Richard Colbeck (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I present an interim report of the Finance and Public Administration References Committee on consulting services, and I move:

That the Senate take note of the report.

This report that I am tabling today on behalf of the committee comes about through a number of circumstances. Knowledge of the actions of PwC have become more apparent through questions on notice that have been placed by various colleagues through committees but also particularly through the estimates process a few weeks ago and through some advice that was provided to us by the Clerk in relation to the events of the Department of Treasury referring the PwC matter to the Australian Federal Police. That has necessitated the committee taking some care in the way it's continued with this inquiry.

The Clerk's advice has been extremely useful to us in that process. It's been comprehensive. It's been valuable to, I think, all members of the committee. We certainly thank the Clerk for the work that has been done in providing that advice to the committee and assisting us in our deliberations. In fact, it's one part of that advice as to how we might proceed that has brought us to the point that an interim report has been prepared. That was one of the mechanisms that was mentioned as part of that advice as to how we might continue with this process, bearing in mind other advice that had been provided to us, that we needed to be careful that we didn't create a pool of evidence that would inhibit the capacity for these matters to be properly aired in any potential legal proceedings. I'm of the view that that's where we'll end up.

Another piece of advice that's also acknowledged in the report is that we not have people who may be subject to legal proceedings who deliberately want to come before the committee put on the record matters that then cannot be used in any subsequent legal proceedings. So the committee is proceeding carefully. But this report is really quite deliberate. It's titled in a very deliberate way, PwC:A calculated breach of trust, because that's how the committee sees the actions that were undertaken by Mr Peter Collins. He was given the privilege of being part of a consultation process on new legislation that was being proposed to deal with multinational tax avoidance and to ensure that tax on earnings earned in Australia was paid in Australia. It was a significant reform being undertaken by the then government. It was a significant part of our conversations with other jurisdictions.

What becomes clear from the emails that have been tabled through the efforts of my colleagues is that this is not just an Australian matter; it extends internationally. There are email addresses that have UK addresses and US addresses. This is something that was being worked on and negotiated globally. We haven't got that far in the context of our investigations at this point in time, but there's no doubt in my mind that other jurisdictions should be looking at this matter, what has happened here in Australia and the links to it that come from the email trails that we currently have. It would be in their interests to do so. I'm sure my colleagues, when they get to their contributions, will agree that PwC Global shouldn't be able to cauterize their involvement by trying to make out that this is a local issue. It is not. It is clear from the little that we have at this point in time that it goes much more broadly than that. It became apparent once those emails became available but also through some of the other evidence that we've already received.

This is not just a calculated breach of trust, but it's an egregious one, very much so. It's a breach of trust in so many different ways. In the evidence that's been provided to us through a number of committees, PwC resisted attempts to find out what was going on. They used legal mechanisms to try and prevent, first, the ATO, and others, from investigating what was going on; all the while, Mr Collins continued to sign further confidentiality arrangements. It beggars belief that this is what was happening. It also impacts on so many others that work within that organisation. We have 36 or 63 names, however many names, that might have been involved on email lists, and all of those people—some of whom, we understand, may have just been on an email list and, therefore, only received an email—have this hanging over their heads and potentially impacting on them.

PwC doesn't seem to understand that it's their responsibility to deal with this—to provide appropriate information to the Australian community and the Australian authorities. They've handed over to us a list of 63 names and then said to us, 'Don't publish it,' but we don't have the background information to know the depth of involvement or otherwise of any of those people. The fact that they can't seem to even get that right or understand what their responsibilities are as a part of this process actually compounds the problem.

So we have made this report that highlights some of the issues and demonstrates how they've attempted to hide what's been going on. As the Secretary of the Department of Finance told us in Finance estimates, they initially said, 'No, it was just one person.' Then it was nine, and now it's more, but we don't know who they are. Those nine will not be involved in any engagement with government projects. It's time that they came clean. It's time that they told the Australian community and the international community what was going on. It's time that they cooperated with the investigations that are being undertaken so that we can understand what went on—the Australian community deserve to understand what went on. But, quite frankly, they also owe a duty of care to all of their employees not only so that those that weren't involved can understand that their name is clear, get on with their lives and get on with being an effective part of the Australian community but also so that those that need to be brought to account can be brought to account.

