Tuesday, July 18, 2023

Luke Sayers in PwC word games

Tracey Murray says there is a
“widely held view in the Australian economy that if you get your advice from one of the Big 4, that you really won’t be challenged by the ATO…even if something goes wrong” 

Consultant work for federal agencies jumps 1300pc

Chanticleer - Welcome to the big four’s worst nightmare 
The skewering of Deloitte’s CEO before a parliamentary committee shows the veil of secrecy the big four has enjoyed is gone. And now tougher regulation looms.

It’s the sector’s worst nightmare: embarrassment today, new regulation tomorrow.


The AFR View

The AFR View

PwC pile-on is beginning to lose focus

The Financial Review’s take on the principles at stake in major domestic and global stories.

The Senate inquiry into public sector consulting, which began sitting on Monday, has descended into part fishing expedition and part show trial.

The inquiry was triggered by the failings of one division at one firm, PwC, and revealed by The Australian Financial Review. But the PwC pile-on is now losing focus.

It has brought calls to separate and regulate the entire consulting industry. Former ACCC chairman Professor Allan Fels said the big four firms should be broken up. “Non-audit activity has the potential to compromise the conduct of audits”.

Except in Australia, there have been no auditing scandals and, coincidentally, on Monday, we reveal that the Australian Securities and Investments Commission is winding back its scrutiny of company auditors.

Former KPMG partner Brendan Lyon – who was caught up in two government departments playing two ends of the consultancy against each other – is now an academic who says these “pseudo corporations” operate “beyond the law”.

It was not long before that ultimate call was heard – a royal commission into the sector, and then regulation. But given the sweeping and undefined scope of consultancy work, regulating it is likely to be far easier to say than to do.

PwC has already been forced into a drastic split and fire sale to salvage the government business with a new owner and protect the rest of the firm. The immolation of PwC is likely to impose more discipline on the others than any regulator could provide.

Likewise, the market rightly decides the rate of pay of Deloitte boss Adam Powick. Comparisons with the prime minister’s salary are irrelevant here. As is the case too often with such inquiries, they are exercises in indignation rather than investigation. To be of use, they need to focus on the problem they are trying to fix.

The Australian Financial Review's succinct take on the principles at stake in major domestic and global stories - and what policy makers should do about them.

 Rear Window

Luke Sayers in PwC word games

Joe AstonColumnist

Four weeks have passed since the Senate finance committee published its report, PwC: A calculated breach of trust, and since its chairwoman Deb O’Neill characterised as “quite implausible” that Luke Sayers – PwC’s chief executive when the ATO discovered the firm’s tax leaks – had known nothing about it.

O’Neill was responding to Sayers’ obtuse statement (via a spokesman) of June 21 which, for flimsy exoneration, relied upon the fact the Senate report only mentioned him once.

Former PwC CEO Luke Sayers. Wayne Taylor

“The latest Senate report into PwC contains a single mention of Luke Sayers.” Here, he invites us all to believe that his scarcity on the page is an accurate reflection of his non-presence in the conduct of the scandal. All he succeeded in doing was identifying the report’s greatest oversight.

“Mr Sayers, who was elected Australian CEO by his fellow partners, was not aware of the confidentiality issues that have since emerged within the international tax practice at PwC.”

We can only marvel at the brazenness of this attempt to disperse his personal responsibility to those poor fools who elected him. What other purpose does it serve to mention how he came to have the job?

Sayers is also resorting to the word games that worked so well for his successor Tom Seymour in May. He doesn’t say he knew nothing about PwC’s dispute with the ATO between 2016 and 2019 over the conduct of certain tax partners, one of which was Peter Collins. He doesn’t say he had no idea that PwC had used legal professional privilege to block the ATO’s access to client correspondence regarding its front-running of new multinational anti-avoidance laws (MAAL) in 2016.

No, Sayers merely claims non-awareness of the “confidentiality issues”. That could mean anything, which is the entire point – to create sufficient vagary for a shape-shifting explanation when it later emerges just how involved he really was.

Pitched battle with ATO

Sayers wants us all firmly focused on what he (purportedly) didn’t know, rather than what he did.

Sayers was CEO until March 2020. A tranche of internal PwC emails like those released by the Senate eight weeks ago was handed over to the ATO in 2017. These emails were demanded by the ATO only after PwC refused, on the basis of privilege, to provide its MAAL-related emails with clients.

Does Sayers expect us to believe his firm was in a pitched battle with the Tax Commissioner over highly sensitive (indeed, incriminating) emails, but he knew nothing about it?

ATO Second Commissioner Jeremy Hirschhorn gave a speech in September 2019 warning the big accounting firms about their use of “guru” tax partners “who seem to operate almost on the basis that tax is discretionary or for people who are not as clever as them or their clients”.

The very next day, Seymour conceded that “community expectations have changed” and promised to rein in PwC’s tax advisers.

Clearly, PwC’s unacceptable conduct as a large tax agent went way beyond these “confidentiality issues” Sayers didn’t specifically know about. Will he accept any responsibility for that? Or for PwC’s ultra-aggressive, inappropriate use of legal professional privilege that was a hallmark of his time in charge?

Two weeks ago, PwC sacked eight partners, including partners who weren’t themselves involved in the tax leaks or the MAAL schemes. Their “failure to adequately exercise their expected leadership or governance responsibilities to prevent these actions or to address the deficiencies in culture at the firm” was enough.

That’s certainly not a standard of failure Sayers holds himself to.

Only the Senate has any hope of piercing Sayers’ sophistry and forcing any real explanations, and that’s only a matter of time.

This is not the last episode of Luke Sayers: the miniseries. Saying the least he possibly can has worked for him to date, but tragically, the people writing the next script are not his spin doctors.

Joe Aston has helmed The Australian Financial Review's Rear Window column since 2012. He is based in Sydney. Connect with Joe on Facebook and Twitter.Email Joe at joe.aston@afr.com