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.
There’s another interesting story. These huge firms like the secrecy of operating as partnerships, but when Arthur Andersen was brought down by its involvement in Enron they suddenly became very afraid of the liabilities that partners could incur when their audits were grossly wrong. Of course they could easily have protected themselves from personal iability by operating as ordinary limited liability companies instead of partnerships, but part of the quid pro quo of the privilege of that limited liability is the obligation to publish annual reports and accounts. Quelle horreur! So what did they do? They got the governments to change the rules and create a new sort of partnership, the LLP, which combined the privilege of limited liability with the privilege of keeping their accounts private; the best of both worlds. Since then the LLP has become the status of choice for countless thousands of business fronts and shell companies used by money launderers, drug cartels, oligarchs and organised crime gangs all around the world. Private Eye has been reporting on it for years. Nothing is done.
Excellent reporting. This is just the latest scandal involving these companies — scandals not just concerning their work for governments, but their involvement in many corporate disasters and bankruptcies such as the collapse of Enron, where the Arthur Anderson accountants played such a leading role. Governments should not even consider using them because the conflicts of interest, and the risks arising from them, are overwhelming. Governments, if they had any sense of responsibility and concern for the public good, would ensure they always have sufficient expertise in the public service to provide the advice the government needs. Unfortunately governments are run by professional politicians whose parties are enmeshed with these and other corporations that pay them
bribesdonations and sponsor their conferences and other activities, so they are happy to pay the foxes colossal fees to help them design and build the hen-house.correction – Arthur Andersen LLP.
Arthur Andersen LLP RIP
I had dealings with them when I was in a government role and found them snotty and uncooperative. They didn’t see why they needed to provide any information to government in order to get approval of what they wanted to do and in fact through their obfuscation made a very simple process much longer. I wasn’t sorry when they went down with Enron.
The local arm did a great job on HIH ….
Couldn’t agree more re. excellent reporting. Note to Crikey Editor, this is the standard we subscribers require and it’s been sadly lacking of late.
Fully agree. Re “Governments, if they had any sense of responsibility and concern for the public good, would ensure they always have sufficient expertise in the public service to provide the advice the government needs”, very true but probably not realistic. But at a minimum should have staff of sufficient expertise to properly oversee consultants and evaluate their work. So not all purpose, off the shelf PS contract managers. Moreover, a lot more transparency is needed regarding tender processes, terms of reference and both reports and supporting documentation. Stronger and better resourced auditor-generals are also a key. All too often consultants are brought in to provide justifications and ticks and do so via series of nods and winks followed by a big cheque.
Yes, that’s true. There will always be areas of expertise, such as specialist technical advice for a specific project, that are better provided by outside consultants as and when required; but as you say, it is critical that the public service has the capability of managing such contracts and there must be transparency. Far too often ministers and consultants conspire to hide behind ‘commercial in confidence’ obfuscation and the ability to hide consultants from the sort parliamentary scrutiny which applies to the public service. There are other areas which should be seen as core business where the public service must be sufficiently capable and expert of itself, and I’d put taxation policy at the heart of that. Machiavelli, in The Prince, chapter 12, discusses whether a principality should use its own arms or mercenaries to defend itself. He utterly condemns relying on mercenaries as both useless and dangerous — a practice that risks the overthrow and ruin of the state. The reasons he gives for this conclusion apply also to consultants, though perhaps to differing degrees.
As a technical consultant in another field, I have had occasion to deal with the likes of PWC. My lasting impression of most of the people in this industry is that because they have learned the rules of accounting, they think they know everything about everything else as well.
Yesterday Senator Jane Hume was on ABC Radio bemoaning the fact that the Federal Government was about to employ 8,000 more public servants. The can do that for the cost of about 2,000 person years of payments to PWC and its cronies. There aren’t many (any?) upper-middle level public servants being paid annual bonuses of $380,000.
