Consulting giant PwC has been accused of misleading the Senate by planning to sell its consulting business at the same time it told a 2019 investigation that separating its audit and consulting divisions would make it impossible to operate.
Key points:
- Current and former PwC executives have been questioned during a Senate inquiry examining the consultancy sector.
- PwC said in a 2019 investigation that it was opposed to splitting up its divisions as it sought to sell parts of its business.
- Its current CEO blamed former PwC bosses for “a lack of leadership” that led to the tax leak scandal.
On Thursday, current and former PwC CEOs appeared before a Senate inquiry examining the management and integrity of consultancy firms in Australia, established in the wake of the PwC tax leaks scandal.
The investigation was launched in March after PwC’s former head of international tax, Peter-John Collins, shared confidential tax information from Treasury and the Australian Tax Office in 2014 in order to reverse engineer it to helping large multinational companies avoid paying their fair share of tax. in Australia.
Mr Collins had his tax license suspended by the Tax Practitioners Board in December 2022 and is no longer an employee of PwC. The Australian Federal Police have since launched a criminal investigation into Mr Collins’ behavior, but no charges have been laid.
Thursday’s hearing was the first time former PwC CEO Luke Sayers, who led the firm from 2012 to 2020, faced questions from the inquiry into his involvement in the tax leaks scandal.
Throughout the hearing, Labor senator Deborah O’Neill and Greens senator Barbara Pocock continually raised questions about an earlier plan to sell PwC’s consultancy business, conceived by Mr Sayers.
He told the Senate inquiry that the idea, created between 2017 and 2019, was to split the Australian, New Zealand and some Asian management consultancy arms of PwC.
The project was far enough along for Mr Sayers to travel to the US to promote the idea of the sale, with the investigation revealing the company’s valuation was around $1bn – but the deal was never concluded.
As the end of Mr Sayers’ lengthy questioning neared, Senator O’Neill reproduced a 2019 submission from PwC Australia to a then-Senate inquiry that examined audits and consultancy firms.
In the document, PwC pushed back against the idea of ”structurally separating” the audit and consultancy businesses because it would negatively impact their operations – but the Senate heard on Thursday that PwC was actively planning to separate its auditing businesses. audit and consulting when he made this presentation. .
“Mr. Sayers, this really makes me question PwC’s interactions with the Senate under your leadership, the fact that this was happening in part of the business, and the public documentation submitted to the Senate was a denial that a “This should never happen because it would render the company unable to operate,” Senator O’Neill said.
“This makes me question everything you’ve said to me today, because these two things are complete opposites.”
PwC sold its government consulting business to private equity firm Allegro Funds for $1 in July, in an urgent sale aimed at protecting thousands of employees in the wake of the tax leak scandal.
“Bad Apples” or “Failed Leadership”?
PwC Australia’s new boss, Kevin Burrowes, was the first to appear before the Senate inquiry on Thursday and has repeatedly blamed the company’s failures on its former CEOs – Mr Sayers and Tom Seymour, who led the company from 2020 until his departure earlier this year. .
Mr Seymour did not appear before the inquest on Thursday.
Greens senator Barbara Pocock repeatedly referred to PwC’s culture during questioning with Mr Burrowes, after a damning internal review of PwC led by former Telstra CEO Ziggy Switkowski highlighted evidence of significant cultural issues within the company.
Senator Pocock argued to Mr Burrowes that the scandal which engulfed PwC stemmed from a culture ultimately fostered by poor leadership.
“Switkowski’s main conclusion is that the PwC scandal was born from the company’s pursuit of revenue at all costs, a ‘whatever it takes’ culture, and a revenue system that places the profit before ethics,” she said.
“Even if a small number of bad apples have been sacrificed or suffered some kind of penalty, the system persists.”
Mr Burrowes was questioned by Senator O’Neill about who he thought was responsible for PwC’s culture, before pointing the finger at the “leadership failures” of Mr Sayers and Mr Seymour.
“I think it’s fair to say that these two individuals appear to have let the company down,” Mr Burrowes said.
“Mr. Burrowes, just to be clear, Mr. Sayers, as the former CEO of PwC for a long period of time, and Mr. Seymour failed in their leadership. Is this your testimony before the committee?” » asked Senator O’Neill.
“Well, clearly the company found itself in a terrible position and because of a lack of leadership,” Mr Burrowes replied.
“Therefore, the only assertion you can make is that they have failed in their leadership of PwC Australia during this period, Senator.”
This assessment was supported by Catherine Walsh, PwC’s new head of HR, confirming that the company’s problems were not limited to a few “bad apples” behaving badly.
“As a company, we have to accept and we accept what Dr. Switkowski has laid out for us very clearly… but our response is very genuine,” she said.
“We need to hold ourselves accountable…but it comes down to leadership, it comes down to culture. We need to change the whole company, not just a few bad apples.”
Former CEO denies leadership ‘failure’
During his appearance before the Senate, Mr Sayers – who is also chairman of Carlton Football Club and runs his own consultancy – said “bad actors” were to blame for PwC’s failures when asked how much of responsibility he assumed for the company’s past actions. .
“I feel responsible, it’s just a terrible, terrible situation. But the bottom line is that a number of bad actor tax partners made bad behavioral choices,” Mr Sayers said.
“The confidential information that was shared…is blatantly false (and it) should never have happened.”
Senator Pocock rejected Mr Sayers’ assessment of the situation, reiterating Mr Burrowes’ assertion that the breach was the result of a “failure of leadership, a failure of culture”.
“That’s not what was happening at PwC, Mr Sayers, and you have to deal with the culture that your leaders left this company with,” she said.
Mr Sayers then denied suggestions from Senators Pocock and O’Neill that Switkowski’s review reflected his tenure as CEO at PwC, as the review was based on the company in 2023, when he had left the company for a long time.
He also revealed he had worked on PwC’s Telstra account in 2001, when Dr Switkowski was CEO, after being questioned by Senator O’Neill, but said he had no input into the PwC review.
Mr Sayers told the inquiry he had no knowledge of the tax leak scandal before it became public earlier this year, and apologized for it happening on his watch .
At a Senate estimates hearing in May, the Australian Taxation Office (ATO) said it first attempted to investigate PwC in 2016 before raising concerns with Treasury and the AFP in 2018 – during which time Mr Sayers was in charge.
The involvement of the ATO and the Treasury’s attempted investigations during Mr Sayers’ tenure led Senator O’Neill to question Mr Sayers about his friendship with former Treasurer Josh Frydenberg.
Mr Sayers denied communicating with Mr Frydenberg or his team regarding the tax leak scandal. Senator O’Neill did not suggest any potential wrongdoing by Mr Frydenberg.
The senator then asked Mr Sayers if he had ever encouraged Mr Frydenberg to make representations to the ATO as treasurer to “step back” the investigation into PwC – which he also denied.
“Senator, with all due respect, my integrity is being questioned and questioned here. Of course not,” he said.
The final report of the inquiry examining the management and integrity of advice services is expected to be delivered by November 30.
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