Subscribe
Share
Share
Embed
A journey into the dark heart of corporate Australia. Join corporate governance expert Dr Andrew Schmulow and award winning investigative journalist Anthony Klan as they lay bare the systemic cronyism and corruption that is modern professional Australia.
Anthony (00:00)
Hello and welcome to Corporate Grime. I'm investigative journalist Anthony Klan and with me is Professor Andrew Schmulow, a corporate governance expert. And we're here to talk about all things corporate crime, corporate governance related. And it's been a huge couple of weeks. Andy.
Andy (00:16)
Hello, Anthony, and hello to everybody listening. I'm so terribly sorry it's been such a long hiatus since the last episode, but to put it in the vernacular, I've been as flat out as a lizard drinking.
Anthony (00:29)
And you've had you've had you've certainly put the time to good use. It's been a pretty remarkable week with this ASIC, the findings regarding ASIC or the ASIC investigation by the Senate inquiry. And you've been thoroughly quoted through that. So that's great to see that people are listening, at least we'll see if what comes out of the actual report. But it's good to see there that they are taking taking advice from people that know what know what's going on.
Andy (00:56)
Thanks, Anthony. And I was pleased to see that the Senate report into ASIC, a number of its core recommendations reflected the submissions and the testimony and the answers to questions on notice that I provided. I was a little bit peeved to see a report in the financial review that interviewed a former ASIC commissioner who decided he or she wanted to remain anonymous and said that the
ideas in the suggestions in the Senate report into ASIC, he described them as a DAI, a dumb ass idea, and said that they lacked intellectual or scientific rigor. And, you know, I have to say there were submissions made by my good friend and colleague, Jason Harris, who's Sydney University's professor of corporate law and probably Australia's foremost authority on the Corporations Act.
And for what it's worth, I've spent more than the last 10 years with my research focused on financial regulatory architecture and had the opportunity and been asked to share that advice with members of the House of Commons and the House of Lords, the governments of Brazil and South Korea and South Africa and New Zealand and the Hainan Royal Commission and various Senate reports. And I would hope that that former commissioner, in light of the fact that they're a former commissioner and I can't see
why they need to remain anonymous, I hope that they would come forward.
Anthony (02:24)
That's really remarkable. I mean, imagine, imagine sort of coming out, making a claim like that, not backing it up and then remaining anonymous. I mean, that's just that's out of line, as far as I'm concerned. But there you go.
Andy (02:35)
Well, I would love that person to come forward and engage with me in a respectful debate and let the better person win.
Anthony (02:42)
Of course, of course, let's be open about let's have this discussion. That's that's you know, that's what that's how democracies work. But anyway, there we go. So I guess it was interesting, the report that's come out. And a lot of listeners will be aware of it. Senator Bragg's oversaw the Senate inquiry, it's come out and recommended splitting ASIC and a whole host of changes. But the one thing that jumps out at me is that it's and he actually mentions this.
It's the same thing over and over. We've had the same three investigations in OASIC over the past 30 years, the same almost identical reports. He even mentioned that the same findings, the same issues. So what the issue is now is getting government to actually act on it. And that's, that's always been the heart of the problem.
Andy (03:27)
Yeah, that's absolutely spot on. There was a 2014 Senate inquiry into ASIC, which was the first time there was a call for a royal commission. That inquiry described ASIC as a weak and feckless regulator captured and suborned by industry. Then there was the Hayne Royal Commission, which said that ASIC's problem is it doesn't enforce the law and it treats regulated entities like they're customers. It acts like, these are not his words, these are mine, but acts like a jumped up glorified office works.
And we had a treasury capability review in 2015, I think it was, that was pretty critical of ASIC's enforcement. And now we've got the BRAG review that's critical of enforcement and ASIC's performance. And what is really disappointing and kind of weird and curious is that whoever is in government and whoever is in opposition seems to play the same role. Whoever is in opposition criticizes ASIC and calls for something to be done.
