The Acting CEO of embattled consultancy firm PwC has spoken publicly for the first time since the tax leak scandal, apologising for the breaches and promising “severe consequences” for those involved.
Key points:
- Acting CEO of PwC shared an apology during a parliamentary inquiry
- It was revealed the consultancy firm was involved in a confidentiality breach
- An incoming CEO will replace Kristin Stubbins after Tom Seymour stood down
Kristin Stubbins AM addressed a New South Wales parliamentary inquiry into its use of consultants, called in the wake of revelations PwC shared confidential government information with clients.
Earlier this year it was revealed senior PwC partners misused confidential federal government information to help big multinational companies avoid paying more tax.
Ms Stubbins, who was appointed Acting CEO after former CEO Tom Seymour stood down over the scandal, has since written an open apology letter.
In a statement to the New South Wales parliamentary inquiry, she reiterated her apology.
“We failed the standards we set for ourselves as an organisation, and I apologise on behalf of our firm,” she said.
PwC Australia is battling to put the damaging tax leaks scandal behind it, with the company’s global arm stepping in to steer the future of its local arm and prevent the fallout from spreading globally.
Singapore-based leader Kevin Burrows will take over as CEO, and said the company will sell its entire government business to private equity firm Allegro Funds for $1.
The firm has refused to say if the proposed deal for private equity firm Allegro to buy its government consulting division for one dollar will come with employment guarantees for the 130 partners and almost 2000 affected staff.
Questions remain about the future of big four accounting firms, and whether the sale will pave the way for more splits between the Big Four’s auditing and consulting functions.
NSW Greens MLC Abigail Boyd told the inquiry the sale was a “PR exercise,” and asked Ms Stubbins if that was an admission PwC could not conduct government business in an “ethical manner.”
“No, it’s not,” Ms Stubbins said.
“It’s an announcement that looks at the situation and what is best for our people, and to ensure continuity of service to our government clients.
“There will be no question around management of conflicts at all in a completely separate business.”
Nine senior partners have been stood down over the scandal, but Ms Stubbins told the inquiry she would not release their names until investigations were finalised.
“The Australian public will receive the names of people who are associated with this, who have done anything wrong,” she said.
“We will expect to announce consequences and you’ll see that publicly, and they will be severe.”
Ms Stubbins said more than 100 PwC partners would move across to Allegro, but assured the inquiry no one involved in the confidentiality breach would be allowed to work in the government business.
NSW Labor Senator Deborah O’Neill said she was concerned the sale to Allegro was an example of “phoenixing.”
“What I’m concerned about is the cultural practises that have now been revealed at PwC morphing across under a different name and title,” she said.
The Senator said there was still work to do to ensure the full scale of PwC’s actions and its impact on the Australian Tax Office (ATO).
Regulation change being considered
Senator O’Neill is now heading anther inquiry into PwC, and has flagged new regulation could be on the cards.
“My committee will be careful and methodical, and very, very determined to put on the record the shape of the challenges that we face, and to give proper consideration to what structural reform needs to be undertaken- whether that’s legislative or regulatory,” she told ABC News.
“We have a self-regulation model operating in this sector. I don’t think it’s too much to say that it’s palpably failed.”
Former ACCC chairman Allan Fells said this is just the beginning of further splits in the auditing and consulting functions of Big Four firms.
“Because of the continual dribble of news about the problems in … relationships, government, consultants, there’ll be a total break-up of the firms, and they’ll stick to their traditional audit function and do nothing else,” Mr Fells said.
“And the other business will be sold off to other operators. Of course, there’s other operators, who still have to meet many more protocols and at present, to be more transparent, accountable, honest and avoiding conflicts of interest.”
Dr Fells welcomes greater regulation.
“There’s been very poor performance from the Tax Practitioners Board and the ATO in dealing with this, and a complete overhaul … is needed in this regard,” he said.
Kevin Burrows, a PwC veteran that’s headed the firm’s global business in Singapore, will move to Sydney later this year to take the reins, but it remains to be seen if he can stem the global fallout of the tax leaks scandal.