THE EVIL OF CORPORATISM: ON USING CONFIDENTIAL GOVERNMENT INFORMATION TO BENEFIT PRIVATE CLIENTS

[VIK LEWA]

THE EVIL OF FACELESS CORPORATISM

PwC used confidential information on future tax laws to win work

“I have the utmost faith in the ethical standards of the people we employ,” Tom Seymour, chief executive officer of PwC, told the inquiry into corporate tax avoidance in April 2015.
“I certainly would be shocked and hugely disappointed if anyone in our firm is breaching laws.”
Seymour was forced to step down last month.

PwC in Australia: The social and political anatomy of a scandal

Like all corporate scandals, that which has erupted around the Australian operations of accounting and financial consulting giant Price Waterhouse Cooper (PwC) is significant not so much because of the nature of the individuals involved.

PwC chiefs would love to put it down to a case of some “bad apples,” but their activities arise from, and are the expression of, the way things really operate in the financial world of money-making. The activities of the individuals involved are of interest, but their deeper significance is that they are the personification of objective socio-economic processes. And what is most important, going beyond the immediate issue of PwC, is what the scandal reveals about the real nature of so-called parliamentary democracy and its relationship to the growing parasitism which increasingly characterizes 21st century capitalism.

Amid the forest of emails surrounding the case and the questions of who, among the partners of the firm, knew what and when, etc., the essence of what PwC did, largely in plain sight, is straightforward enough. In 2015, it was assisting the then Liberal-National Party coalition government in drafting new tax legislation, the Multinational Anti Avoidance Law (MAAL). This was purportedly to create the conditions where the Australian government could overcome, at least to some extent, the tax avoidance schemes employed by many companies such as those in the hi-tech area like Google and Facebook. They were using schemes with names such as Double Irish, devised by PwC in that country, the Triple Dip, Debt Dumping and other schemes set up by PwC in Luxembourg. All these operations had the same aim: to transfer profits made in countries with a higher taxation regime and recognise them in a country with a more favourable tax structure. In Australia, at the same time as providing advice to government authorities, the PwC partner involved, Peter Collins, was providing information to companies on how to get round the very laws he was helping to draft. He supplied information to other PwC partners. The full number is not yet known but there were at least around eight, so they could do the same thing. Collins was involved in advising the government since 2013. According to an account by journalist Neil Chenoweth in the Australian Financial Review (AFR): “Collins had been involved in a string of tax controversies, including the huge loans that energy companies such as Chevron loaded onto their Australian operation to reduce taxable income; Singapore marketing hubs; and an $88 million loan structure that the Federal Court found was tax avoidance.” Chenoweth noted that if you were being kind to Treasury, it could be regarded as a case of poacher turned gamekeeper. “A less generous assessment would be they let the fox into the hen house.” Collins signed three confidentiality agreements with Treasury. But he is accused of providing information to business clients about the new tax regime.

‘Disgraceful breach of trust’: how PwC, one of the world’s biggest accountancy firms, became mired in a tax scandal

PricewaterhouseCoopers used government secrets to help clients in Australia and the US avoid tax – a scandal that has forced resignations and threatens contracts worth hundreds of millions

PwC to remove staff involved in Australia tax leak scandal

PricewaterhouseCoopers (PwC) has agreed to remove staff with links to the leak and use of confidential Australian tax plans from government work, a senior government official told an inquiry on Thursday. The accounting firm is embroiled in a national scandal over its use of confidential information about proposed tax laws to drum up business. The Australian Treasury referred the matter to police for a criminal investigation on Wednesday.

PwC tax scandal: the inside story on how the accounting firm used confidential updates on government MAAL tax plans ...

Partners told AFR Weekend that Seymour said only “six to eight” partners actually shared confidential information, but 30 to 40 (including Seymour himself) were on emails where the plans to use the information to market to clients were made. But this wider group, which included Seymour, did not know Collins was passing confidential information. He didn’t intend to stand down. Internal PwC emails published by the Senate this week underline the crisis of trust that now confronts Australia’s biggest accounting firm. It’s facing public indignation that a firm that won $537 million in government contracts in the last two years had a business model – Project North America – in which using leaked government information to win clients played a key role. The revelations put at risk the long-established system where the government of the day consults widely with experts and other stakeholders, sometimes confidentially, on draft legislation to ensure that the new laws are both workable and achieve their stated policy aims. As John Roskam, the head of conservative think tank The Institute of Public Affairs, wrote in these pages on Friday, “What PwC did wrecked this process and will have repercussions for years.”

Picking the wrong side: Why the PwC scandal just gets juicier

Ever noticed that when a major scandal engulfs big companies – from banks to resources firms to casinos – that it’s the large auditing/advisory firms that are usually enlisted to dig into the bowels of the miscreant organisation to investigate the behavioural and cultural tumours? We have just been given a rare glimpse under the hood of one of the big four accounting firms, PwC, and how it used its privileged position as a government adviser on tax policy to turbocharge a drive for new clients. Not only did PwC breach government confidentiality, but it used the information to circumvent the government’s attempts to stem multinational tax avoidance. PwC did this all while enjoying the sweet sounds of the dollars rolling in. It’s a classic gamekeeper turned poacher scenario, and unsurprisingly PwC is now in damage control. And you have to wonder how PwC can be relied on to fix the cultural issues of its clients when its own culture has been exposed as desperately wanting. PwC has been under fire after it emerged in January that a former partner, Peter Collins, had been banned by the Tax Practitioners Board for leaking confidential government tax plans – which included new rules to stop multinationals avoiding tax – to other staff and partners at the firm. Any hopes of branding this scandal as the fault of one rotten apple disappeared last Friday when a series of emails demonstrated how far the information had spread throughout the firm, and how it had been misused to drum up business from various and notorious multinational tax avoiders.