And whoever is in government resists those calls. So for the last 10 years, it was to be fair, Senator Andrew Bragg's party that was resisting calls for something to be done about ASIC. And it was Albanese's party that were calling for steps to be taken. Now the roles have been reversed and the positions have been reversed. Now it's Bragg and the liberals who are calling for something to be done. And the Labour Party is resisting that. And I kind of have this sense, I have this suspicion.
that whomever is in government, one of the things that happens is that they have a couple of meetings with treasury and treasury, treasury employs hypnotists who do these Jedi mind tricks on whomever is in government. Look at the eyes, look at the eyes, don't look around the eyes and bamboozles whoever is in government because treasury is perennially the puppet master in all things and they want to keep control of everything.
And they want to make sure that they find the best solutions, not for Australia, but for Treasury. And the failures and the deficiencies in ASIC's performance make supporting ASIC and resisting a call for structural reform simply indefensible.
Anthony (05:42)
And I think as well, I mean, it is simply indefensible. And the broader public knows this. I mean, it's such a problem. It's been such a problem for so many years. I think what it comes down to, to some extent, is that both the two major parties, they're sort of representing their backers. So you've got big business, a big end of town, big donors, big end of town. They don't want a strong asset. They don't want to be held to account. And that's, I guess, understandable. I mean, that's what big businesses do. But that's why you have governments, the whole business.
to account when it's doing the wrong thing. And I just think it's so telling that you have a government come in. I guess this could also put in the context of a broader issue with the Albanese government that's been raised by quite, quite widely is that it's sort of timid to really take on anyone or any any significant action. It's just sort of continuing with this small target approach. So I think you're right there between between Treasury and the donors issue and just a lack of will by the government to actually.
affect change for the better of the country. And I mean, this is a big thing. I mean, we've discussed this before, but ASIC, it's such an important role, enforcing corporate law in a major economy is such an important role. And when it doesn't do its job, which is pretty much all the time, or an awful lot of the time, sadly, people hurt, people hurt really bad. So look, you can hope for the best, but look, wait and see what actually comes out of the...
what comes out of the government regarding the report.
Andy (07:09)
Yeah, you know, I say to people Australia is not a two party state. It's a one party state. There's the Liberal Party and then there's the Diet Liberal Party. Fewer calories, but same great liberal taste. And you get a change of faces, but you don't get a change of policy. And my sources tell me that after Bill Shorten lost the election to scumbag Morrison, the sense that Albanese had was that
in order to win the election that he won, he said to his party, for God's sake, don't spook the capital markets. And I think that the Labour Party has this fear that if they do anything that might be conceived as anti -business, they'll get pilloried by the Murdoch press. And I think it's time for them to say, to hell with the Murdoch press, it's not Qantas or ANZ or Telstra or Woolworth,
Woolworths that vote in elections. We the people vote in elections and irrespective of whether it's inconvenient for Commonwealth Bank to be held to account when they behave as a gold medalist for misconduct. I think that most what most people want is a financial industry that serves the community, not the other way around, that treats customers fairly with dignity and respect, that operates in a market that is transparent and efficient, that
produces, if not universally, then at least consistently good outcomes from products and services that perform as consumers have been led to expect, and that takes care of vulnerable consumers, the elderly, first Australians, people with disabilities, women who are facing the scourge of domestic violence. And you know, if you say to me, well, that all sounds wonderful, but it sounds a bit kind of, you know,
unicorns and rainbows and rainbow unicorns and it's all a bit pie in the sky. My response is it's not. I have seen demonstrably better conduct in financial industries in other parts of the world, including gobsmackingly South Africa, which is a country that is well on its way to becoming a banana republic and has cripplingly high levels of corruption. But conduct in the South African financial industry is, I would say 10.
somewhere between 10 and 20 years ahead of Australia. And for people who find that difficult to believe and who treat that statement with skepticism, and you should treat all statements with skepticism, let me explain to you why that is. South Africa has a population, I think, of about 55 million people. 90 % of that population is black. 10 % of the population is white. The 10 % who are white own 90 % of the financial industry.
The 90 % who are black own 10 % of the financial industry. And so financial industry firms in South Africa know only too well, and they understand only too well, that if they commit misconduct at scale, the vast majority of the victims will be black South Africans and a sizable portion of those will be vulnerable consumers. South Africa has the highest rate of unemployment in the OECD. It has an unemployment rate in excess of 33 % and virtually no social security.
that if they commit misconduct at scale, that will be the fastest, most hassle -free, most efficient route to being nationalized. So the guys who run the financial industry are absolutely shit scared of misconduct. I had a meeting with the CEO of one of their big six banks, they had a big six, not big four, first national bank, and he said to me, my greatest fear is that I come to work one morning and 60 minutes is in the foyer doing a story.
