Seven questions for PwC At the end of this week, the Joint Committee on Corporations and Financial Services is expected to hear from PwC Australia’s current chief executive Kevin Burrowes and his predecessors Luke Sayers and Tom Seymour.
Other witnesses expected to be called include PwC Australia’s former general counsel Meredith Beattie, chief risk and ethics leader Jan McCahey, and Ziggy Switkowski, the former Telstra chief executive who was commissioned by PwC to complete a report into the culture at the top of the firm.
Since the tax leaks scandal broke last year, there have been two separate parliamentary inquiries, an ongoing criminal investigation by the Australian Federal Police, nine separate investigations still being carried out by the Tax Practitioners Board, one internal review commissioned by PwC Australia and a separate investigation commissioned by PwC International.
More than 700 staff and dozens of partners have since left the firm. PwC Australia also sold its Canberra consulting practice for $1 – and remains banned from receiving new government contracts.
Yet despite the string of revelations that followed reports PwC had used confidential government information to help clients evade multinational tax changes, serious questions remain as to exactly who knew what and when inside PwC, both in Australia and globally.
“The day before I moved a motion in the Senate to hold an inquiry into the government’s use and management of consultants, PwC’s then chief executive, Tom Seymour, was on stage at an AFR Business Summit claiming that the tax leaks scandal was just a perception issue,” Greens Senator Barbara Pocock tells The Saturday Paper. “This really set the standard for all PwC’s responses to the scandal – deny, obfuscate, cover up, lie.”
The following are seven unanswered questions.
Who used the information?
While PwC has released some of the names of the 35 employees who were on the receiving end of 144 pages of emails containing information improperly shared by tax partner Peter Collins, the full list of names has not yet been publicly released, despite multiple demands for PwC Australia to publish the names.
The names of all overseas PwC operatives who played a role in what the firm called “Project North America” also remain secret, as do the names of 34 US tech giants that were targeted as part of the tax advice project.
“With some names being released, and others not, it is clear there should be full public disclosure of the list of names,” Brent Fisse, honorary professor of law at Sydney University, tells The Saturday Paper. “It’s discriminatory that some people should have been tarnished, or have been named publicly, and others have not been.”
What is in the Linklaters report?
Commissioned by PwC’s then global chairman, Bob Moritz, who stepped down this month after eight years at the top, the Linklaters report is an investigation into the tax leaks scandal by international law firm Linklaters. It reportedly cleared PwC’s overseas partners of using the confidential information obtained by Collins for commercial gain.
Still, the report itself remains confidential, with PwC global only publishing a one-page summary that revealed six international operatives had been disciplined for not inquiring about the source of the information passed along by Collins.
Despite multiple requests from the Australian parliament to see the report, PwC global has steadfastly refused to release it, claiming it contains privileged information that is confidential to PwC. Even PwC Australia chief executive Kevin Burrowes, who receives more than a quarter of his $4 million annual salary from PwC International, claims not to have seen a copy of the report.
“They are not required by any law to conceal it,” Labor Senator Deborah O’Neill tells The Saturday Paper. “Legal professional privilege doesn’t mean that they would be doing something wrong if they revealed it. The legal professional privilege sits with them, they make that choice. It is their document, they own it, it is within their remit to reveal and release that document, and it has been their choice not to reveal it. My understanding of that decision is that there’s got to be a lot to hide in that report if they are going to these lengths to resist the Senate of a sovereign entity.”
“Truth has been jettisoned, and personal financial benefit and dissembling have won. Bad look, PwC. When will you learn the lesson?”
Did PwC misuse legal professional privilege?
PwC has continually avoided directly answering questions about its use of claims of “legal professional privilege” to help avoid outside scrutiny of the firm itself and its dealings with clients. PwC even went so far as to buy a law firm so it could have a lawyer in the room for particular client meetings to help it claim LPP protection.
Revelations surrounding PwC’s abuse of LPP rules first surfaced in June 2022, when then commissioner of taxation Chris Jordan issued a notice requiring the firm to provide documents concerning particular audits. In response, PwC claimed LPP over about 15,500 documents it had withheld from the commissioner.
An analysis of a random sample of 116 of the 15,500 documents ordered by Federal Court Judge Mark Moshinsky found only 49 were properly classified as attracting LPP, with 61 documents subject to incorrect claims of LPP and six documents classified as being partly privileged.
