Wednesday January 6 2016 was a champagne day in a bumper year for the top dogs at consulting firm PwC.
Peter Collins, PwC Australia’s senior international taxation partner, was hailed by colleagues for his role in delivering millions of dollars in new business for the shiny “big four” accountancy firm. PwC had snared grateful new corporate clients in the US eager for sharp advice on their tax. As a PwC internal email put it, the firm’s triumph was “heavily helped” by “the accuracy of the intelligence” that Collins was able to supply.
Collins’ work had led to an eruption of new year joy. “Our work has been efficient and seamless,” the team email continued. “We have received some excellent client feedback as to responsiveness, the quality of our work and the dedication of the team.”
Later that year Collins was awarded Corporate Tax Adviser of the Year at the Tax Institute of Australia Awards, a glittering black-tie affair celebrating the best of the best. PwC’s tireless team of brand builders and marketing hacks trumpeted Collins’ award as testament to the “significant market brand” he had built over his years at PwC, citing his appearance at the government’s corporate tax Senate Inquiry.
“Every day our people do amazing things and these achievements deliver value either internally, to a client or to the wider community,” PwC told itself, marinating its staff in the cloying positivity so beloved of corporates.
Seven years on — and despite PwC’s concerted efforts to hide the issue — the ugly truth has emerged on Collins’ golden year at the top of the big four pile. Collins’ much-vaunted intelligence on the development of Australia’s international tax regime had been given to him in utmost confidence by the Australian government, and he had betrayed that confidence in sharing the information with his PwC colleagues in Australia and overseas for the firm’s financial gain.
A subsequent investigation spelt out that “the confidential information was subject to Commonwealth Confidentiality Acknowledgements (CA) signed by Mr Collins on 11 December 2013, 15 April 2016 and 19 February 2018”, covering the very period of Collins’ and PwC’s ascension.
The revelations of Collins’ and PwC’s joint deception have provided a rare glimpse into the opaque world of the big four accountancy firms which between them have sewn up billions of dollars in government business, all the while supplying the kind of services which had belonged with the public sector, as Crikey has documented.
Too much for the IPA
The revelations are too much even for the pro-private enterprise, pro-small government buccaneers of the Institute of Public Affairs (IPA). The IPA’s John Roskam late last week found himself, evidently to his own consternation, siding with the Greens.
“The Greens are not always wrong. On what should happen to PwC, they’re absolutely right,” he wrote, citing a call from Greens Senator Barbara Pocock that the firm should be prohibited from further government work.
“Peter Collins … has been deregistered as a tax agent by the Tax Practitioners Board for two years. An appropriate punishment for PwC itself would be a ban on the firm receiving any federal government contract for at least three years.
“Over the past few years Labor has been all too willing to make an example of big corporates who have breached their ‘social licence to operate’. PwC is now in the same category as the likes of Westpac (breaking anti-money laundering laws), AMP (charging dead people for financial advice), and Rio Tinto (blowing up a sacred site). And it wasn’t just a regular run-of-the-mill tax issue PwC was dealing with. It was the ALP’s bête noire — tax-minimising global corporations.”
PwC culture
PwC has grown fat on the profits of its aggressive drive for business. Operating a near-cartel arrangement with the other three major firms, PwC made almost $470 million profit in the 2019 financial year, according to confidential data seen by the AFR.
The AFR reported that the share for junior partners would be about $380,000 each a year, with up to $3.9 million for the most senior partners. The average income for the more than 500 partners would exceed $900,000 a year in the 2019 financial year.
As a partnership, PwC has no legislative obligation to report its profits and salaries, notwithstanding the hundreds of millions of dollars it is paid in public money. Its corporate mythology has it that this bounty in profits is due to its singular abilities to see things which others don’t. The ordinary person might have the quaint view that PwC is a group of accountants turned greed-driven corporate denizens — but that is not how PwC sees itself or wishes to be seen by others.
“We are a community of solvers combining human ingenuity, experience and technology innovation to deliver sustained outcomes and build trust,” it proclaims, with a form of words which has surely been the subject of interminable workshops and top-level sign-offs until it reached peak BS.
