Consulting giant EY fired an Australian partner accused of promoting a tax minimisation scheme and receiving more than $700,000 in unauthorised payments from clients, according to a letter published by a Senate inquiry.
According to the letter, EY was aware of the allegations in June 2021, when the Australian Taxation Office confirmed it had referred the partner for investigation “in relation to the potential promotion of a tax exploitation scheme”. The letter says the partner was not fired by EY until August 2022.
The former partner, whose name and former title cannot be revealed due to a suppression order, is being sued by the commissioner of taxation in the federal court.
When the Australian Financial Review first reported the court action but not the firm, due to the suppression order, the Greens senator Barbara Pocock sent a series of questions to the big four firms seeking confirmation of any involvement. Pocock is a member of an ongoing Senate inquiry into consultants.
In a letter submitted to the inquiry on Thursday, EY Oceania said it successfully applied to vary the suppression order so it could reveal itself in response to questions from Pocock.
EY said it was still “severely restricted from providing certain details” about the case, but confirmed “the Commissioner’s proceedings contain allegations that the former partner promoted a tax exploitation scheme”.
“The former partner was terminated for the unauthorised receipt of financial benefits in connection with the client transactions subject to the proceedings,” EY’s submission to the Senate standing committee on finance and public administration said.
“The former partner – acting in isolation and without EY’s knowledge or approval and contrary to EY’s policies and procedures – received unauthorised personal financial benefits in excess of $700,000 in connection with client transactions the subject of the proceedings.”
EY told the Senate that the commissioner alleged the former partner “proposed a tax exploitation scheme to seven clients”. The proposals were allegedly made between November 2016 and April 2021.
“It has not been alleged by the Commissioner and we have no reason to believe that any other EY partner or staff member acted inappropriately, as a result, no other EY partners or staff were sanctioned in relation to the actions of this isolated individual,” EY said.
“No other EY partner is a party to the Commissioner’s proceedings. The Commissioner makes no allegations of wrongdoing by EY in the proceedings.”
According to EY, an internal investigation was launched between June 2021 and May 2022, before the partner was given a chance to respond to concerns. “Further detail on the unauthorised financial benefits was obtained during this time,” EY said.
In a joint letter to the Senate, EY Oceania’s chief executive, David Larocca, and risk management leader, Leigh Walker, said they would provide more information to the Senate when appropriate.
“EY will continue to be an intervenor in the proceedings, seeking to lift the orders preventing us from providing more information on this matter, however, pending being successful in this application, a breach of the suppression orders would be a contempt of court, which is a criminal offence,” the executives said.
“It is our intention to release these reviews to this committee as soon as we are permitted to do so by the courts. If and when the suppression orders are varied to enable it to do so, EY will provide documents insofar as it can consistently with its other obligations and rights including in respect of protected information.”
The partner is defending the accusations.