There are two very simple recommendations at the end of the report: fully and openly comply and cooperate with the investigations of the AFP and the Tax Practitioners Board. That's not unreasonable. You would think that you wouldn't need to make a recommendation about that matter, but we have—and it's clear. They should be open and honest with the Australian people and the international community and accurately publish information about who was involved so that those that aren't involved can pay a duty of care to their communities and employees and get on with their lives.

I acknowledge the work of the committee secretariat in pulling this report together. They've done a mighty job since we decided last week to pull this report together. It's not long. It's relatively graphic though, I have to say. I also acknowledge my colleagues Senator Barbara Pocock and Senator O'Neill for the work that they've done in bringing this to light. This is not the end of the process. This is an interim report based on the advice that we received from the Clerk as to how we might progress this. There will be more, and we, of course, will be talking to other members of this industry, sector or community, if you like, as the work of the committee continues.

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I want to hold up these documents, containing 144 pages of emails, that continue to reveal the nature of deception that was involved in the matter to which this report seeks to put some context around. It is a convoluted tale. It's really worth looking at the report, because the extraction-of-teeth method that we've had to go through, to get to this point, has been unbelievably painful. I want to say, right at the start, that it is an offence to me as a senator—and I find it offensive to the Senate, to my colleagues and to the Australian people we represent here—that PwC attempted a swiftie a couple of weeks ago, on a Monday morning, with a headline that indicated they had released the names.

Let's be very clear: they didn't release the names. They sent a list of names to us, which was different from another set of lists that was going around, and then they asked us to keep it secret. They got a headline. If they're going to continue to chase headlines and fail to respond to the orders of the Senate to tell the truth, it's going to get uglier and uglier. It is more than time for PwC to change their strategy. Spin's not going to get anyone out of this mess. There is a requirement for truth-telling to the Australian people.

Today this report into PricewaterhouseCoopers Australia—and, tangentially, PwC global—is a response to that behaviour so desperately and awfully revealed in that 144 pages of emails and the consequent behaviour that has followed as those emails became somewhat known in public. This document reveals a profoundly unethical nature of behaviour inside the organisation over many years and is a calculated breach of trust.

The scale and significance of the public interest in this matter has motivated the release of the report. I want to associate myself with the remarks already on the record from the chair, and certainly with Senator Pocock who has been pursuing this matter, and I want to applaud the powers of the Senate to do its job for the Australian people. These documents were released because of questions that were asked in estimates. The fact that we got them, in response to questions that were put on notice afterwards, has given us the shape and scale of what's reported today in this very important report.

To be clear, the view of the committee is that what happened with PwC Australia and PwC global was a deliberate and planned breach of trust by PwC. The actions of Peter-John Collins, ex-PwC, in intentionally sharing confidential information with PwC partners and in personnel risked at least $180 million per year of tax to which Australians, rightly, had a claim. It also generated at least $2.5 million of income for PwC.

This occurred at the time when Mr Tom Seymour, who has stepped down as the recent CEO of PwC Australia, was head of tax, and it occurred under the watch of Mr Luke Sayers, who was the CEO of PwC at the time. What is manifestly clear is that the company failed in its duty of care towards its own partners and personnel and to Australian taxpayers, and it failed to report the actions of unfit and improper persons in their midst.

This is a failure that extends because of the structure of PwC, thereby to all partners. Whether they were embedded in these emails, whether they had knowledge of it, whether they had degrees of knowledge of it, every partner is engaged in this breach. All the personnel who were working with PwC, by association, had their reputations tarnished.

As these internal PwC emails received and published by the Senate Economics Committee reveal, Mr Collins and other PwC parties had no regard for their obligation to confidentiality of their engagement with Treasury. While Mr Collins is a central figure in these events, it's evident from the internal PwC emails, brought to light through the Senate estimates, that his actions were understood by PwC to be problematic, for the company, if they were to ever be made public. So they knew it was 'dodgy as' but continued the practice anyway. There's no evidence that PwC colleagues or leaders called out this behaviour until it became publicly known in 2023—eight years after it commenced.

