Thursday, November 21, 2024

Former PwC partner Paul McNab points the finger at international links to tax scandal


Former PwC partner Paul McNab points the finger at international links to tax scandal

A former PwC Australia partner has named an American heavyweight within the firm allegedly linked to its tax leaks, potentially broadening the scandal to its international offices. 
 DAVID ROSS November 20, 2024 


A former PwC Australia partner has revealed for the first time the identity of a key international figure in the firm allegedly linked to its tax leaks, naming an American tax heavyweight in a move that opens the door for the scandal to spread to the firm's global arms.

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

Former PwC partners Wayne Plummer and Richard Gregg.

PwC Australia settles with three former partners for millions

Ex-PwC partner sues firm over retirement payments

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AUDIT THEM HARDER: Over 800 IRS employees owe millions in back taxes after audits pushed by Ernst.

Over 800 Internal Revenue Service employees still owe millions in back taxes despite heavy criticism from Sen. Joni Ernst (R-IA), who is hoping the level of tax waste will be squashed by billionaire Elon Musk, the newly tapped co-leader of the Department of Government Efficiency.

In a letter to the Iowa senator sent on Nov. 8 and shared exclusively with the Washington Examiner, the IRS noted that of the 2,044 employees who reported having balances totaling more than $12 million, 860 employees still have not paid overdue taxes. Only 20 of the 70 employees who “willfully evaded” paying their taxes were removed.

“We haven’t seen a tax revolt like this since the Boston Tea Party,” Ernst said in a statement. “If hardworking Americans dodge taxes, they are faced with steep fines and imprisonment, but it appears that tax collectors in Washington believe those rules are for thee but not for me.”

 







Wednesday, November 20, 2024

Bill Shorten - Global Scam Alliance issues report that says consumers worldwide have lost $1 trillion on the last year

Bill Shorten: Making myGov unhackable


Who makes fake websites?  Jack Whittaker has long been involved in helping victims of pet frauds, which advertise online and sell pets that don’t exist.  These scams are run from Cameroon and, no surprise, the same scammers advertise lot of other goods that they never deliver. Jack interviewed many people in Cameroon who build the fake web pages these frauds use, and it is fascinating. His thesis, here, also explains why it is not easy to take down these web sites, since they use hosting and domain name services that are at least complicit. 

 



Where are we with scammers using Western Union & Moneygram to get money?  Both companies have been sued the FTC over allowing their services to be used by scammers to get money from victims, often with agents who were either scammers themselves or were complicit. It appears that these enforcement efforts have been largely successful. I’ve not seen a report on losses through either company for several months. Now the frauds often send people in person to pick up the money or have them use Bitcoin ATM’s.
 

Fraud Studies: Here are links to the studies I’ve written for the Better Business Bureau: puppy fraudromance fraud; BEC fraudsweepstakes/lottery fraud,  tech support fraudromance fraud money mulescrooked movers, government impostersonline vehicle sale scamsrental fraud, gift cards,  free trial offer frauds,  job scams,  online shopping fraud,  fake check fraud and crypto scams
 
Fraud News Around the world
Global Scam Alliance issues report that says consumers worldwide have lost $1 trillion on the last year
India arrests nine at call center operating tech support scam that targeted UK and Australian victims
South Carolina: Ten convicted for multi-state identify theft and fraud ring
Study finds 56% of rental ads on Facebook Marketplace are scams
UK gives banks three more days to delay paying when they suspect their customer is a scam victim
US lawyers are getting emails supposedly from court filing systems; phishing and malware in attachments
International students from China being used as money mules
Boston: Man (Vietnamese?) convicted of laundering fraud money through bitcoin; handled more than $1 million
Canada orders TikTok to stop doing business there; cites national security
Spain arrests four in online rental fraud scheme
Hackers are using fake government email addresses to send to tech companies looking for personal information on users
BBB releases new report on fraud issues affecting the military and veterans
Humor FTC and CFPBVirus Benefit Theft Kidnapping and forced to scamBusiness Email compromise fraud Bitcoin and Crypto FraudRansomware and data breachesATM SkimmingJamaica and Lottery FraudRomance Fraud and Sextortion 

The seven major unanswered questions ahead of Mineral Resources’ hotly-anticipated annual general meeting

 

Mineral Resources’ corporate governance scandal has left a trail of burning questions, setting the stage for the most anticipated annual general meeting in recent memory.



Embattled managing director Chris Ellison on Thursday will make his first public appearance since it emerged he had dodged tax on co-owned offshore companies, misused company resources for his own benefit, and allegedly profited on deals at the expense of MinRes shareholders.
Those shareholders, who have seen their MinRes shares fall 45 per cent since the last AGM, will soon have the forum at MinRes Park in Lathlain to try and squeeze some answers out Mr Ellison and the rest of the board.