PwC scandal shows consultants, like church officials, are best kept out of state affairs

The scandal of PwC consultants using confidential government information to benefit private clients highlights a problem far bigger than one...

PwC Australia’s chief executive Tom Seymour and two other board members, Pete Calleja and Sean Gregory, last week finally resigned their leadership positions over the use of confidential information about Australian tax policy to help PwC clients avoid paying tax. In March, the Senate announced an inquiry into the integrity of consulting services. Seymour downplayed the leak as a “perception issue”. Things only substantially changed after the inquiry this month published internal PwC emails showing that (in the words of the Australian Financial Review) “for years, dozens of PwC operatives used confidential updates on government tax plans obtained by Collins to drum up new tax clients”. PwC made at least A$2.5 million from the leaked information, using it to drum up new business for the company’s tax services. In terms of PwC Australia’s total revenues of $2.6 billion last year, it’s not much. But the fact it happened, and the response of PwC’s leadership since, is telling. The whole fiasco stands in stark contrast to PwC’s stated corporate values that “celebrate doing the right thing”. The firm describes itself as “purpose-led and values-driven”. In 2019 its global chairman, Bob Moritz, was among 181 business leaders who signed a declaration redefining the purpose of the corporation as being about delivering value to all stakeholders.

Federal spending on consultancy-related contracts rose from $352 million to $888 million a year between 2012–13 and 2021–22, according to the Australian National Audit Office says. PwC’s share over the decade was more than $420 million. Reversing this trend, and separating corporate and public interests, is now as crucial as separating church and state. As the coronation of King Charles reminds us, the separation of church of and state is unfinished business in the political institutions inherited from Britain. Nonetheless, since the Enlightenment it has been broadly accepted that keeping church and state broadly distinct is necessary for good democracy. One of the reasons the church got powerful in the first place is that for hundreds of years it was the only institution more or less based on meritocracy. It was a source of advisers who could read, write and add up numbers – useful skills for any monarch. Clerical advisers such as Alcuin of York in the court of Charlemagne, or Cardinal Richelieu, the chief minister to King Louis XIII, were a bit like modern corporate consultants. They belonged to a multinational organisation with a vast global network. Secular leaders looked to them as the experts on many matters. The lack of separation, however, between their allegiances came with significant downsides, both for religious freedom and state political independence. The power of the modern consultants to influence government is akin to the influence Church officials once wielded. The danger of particular private interests taking precedence over public ones is striking, as the tax scandal illustrates.

Richard Boyle faces life behind bars while those in the PwC scandal are protected by the corporate world

It's a crisis that calls into question the wisdom of government outsourcing crucial functions and highlights the often cosy relationship...

Richard Boyle faces the grim prospect of life behind bars. In March, the former Australian Tax Office employee lost his bid to be declared immune from prosecution on 24 offences stemming from his decision to go public on what he claims were unethical tactics used by his former employer to collect debts. His plight, and the case, has created a furore around the treatment of whistleblowers accused of breaching the law while attempting to act in what they believe are the public's best interests. It also has highlighted the stark difference in justice meted out to those acting alone as opposed to those protected by the veil of the corporate world.

Ironically, Mr Boyle's Federal Court decision came just weeks after Peter Collins, the former senior tax partner at Big Four accounting giant PwC, was barred from practising by the Tax Practitioners Board. His misdeed? It was discovered that in 2014, Mr Collins had shared confidential tax information with other partners and staff about a federal government initiative to clamp down on multinational tax avoidance. At the time, then-treasurer Joe Hockey had pledged to tip the scales against tax avoiders, particularly major tech companies, and had tasked Treasury to come up with a new tax regime, on which Mr Collins was advising. Mr Collins shared what he knew with dozens of senior partners, going all the way to the top, and PwC immediately began hawking strategies to the biggest names in the business on how best to navigate around the new laws. At least 14 firms were approached. Ever since the Tax Practitioners Board decision in January, the firm has been desperately trying to contain the damage, hosing down concerns from within and outside the firm. But to no avail. In the past fortnight, the firm has been plunged into a crisis that threatens its very future in Australia. It's a crisis that calls into question the wisdom of government outsourcing crucial functions and highlights the often cosy relationship between government, bureaucracy, regulators and the corporate world.

The end came swiftly for Tom Seymour. After months of obfuscation and assurances that it was all just an isolated incident from almost a decade ago and that all involved had since departed, the PwC chief executive was forced to step down last week. A fortnight ago, the Senate released a stash of email correspondence that showed the confidential information, along with the plan to market tax strategies globally, had been shared by 53 recipients, all of whose names had been redacted from the documents. A few days later, Mr Seymour admitted to staff that six to eight senior partners had shared the confidential information while another 30 to 40, including himself, were on the email trails but were unaware the information was secret. It was a revelation that rocked the firm and destroyed what little confidence was left among staff. Emails released by Labor senator Deborah O'Neill contain correspondence about PwC's "North American project" from 2016 stating: "In total we expect (based on fee estimates that we have agreed with clients) that revenue from this first stage of the Multinational Anti Avoidance Law will be approximately $2.5 million." For a firm with revenue of $2.8 billion, it seems like fairly small beer, particularly given the risk involved. But, as the email pointed out, this was just the first stage, and the entire project appeared to be focused on luring in the big names in US technology. "We were aggressive in telling these relationships they needed to act early (heavily helped by the accuracy of the intelligence that Peter Collins was able to supply us, and our analysis of the politics)," the unnamed partner wrote.