In answers to questions on notice, PwC revealed that between 2016 and 2020 the firm had received at least 46 requests from the Australian Taxation Office requiring production of documents or information. PwC continues to refuse to identify the number of LPP claims it made to the tax office during that period.
“It is a wholesale attack and impediment on what should be legal professional privilege,” says Andy Schmulow, associate professor of law at the University of Wollongong.
To what extent did PwC mislead the Foreign Investment Review Board?
PwC is yet to reveal the extent to which PwC deliberately misled the Foreign Investment Review Board in order to obtain lower tax risk ratings for its clients.
In answer to a question on notice provided to the Senate in June, the tax office revealed it had “concerns that statements made to the ATO by the FIRB applicant and/or PwC as adviser that, while possibly legalistically correct, had the effect of misleading the ATO as to the intended use of aggressive tax structures by the FIRB applicant, with flow on effects for the ATO’s advice to Treasury”.
The tax office’s concerns triggered a significant tightening of the law surrounding foreign takeovers, including making paying tax in Australia a condition of foreign investment. They also led to a major upgrade of resources for the FIRB itself.
“PwC’s behaviour here involves dissembling at the very least,” Senator O’Neill says. “At worst it’s outright lying and deception.”
How do PwC Australia and PwC International work together?
PwC Australia and PwC International have consistently refused to reveal the formal agreement that exists between the two entities.
Both Senator O’Neill and Senator Barbara Pocock have repeatedly argued this is relevant because of the way in which PwC International partner Kevin Burrowes was relocated from Singapore to Australia and installed as chief executive of PwC Australia, demonstrating the PwC Australia franchise is not a truly independent entity.
“Burrowes, in my opinion, was put in place as head of PwC Australia by the international firm to quarantine the damage,” Senator Pocock says. “He’s here to make sure that none of the partners and staff, who were clearly involved in handling the leaked information in PwC offices around the world, will be held to account for their actions.”
How much does Kevin Burrowes make?
Asked his annual salary when he appeared before the Senate in February, Burrowes answered $2.4 million. A couple of days later, Burrowes sought to correct the record, clarifying to the Senate that the salary for his current role was actually $2.8 million.
Then last month Burrowes advised the Senate that he was receiving an annual $1.2 million top-up courtesy of PwC International for undefined services to the PwC “network”.
Senator O’Neill says: “In the currency wars between truth-telling in the public place, professional integrity and reputation, and raking in the personal benefits in dollars, PwC’s latest leader is following the leaders who preceded him. Truth has been jettisoned, and personal financial benefit and dissembling have won. Bad look, PwC. When will you learn the lesson?”
What did Luke Sayers know?
Luke Sayers was chief executive of PwC Australia for the entire period when Peter Collins leaked the confidential information on anti-avoidance tax laws. Yet Sayers, the current president of the Carlton Football Club, has steadfastly maintained he knew nothing about the tax leaks or anything else.
ATO deputy commissioner Jeremy Hirschhorn says he personally advised Sayers to review PwC’s internal emails at a meeting in August 2019 due to various concerns the tax office had about PwC’s behaviour, including “breaching the confidentiality of a Treasury consultation process and the apparent commercialisation of that breach”. He also raised concerns over the firm’s potential non-compliance with formal notices to produce information by making false claims of legal professional privilege.
Sayers says he did not personally review the “tens of thousands of documents and emails which PwC provided to the ATO”. In March, a Senate inquiry report noted it was “concerned about the truthfulness of some of the evidence it has received and is left questioning the credibility of Mr Sayers’ evidence”.
Hirschhorn noted that he suggested Sayers review certain emails, and the ATO said he personally “read out several representative PwC emails to Mr Sayers which had been previously provided to the ATO by PwC”.
What exactly Sayers knew, and when, will be a key focus of Friday’s public hearing.
“PwC has been in damage control mode since January 24, 2023, when news first broke about the tax leaks scandal,” Senator Pocock says. “Eighteen months later, after an exhaustive inquiry, they are still in no mood to answer our questions.”
This article was first published in the print edition of The Saturday Paper on July 27, 2024 as "Seven questions for PwC".
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