Waffle, fastidious yet unadulterated waffle. This is the day of the PwC whitewash. Michael West reports on two cover-ups, that of PwC and PwC Global.
The Accountants of Fortune at PwC hired Ziggy Switkowski to conduct an ‘independent’ review into the governance of the Big 4 firm. Nobody knows better than PwC that you don’t commission an ‘independent expert report’ if you don’t know what it’s going to say. And so it is that Ziggy has delivered a humbling admonishment spectacularly lacking in evidence of any wrong-doing, but long on motherhood statements.
Expertly, Ziggy told us what we already knew: greed, secrecy, culture issues. He managed to do this entirely without naming one name, without holding one human being to account. And entirely, expertly, without even telling the story about how the breaches happened.
He even admits PwC did not allow him to access to documents such as board papers; only “samples”. The PwC partners allowed him to see some “samples”. Hooray for samples. And hooray for PwC’s cosy PR shindig to get the right message out there.
PwC gave selected media (not us) an "embargoed" Switkowski review at 10am yesterday. Then at 12.40pm (after articles already written up the way PwC wanted) it released the more substantial document.
The snubbing meant we got it right the first time….https://t.co/E0mSJoGgDm pic.twitter.com/GTsEAPCHXp
— Anthony Klan (@Anthony_Klan) September 27, 2023
Hard on the heels of Ziggy’s “independent review”, the Accountants of Fortune sallied forth with their own document Orwellianly titled “Statement of Facts”. They humbly accepted Ziggy’s recommendations to lift their governance game, and declared the investigation “is now complete”.
It is redolent of Rupert Murdoch’s “This is the most humble day of my life” apology before the Leveson inquiry into News Corp bribing police and hacking the phones of murdered schoolgirl Milly Dowler, relatives of dead British soldiers and victims of the London bombings. Time to move on now.
Statement of facts?
We interrupt this broadcast of the PR whitewash of PwC to remind readers of what actually happened. PwC has been busted for systemic fraud, charging millions to advise the government on tax reform, confidentially, while selling its tax secrets to foreign multinational corporations such as Google.
The real statement of facts is that, for this firm and the rest of the Big 4, the business model is treason. Collectively, they earn billions of dollars a year advising the world’s biggest companies to rip off the Australian Tax Office by tens of billions of dollars.
PwC’s sins are threefold: advising the government how to stop the tax leaks, getting caught flogging that information to their clients in order to rip off the government more, and then the first cover-up – trying to stitch up one bloke with the whole caper – “rogue partner” Peter Collins.
The cover-up backfired. And today, in their full glory, in a resplendent PR exercise nicely timed with the shock resignation of Daniel Andrews, are the other two cover-ups. Yes, not merely Ziggy’s tutt-tutting but another “independent expert report” from law firm Linklaters.
Sorry, Your Honour, we didn’t know the car was stolen
PwC Global hired Linklaters to ‘independently’ clear the firm’s overseas partners of any wrongdoing. Faithfully, Linklaters found PwC’s partners had done no wrong. Yes, they might have been in possession of this confidential information but, hey, they did not know the information was confidential.
A reprise of the “Sorry, Your Honour, we didn’t know the car was stolen”.
“The unauthorised sharing of confidential information and related leadership failings are completely unacceptable and go against PwC’s culture and values,” said global chairman Bob Moritz.
No they don’t Bob but … case closed.
What PwC is worried about is falling afoul of US regulators, particularly the US Public Company Accounting Oversight Board. The offshore partners had intervened earlier this year to contain the scandal to Australia by forcing PwC Australia to flog its $300m government consulting business for $1 to a private equity firm Allegro.
A rich tapestry
The most fabulous line in Ziggy’s report, illuminated with some mirth by the AFR’s Rear Window crew today was this:
“There is a complex ‘tapestry’ of responsibility for conduct at PwC Australia”. Tapestry, yes. In the tapestry of the entire PwC imbroglio this is but the weaving of a solitary middle finger.
The problem here is, yes, as Ziggy quite robustly identified, culture. “Scathing” said the Guardian. But he missed the lumbering elephant in the room: untenable conflicts of interest. To wit, there are four firms – Deloitte, KPMG, PwC and EY – who advise governments on tax reform while advising their multinational clients how to dodge paying tax.
And there’s more. They are self-styled “Guardians of Commerce” which audit the vast majority of big company financial statements. There is a massive conflict signing off on proper financial statements while the tax partners, supposedly on the other side of the Chinese Wall of gossamer, tell clients how to run as close to the line on tax evasion as possible.
They need to be broken up. Senator Barbara Pocock pressed hard in the Consulting Inquiry this week, seizing on the testimony of Tax Office deputy commissioner Jeremy Hirschhorn, who intimated PwC was “too big to fail”.
Systemic fraud but too big to fail?
The other big issue is the Big 4 are not companies (which are compelled to report financial statements and other disclosures), they are shadowy partnerships. They ought to be compelled to incorporate and issue full General Purpose financial reports. But this won’t happen.
In its response to Ziggy, the firm conceded that it would embrace “some” ASX principles; appoint a couple of independent directors and a chair to the board.
Well, that’s worked well with Qantas, hasn’t it?
PwC did also commit to publishing audited financial statements in two years’ time. That’s something, if it happens in a meaningful way and the public is able to see it.
They will continue to finesse their PR ethics renaissance, supposedly with the same failed, or non-existent, regulatory regime. The firm has engaged not one but three big-ticket law firms to provide it with “privileged” analysis of the matters.
The technical term for this is “arse-covering”. “Privileged” means they will keep the details secret. So we have Mallesons (engaged by PwC Australia); Linklaters (engaged by “PwC International”); and Allens (also engaged by “PwC International”).
A lot of good that will do.
Meanwhile, PwC Australia’s “statement of facts” fingers a handful of former partners – Tom Seymour, Peter Collins, Michael Bersten, Pete Calleja, Paul McNab, Neil Fuller – all of which have been named before.
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.