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Monday, July 22, 2024

KPMG’s ghosts in the machine

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.


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Neil Chenoweth is an investigative reporter for The Australian Financial Review. He is based in Sydney and has won multiple Walkley Awards. Connect with Neil on Twitter. Email Neil at nchenoweth@afr.com.au