PwC is accused of deceiving the Senate in 2019 on its plan to sell its consulting business while simultaneously publicly criticizing the proposal.
The world’s largest consulting firm PwC has been charged with deceiving the Senate by announcing plans to sell its consulting division while claiming in 2019 that splitting its auditing and consulting divisions would make it difficult to function.
The current and previous CEOs of PwC spoke before a Senate inquiry on Thursday that is looking into the management and ethics of Australian consulting firms in the aftermath of the PwC tax leak scandal.
The inquiry was started in March as a result of Peter-John Collins, the former head of international tax at PwC, sharing secret tax data from the Australian Tax Office and Treasury in 2014 to reverse-engineer a scheme to assist large multinational corporations avoid paying their fair share of tax in Australia.
In December 2022, the Tax Practitioners Board suspended Mr. Collins’ tax license; he is no longer employed by PwC. A criminal investigation into Mr. Collins’ actions has since been opened by the Australian Federal Police, but no charges have been brought.
Luke Sayers, the former CEO of PwC who led the company from 2012 to 2020, was questioned by the committee into his role in the tax leak scandal for the first time at the hearing on Thursday.
Senators from the Labor Party and the Green Party, Deborah O’Neill and Barbara Pocock, repeatedly brought up an earlier, by Mr. Sayers-conceived plan to sell PwC’s consulting division throughout the hearing.
The notion to separate PwC’s management consulting operations in Australia, New Zealand, and some Asian countries was conceived between 2017 and 2019, he told the Senate hearing.
The strategy had developed to the point where Mr. Sayers traveled to the US to promote the sale concept. The inquiry noted that the business was valued at about $1 billion, but the purchase was never finalized.
As Mr. Sayers’ protracted questioning came to a close, Senator O’Neill cited a contribution made by PwC Australia to a Senate investigation looking into audits and consulting businesses in 2019.
PwC opposed the idea of “structurally separating” the auditing and consulting businesses in the document because it would have a negative effect on their operations. However, the Senate learned on Thursday that PwC had been actively planning to do so when it submitted its proposal.
Mr. Sayers, Senator O’Neill voiced worry regarding PwC’s interactions with the Senate under your leadership. She drew attention to a discrepancy where one aspect of the company appeared to be involved in something, but the public information provided to the Senate refuted the possibility of such occurrences. She was confused by this paradox because it might make it more difficult for the company to run smoothly.
“That makes me question everything that you’ve been telling me today, because those two things are completely at odds.”
In July, PwC made a hasty sale of its government consultancy division to private equity firm Allegro Funds for $1 in order to save thousands of employees following the tax leak incident.
“Bad apples” or “leadership failure”?
In his first appearance before the Senate committee on Thursday, newly appointed PwC Australia CEO Kevin Burrowes repeatedly attributed the firm’s mistakes to Mr. Sayers and Tom Seymour, who served as CEO from 2020 until his departure earlier this year.
On Thursday, Mr. Seymour did not show up for the investigation.
During her interrogation of Mr. Burrowes, Greens Senator Barbara Pocock frequently brought up PwC’s culture. This was in response to a damning internal study of PwC done by former Telstra CEO Ziggy Switkowski, which exposed serious cultural issues within the company.
Senator Pocock reminded Mr. Burrowes that the culture that eventually led to the PwC debacle was nurtured by poor leadership.
Switkowski asserts that the PwC controversy resulted from the organization prioritizing profit over ethical considerations, developing a culture of doing whatever it takes, and prioritizing making money at any costs. Despite a few people receiving repercussions, the flawed system is still in existence.
Senator O’Neill pressed Mr. Burrowes hard on who he thought was in charge of shaping PwC’s culture before he singled out Mr. Sayers and Mr. Seymour for their “failures of leadership”.
“I think it’s fair to say that both those individuals appear to have let the firm down,” said Burrowes.
“Mr. Burrowes, just to be clear, both Mr. Sayers, who served as PwC’s former CEO for a considerable amount of time, and Mr. Seymour had poor leadership skills. Is it the testimony you gave the committee? Sen. O’Neill enquired.
“Well, clearly the firm has found itself in a terrible position and through a failure of leadership,” answered Burrowes.
Therefore, Senator, the only thing you can really argue is that they didn’t lead PwC Australia very well at the time.
The company’s issues weren’t limited to a few “bad apples” acting improperly, as Catherine Walsh, PwC’s new head of human resources, confirmed in support of the assessment.
“As a firm, we have to accept and we do accept what Dr Switkowski set out very plainly for us … but our response is a very genuine one,” she continued.
We must hold ourselves accountable. but it also has to do with culture and leadership. The entire company must be changed, not simply a few troublemakers.
Ex-CEO disputes accusations of ‘failure’ in leadership
When asked how much responsibility he accepted for PwC’s prior acts during his appearance before the Senate, Mr. Sayers—who is also the president of the Carlton Football Club and owns his own consultancy firm—said that “bad actors” were to blame.
“I feel responsible; the situation is absolutely awful, awful. The fact remains, however, that a few of tax partners behaved badly and made poor decisions, according to Mr. Sayers.
Senator Pocock disagreed with Mr. Sayers, saying that it was utterly wrong and never should have happened to share sensitive material. He agreed with Mr. Burrowes that a lack of leadership and a negative corporate culture were to blame for the breach.
“Mr. Sayers, what you’re saying doesn’t line up with what happened at PwC in reality. You should be aware of the influence your leadership had on the company’s culture.
Sayers continued by refuting the senators Pocock and O’Neill’s claims that the Switkowski evaluation was an accurate reflection of his tenure as PwC CEO because the review was based on the operations in 2023, long after he had left the company.
After being questioned by Senator O’Neill, he also admitted that he had worked on PwC’s Telstra account in 2001, when Dr. Switkowski was the firm’s CEO, but he said that he had no impact into the PwC review.
Before the tax leak controversy became widely known earlier this year, Mr. Sayers claimed to the investigation that he was unaware of it. He also expressed regret that it took place under his direction.
The Australian Taxation Office (ATO) said at a Senate estimates committee in May that it initially attempted to examine PwC in 2016 before bringing up its concerns with Treasury and the AFP in 2018 – while Mr Sayers was in charge.
Senator O’Neill questioned Mr. Sayers on his acquaintance with former treasurer Josh Frydenberg due to the role of the ATO and Treasury’s attempted investigations during Mr. Sayers’s tenure.
Mr. Sayers denied having discussed the tax leak incident in any way with Mr. Frydenberg or his colleagues. Senator O’Neill made no inferences about Mr. Frydenberg’s probable misbehavior.
The senator then questioned Mr. Sayers about whether he had ever encouraged Mr. Frydenberg to contact the ATO in his capacity as treasurer to “back off” the PwC inquiry, which he again rejected.
“Senator, you are questioning and challenging my integrity in this situation, with all due respect. Of course not,” he replied.
The investigation’s final report, which will look at consulting services’ management and integrity, is expected to be submitted by November 30.