PwC will name staff involved in tax leak, warns of severe consequences

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PwC Australia’s acting CEO says the embattled consulting firm will name all those involved in the tax leak scandal and warns of severe consequences as it nears the end of an internal investigation.

“The investigation into the confidentiality matter is to be completed shortly,” Kristin Stubbins told a NSW parliament inquiry on Monday.

Acting PwC chief executive, Kristin Stubbins, said the firm will name those involved in the tax scandal and consequences will be severe. Credit: Edwina Pickles

“We have been doing a very, very thorough investigation involving help from two external law firms. And so we will expect to announce consequences, you will see that publicly, and they will be severe,” she said in her first public appearance since taking the top job last month.

She said the firm would publicly name those involved in leaking confidential information on government plans to combat multinational tax avoidance with staff at the firm. This information was then marketed to the companies targeted by the government.

“When the investigation is complete, which it will be shortly, we will be naming all those people who did anything wrong and there will be appropriate accountability.”

Stubbins also defended the move announced on Sunday to split off its government business into a separate entity that will be sold to Australian private equity group Allegro Funds for $1.

The acting boss of PwC has warned of consequences for those found to be tax leakers.Credit: Martin Ollman

“This whole transaction is designed to protect a significant number of jobs, 1500 jobs,” she told the public hearing.

She was asked if the split was “an admission that PwC simply can’t conduct government business in an ethical manner” under its current structure?

“No, it is not,” Stubbins replied.

PwC has been effectively banned from any further business with the federal and various state governments following the tax scandal.

The proposed buyer of PwC’s government business, Allegro Funds, recently sold Pizza Hut’s Australian stores to a US buyer. Credit: AFR

Stubbins said the decision to spin off the business was made recently, after the firm determined that plans to ringfence it from its private sector business did not go far enough.

She also said PwC Australia decided to sell the business to Allegro, and it was not forced into the decision by the global group.

PwC global sent senior partners to Australia in early May, soon after the scandal broke. It intervened more forcibly on Sunday when it appointed a senior global executive, Kevin Burrowes, to take control of the Australian firm.

In the same announcement, PwC said it had entered into an agreement to sell its government business, which accounts for 20 per cent of its revenue this year, to Allegro. A binding agreement is expected to be signed by next month.

Some senators questioned the divestment decision and expressed scepticism at how quickly the firm had engineered the scheme.

“We have this unseemly haste with a profit-driven motive to try and phoenix itself back into some sort of connection with the government,” Senator Deborah O’Neill, head of the finance committee who has been calling for more details on the scandal, told ABC Radio on Monday.

“I’m very concerned at this point of time that the motivations of those at PwC remain self-centred and not about service.”

Greens senator Barbara Pocock said: “PwC seems to be putting a lot more effort into looking after its partners and staff than into addressing the ethical failure of the tax scandal or coming clean about who was involved.”

She said the proposed split did not deal with the internal inherent conflicts of interest within consultancies doing work for the government.

“PwC is in self-preservation mode where the business model remains intact and conflicts of interests remain unaddressed,” Pocock said.

If the deal to spin off its government business succeeds, about1500 staff, including 120 partners, are expected to move across to the new group, Bell.

This business will no longer work as a partnership. All staff will become salaried employees of the new entity, which will operate with an independent board and corporate structure akin to an ASX-listed company.

Allegro is negotiating the ownership structure of the business with the PwC partners who are expected to share ownership. These partners are expected to end any economic relationship they have with PwC.

Allegro has made its reputation with lucrative deals to acquire, and then fix-up, troubled businesses. It recently sold the Pizza Hut business in Australia to a US restaurant group.

Stubbins also drew questions about the hundreds of PwC employees serving on not-for-profit boards. This included her own former role on the board of a local NSW health district, which later hired PwC as a consultant.

She said it was not intended to generate work for the firm.

“It’s part of, actually, our culture to want to do community service. So most partners like to bring their expertise to boards they are passionate about,” Stubbins said.

The independent review of PwC’s conduct in the scandal, headed by former Telstra boss Ziggy Switkowski, is due to be released in September.

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