While PwC were out publicly and in their representations to the ATO supporting the new tax laws, they were in fact undermining those tax laws behind closed doors. Let me remind you of some of the communication in redacted PwC emails from an unnamed PwC employee:

It sounds like you haven't received this document in any form. Because it was provided to us on a confidential basis, I ask that you don't circulate it beyond us or discuss it outside PwC—it would really put PwC Australia and me in a real bind.

There is a procedure for me to get you confidentiality clearances—you sign a deed—if needed.

The name of the person that signed that particular email has been redacted. We don't know if that person still works at PwC. We don't know if that person could be working on government contracts. This person could be in a senior executive position at PwC or any other company globally. They could indeed be on the audit board for standards globally. We have no idea because the obfuscation continues from PwC Australia and PwC Global. The role and identity of that unnamed person and all unnamed persons are crucial to Australia's understanding of the depth of this issue and in allowing the correct course of justice to be enacted. I acknowledge that there is a tension between providing natural justice to those who were tangentially or peripherally involved, but there is a national interest in us knowing and an international interest in all of us knowing exactly who and how and to what degree people were involved. And we are no closer to that. No matter how many headlines about names being released get printed, the fact is we remain in the dark because PwC are not coming clean.

Ms Stubbins is the new CEO, and I would suggest that, like many who have gone before her, she simply doesn't seem to understand the nature of transparency and accountability. On Monday 5 June we got some information. Four partners were named: Peter Collins, Michael Bernstein, Neil Fuller and Paul McNab. They were happy to put them on the public record, but not others. They did, however, dribble out a bit more information to pretend that they were actually coming clean with Australians, and so there are nine partners who have gone on gardening leave. I don't care how good they are at gardening, and I'm really not satisfied that only four people were named. Are they the four people that they didn't like? Let me express some concern about reports from whistleblowers prior to the report landing. Even up to today people inside PwC are scared to death or are frightened to speak up because they are being intimidated. That is the culture of this organisation that is manifested today. And if you think you can frighten people so much that they are afraid to speak to their elected representatives, well, think again.

I have confidence in the Australian people deciding to stand up for what is right, and I have great confidence in people inside PwC who have done the right thing, who continue to do the right thing, who do act professionally, who are ethical, who want to participate properly in the economy and provide due and proper assurance to the market. I know they are in there because they are writing to me and to my colleagues. I don't think that PwC understand that the tactics of intimidation will not assist them. Sixty-three names have been provided to the committee, but they did not provide the committee with an indication of the extent to which those 63 individuals were involved. Let me convey my deep displeasure and my absolute frustration with PwC for placing our committee in such an invidious position. It is contemptuous to attempt to use the Senate in the way that they have tried. It was a big try-on, it was completely inappropriate, and if you think that is going to bring the matter to an end, it certainly won't. (Time expired.)

Barbara Pocock (SA, Australian Greens) Share this | Link to this | Hansard source

COCK () (): I associate my comments with those of my fellow committee members Senator Colbeck and Senator O'Neill. The Australian public are horrified at what they have learned about PwC in recent months, and the Senate, as this report shows, shares that horror across parties. I've had hundreds of emails and calls, none in support of PwC—not one. If my mailbox is any indication, this organisation has few friends and Australians are angry. They want action, accountability and honesty. And, as this report shows, we're very long way from any of that. I want to address three issues in my comments: what has happened, how PwC has responded and what needs to happen next.

Firstly, what happened? PwC partners signed confidentiality agreements as they advised government, and then went to work to aggressively and unlawfully sell information they harvested, earning $2.5 million in fees and growing their client list internationally. Far from helpful advisers to government, they were voracious, greedy lying scoundrels, and they thought they could get away with it. And they probably would have, without alert journalists and an alert Senate. PwC were consulted by a government which wanted to reform tax law to collect more revenue from multinationals evading tax. The government thought that if you want to catch a fox, ask a fox—an experienced fox who knows how tax minimisation works. Treasury required that fox to sign confidentiality agreements, with potential criminal sanctions if betrayed.

