PwC cover-up of tax leaks scandal ‘worsens the crime’: report
Mar 27, 2024
PwC International’s refusal to release a report into the overseas aspects of the tax leaks scandal is part of an ongoing cover-up by the firm that “worsens the crime” of a case that has rocked its local operations, a damning parliamentary report has found.
A Senate committee said the global organisation’s use of “legal professional privilege” was “symptomatic of its problematic engagement with the committee”. It said PwC Australia had yet to demonstrate that it reformed its operations “beyond superficial commitments to change”.
The 48-page interim report, titled PwC: The Cover-up Worsens the Crime and tabled in the Senate on Wednesday afternoon, again demanded that PwC International provide the committee with the report by law firm Linklaters into “the dirty six” overseas PwC partners linked to the leaked tax information.
The committee said PwC Australia had provided “vague at best” information about which specific current and former partners were “responsible for the misuse of confidential government information”. The local firm had also failed to provide enough evidence to prove it had reformed its “structure, practices, and culture” following the tax leaks scandal.
It is the second time the Senate committee into consulting, chaired by Liberal senator Richard Colbeck, has published an interim report into the scandal. The final report was originally scheduled to be issued on Thursday, but has been extended to the end of May.
The committee’s first report found PwC Australia engaged in a deliberate multi-year strategy to cover up the breach of confidentiality in the tax leaks scandal, as company personnel worked to monetise the information.
Failure to ‘genuinely change’
“The failure of PwC to be completely open and honest as per the committee’s recommendations in its first report is reflective of PwC’s failure to genuinely change,” the report tabled on Wednesday concludes.
“The committee does not see how PwC can recover [its] reputation while it continues to cover up because the two are incompatible. Indeed, the cover-up worsens the crime.”
The report was handed down after PwC’s global chairman, Bob Moritz, wrote to the committee saying he was declining its request to provide the Linklaters report, on the grounds it was legally privileged and confidential to PwC International.
It also comes after The Australian Financial Review revealed that PwC International put PwC Australia into “supervised remediation” last June, forcing the firm to “take all necessary steps” to appoint global partner Kevin Burrowes as interim chief executive.
“[PwC International] continues to use legal professional privilege as a reason not to provide the Linklaters report to the committee,” the report states.
“In this regard, the committee reminds PwC [International] that PwC [Australia] consistently hid behind the incorrect application of thousands of legal professional privilege claims to prevent the ATO from accessing potentially incriminating evidence.”
‘Failure to take responsibility’
The report criticises PwC Australia’s former “leadership [for] consistently fail[ing] to take responsibility for the problems within the organisation that led to this situation occurring.”
Labor Senator Deborah O’Neill said the report highlighted “the immense failures of leadership, professionalism and ethics which enabled the tax leaks scandal to occur in the first place, and the gross failures of professional accountability which saw it go unacknowledged and unpunished for so long”.
Greens senator Barbara Pocock said the evidence in the report showed PwC Australia’s initial response to the scandal “was appalling, and its attempts to mislead the Australian public and to thwart any investigation into the tax leaks remains a stain on the firm’s reputation not only here in Australia, but globally”.
A spokesman for PwC said the company was aware the Senate had released an interim report and it was digesting the contents.
“However, we note the report’s detailed description of the findings of Dr Switkowski’s independent review and the actions PwC is taking to address its culture and governance since the review’s release,” they said.
“We have taken considerable steps to transform our firm and rebuild trust, making significant progress on our comprehensive transformation program and implementation of our Commitments to Change. These include: the endorsement of a major governance reform package which will see PwC become the first of the big four firms in Australia to have an independent chair of its board; an improved enterprise-wide risk management function; and the implementation of cultural change from the top down.
“We would highlight again that meaningful change takes time and that we will continue to cooperate with the Senate and regulators in an effort to enact transformative, structural change to our firm and industry.”
‘Coup d’etat’
Senator Pocock said that the firm’s interim CEO, Kristen Stubbins, had been “unilaterally replaced by PwC International who quietly took control of the Australian firm in what appears to be a coup d’etat against local leadership”. This meant that “PwC Australia is nothing more than a puppet on a string that stretches all the way back to head office in London”.
The tax leaks scandal involved former partner Peter Collins sharing confidential tax information with PwC personnel, who then used it to help clients sidestep tax laws he was helping Treasury develop.
[Australian Financial Review]
