Neil Chenoweth KPMG paid more than $500,000 to tax division whistleblower
Claims of secret payments, gifts, bullying: Former KPMG partner named
A former KPMG partner, Philip Henry, allegedly received secret commissions, reduced client fees in return for a car and other personal gifts, and treated female staff inappropriately.
The allegations against Henry were made by a former KPMG senior manager and communicated to the firm in a letter on August 30, 2023.
Philip Henry in 2005 when he was chairman of mid-tier accounting firm PKF. Tamara Voninski
In the letter, the manager blames Henry for wrongdoing for which she was held responsible, including being pursued by regulators for more than a decade. KPMG eventually paid the senior manager a settlement of over $500,000 for her legal costs.
Henry’s name was revealed when the letter was tabled on Thursday by the parliamentary committee that is looking into wrongdoing at KPMG, in particular whistleblower claims of misuse of client information by the audit division.
KPMG’s former chairman Martin Sheppard and former chief executive Andrew Yates were asked about the $500,000 settlement by the parliamentary committee at a hearing last Friday.
Yates said the firm had been unable to substantiate the allegations in the letter as they were “very historic. The bulk of them dated back about 25 years so it was very, very difficult [to assess].
“My recollection is that the individual was reluctant to provide information to the firm...we did try and investigate but the passage of time had been so long that we were just unable to find the information,” Yates said.
The Australian Financial Review reported the $500,000 settlement and details of the alleged misconduct before Friday’s hearing.
Henry – who was contacted for comment – was head of KPMG’s middle market practice until 2004, when he was appointed NSW chairman of mid-tier accounting firm PKF.
The letter claims that during his time at KPMG, Henry and other partners received secret commissions in cash “for facilitating clients’ participation in a taxation arrangement” and that “[name redacted] was selling tax losses which Philip Henry knew to be non-existent or materially deficient, and also knew that [redacted] had not filed income tax returns for more than 25 years”.
The letter describes Henry offsetting client fees for personal gifts he received, including a new garage door, painting his house and a Maxima sedan.
It also claims “misuse of client trust accounts administered by KPMG for personal tax benefit without client consent”, and “misappropriation of funds from client trust accounts”, including one case of approximately $7000 where it claimed that “Philip Henry arranged for the funds to be used for the purchase of a jet ski from [deleted] for personal use”.
The letter referred to a tape that it claimed contained references to destruction of evidence in the decade-long Australian Tax Office investigation that targeted the senior manager.
The letter claims Henry treated female staff and clients inappropriately, and of “bullying and intimidating [redacted] to act outside the scope of her employment contract regarding significant legal action against KPMG by the Attorney-General [Michael Lavarch], a legal action which could have made the firm insolvent”.
It is not clear what the action referred to here was. The reference appears to refer to LOIS case management software which the then Peat Marwick firm contracted to provide to the Attorney-General’s department in the early 1990s, only to abandon the tender after running up large costs in an effort to address flaws in the software.
The Financial Review is not suggesting the claims in the letter are true, only that they have been made.
In a matter unrelated to the Henry allegations, the letter refers to an anonymous 2021 letter which claimed that “secret commissions amounting to $2.4 million received by [redacted] ($1.2 million each) were the rightful income of KPMG given the nature of the transactions, the firm’s relationship with the counterparties and the obligations of partners at the time”.
The letter sent in 2023 claimed that the anonymous 2021 letter had been “corroborated by a credible witness”.
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