He didn't say my greatest fear is an exogenous economic shock or my greatest fear is that interest rates go up or my greatest fear is that we're subject to a hostile takeover. His greatest fear was some kind of reputational scandal. And that's a beautiful thing when people who run big banks are scared of misconduct.
Anthony (11:12)
That's, that's working precisely. And that's the problem we have in Australia is that they're just not scared of misconduct. Because why would they be? I mean, we've got this fees for no service, it's still coming up six years after the Royal Commission. But the ANZ this week's been caught again, charging, charging dead people fees for financial service. It just it just keeps going. And of course, it is going to keep going because not one person has ever been held accountable. They just come and pay some fines, the bank.
pays the fines. No one's ever even named in any of the statements. So that's the problem.
Andy (11:43)
Yeah, and in response to the fees for no service in the superannuation industry, we all have superannuation and it is in all of our interests to ensure that we are treated fairly and honestly and responsibly by our superannuation fund. ASIC did a survey, which they released the results of in May of this year. They didn't survey the entire superannuation industry. They just picked 10 funds at random. And across those 10 funds at random, they found that almost a billion dollars a year
was still being charged in fees for no service six years after the Hayne Royal Commission. And ASIC said that in these circumstances, they will consider taking steps against these super funds. What? Consider taking steps, telling us that you're putting trustees on notice. You shouldn't be putting trustees on notice. You should be putting trustees in jail. What the hell are you doing, man? It's absolutely outrageous. And in respect of ANZ Bank, they were taken to task not by ASIC,
Anthony (12:35)
And it's literally
Andy (12:42)
They were taken to task by the Banking Code Compliance Committee, which is a Glee club for the banking industry and oversees a code of compliance created and written by the banking industry for the banking industry. The BCCC is the grand repository of the great wet lettuce leaf, and they've taken more steps against ANZ than ATSEC has.
Anthony (13:04)
And this is also in the context of ASIC and APRA, APRA being the banking regulator at the start of the Royal Commission, during the Royal Commission, they were arguing over which one was actually responsible for superannuation. We're talking 25 years into Australia's compulsory superannuation sector. Anyway, it fell to ASIC. So they ultimately decided, well, like ASIC's responsible for enforcing the law where there's been breaches of the law. Now, there's a law in there that says
the superannuation funds must act in the best interests of members. Now ripping members off isn't in the best interest. I mean, we've mentioned this before, but it's the same thing. No one's ever charged. It's just, it's not hopeless, because nothing's hopeless, but it's very frustrating.
Andy (13:48)
No one is ever held accountable. The only time that ASIC takes steps against anyone, it's one man or small operators, low hanging fruit.
Anthony (13:59)
The small fries. Yeah. And I recall writing an article about this in 2005 for the Australian newspaper and it was titled Small Fry. ASIC Chief Tony De Lucio, I believe it was at the time, goes after the small fry. And that's exactly what it was because I analyzed and saw who they were going after and who they'd taken action over the year. And it's just this tiny little, you know, sole traders. And they say, look, we had one or two cases. I'm like, well, that's nothing. And I think neither of them were successful. But anyway, the point being that it's just the same old caper.
If you're a big end of town, if you're a say you work in a Westpac branch and you've taken some money from the bank, you'll get pinged. But if you're the bank taking money from the public, you're completely fine. So
Andy (14:40)
Yeah, or worse than that, if you're an Indigenous Australian and you steal a packet of biscuits or a plastic shopping carry bag, these are actual cases, then all of a sudden the response is, well, that sh** will undermine Western civilization. So we'd better get hold of that little bastard and put him in jail and put a bag over his head and beat him until he cries blood because that's Australia. But commit fraud in an amount of a billion dollars a year, six years after the Haynroll Commission.
and ASIC threatens to give you a dirty look. It's unbelievable, man. And, you know, as I like to remind people, we bandy these figures around millions and billions. And in the process, they lose meaning and they lose impact. Do you know how long it would take you to count to a million if you counted once one number per second? 11 days. Do you know how long it would take you to count to a billion? 32 years. This is a lot of money, man. And these people who've had a billion dollars taken out of their super funds in fees for no service, they're going to retire
Anthony (15:32)
Yeah.
