goingconcen - Elsewhere in the House of Klynveld, AFR’s Neil Chenoweth writes about some old ghosts coming back to haunt the firm in Australia:
KPMG’sghosts in the machine
Neil Chenoweth Senior
writer
Jul 22, 2024
Every job has its red-hot issues. For KPMG chief executive Andrew Yates and chairman Martin Sheppard, it’s a radioactive file which we
can call Wild, Crazy Things That Tax Accountants Do.
What a colourful life
KPMG partners once enjoyed: a mostly male club whose members worked hard,
partied hard and went on to invest together, sometimes with disastrous results.
KPMG Australia CEO Andrew Yates:
struggling to find records from the 1980s and ’90s. Alex Ellinghausen
In the ’90s they even had a social
group, the Live a Little Better club, which would attend race days to raise
money for charity and hold black-tie dinners for 30 to 40 KPMG partners, a
noble effort that surprisingly necessitated imbibing certain amounts of
alcohol.
And that’s the tame stuff! For the
past 11 months, the firm has been studying historical allegations with varying
degrees of focus. This follows a complaint made by a former, quite senior,
partner about KPMG people behaving badly, much of it dating from the 1980s and
’90s (this masthead has written recently about Chris Jordan’s time at KPMG,
but this is unrelated to that).
Where to begin? Perhaps with the
partner who is alleged to have had a client replace his garage door in 1994, a
second client who painted his house, and a third client who handsomely provided
the partner with a Nissan Maxima sedan: all of these services were in return
for writing off their KPMG fees.
Talk about
full service. It’s quite a progressive payment arrangement. So little
paperwork.
There are allegations of accessing
client trust accounts to strip out tax losses; partners taking secret
commissions; diverting the residual of a client’s estate to a partner’s private
company; and moving $7000 from a company which was being transferred overseas
into the KPMG trust account. Apparently, an enterprising partner used that
money to buy a jet ski. As you do.
The most picturesque claim is that
in 1984, a partner allegedly had his wife smuggle $625,000 in cash from
Singapore into Australia in her handbag for a client (yes, a KPMG spouse is the
one with the giant clutch purse). This was after attempts to order staff
members to carry the money failed to generate the necessary enthusiasm.
In another claim, almost $800,000
raised from winding up Australian companies was allegedly never returned to
their US parent. It’s even alleged the election of a managing partner was
rigged.
Few of the era’s partners remain
The complaint by the former senior
partner provides considerable detail, citing partner and client names, dates
and companies.
The difficulty for KPMG is that,
with its previous policy for mandatory retirement at 55, few if any partners
from that era are still with the firm, though some staff probably would be. And
as for the relevant records …
A KPMG Australia spokeswoman said an
internal review and an external law firm were examining the matters raised.
“We are investigating allegations to
the best of our ability, noting that the majority date back two or three
decades,” she said.
“To date, we have no evidence of any
wrongdoing. However, if KPMG can assist with relevant information, we will not
hesitate to act or provide it to relevant authorities. While the historic
nature of the allegations makes corroboration particularly challenging, KPMG is
treating these matters seriously.”
The KPMG allegations centre on just
a handful of former partners, but even if only some of the claims can be
verified, it raises questions about the firm’s broader culture. Those wacky
guys.
Then again, it’s a culture that
produced many senior figures who went on to take senior positions at the Tax
Office, transforming the regulator’s own culture. Surely only in a nice way.
The country’s most expert opinion
and analysis. Sign up to our weekly Opinion
newsletter.
