If PwC Australia failed to comply with these demands, it faced expulsion from the global network.
Letters from PwC International to PwC Australia published by the parliamentary committee on corporations and financial services detail the iron grip the global firm has – and continues to have – on the local firm’s ability to freely communicate with media, other stakeholders, parliamentary committees and regulatory authorities.
The global network listed a raft of reasons in the remediation letter for its intervention in the local firm. These included the failure of PwC Australia to properly acknowledge the seriousness of the tax leaks saga that saw the firm and its former partner Peter Collins disciplined by the Tax Practitioners Board (TPB).
Sharp criticism is levelled in the remediation notice at the Australian firm’s failure to treat the TPB matter as being serious in public statements.
“The firm made public statements that improperly downplayed the severity of the TPB matter and minimised the significance of the underlying behaviours, which have given rise to significant adverse media, both domestically and globally,” the June 23, 2023 letter to PwC Australia says.
A set of emails released by the TPB to the Senate following the request of Senator Deborah O’Neill in May 2023 also receives a mention as being a source of reputational damage for the firm.
“Evidence produced by the TPB, which was also publicly released in redacted form as its response to written questions from a Senate inquiry, indicates that members of the firm’s leadership had information that should have caused them to question the conduct of the partners involved but that they did not do so,” the letter says.
“The publication of this evidence and the firm’s public response have further eroded trust and confidence in the firm.”
There is also a reference to the robodebt saga, in which PwC Australia was engaged to evaluate the debt-collection methodology.
“[A] series of public hearings and disclosures have shed light on the firm’s involvement in consulting engagements that have been beset by poor risk management practices and actual or perceived conflicts of interest, evidenced gaps in professional judgement and exposed the firm to further public scrutiny and criticism (collectively, the ‘consulting matters’),” the global remediation letter says.
“These include, among others, a matter in which the firm was engaged by a government agency to evaluate a debt recovery practice, determined that the agency had overstated the benefits of the practice and then allegedly acceded to the agency’s request not to produce a critical report (while still collecting its engagement fees).”
PwC’s network leadership team had set out a series of demands the local firm had to follow. These included former chief executive officer Tom Seymour being removed as leader of the Australian practice.
The global firm also insisted PwC Australia must seek approval for any actions the firm decided to take action against people involved in the tax leaks saga. This was the reason for the global intervention in the first place.
The global network also placed heavy restrictions on the ability of the local firm to deal with domestic stakeholders such as parliamentarians, regulatory authorities, the media and government departments without clearing with a global network representative first.
“[The] firm will cooperate with PwC’s Global Corporate Affairs and Communications group in preparing communications or talking points or conducting webcasts that relate or refer to the matters, the Senate inquiry and other related matters; the results of the independent review of governance, accountability and culture and resulting recommendations; and significant decisions relating to the leadership and governance of the firm,” the global firm letter says.
“The firm will not issue or distribute any such communications until the network communications leader and the network representative have reviewed and approved such communications.”
PwC Australia was also limited in the freedom it had to submit regulatory issues to regulators and government departments without getting the okay from its global hierarchy.
“[The] firm will not provide to any regulator or other governmental or legal authority any formal, significant or substantive submissions or responses (whether oral or written) regarding any of the topics until the network representative and I have reviewed and approved the materials,” the global firm says.
PwC Australia’s inability to submit material to government bodies with it being reviewed by the global network caused practical difficulties for profession-wide consultation and networking.
The Mandarin has been told by industry sources who declined to be named that the global firm’s strict policy of vetting what PwC Australia proposed to tell government meant joint positions from the Big Four firms could not be agreed on as PwC global had to have its say under the remediation conditions.
It also explains why PwC Australia chief executive officer Kevin Burrowes has done limited media in Australia. The most recent foray into direct media contact was an interview with the Australian Financial Review in which Burrowes said he wanted to move on from the tax leaks matter.
O’Neill is the chair of the corporations and financial services committee that finally managed to get documents it requested from PwC Australia.
She said the documents published by the committee revealed the depth of control the global network has over the domestic practice.
“These documents demonstrate, in crystal clear detail, the lengths to which PwC International went in its attempt to inhibit transparency and accountability in the wake of the tax leaks scandal and the revelation of Mr Peter John Collins’ misuse of confidential Australian government information,” O’Neill said.
“The documents show how PwC International threatened its Australian arm with expulsion from the global franchise if it dared to freely cooperate with the legitimate inquiries of this parliament. This is a blatant and deeply inappropriate form of intimidation.”
Senator Barbara Pocock said the letters the committee obtained from the firm reveal the failings involved in partnership governance.
Pocock said that it appeared PwC’s global network had similar frustrations to that experience by parliamentarians in Australia in understanding what had unfolded in the Australian firm regarding the tax leaks matter.
“Apparently PwC global shared the frustrations of the Senate in trying to get information about the tax scandal out of some of the locals,” Pocock said.
“There was clearly a very low level of trust in PwC Australia among the global leadership, and that was borne out in the local firm’s consistent failure to comply with the conditions imposed when PwC global took over.
“However, this latest material confirms the failings of large partnership governance, where global interests well beyond the Australian partnership step in to take control, overriding locals.
“This is a failed, opaque structure of governance with a global Russian doll hidden within a local Russian doll. Who is really pulling the strings behind the veil here, and whose interests are being served? Certainly not those who want to see large Australian entities robustly governed, with public accountability and transparency.”
About the author
PwC International threatened Australian arm with expulsion unless it handed over control of scandal
New documents reveal PwC International leaders threatened their Australian counterparts with expulsion from the network unless they handed over ultimate control of the consultancy firm’s response to the damaging tax leaks scandal.
In May 2023, PwC International’s global general counsel, Diana Weiss, wrote to the Australian executive warning its response to the scandal had “caused a breakdown of trust and confidence in the firm and significant damage to PwC’s reputation”.
The scathing letter outlines how deeply unhappy the global executive was with the Australian firm. The letter, published by the Parliamentary Joint Committee on Corporations and Financial Services on Friday, includes:A series of public hearings and disclosures have shed light on the firm’s involvement in consulting engagements that have been beset by poor risk management practices, evidenced gaps in professional judgment and exposed the firm to further public scrutiny and criticism.
The firm made public statements that improperly downplayed the severity of the … matter and minimized the significance of the underlying behaviours, which have given rise to significant adverse media, both domestically and globally.
The global firm demanded PwC Australia hand over ultimate control of its communications with regulators and ongoing investigations. PwC Australia accepted the conditions.
The chair of the inquiry, Labor senator Deborah O’Neill, said in a statement:
deserve to know who is actually running the large consulting, audit and accounting firms which are so deeply enmeshed with not just our government, but our financial markets and collective economic security.
Details of PwC’s misconduct, and the steps taken by PwC International to firewall itself from the Australian firm and protect its global reputation, are of significant public interest.
PwC Australia sacked eight staff in 2023-24 over data breaches
PwC Australia sacked eight staff last financial year due to their involvement in undisclosed data breaches.
The sacked staff include two partners, one director, two senior managers, one manager, one senior associate, and one associate. The staff are not named.
The firm has outlined the nature of misconduct in response to questions from Greens senator Barbara Pocock:1. The exporting or inappropriate access, copying, printing or disclosure of documents.
2. The sending of client or PwC-related information to personal email addresses.
None of the sacked staff were registered tax advisers, which meant professional accounting bodies were not informed.
Another three people were sacked by PwC Australia last financial year, taking the total to 11.