Andy (15:39)
demonstrably better off and some of them who are on low superbalances will never be able to retire and if they get too sick to work they'll end up eating dog food.
Anthony (15:48)
This, I mean, I think this gets lost a lot. This is what we're talking about. It's not just numbers on a page or figures, it's people's lives. And that's really what gets me. But look, moving on from Super, PricewaterhouseCoopers, what was, actually, before we get there, anything else on the ASIC report there that you wanted to bring up?
Andy (16:09)
Well, I'd like to take the opportunity to name the super funds that ASIC identified. In case any of our listeners are in any of those funds, you might want to check whether you're being charged fees for no service. Australian Retirement Trust, Australian Super, AWARE Super, Premium SMA Superannuation Fund, AMG Super, Hub 24 Superfund, I00F, I can't even...
Anthony (16:23)
Please do.
Andy (16:37)
just gobsmacking to me that anybody would still have their super with IAOF after what came out at the Royal Commission. IAOF Portfolio Services Superannuation Fund, Macquarie Superannuation Plan, Wealth, Personal Superannuation and Pension Fund, and Net Wealth Superannuation Master Fund. Those are the 10 that have been pinned for continuing to break the law.
Anthony (16:59)
And I think that I00F, that's quite, yeah, I'm completely with you having covered that very closely at the time and the Royal Commission, that it's just, they're just gouging, recklessly gouging people's superannuation, but there you go.
Andy (17:15)
Yeah, and it's disappointing to see two, at least two industry super funds, Australian Super and Australian, I think Australian Unity was in there. Excuse me. That's particularly disappointing and I would have expected, I would have expected better. And you know, as a university academic, I have an incredibly good fortune to be a member of Uni Super, which
Anthony (17:26)
That jumped out at me as well.
Andy (17:42)
I've done work with them and I've interrogated them and I've had lots of conversations with them. And I regard their commitment to ethics and integrity as a benchmark. And I had a conversation with the Chief Investment Officer, John Pierce, and I said to him, there are moves to fine trustees and trustees of super funds all over the show are putting together a kitty and taking it out of super fund members balances in case they have to pay fines.
What's your plan, John? And he said, we're not putting aside a kitty. So I said, well, what's going to happen if you have to pay a fine? He said, we don't pay fines. So I said, how do you know? He said, because we don't break the law. Bang, simple.
Anthony (18:26)
Simple as that. And that also circles back to the issue with ASIC. Why are they fining a superannuation company or a bank? Why aren't they fining the person that did it? The size of the fine is so paltry that it makes absolutely no difference. It doesn't actually hurt the person that's done the wrongdoing. It hurts the shareholders in a tiny amount. So the idea from there is,
Andy (18:39)
Well.
Anthony (18:52)
it hurts the shareholders there for shareholders are less likely to invest in this company that it's just such a tenuous link of having any form of accountability. It's just, it's hopeless.
Andy (19:01)
Yeah, it's privatizing the benefits of misconduct and socializing the consequences of misconduct.
Anthony (19:08)
Exactly. So another price water price waterhouse, Cooper's, I mean, we probably couldn't get through an episode right at the moment without without having a look at what's happening with PwC. But it's also been a big couple of weeks
Andy (19:20)
So the Senate brought out their report into consultancies and there's a majority report and a minority report. So the majority report is the report that is the official report of that inquiry. And then members of the inquiry, if they don't agree with the majority report, have the opportunity to put in a minority report.
and Senator Barbara Pocock of the Australian Greens, who has been such an absolute force of nature on that inquiry, she put in a minority report. And the consequences are the differences between the two reports are just chalk and cheese. Both of the reports require that PWC make available the Linklater's report. So this is the report done by Linklater's into
what other partners in PWC, in other parts of the world, in Congress, acted with partners in Australia to attack Australia's interests and to undermine the authority of his Australian Majesty, the King. Now, at
Anthony (20:32)
And this is the report paid for by PwC International and this is sort of integral to the entire event that we've been hearing about for 18 months. This is the report and PwC, mind you, is out in public saying they've changed, they're into transparency, all the rest of it. But we still don't have this report. It's quite bizarre to watch.