1. Can Mr Ellison’s boardroom colleagues still say his settlement with the ATO was not material? 

The revelation that kicked this whole saga off was that Mr Ellison finalised a secret settlement with the Australian Taxation Office last year after being involved in an offshore tax evasion scheme.
Since this came to light last month MinRes shares have has lost more than 20 per cent of their value, equating to about $1 billion of damage.
The MinRes board admitted it knew about the settlement before the end of 2023 but did not believe the matter was price sensitive. The subsequent share price drop might suggest otherwise.
If angry shareholders take them to task on this on Thursday will they change their tune, or double down?

2. When will Mr Ellison step down as chief executive?

The MinRes board has given its founder between 12 and 18 months to step down as boss.
The super funds dotted throughout the top end of the company’s share register want this to happen sooner and some analysts have said the long goodbye leaves a dark cloud lingering over MinRes’ future.
MinRes says the protracted timeframe allows it to find a suitable candidate and facilitates a smooth leadership transition. But will they cave into pressure and speed things up?
There has been no indication yet if he will just step down as boss, or cut ties with the company altogether, which leads to the next pressing question.

3. Will the outgoing chief leave MinRes altogether?

Despite the scandal, MinRes’ leader since its inception on the ASX in 2006 still holds a strong hand in determining the company’s future.
He is the number one shareholder and has another major investor — L1 Capital — in his corner.
“We have engaged with many large MinRes shareholders in recent days and we understand there is widespread shareholder support for Chris remaining as CEO over the medium term,” L1 Capital said last week.
On top of the support from the big end of town a legion of rusted-on mum and dad shareholders that comprise a big chunk of MinRes’ register have made a motza by backing Mr Ellison over the years.
The man himself told this masthead in May he had no plans to leave MinRes for the next decade.
“I don’t expect to go anywhere in the next ten years. This is my hobby,” Mr Ellison said.
Will he really go quietly into the night? Even if he leaves as the head honcho will there be an empty chair at the MinRes leadership table waiting for him?
If there is no golden parachute, can the board say with any confidence that he will not try to roll them with his supporters?

4. Did the board know about his Bullsbrook property deal?

Many of Mr Ellison’s troubling dealings occurred in the mid-2000s and the current MinRes board can distance itself from them to some extent.
But that will not pass muster for recent revelations that MinRes in May paid $45 million for a 49.04 per cent stake in the Northern Gateway Master Trust, which owns an industrial park in Bullsbrook.
The balance is owned by Northern Gateway Investments, a company whose owners include Mr Ellison and his wife Tia. The stake MinRes bought is valued in the company’s 2024 annual report at $17m, but there is no other detail.
Mr Ellison’s relationship as a co-owner of Northern Gateway Investments is also not mentioned.
Either the board knew of the transaction and signed off on it, or it had no clue what was happening. MinRes declined to comment when asked by The West Australian which of the two scenarios it was.
Either option is not a great look.

5. Will MinRes keep using Mr Ellison’s daughter as a shipping agent?

Numerous related-party transactions involving Mr Ellison have surfaced in recent months, including that MinRes encourages ship owners transporting the ore it exports from WA to use a shipping agent owned by Kristy-Lee Craker.
One of the other companies she is linked to directly does marine work for MinRes.
MinRes last week said these companies linked to her were asked to repay $158,000 after an investigation into a “rent relief” arrangement that lasted for 11 years up until 2023.
The vast majority of MinRes’ exporter still use Ms Craker’s firm — Ship Agency Services — as their agent, port data shows. Will the company look to sever ties and start fresh by recommending a new agent?

6. What is the process for James McClements’ replacement?

Mr Ellison has not been the only casualty of the ongoing saga.
MinRes chair James McClements is set to step down either at, or before, the company’s 2025 annual general meeting. Who will replace him and what the process will be to fill his seat remains a mystery.
The establishment of a separate ethics and governance committee also throws another curveball, given the chair is absent from the newly-formed team. Will the new chair also be frozen out? Who will this committee report in to?

7. What will Mr Ellison be able to say, if anything?

Clearly all eyes will be on the MinRes founder. He is normally extremely outspoken and not afraid to go off script with expletive-laden rants. But this year the circumstances have changed and the stakes are much higher.
ASIC is knocking on the door and MinRes have lawyered up to the hilt. Legal eagles usually advise their clients to say as little as possible in public forums.
Will Mr Ellison rein it in and toe the line? Or is the temptation to get his side of story out there amid a barrage of criticism too great?