Well, the fox has shown itself to be without scruple. The fox shared the confidential information widely with fellow foxes within PwC and, together, they harvested its profit—to date, without serious penalty for the partnership as a whole. I remember the day in estimates when I asked the Minister for Finance about the consequences for this corruption. She told me that they would suffer reputational damage. I was shocked; a bank robber suffers reputational damage when they're convicted but we do not withhold other consequences, like jail. White-collar crime by consultants cannot give people a get-out-of-jail-free card when most of us—most of Australia—have no such access. Reputational damage is a weak penalty. As long as we stop there we let crimes like this get off free, and we say to PwC, and to the big four, 'Don't worry, you've got friends in high places who will not call you to account.' Our report repudiates that. This Senate report calls wrongdoers to account. This report calls PwC to account, and says to anyone else shirking the conflicts of interest that litter the ground of tax and consultancy: 'Pay attention! You are on notice.

The second issue I want to go to is the way in which PwC has responded—how it has handled this egregious set of dishonest acts and how it has attempted to obscure events and even use this Senate, as we heard Senator O'Neill reflect on. At first, Mr Tom Seymour, the then CEO, optimistically believed he could outride the revelations of a conflict of interest and monetisation of government information when he publicly characterised them as a 'perception' problem. He failed to take responsibility, and this has proved to be a consistent pattern throughout this scandal. Again and again, PwC has failed to take responsibility. It must have known for years the names, the communications and the specific acts of those responsible, as well as those who are not responsible. PwC frustrated government efforts by hiding behind tens of thousands of claims of professional legal privilege. The leadership of PwC have failed to deal transparently with this scandal. Instead, according to insiders who have put this to me, they adopted a fall-guy strategy, seeing one of the partners, Mr Peter Collins, off as a sacrificial problem player, when we know that a sizeable number of PwC partners and personnel shared confidential information and monetised it in Australia and globally.

PwC has adopted a strategy of resist, deny and diminish—stay opaque and don't publish the names and actions of those who are responsible. In the process they have potentially hung out to dry all those who received emails or who are on various lists, without care as to their innocence or their guilt. Where is PwC's duty of care, as Senator Colbeck asked? Where is their duty of care to the whole 9,000 workers and employees within PwC who potentially will suffer reputational contamination? It is not in evidence. I predict that PwC's unravelling will be a Harvard Business School case study on how not to deal with massive organisational ethical failure.

The rule book says: 'Be honest. Face up and act, or trash your brand and your future work stream.' Whoever is advising PwC on critical-incident management needs to go back to PR school. The average parent trying to teach their kids simple honesty could have given you better advice. The way in which PwC has responded tells us a lot about the internal culture, management and leadership in that organisation. They have yet to name who did what within their ranks. And past leaders, like Luke Sayers, CEO through this scandal, have taken no responsibility. PwC leaders have instead tried to pass the parcel to the Senate. They've yet to recognise an internal cultural leadership failure for what it is. No-one, it would seem, within PwC publicly called out this egregious ethical failure at the time or over the years since it occurred.

And we have read the emails which Senator O'Neill has held up. PwC tax offices are falling over themselves, throughout this set of emails, to harvest a profitable opportunity. It's a double fail. As history tells us, it's not the initial crime, often, that brings organisations undone, but, so often, the subsequent concealment. This chapter raises serious concerns about the aggressive pursuit of money. What is the business model at work here, and with what consequences for the people who work there, for ethical partners or staff, or for the larger public interest for ordinary taxpayers?

