As someone who has worked in the field, I couldn’t repeat the words that came into my head when I was first made aware of the detail of the Tax Practitioners Board decision on PwC Australia’s egregious breach of ethics, trust, and process. They’re not for polite company.
The local offices of global accounting behemoth PricewaterhouseCoopers, or PwC Australia, continue to be the centre of attention in media and political circles. As was recently revealed, a former partner of the firm, Peter Collins, had been banned by the board for leaking confidential information about tax avoidance laws to other partners and staff.
These plans involved new rules to stop multinationals from avoiding tax, and politicians such as Australian Greens Senator Barbara Pocock and Labor Senator Deborah O’Neill want to know who else was involved in promoting arrangements designed to circumvent these tax changes. A recent motherlode of partly redacted emails points to many other individuals being involved or at least kept in the loop.
A wildfire
Let’s be clear: there is nothing like a story involving a global brand, a scandal and questions about why a firm went like PwC used confidential information to explore restructuring options to dodge the full force of incoming tax laws.
The firm — which advises others on the need for high-quality reporting and transparent disclosure — has continued to make itself the story when it failed to upload a media statement to its website announcing the effective resignation of chief executive officer Tom Seymour after his admission of being one of the many people in the email chain revealed by the board.
Seymour was replaced by assurance leader Kristin Stubbins as acting CEO until the partners vote on a permanent appointment. Two other senior partners, Pete Calleja and Sean Gregory, also stepped down from governance positions. Neither of the leadership changes has been advised in a media statement on the firm’s website. The departures, however, have been quietly deleted from the relevant page advertising PwC’s leadership batting order.
The fuss, consternation and outrage are understandable given the breach of confidence was linked to the planned promotion of the firm’s services that the tax practice itself forecasted would pull in $2.5 million.
What is not well explained is how something like the complete cluster in which PwC finds itself right now could have happened in the first place.
I might be able to help.
Life of an adviser
For a period in my career I was a policy adviser — a kind of propeller-head focused on accounting, audit and governance matters — with a professional accounting body with duties that involved consulting government departments and agencies.
These roles have multiple functions. You are involved in engaging with members of a body in order to understand their concerns, and then you engage with your counterparts working for other bodies to understand whether the observations made by your members are the same or similar.
You learn from the membership, but you also engage directly with government departments, ministerial offices and various statutory or other agencies to alert them to issues faced by the people you represent.
You also participate in different consultations that a government department might be running, of which there are different kinds. Some are public, such as those of the accounting and auditing standard-setters, and those processes can be observed by those who bother to attend. Anyone wanting to understand the sausage machine that develops accounting standards — which tell companies how to prepare and present the figures printed in newspapers during profit season — can observe it.
Standard-setters may also have specific project advisory groups they will draw on for specialist advice on a topic. I was a part of project advisory groups on ethical and auditing standards in my capacity as an adviser. Many of these discussions would be under an agreement that what is said within the room stays within the room. This meant participants ranging from practitioners to regulators to policy experts could speak frankly.
It is in everyone’s interest — and in the public interest — that these things are soundly developed, but some discussions need to be had in confidence, otherwise the opportunity to develop good regulation suffers.
You then have the sensitive type of consultation that has resulted in PwC’s international tax division finding itself in a large vat of rocking horse droppings, with the rest of the firm having to hold its nose as it attempts to clear the mess.
Review the material. Provide advice. Shut up
Certain consultation processes with governments involve the signing of a non-disclosure or confidentiality agreement. This is particularly so when a new law is being developed to discourage people from mucking about with tax structuring across several countries to minimise tax.
Advisers or experts sign a non-disclosure agreement to review draft law and to provide feedback so Treasury or another relevant department has a full understanding of what the draft legislation means.
You review the material. You provide advice. You shut up.
These processes are intended to develop the best law possible in the public interest and any breach of trust of this nature impairs the ability of politicians to get the best feedback from experts.
The knowledge obtained during these processes is not meant to be used to offer companies advice on restructuring corporate affairs to minimise the impact of tax changes proposed by a government, one that has trusted those same people to provide feedback in good faith.
