in making legal privilege claims over investigation reports” following “alleged corporate wrongdoing”.
It is exactly what KPMG, Ashurst and Allens now seek to shield: the firms’ investigations and communications regarding the whistleblower’s auditor misconduct allegations.
Maher noted the Optus case reiterates that an investigation’s “dominant purpose” must be providing legal advice to attract privilege.
Justice Jonathan Beach ruled Optus failed this because the review was for “management purposes”. Beach gave “significant weight” to an Optus press release stating the board engaged it for this purpose.
If only he’d thought to tell KPMG! Sheppard and recently ousted CEO Andrew Yates issued press releases in March and mid-May declaring the lawyers’ inquiries were to “review our firm’s investigation”. No mention of legal advice.
In late May, Sheppard even pledged to report Allens’ findings to “clients, the committee, regulators and professional bodies”, echoing the client-sharing promises that Beach used as proof that Optus lacked legal purpose.
Senate clerk’s neat solution
KPMG’s months of denying wrongdoing doesn’t help its case. To prove a legal purpose, KPMG must show that the lawyers’ work was for legal advice or in anticipation of legal proceedings. Good luck coming up with a palatable way of saying “these documents are strictly secret because we actually anticipated being sued for wrongdoing, even if were insisting we were innocent”. Oh, and don’t forget we’re trustworthy.
While Allens and KPMG fairly note that releasing requested information could prejudice other inquiries, the Senate clerk has a neat solution: submit it to the committee in confidence, to be published only if and when any risk passes.
But these privilege claims aren’t just legal strategies. They’re a business model. One that the likes of Allens need to stay in place.
Maher writes of “privilege claim optimisation measures” in the Optus article. His colleague Christopher Kerrigan (who is appearing before the inquiry on Friday) advises in a separate article that investigations are conducted “in a manner that maximises the prospects of claiming legal professional privilege”.
KPMG is well aware of this, too. Part of the reason the big four made their (failed) attempt to open legal divisions in the 2010s was because of the apparent appeal to clients of being able to claim legal privilege over more advice.
The legal industry is already shitting itself at the prospect that its work may now be fair game for parliamentary questioning. It can’t afford for clients to be doing the same.
But at what cost? Over at Barangaroo, KPMG’s rank and file are thoroughly unimpressed with this attempt to shield the investigations.
It won’t end well for KPMG, if PwC’s example is anything to go by. Some staff believe the executives are dragging out the firm’s reputational pain to protect themselves.
As one auditor said, the firm’s clients are already grilling them about confidentiality. Now, they will just ask why KPMG cares enough about its own confidentiality to fight the Senate over it, but not enough about theirs to stop their data being misused in a bid to get new clients.
Meanwhile, Ashurst apparently knows a lost case (or a toxic client) when it sees one. Partner Lea Constantine sent a 200-word letter to O’Neill saying it was legally required to produce the documents (no arguing from them whether it had the power to do this) and to follow KPMG’s orders that they are privileged. It sounds like Ashurst even got a thinly veiled threat from KPMG about its professional duties!
So Ashurst would hand over its documents in a “password-protected container”, she said, and the committee and KPMG could work out what to do about it.
She’s up before the committee on Friday. As are Yates, Sheppard and other KPMG and Allens partners. Place your bets on how many times they repeat “privilege” before O’Neill combusts.
More on the KPMG audit leaks
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