I get phone calls almost daily from people in PwC, past or present, or in the other big four consulting firms, who say to me: 'Keep going. Please call out bad behaviour, conflicts of interest and straightforward, untrammelled greed.' People who call say that they are distressed by the internal culture and partnership model, which several of them have described as 'cult-like', where, they say, senior partners are protected and more junior people are bullied, in their words, 'to protect the bosses and the partnership'; where whistleblowers are cast out and aggressively pursued, making calling out unethical behaviour literally a dangerous thing to do. As a current PwC partner wrote to me anonymously, 'It is almost impossible to act against the leadership of the firm,' given the partnership model. Others have contacted me on burner phones—I kid you not—or from fake email addresses, because their big-four-firm employer has access to all of their communications, and monitors them, and they are fearful. Several have told me that the PwC case is the tip of the iceberg—that conflicts of interest, poor value for money and aggressive pursuit of profit where ethics fall at the first hurdle are common practice.

This concerns me. It needs to stop. That kind of culture leads to organisational failure, to unsafe organisations, to big rip-offs and to the kind of scandal we've seen unfold. This model fails staff. It also fails the Senate. And, most importantly, it shows contempt for the Australian people. It also reveals contempt for Australia's tax machinery: for Treasury; for the ATO; for the Tax Practitioners Board. PwC has failed to manage its affairs and it deserves serious consequences for its lazy and cowardly failure to manage these events. Well, the Senate says 'no' to that cowardice in the pages of this report.

My third point is: what needs to happen next? This appalling, unlawful chapter must have consequences. Our tax regulatory system has shown itself inadequate in the face of wily, unethical players who chase money at any cost. This is a matter for our Senate committee and its larger deliberations, and we will bring forward proposals for change, I have no doubt. But now it's the time for logical consequences. Anyone who has raised kids knows the power of logical consequences. These are the actions that the adults in the room take to guide others to take responsibility for harm caused or damage done. We need some of that now, in the face of serious and contemptuous actions by PwC over years. I call for three immediate consequences: a two-year removal of PwC's registration as a tax practitioner, a ban on government contracts—and, as we stand here, we see states around the country moving to exactly that ban—and, finally, a referral to the National Anti-Corruption Commission should be top of the list come 1 July.

Our Senate committee on consultancies has important work ahead of it. We will be looking beyond the tip of the iceberg. Our country deserves better.

Paul Scarr (Queensland, Liberal Party) Share this | Link to this | Hansard source

I rise to actually pay a compliment to Senator Colbeck, Senator O'Neill and Senator Pocock. From my perspective, I think you've done an absolutely outstanding job in relation to examining this very, very disturbing matter. During my career—and I had 25 years in the private sector before coming to this place—I worked very closely with PwC on four continents. I was company secretary and general counsel of a company where PwC was the auditor. I had worked in my office settling accounts with them until two or three in the morning, against terrific time pressures. I am so dismayed by what has come out.

I say to PwC: please reflect on the damage that you have done to your reputation. As Senator Barbara Pocock said, there are 9,000 people working for PwC, and many of them would not have been involved in this matter and the many friends I have at PwC have not been involved in this matter. Put yourself in the position of the young graduate or young accountant who has been there five or six years, burning the midnight oil. They are now in this position where, as Senator Barbara Pocock said, they're going to unjustly suffer the tarnish of this terrible situation.

The second point I want to make is that I think we also have to reflect on the fact that, when something like this happens in the private sector, it makes it hard for us to get up and defend the private sector, its principles and the contribution it makes. What happens is the regulatory pendulum swings hard and can have adverse consequences for everyone in the private sector who is doing the right thing. They all suffer because of those who do the wrong thing. That is a terrible thing.

The third point I make is that this is a very good case illustrating why we need a whistleblower protection authority. The reason I say that is that I am absolutely positive that there would have been people within PwC—and Senator Barbara Pocock, Senator O'Neill and Senator Colbeck are hearing from people all the time—who were very concerned about what was happening but did not know where to turn. Where do you turn when something like this is happening at such a high level? I think it is a very good illustration of why we need a whistleblower protection authority that provides an avenue for people from both the public sector and the private sector to seek some sort of guidance as to where to take their concerns in a confidential manner. These are very difficult situations, especially for young professionals.

In conclusion I really do sincerely compliment Senator Colbeck, Senator O'Neill and Senator Barbara Pocock on the important work they are doing in this regard. More strength to your arm. I seek leave to continue my remarks later.

Leave granted; debate adjourned.