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

Find out the inside scoop about Accenture, Deloitte, EY, KPMG, PwC and McKinsey. Sign up to our weekly Professional Life newsletter.



Ex-PwC Partner Blames Tax Scandal Fall-Out on Leaders' Failures


Deborah Nesbitt


A former Pricewaterhouse Coopers Australia tax partner has hit back against a claim brought by the firm which alleged he was responsible for the tax scandal that has plagued PwC for two years.

It’s the latest in a legal fight between Paul McNab and PwC over post-termination payments denied to him, which was filed in the New South Wales Supreme Court in January.

PwC’s cross-claim in the case, filed Nov. 14, alleged McNab caused “identifiable loss and damages” for the cost of investigations and inquiries into the leaking of confidential government tax information, “and the loss of all value in PwC’s government business which was sold to private equity fund Allegro Funds in a $1 distressed sale”.

PwC’s cross-claim alleged the damage McNab caused the firm outweighed any partnership payments it may owe him.

McNab breached the firm’s partnership agreement by knowingly receiving and sharing confidential information provided by former partner Peter Collins about consultations on government plans for a multinational anti-avoidance tax law, PwC’s claim alleged. Collins was barred from working as a tax agent by regulators in 2022, for breaching his government confidentiality agreement.

“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,” McNab said in a LinkedIn post on Wednesday. 

“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. 

McNab said he had not signed a government confidentiality agreement and had never provided a client with advice contrary to Australian tax law.

McNab’s dispute with the firm over partner post-termination payments began when he left PwC in 2020 for law firm DLA Piper. 

PwC named McNab as being involved in the leak in June 2023 and, after he resigned from DLA Piper the following month, denied him the payments. 

“It is implausible that the conduct alleged by PwC against McNab could be the cause of the tax scandal loss,” his Nov. 14 response to the firm’s claim said. 

His statement partly reproduced emails from Collins to him and other recipients including “persons from PwC Australia, PwC UK and PwC US” as evidence he was not alone in receiving and sharing the information. It indicates his lawyers will be seeking disclosure of more documents related to the leak by PwC.

A directions hearing in the case will be held on Friday, Nov. 22. PwC said it would not comment on ongoing legal matters. 


To contact the report responsible for this story: Deborah Nesbitt in Canberra at correspondents@bloomberglaw.com
To contact the editor responsible for this story: Rose Walker at rwalker1@bloombergindustry.com


22 Nov

10:00 am

2024/00032214

Paul Joseph McNab v Kevin Burrowes trading as PricewaterhouseCoopers

Civil

Supreme Court

Directions (Commercial)


Justice J Stevenson

Supreme Court Sydney

Law Courts Building
Court 10E Queens Square Sydney


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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

PwC Australia provides perfect example of how not to respond to an inquiry, says senator

PwC Australia provides perfect example of how not to respond to an inquiry, says senator

Senator Paul Scarr is maintaining the rage over PwC Australia and the time it took to provide crucial evidence for a committee inquiry.
TOM RAVLIC 
PwC Australia has given the community a case study of how witnesses to future parliamentary inquiries should not behave, according to a member of the powerful corporations and financial services committee.

Liberal Senator Paul Scarr said he was aghast at the firm’s failure to cooperate and provide information as early as possible during the inquiry chaired by ALP Senator Deborah O’Neill.

Details sought by the committee, which released its final report a fortnight ago, included the various aspects of the supervised remediation process PwC’s global network had placed the Australian firm under following revelations senior partners had shared information subject to confidentiality agreements.

The global firm also noted in its remediation correspondence the publicity PwC Australia received when it appeared before the robodebt royal commission.

Scarr noted the persistence of O’Neill in trying to get the relevant documentation from the firm so the committee had all of the necessary evidence on how the tax leaks saga came about and who ultimately bore responsibility for the firm’s culture.

“This will be held up for years to come as an example of how not to respond to a parliamentary inquiry and how not to deal with a crisis of confidence in relation to a major world-leading organisation,” Scarr said.

“I was aghast at some of the failures of PwC in the course of this inquiry … their failure to provide full, complete and accurate information at the earliest opportunity.

“Even at the end of the inquiry’s deliberations, there was still key evidence which had been withheld from the committee on the basis of legal professional privilege asserted overseas in circumstances where that privilege was in favour of PwC.

“It was within their control to waive that privilege so the committee could have received all the evidence which the committee sought. PwC chose not to provide that information to this committee, and that should be noted and should be a cause for deep reflection for PwC.”

The committee only received various documents during the dying days of the inquiry’s evidence gathering. This included letters relating to supervised remediation as well as the services agreement between PwC Australia chief executive officer Kevin Burrowes and the global network that enabled him to pocket $1.2 million. This took his remuneration package to $4 million plus bonuses.

That $1.2 million paid to Burrowes comes via a local subsidiary owned by the network firm based in the United Kingdom. This was only revealed when the ultimate owner of the Australian-based subsidiary was searched for by The Mandarin using ASIC’s company database.

A further concern for the committee was that PwC Australia and its global network did not provide the report by the global law firm Linklatersinto which personnel across international offices received information subject to confidentiality agreements.

The firm has not provided the committee with the identity of the six people that were identified by the Linklaters team, but PwC Global provided a summary of the processes the law firm went through to understand what went on.

Scarr said that Burrowes told the committee he, as chief executive officer, would prefer to focus on the future of the accounting profession but that PwC Australia itself was responsible for the committee’s focus on the firm’s conduct rather than crystal ball gazing on the future of the accounting world. 

“From my perspective, having the philosophy I have, it’s a great shame that the committee had to inquire to the depth that we had to in relation to the activities of PwC and consider a whole raft of recommendations, which will necessarily mean that there’s a regulatory burden imposed upon those who have done the right thing,” Scarr said. 

“That is a great shame and something which PwC should reflect on.”

Scarr’s contribution to the Senate discussion about the committee’s final report accounting, consulting and audit firms followed speeches by O’Neill and Greens Senator Barbara Pocock, who set out the need for regulation of major accounting firms.

The committee’s final report made 40 recommendations, including a radical change in numbers allowed in an accounting partnership from 1,000 to 400 partners, greater transparency for large accounting firms, and an increase in audit inspections by the corporate regulator.

READ MORE:

TOM RAVLIC 

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

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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
 
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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