Contagion shows no one is safe from PwC scandal

Save articles for later

Add articles to your saved list and come back to them any time.

It might not represent an extinction-level event for PwC Australia just yet, but what has emerged over the past 24 hours represents the sum of all fears about just how bad things are going to get for the global giant as it grapples with the growing tax leak scandal.

The commencement of a criminal investigation into the leak of sensitive government information is bad enough. But there is also the very real prospect of a defacto government ban on PwC getting further work, despite Finance Minister Katy Gallagher playing down the issue this afternoon.

The Australian Federal Police investigation is only one of the blows delivered to PwC over the past 24 hours. Credit: Eamon Gallagher

PwC’s latest hell began when a carefully worded statement from Treasury on Wednesday evening confirmed that its referral to the Australian Federal Police for a criminal probe was not just about Peter Collins’ role in leaking confidential government plans to combat corporate tax avoidance.

Treasury secretary Steven Kennedy noted the significant extent of the unauthorised disclosure of confidential information “and the wide range of individuals within PwC who were directly and indirectly privy to the confidential information”.

The next morning, AFP deputy commissioner Ian McCartney confirmed that, not only had an investigation commenced and become a high priority, it would look far beyond Collins.

“We’ll work through that process and identify any other persons of interest we believe may have committed an offence or alleged to have committed an offence,” McCartney said.

In other words, the overseas partners and anyone else considered by authorities to have been suitably involved in the scandal is now at risk of criminal charges.

Any partners involved in exploiting the leak who have since moved to other big four consulting groups are now in the spotlight.

But the real killer blow was delivered this morning when Finance Secretary Jenny Wilkinson went before Senate estimates and delivered a series of bombshells indicating just how high a price PwC is likely pay with Treasury and Finance departments, which are clearly furious with the firm.

Last week, even before Treasury referred the matter for criminal investigation, the Finance Department directed PwC to stand down anyone working on Commonwealth contracts who was directly involved in, or who had knowledge of, the scandal.

Any partners involved in exploiting the leak who have since moved to other big four consulting groups are now in the spotlight.

This directive appears to go beyond the 50 or so staff and partners who were named in the emails released early this month detailing how PwC partners exploited the information for commercial gain.

Wilkinson says that if this breach had occurred under the Management Advisory Services Panel – the all powerful panel that governs Commonwealth contracts for the private sector – it would have given Finance grounds to tear up all PwC’s current contracts.

Senate estimates was then told that Commonwealth business with PwC for the financial year to date – up to May 16 – totalled $255 million. PwC is estimated to generate annual revenue of about $3 billion.

More interesting are the fresh directives that go to the heart of whether PwC is effectively shut out of all government business for the foreseeable future.

On the day the directive went out to PwC to stand down staff, the Finance Department published a procurement policy note on its website reminding Commonwealth officials that when considering external contractors they must “consider previous behaviour, including ethical conduct”.

These government procurement officers, controlling billions in contracts each year, will not have a hard time working out what Wilkinson thinks of PwC’s ethical conduct.

Not after she detailed just how the release of the 144 pages of emails in May, detailing how PwC’s attempts to exploit the confidential information, starkly contrasted with its initial response that the matter was limited to Collins.

“This additional information raised serious concerns about the broader culture within PwC and undermined our confidence in their earlier engagements around this matter,” she said.

Whatever happens from here, PwC Australia has lost its biggest customer for the forseeable future. And its corporate business might just follow.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Most Viewed in Business

From our partners

Source: Read Full Article