The question perplexing me today, however, is not just how many people were involved in the chain of events at PwC, but precisely what they were thinking.
It is now more than two decades since the royal commission into the collapse of HIH Insurance, but the words of royal commissioner Neville Owen in his report on that corporate calamity still ring true, and partners in consulting firms thinking naughty thoughts might benefit from some revision:
In an ideal world the protagonists would begin the process by asking: is this right? That would be the first question, rather than: how far can the prescriptive dictates be stretched?
These defacto public servants enjoy a conflict of interest that defies logic – let alone sound governance – all the while we foot the bill for their hugely profitable misdeeds and consequent gardening leave when fingers are pointed.
If they can blab openly in emails about this behaviour then one can only imagine what other coke-fueled dick swinging schemes go on in their corporate sanctum.
PwC – Proudly we Cheat.
These people are NOT defacto public servants, they are employees or partners of major corporations being paid to advise the government on proposed taxation law and yes, the certainly do have a conflict of interest.
A public servant who breaches the Public Service secrecy act knows that being sacked is not the end of the matter, jail is on the cards.
As it should be for anyone with a fingerprint or a read tick on the email trail.
De facto:
adjective
• existing or holding a specified position in fact but not necessarily by legal right.
…
Regardless, agree wholeheartedly with you, Ratty. Here’s now hoping Mr Ropeable now gets to the bottom of this deep mess.
And speaking of corporate side hustles, let’s make sure Mr Marles’ nuclear submarine consultants/golf buddies get some sunlight disinfectant in the process.
If PWC is prepared to breach non-disclosure agreements, what other contractual documents might it also ignore.
Can one rely on a signed agreement with PWC?
Clearly NOT.
Weren’t PwC the ones who did the ‘report’ for Dept Social Services on Robodebt, the million dollar report that was fully paid for and never delivered?
Back in the 1990s when PW merged with Coopers & Lybrand, PW obviously brought along their robber baron culture……PW have form-they were consultants to Clinton administration and double charged the Pentagon for photocopying and had to pay back something like US 4 million.
Leopards and Spots.
The government said it didn’t want the report. So it paid up for the work and said don’t bother giving us the report now we know it’s full of bad news we want to continue to pretend we don’t know.
Left the report in draft form, the RC read it.
Allegedly, the report was ok. Acceptance was not.
Acceptance would have negatively affected the cast-iron prerogative of cabinet deniability, much loved by our policy makers.
Yes, they are political creatures, just as the AFP is. The report was left in draft form.
What were they thinking? What they’re always thinking – maximising a business opportunity. This was just a small extension to their normal business model, which might be wholesome in theory but degenerate in practice – much akin to asking the fox to advise on chook house security.
I like how these professional consultants are pretty bad at following their own crisis management advice aswell
Shysters
C*NTS!
No point beating around the bush on this one!
Perhaps you were an ethical consultant offering fearless advice to whoever paid. But that’s not my experience of the big (and even the tiny) consulting firms – at least the ones infesting the CoL.
Take the most cynical definition of consultant and you might be halfway there.
The general playbook is someone wants to do something bad, expensive or stupid but doesn’t have the justification so hires a consultancy to pump out a report confirming their decision and hence removing the risk someone will twig their massive cost cutting project a) is unnecessary b) increases costs c) is illegal d) or all of the above.
PwC just got caught – Andersen’s ceased to exist as a result of their misbehavior.
Having said that some of the best people I met professionally were consultants for big firms – of course they were the low tier folks tasked with surveying the landscape – the recommendations were already decided…
In government consultants have replaced internal experts in many areas – it’s part of the refusal of anyone senior to take responsibility – too much career risk.
Borrows your watch to tell you the time and then charges you for it…
Outsourced advice is much more likely to give the “advice” required.
This cuts to the core of the outsourcing problem, bring back into the public service the functions we currently pay the big 4, billions of dollars for.
I think they should face prosecution. It is almost treasonous
Witness K ?