The arrogant know it all attitude is an essential part of the marketing of the brand. All too often they know lots of techniques, but nothing about what will work in this particular situation, with these particular people, in this particular organisation. However, my experience with them is that when working for the public service, as long as they do what is asked (no matter how bad this is for the organisation) that is fine for the people to whom they are reporting, both those inside the public service and those inside their own organisation. It is all bluff & bulldust with some very slick marketing that hides the limited depth of knowledge. Superficial and full of buzz words that gets them the work and enables them to outshine those who really understand the issues. They’re salespeople.
Indeed. I don’t think people know how much time public servants spend fixing the shoddy and eye watering expensive “work” handed in by these firms.
I have direct experience of it. ‘Shoddy’ would be almost too kind for some of the most egregious errors in the consultants’ work I am thinking about at a certain federal agency. The consultants had so little understanding of the agency and the legislation that set it up that they wrote procedures full of nonsense. Perhaps the best was requiring agency staff to carry out actions for which the staff had no legal authority or powers, which would very likely have been criminal and exposed the agency to being sued if not prosecuted. The consultants were of course paid in full and then the agency spent a very long time revising the procedures into something workable, which could have been done much more easily, quickly and cheaply if the consultants had never been there.
The department where I once worked brought in an IT consulting firm to advise on whatever. The IT crowd employed by the dept said as far as they could see, the consultants just asked them what they were already doing and wrote that up in their report and recommendations.
The (mostly) publicly funded organisation I used to work for parted with over $30mil over a couple of years of restructures, all paid to big four consultancy firms who brought little actual, lived expertise in the sector. After the fancy PowerPoint presentations and pretend ‘consultation’ where ideas contrary to management’s agenda and big 4 corporate ideology were ignored, they left a trail of disaster in their wake. In the months and years that followed, what little corporate memory that was left behind undid a substantial number of the changes the consultants in their shiny suits imposed on the organisation. That these companies on the one hand are happy to accept taxpayer funded contracts while on the other they dispense advice to multinational companies how to avoid paying tax on their obscene profits tells me that none of their partners would be able to find the words ‘ethics’ or ‘morals’ in the dictionary.
Yes, my university was Deloitted (as it came to be known over campus) – biggest waste of money ever. Consultants came in and didn’t even understand the jobs they were trying to remake, as they didn’t fit the standard parameters of what they thought people should do. Basically seagulls, they swoop in, eat all the chips, s**t over everything and then fly off, leaving, as you said JL, a trail of disaster in their wake.
Yes, it has been observed for years, if not decades, that they do a search and replace for company name on some spreadsheets (often failing to clear out the metadata), mine the company for information they can use elsewhere, put up some very good people for the first month, then you never see anything but naive & arrogant juniors. Take vast sums of money and disappear before there can be any accountability. One decade it’s all generic advice about decentralisation but with the trendy jargon of the year, next decade it’s all centralisation, but “on the cloud” etc. etc.
So we ask some of the more honest management, or ex-management why they keep doing it as they must know whats going on. It is simply to get executives unpopular ideas presented by “independent experts“, and then to be able to blame someone else when it all falls apart. Second order benefits are various kickbacks and personal networking of course.
Yes lawsonr93, it is all too often about execs wanting to avoid taking responsibility, whilst wanting someone else to push their ideas. It’s very disheartening for true professionals who give informed advice that is rejected because it doesn’t fit the agenda of the execs.
I’ve learned why people joke about consultants in Canberra, because so many say what they’re asked to say, rather than giving a professional opinion based in scientific evidence and knowledge. There’s often no need for the latter here and it is often an obstacle to running a sustainable business, because many clients want endorsement of their own beliefs, not information that will help the organisation to perform better. This is especially true of some of the larger public organisations or those with high turnover, as the executives goals are focused on their own career, not that of the organisation
Your story reminds me of the show House of Lies!
PwC returns to the Bronze Age, knowing it’s offered enough human sacrifice to placate their clients for a couple of years. There is no threat to the advice industry. Private Eye has been covering this debacle in the UK for years. EY recently abandoned their attempt to resolve conflicts of interest by splitting “assurance” from “sleaze” because the US assurance firm realised their clean opinions required added tax advice to provide partners with a living fortune. Underpinning all of this is the pervasive theory, that governments can’t run things properly – good decisions depend on the insatiable greed of the decision-makers.