The Senate Finance and Public Administration References Committee has uncovered explosive evidence about the PricewaterhouseCoopers (PwC) secrets-for-sale scandal.
Senate Estimates has heard an avalanche of Bergin-like revelations of corruption, conflicts of interest and a litany of enforcement failures.
But beneath the outrage and sensational headlines lies a decades-old, bitter truth: once government accountability was privatised, it was only ever going to end one way.
Every election the campaign machine trots out the same budgetary dog-whistle: that “trimming the fat off the public service” and more outsourcing of government services increases productivity and decreases costs.
It is popular talkback fodder: that “bloated” public servants who are “bludgers” on an “easy wicket” are the reason they themselves are underpaid, overworked and unable to pay their rent.
In reality, the perceived cost savings and allegedly superior technical skills of external providers were not only grossly overstated, the “fat” was never cut from where it really lay.
It was not cut from senior executives on six-figure salaries, the board room wine or the chauffeur driven Comcar fleet, but from the public servants’ intellectual muscle.
It was cut from the very in-house expertise that once protected self-interested politicians from themselves, protected democracy from politicians, and protected taxpayers money from corruption — specialist skills such as contract compliance and internal audit.
Forensic in skill and incorruptible by design, government auditors used to be on the state or federal payroll, their independence protected by law and union.
They saved the country billions by verifying accounts and stress-testing the integrity of policies, contracts and procurement.
But integrity costs and talk is cheap, especially during election campaigns, and audit functions became a juicy target for ruthless politicians who knew public service cuts are always popular with misinformed electorates.
In the profit-driven feeding frenzy that followed, corporate advisory firms began swallowing each other whole until only four were left: KPMG, Deloitte, Ernst and Young and PwC.
The cuts to publicly-owned integrity protection services continued. Catastrophe was only a matter of time.
The long game
The issue of the so-called “Big 4” accounting firms being government contractors complicit in private corporate tax evasion has been reported by Michael West Media since 2016.
The Australian Financial Review reported that in 2019, Peter Collins, PwC’s then head of international tax in Australia, was de-registered by the Tax Practitioners Board (TPB) for misconduct.
Collins did not walk until two years after his de-registration, and an initial referral to the Australian Federal Police (AFP) found the matter unworthy of further investigation.
The 16-executive, 53-partner PwC was happy for Collins to take the fall and even happier the conduct causing his de-registration was not publicly disclosed.
At the current inquiry, led by Greens Senator Barbara Pocock and supported by Greens Senator David Shoebridge and Labor Senator Deborah O’Neill, the reason Collins was de-registered finally came to light when the committee obtained 144 heavily redacted pages of internal PwC emails.
The committee heard the TPB had been advised that wider disclosure would have been illegal under its own confidentiality laws. It was the first of many enforcement failures, including the initial “inadequate” AFP desktop investigation.
Pocock told the ABC’s 7.30 on June 7 that events in PwC since Collins lost his tax agent registration amounted to a “go slow” protection racket that went on for more than seven years.
Now we know why. In 2016, PwC was — at a cost to the taxpayer of hundreds of millions of dollars — advising the government on amendments to tax law to minimise tax avoidance by multinationals.
The emails revealed that Collins was advising the government on tax law in the morning, then shopping out that classified confidential government intelligence to PwC’s own multi-national, tax-avoiding clients in the afternoon.
What’s more, at least 50 other people at PwC knew about it.
Worst of all, witness after witness at the inquiry outlined just how ingratiated PwC had become in government processes: the list of PwC clients including Treasury, the Tax Office, Defence, the Robodebt scheme and the AFP — the same now investigating a fresh Treasury referral into possible criminality at PwC.
Shoebridge called it “a complex mess”, saying having PwC staff embedded in top secret defence areas is “putting Dracula in charge of the blood bank” and questioning how the AFP can plead no conflict of interest in investigating its own internal auditor.
Shoebridge also questioned whether AFP Commissioner Reece Kershaw’s personal friendship with former New South Wales Commissioner Mick Fuller, who now works for PwC, presents a conflict of interest given the size of the contracts involved, He described PwC as being like “an octopus”, with tentacles everywhere.
By any measure it’s a dumpster fire.
Calls for PwC to be banned from all future government contracts have revealed just how baked into the government’s own auditing and advisory services PwC is.
Finance minister Katy Gallagher admitted she did not know how big the hole really is, or how many of the numerous PwC staff are still working in secure government areas and may have been in on it.
What now?
PwC may be on the blacklist for new government contracts however, for all the recriminations, Collins remains the only one to actually lose his job.
PwC’s CEO has stood down, but remains a partner. The board’s entire risk and governance committees voluntarily stood aside, but the individuals remain on the payroll at PwC.
Nine other senior staff have been “stood down” pending an internal PwC investigation, the findings of which already have zero credibility. Both PwC and the government remain in catastrophic-damage control, despite a new CEO being appointed. No doubt talkback radio can help with that, too.
[Suzanne James has a background in writing policy, governance, risk management and regulatory compliance frameworks and in legislative compliance application.]