Save content
Have you found this content useful? Use the button above to save it to your profile.
pwc
istock_Katharina13_pwc

Embattled PwC ‘rearranging deckchairs’ in bid to limit tax leak scandal

by

PwC is selling its government advisory business in Australia for pennies after a former partner leaked sensitive tax avoidance plans to corporations, triggering a scandal that could topple the Big Four firm.

29th Jun 2023
Save content
Have you found this content useful? Use the button above to save it to your profile.

A new CEO of PwC Australia has been named as the consultancy giant scrambles to save itself, following an announcement that private equity Allegro Funds will acquire the Government Business arm for AUS$1 (50p).

Reputational damage is engulfing the firm following revelations former tax partner Peter Collins leaked sensitive and confidential government information to fellow partners and clients.

He is accused of helping colleagues pitch for work advising corporations on how to limit their tax exposure based on the confidential information he had obtained from working with the Australian government. PwC has been in crisis fighting mode following the revelations.

The Big Four firm announced on Sunday it would fly in a new CEO from its Singapore team, Kevin Burrowes, as it attempts to repair the reputational damage caused by the scandal.

Collins has since been banned from acting as a tax practitioner, and the federal Treasury has referred the scandal to the Australian Federal Police for a criminal investigation.

The Australian Senate has also launched an inquiry into the broader consulting sector, and a criminal investigation by police has been commended, officials said. 

Fire sale

The former CEO Tom Seymour stepped down in May along with two board members when the scandal initially broke.

Nine further partners have been ordered to go on leave as an internal investigation is conducted “into who may have shared or misused confidential information,” acting CEO Kristin Stubbins said in an open letter.

The move to divest all PwC’s federal and state government business exclusively to Allegro Funds is another attempt to appease a furious public and government.

Stubbins told a state parliament inquiry that PwC Australia staff who are found to have acted improperly in a scandal over the leaking of government tax plans would face “severe” consequences.

An investigation by two law firms would conclude “shortly” and the firm would name any employees found to have “done anything wrong”, Stubbins said.

“We have failed the standards we set for ourselves as an organisation, and I apologise on behalf of our firm,” she said.

Stubbins said Collins had “breached confidentiality in connection with tax consultations.”
“Some of the confidential information was disclosed by Mr. Collins with other PwC personnel who, in turn, disclosed to clients or potential clients of PwC,” Australia’s tax board said in a statement.

Toxic brand

Burrowes will take over from Stubbins and immediately oversee the sale of the government advisory business, but insiders believe it will not be enough to salvage the PwC brand. 

A senior source at the firm with direct knowledge of the matter told Reuters that partners from the unit were pushing for the sale to save their careers and avoid being shut out of lucrative government contracts. 

Public sector partners are expected to walk out on the firm as the number of investigations into Collins’ actions grows. 

“The sale does not resolve the issues of past behaviour including possible criminal action," the insider told Reuters. “They’ll [staff will] be thinking: ‘The firm’s reputation has been damaged and will affect my part of the business.’”

PwC declined to comment.

Deckchair rearranging

Experts believe the firm may have underestimated the groundswell of anger erupting in response to the continued fallout.

“So, the solution to PwC’s woes is to hive off the limb that is problematic and fix the rest,” said Mark Spicer FCPA, accounting specialist and the former finance controller of Telecom Australia. “With PwC forgoing all government work in this country, this looks to me to be more like throwing deckchairs overboard in the hope of saving the ship.”

Former Australian government advisor Jeremy Scrivens said the trend of hiring outside consultants from Big Four firms over civil servants began the rot of conflict of interest troubles.

“Can [PwC] possibly understand our anger, as old school public servants, at how you have abused your role in claiming to serve the Australian people without personal or company gain? Please, just go quietly,” Scrivens said.

Distinguished academic Dr Andy Schmulow, a former UK government advisor and an associate professor of law at University of Wollongong said it’s “game over for PwC”, following a Senate report into the “breach of trust” ahead of the hearings.

“The contents of this report leave them nowhere to turn,” he said, labelling PwC’s actions a “long-standing, multi-year strategy to conceal, diminish in severity, deceive, obfuscate, lie, steal, monetise state secrets, and abuse legal privilege.” 

 “[PwC as a whole] has lost the capacity to act honestly. In fact, it is clear now that its senior leadership does not recognise basic ethical and legal principles,” the Inquiry found.

Tags:

Replies (4)

Please login or register to join the discussion.

avatar
By Hugo Fair
29th Jun 2023 17:45

It takes Aussies to tell it like it is:
a “long-standing, multi-year strategy to conceal, diminish in severity, deceive, obfuscate, lie, steal, monetise state secrets, and abuse legal privilege.”
“[PwC as a whole] has lost the capacity to act honestly. In fact, it is clear now that its senior leadership does not recognise basic ethical and legal principles.”

Just imagine if we had straight-speakers here in the UK or in the US!

Thanks (3)
Replying to Hugo Fair:
avatar
By Justin Bryant
30th Jun 2023 09:30

Yes; and the ATO appear to have their act together and be in a different league to HMRC.

Thanks (1)
Replying to Justin Bryant:
avatar
By Ben Alligin
30th Jun 2023 11:17

Well that is hardly a high bar to surpass.

In footballing terms the ATO might well be Premier division, poor old HMRC would struggle in the Spartan South Midlands Division 1!!

Thanks (2)
avatar
By moneymanager
30th Jun 2023 14:59

"Leak", hardly, I know someone that works in the department that advises corporate s on potential R&D tax credits, an overly complex provison arranged by the came keeper fo rthe poacher.

Thanks (0)