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PwC Australia’s release of names to a Senate committee this week, the latest attempt to salvage its reputation, is a distraction from its major problems: The firm is a pariah with the government sector, with the contagion now starting to spread to its corporate clients, and there are signs of a civil war brewing within its ranks.
PwC on Monday handed the committee a list of 67 current or former partners and staff who had received at least one of the damning emails containing confidential government plans. It also claimed that the vast majority on the list had no idea of the breach that had yielded the information.
And then there were three? The only thing that might save PwC is the fact that the corporate and government sector cannot afford to lose it.Credit: Les Hewitt
PwC’s interim boss Kristin Stubbins shared the information with PwC’s staff but left most of the details – including the four partners it did name due to their allegedly crucial role in the scandal – out of the public statement to the media.
So much for PwC’s commitment to being transparent and ethical.
Senate estimates had most of the 67 names anyway from when Greens senator Barbara Pocock tabled a list of 36 partners implicated in the scandal. The committee decided not to make the 36 names public at the time due to an Australian Federal Police investigation and the current official list of 67 is expected to receive the same treatment when the committee meets ahead of a public hearing on Wednesday.
With its reputation in tatters, PwC is trying to spin quite a tale in its bid to salvage the situation.
The four partners named – Peter Collins, Michael Bersten, Neil Fuller and Paul McNab – allegedly played key roles in orchestrating an incredibly high profile and globally significant tax avoidance strategy, in a firm that now admits its culture was one of ruthless profit-making at all costs.
Collins was banned by the Tax Practitioners Board after a finding that he had shared confidential information. Meanwhile, McNab has publicly confirmed he was on the PwC list and has said that “at all times I worked with my clients to comply with Australian law, and not avoid it”. Bersten and Fuller have not made any public comments.
Everyone else on the list was apparently either unaware or not curious enough to wonder about PwC Australia’s magic sauce that was grabbing the attention of the world’s biggest companies, even those that had never been clients of PwC’s US operation.
The distraction of the names does take the focus away from PwC’s more immediate problem. The firm is at war with itself even as its core business starts to feel the squeeze. It has been hard to escape the drubbing PwC’s business is receiving from the government sector, which is clearly intent on boycotting the firm, but the really disturbing news is emerging from the corporate giants that now control PwC’s fate.
There are signs that corporate clients are moving from a neutral stance on the scandal, and that’s even before investors have had the chance to scrutinise any links to PwC.
Lend Lease has already “paused” plans to appoint PwC as its new auditor. On Friday, Australia’s largest super fund, the $280 billion AustralianSuper, froze all future contracts with the firm and said it will review its auditing work with PwC at the end of the year.
Australian Retirement Trust has now joined the party as well, according to Bloomberg, with the fund saying that it will not be doing any new business with PwC at this time.
Meanwhile, ASX-listed toll road operator Atlas Arteria provided a dress rehearsal of what companies will face at shareholder meetings this year, with its chair Debbie Goodin having to offer assurances before investors voted to keep PwC as the auditor of its Bermuda-based subsidiary.
These public examples are just a hint of the dilemmas that corporate clients face as they grapple with the fact that they are dealing with a firm accused of a gross lapse of ethics and potentially criminal behaviour. A big four auditor’s presence usually bolsters a company’s reputation not tarnish it.
As one of Australia’s largest companies told this publication: What happens when you need to raise money on overseas markets. Do you really want to have to explain why you have PwC as your auditor?
Australian Shareholders Association boss Rachel Waterhouse has made it clear the issue will become even more prominent.
“This PwC scandal goes to the crucial ability of shareholders to rely on the integrity of auditors,” she says.
“We don’t expect PwC to feature as a new (auditor) appointment.”
The last month of chaos has opened the divisions both inside PwC Australia and between the local operation and its global bosses.
Public relations guru Sue Cato is just the latest appointee, representing the interest of the local business, which some internally say, is being thrown under the bus by their global counterparts.
Former Labor minister Stephen Conroy was presumably appointed by the global partners sent to Sydney to fix the mess but evidently powerless against the business, which is controlled by its Australian partners.
Given the public’s red-hot anger at the revelations, PwC Australia’s head honchos are happy to fiddle while the business burns.
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