KPMG澳大利亚丑闻：滥用客户机密信息引发议会质询

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Hello, I'm Amy Bainbridge and welcome to the Bloomberg Australia podcast. This week, what happens when the big end of town is called to account? [music] We need to understand why decisions we find egregious and inexplicable happened [music] in one of the largest audit companies in this country.

I I've taken accountability [music] for the things that didn't go right.

At a fiery parliamentary hearing last Friday,

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the former CEO of KPMG's Australia business, Andrew Yates, was among a string of current and [music] former executives grilled about claims that the firm misused client information. The scandal claimed more senior figures this week with national [music] chairman Martin Sheppard among those set to step down. Meanwhile, the firm's work for some of the biggest companies in Australia faces scrutiny on multiple fronts. To help us make sense of what's happening at KPMG and what it means for corporate Australia and all of us, I'm joined by Melbourne-based finance reporter Richard Henderson.

Rich, welcome back to the podcast.

Thank you very much.

Rich, KPMG has been in the headlines for a few months now and this week, of course, we've heard more senior staff will leave. Can you give us a brief recap of the main allegations against KPMG?

Yeah, [snorts] this is broadening to a huge scandal. So, at the center of it is the inappropriate use of confidential information. So, the companies involved here are Lendlease, a property company. Now, the allegations are that uh senior uh KPMG staff accessed confidential information from Lendlease's board documents in this case and they were used to help bids for audit work from companies including Dexus and Westpac.

So, you know, there are there are a bunch of allegations here. Uh you know, that's one of the key ones. You know, they also kind of calling into question um bids that were successful for Macquarie Group. KPMG was awarded audit work from Macquarie Group taking that from PwC. That's one of the most lucrative audit contracts in the country and also Optus, the telecom provider. You know, the allegations there are that staff at KPMG again accessed confidential information that was used to help a bid for rival Telstra.

So, really it's it's focused using information they shouldn't have to ultimately benefit KPMG economically, which is a really breach of the the standards that support this industry.

And this all of course culminated at a marathon parliamentary hearing on Friday. There were about 30 witnesses called and what stood out for you from that hearing?

So, there were a few broad kind of themes and there were some really important specifics. Broadly speaking, KPMG former executives, current executives got a real grilling by some very angry parliamentarians who are seeing a massive case of deja vu after the PwC scandal that came to light three years ago where PwC was using confidential government information, not company information, government information around tax policy and they were leaking that to their corporate clients.

Some of the specifics to come out were quite notable. There's a there's a huge amount of information. It's a very dense series of allegations and it's kind of broadened to become how the company's dealt with the whistleblower involved. But on Friday, some of the standouts for me was a partner at the law firm Ashurst saying that they actually were never asked by KPMG to investigate the whistleblower's claims something that KPMG has been saying for weeks now.

They were actually asked for a very narrow request regarding the whistleblower him him or herself, um you know, which was more of a contextualized more as a HR issue, not a full-blown investigation of whistleblower claims. That to me, you know, was another example of KPMG Australia not quite clearly saying what's going on here and trying to paper over this broadening scandal. And there was a few other things, you know, there were there was another allegation put to a former KPMG executive by an Australian politician basically saying that the whistleblower was pressured to sign a deed of separation, basically the terms that he or she would leave the company, pressured into signing this under the threat of dismissal, uh which was denied, I should add, but uh but yeah, there's some of the the things that emerged, but really it was this very heated exchange and again a sense of disappointment and déjà vu.

Mhm, I really got that sense, too, and you know, from watching on, it just felt like that the volume was at maximum for most of the day. But, you know, on the face of it, consulting firms can sound a bit dry, especially compared to everything else going on in the world right now. Why is it important to investors and of course the millions of us who are invested in some of KPMG's biggest clients via our super funds?

Well, this really strikes uh at the heart of the sanctity of the Australian financial system. Audit work is vital for ensuring that what companies, especially public companies, what they say and the numbers they put to those claims are correct. And so, we need audit companies to be doing the right thing, to be doing their job very well, and to have appropriate guardrails and oversight for those companies. And we're seeing time and time again, it seems, that the um the behavior of these companies has, you know, there's a lot of shortcomings here, there's a lot of issues.

So, really we're talking about the robustness of the Australian financial system, and then that does also bleed over into government. These These firms not just do audit work, they do consulting work, and there's massive, you know, contracts for for the federal governments, you know, in the hundreds of millions of dollars. Um, you know, KPMG Australia's, you know, annual revenue for the most recent financial year was in the region of, you know, it's above 2 billion.

I think it was something like 2.3 billion, 2.4 billion. So, these are very large companies, and you know, there's a reasonable expectation that they should be doing the right thing, especially with confidential information they have access to.

And it does feel a little bit like we've been here before, doesn't it? I mean, just 3 years ago, you know, PwC, another big four firm, was under fire for the misuse of sensitive information. Rich, how do the two cases compare?

It's a great question, and it really just overshadows this whole episode. You know, everyone's thinking, "Didn't we fix this problem?" This was such a massive blow-up for PwC. They lost a huge number of clients. You know, they ended up jettisoning their business uh for a dollar to a private equity firm, their consulting um I believe their government consulting arm, which was really the focus of that, you know, scandal.

Uh but basically, yeah, as I said, they they leaked um tax government confidential government tax information to their some of their corporate clients. This obviously is we're dealing with companies here, and we're dealing on the audit side. But again, it's confidential information being used to KPMG Australia's benefit to try and gain more business in this case.

Rich, PwC faced police investigations, and there were Senate inquiries back then, and then the firm was temporarily banned from bidding on new Australian government contracts. How is it that so little progress has been made in the industry since that happened?

There've been reports commissioned, there've been findings, there've been recommendations. Reading through some of them, ultimately, there hasn't been much meat on the bone in the changes that have taken place. But, a lot of these recommendations, they were very localized to tax because that was the sort of context of the scandal. It was confidential government tax information being leaked to corporate clients. But, it really didn't get to the heart of what Senator Pocock and, you know, a few others out there are calling for, which is rea

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