“It all adds up to The New Equation,” it concludes, apparently capturing the essence of what it means to be PwC.
There is, of course, an entire PwC web page dedicated to the glory of “The New Equation” along with the obligatory overproduced corporate video, known pretentiously in these parts as a “film”.
Have a look at it. Soak it up. Here’s how it ends:
The profound changes in the world mean that our clients can only succeed by creating a virtuous circle between earning trust and delivering sustained outcomes. By bringing our unique combination of capabilities together, we can help them do that — unlocking value for their shareholders, stakeholders and wider society.
Trust. There’s that word again.
The contact person for all this is senior PwC Australia partner Tom Seymour, whose efforts to minimise the PwC mess in recent weeks have been the subject of a scarifying Joe Aston summation in the AFR’s Rear Window column, which predicted his demise late last week.
“The [firm’s] partners have just one creed — money — so they’ll take out Seymour not because of any desire for PwC to become an ethical organisation, but because he’s now shitting in their river of gold. That’s a transgression they will not abide.”
And last night, like clockwork, Seymour too fell on his sword. After confirming that he was linked to the tax leaks scandal.
“We agreed with Tom that this is in the best interests of the firm and our stakeholders,” the board said in a statement.
And what of the regulator?
The Tax Practitioners Board (TPB) which investigates the ilk of Collins came about as a federal regulator in 2010 during the Rudd/Gillard/Rudd years. With the advent of the Abbott government in 2013 it was given orders to cut red tape as part of Abbott’s grand plan to slash $1 billion from the cost of “red and green tape” across the country.
The TPB handles complaints about the conduct of taxation professionals coming from the public, the industry or government agencies (most likely the ATO). It has the power to compel witnesses to appear before it in an investigation.
It is governed by a board of eight industry professionals. Two of them, Peter Hogan and Judy Sullivan, are former PwC partners. So what role did they play in the investigation of Collins?
In an emailed response the TPB said that neither of the two were part of the four-person board conduct committee that investigated Collins and PwC. It said Hogan and Sullivan had declared their conflict of interest with PwC and advised that both receive pension entitlements under the PwC partnership agreement.
“Further, to address any actual or perceived conflicts of interest, Ms Sullivan and Mr Hogan recused themselves from the relevant BCC and were not involved in any other relevant matters, decisions and discussions” related to Collins and PwC, including discussions at board meetings.
The TPB has imposed a two-year registration ban on Collins, finding that he had breached the legislated code of professional conduct by not acting with integrity and for failing to have in place adequate arrangements to manage conflicts of interest. PwC was ordered to have processes and training in place to manage conflicts of interest.
Labor Senator Deborah O’Neill has described the punishments as a “slap on the wrist”. TPB declined to comment. Its sanctions vary from a written caution to deregistration for up to five years. It is also able to take civil action through the Federal Court to fine a practitioner.
The biggest and perhaps fatal loss would be if PwC was banned from government work, a decision which is in the hands of the Albanese government.
Lipstick on a pig
Last night PwC issued a statement to Crikey confirming that Seymour was stepping down as CEO, effective immediately ,with assurance leader Kristin Stubbins serving as acting CEO. A new CEO would be elected by the partners “in the coming months”.
Tracey Kennair, chair of the board of partners, acknowledged the immediate need for the firm
to rebuild and enhance trust. Kennair said an independent review announced by PwC, in addition to the changes already made, would help “meet this objective”.
Stubbins said PwC was committed to “learning from our mistakes, listening to our stakeholders and enhancing our culture to build stronger trust and transparency”.
PwC’s reputation management is well under way. Its head of reputation (as the position is called) is Rory Grant, whose background makes him more than fit for purpose when it comes to putting lipstick on a pig. He leads a team of “passionate professionals to enhance and protect PwC’s reputation in market”, as his bio puts it.
Grant arrived at the big four company in 2020 after working for the Australian Banking Association, where he “shaped the industry response throughout the period of the royal commission and the reforms that followed.” Before that he was on the ministerial staff of Christopher Pyne, and before that Alan Tudge.
If you can work with that crowd, saving PwC should be a pushover.
