Will PwC's $1 deal save the firm?
PwC's sublime combination of breathtaking arrogance and dazzling ineptitude
“[PwC has been] very, very slow with very resistant responses to public inquiries and yet we have this unseemly haste, with a profit-driven motive, to try and phoenix itself back into some sort of connection with the government,” O’Neil told the ABC.
responds to the latest PwC’s BS
It could well become the definitive case study of what not to do.
In a sublime combination of breathtaking arrogance and dazzling ineptitude, the Australian arm of global accounting giant PwC has managed to turn a possible crime into a national crisis and then allowed it to evolve into a catastrophe.
At each step of the way, rather than take the course of responsibility and transparency, the firm and its local leaders have chosen the opposite path.
In the past few days, the global heads, having jetted in last month, have been forced to take control, pushing aside the acting chief executive (who hurriedly replaced the former head just six weeks ago) and parachuting in a new boss from outside.
In what must be the ultimate humiliation, PwC has struck a deal to sell its government consulting arm for the princely sum of $1. Even that may not save the firm.
And through all this, at no stage during the past eight years has anyone voluntarily fronted the public to explain how and why confidential federal government information was exploited for profit or to outline any steps taken to rectify the situation.
Instead, its leaders have repeatedly chosen to hide, first behind the veil of client confidentiality and later behind an impenetrable corporate wall and an army of spin doctors.
Even after a public investigation late last year revealed the extent of the misdeeds from one of the firm’s leading tax practitioners, PwC’s leaders simply crossed their fingers and hoped no-one would notice.
After all, how many of us have ever even heard of the Tax Practioners Board?
When it did finally make it into the public arena early this year, via a report in the Australian Financial Review, the firm turned off communications and since has maintained radio silence.
Trust me, I’m an accountant
If ever evidence was needed of the disconnect between the standards employed by the firm’s senior management and what is expected by society, it is front and centre in its own defence.
Just a couple of bad apples. Those responsible have left the firm. It all happened years ago.
Consider this. Peter Collins, the former PwC tax head at the centre of the scandal, having signed three confidentiality agreements with the federal government between 2013 and 2018, felt comfortable enough to widely circulate what he knew with others in the firm.
Around 63 partners and senior managers were linked into a long email trail about the strategy then-treasurer Joe Hockey was about to employ to ensure global technology giants paid their fair share of tax.
The emails then reveal the firm’s plans to market schemes to those very companies on how best to avoid the new tax arrangements.
An email trail! In writing.
Many of those partners say they did not utilise the information. Some say they didn’t even read it and their only crime was to be on the receiving end of the correspondence.
Which may be true.
If that, however, is the case, it appears the principle of confidentiality — and profiteering from breaching it — was held in such low esteem at PwC that senior managers found it acceptable practice to engage in office banter about it in writing, even with others who weren’t directly involved.
It seems at odds with a marketing campaign that centres around the word “trust”.
Report finds PwC engaged in “calculated breach of trust”.
It’s just a flesh wound
A dollar doesn’t go far these days.
It does, however, allow you to pick up a business with around $300 million in annual billings and a 1,700-strong workforce across the nation that includes some of the nation’s best and brightest young brains.
While it might seem like a bargain, there’s a catch, and a mighty big one. That potential revenue comes from just a handful of sources — federal and state governments. And none of those once-lucrative clients is in the mood to continue splashing around any coin.
In fact, last month, PwC didn’t pick up a single new contract from the federal government after the Department of Finance effectively banned it as the fallout from the scandal spread and the anger within government ranks escalated.
That puts the entire revenue stream under a cloud once existing contracts end. For potential new owner, private investment group Allegro, the challenge will be in resurrecting the firm’s tarnished image and its cash flow.
Maintaining the wages bill will be no trifling matter, making the purchase a high-risk endeavour rather than the bargain many may think it is.
In a bid to insulate itself against further controversy, the new firm will consult only to government and government agencies, thereby eliminating the potential for conflicts of interest from the other commercial divisions such as auditing, tax advisory and commercial consulting that normally exist within big accounting firms.
That elevates the risk in this deal. With no outside sources of income and little inclination from government to continue any kind of relationship, the new owners have an uphill battle on their hands.
Without the deal, however, PwC was faced with the grim prospect of shutting down the division as there was little chance of it ever recovering its reputation within government circles
Will PwC follow Arthur Andersen into oblivion?
The big consulting firms were already on the nose with government, even before the scandal erupted.
Years of gutting the public service and outsourcing billions of dollars in advice, consulting and contracting to outside parties had rankled many in the incoming Albanese government.
Little wonder then that many in the Big Four accounting firms were bracing for a protracted winter when it came to extracting lucrative government work.
By divorcing itself from the PwC mothership, the new firm — codenamed Bell for now — will highlight the inherent conflicts that exist across the industry and may force the others to ultimately follow suit.
That’s if the deal gets off the launch pad. At the moment, it still is only a proposal.
Conveniently, it has distracted attention away from the main topic of conversation: the monumental breach of trust committed by a raft of senior partners within the firm, the years of cover-up in the aftermath and the continued refusal to come clean on key aspects of the betrayal, such as who was involved.
For PwC’s global leaders, the diversion is welcome relief. Many were around when Arthur Andersen – with 85,000 employees in 84 countries – imploded in 2002 after auditing scandals at two of its former US clients.
Whoever said bean counters were boring?