Andy (20:37)
you
And it's such an affront to countermand the authority of federal parliament and the disrespect that that displays. And that disrespect is not disrespect for the individual members, although it's disrespectful to them as well, but the individual members in the grand scheme of things are irrelevant. What's relevant is who they represent and who they represent is we the people. And so when PWC flips the birdie to federal parliament,
what they're doing in effect is putting out the middle finger to the entirety of the Australian population. And I think that's outrageous. I think it is absolutely outrageous. Let me go through some of the differences between the two reports and the recommendations. So the majority report and the minority report both say that PwC must make available this link later as report. And I'm going to circle back to that because of
statements made by the CEO of PWC, Kevin Burrows, that that report is held by an entity in a galaxy far, far away and he has no control and no influence and no capacity to compel it out of them. And we're going to see that there are some revelations that have come out this week that call that into question. And to call into question the honesty, certainly whether the questions that Kevin Burrows answered when he was before parliament were answered with heartfelt honesty.
And I'll circle back to that, but both reports call for the linkladers, both minority and majority reports call for the linkladers report to be made available. But that's kind of where the similarities end. The majority report is very much demand side driven. So all of the responsibilities and all of the obligations for making sure that the consultancy industry acts with integrity are put on to the Australian government. Barbara Pocock in her minority report.
has absolutely knocked the ball out of the park. And she's produced a minority report with a set of recommendations which are absolutely outstanding. For example, she says that if you are, that the PwC should not be allowed to tender for any government work until all of the current inquiries into PwC have been concluded, including the inquiries that they misled the Foreign Investment Review Board.
and that they should not be allowed to contract for government work until they've made that linklater's report available. And that even when they've done all of those things, when they've made the linklater's report available and when they've gone through all of these inquiries, they should have a five -year ban placed on them to do any government work. The current ban on PwC doing government work, by the way, is lifted in December of this year.
keep an eye open for that. They say that...
Anthony (23:54)
They say that they'll have a decision by December 1. But as we've sort of mentioned before and written about it, the Klaxon listeners can check out. They said they're going to have a decision by December 1. But why finance? This is the Department of Finance. Why finance is given this date is anyone's guess because there's ongoing investigations. There's AFP, Australian Federal Police investigation ongoing. The tax practitioners boards investigations are all ongoing. We have no idea what's happened. So finance has come out and said, look,
by December 1, we'll have a decision is pretty remarkable given it's not really the one doing any of the investigations. And it doesn't know that those findings will be out by then and they almost certainly won't be. So it's sort of, it's about just getting the money flowing again to PWC, the government, the taxpayer funds flowing into PWC. Now, the interesting part there is that the way that they've done it. So they actually put out a statement.
Andy (24:35)
Correct.
Anthony (24:50)
Department of Finance oversees the spending of all departments. So it's chief when it comes to spending taxpayer money. They've come out with a statement saying, we're going to on December 1, by December 1, on December 1, we're going to have a report and say whether we're going to continue or lift the ban on PWC receiving funds. And so what they've done is there's not actually any person who's authored the report. There's no name attached to it. It doesn't say who's making the decision.
What it does say is the federal government has given finance the full right to decide whether PWC can continue to get funds or not. So the politicians are effectively wiping their hands of it and just paving the way for things to continue as usual. And of course, it's worth noting that the big four, PWC says it's no longer, but the big three of the big four continue to make enormous donations or comparatively enormous donations to the two major political parties. And that's a lot of the problem.
that we face. We still go around in circles here a bit sometimes, but that is so much of, so much importance comes down to donations reform, but that's for another day.
Andy (25:55)
Correct. The second recommendation Barbara Pocock makes is in relation to Luke Sayers. Luke Sayers used to be the CEO of PWC. Jeremy Hirshhorn, who's the Deputy Commissioner of the Tax Office, said that he had three very long, very detailed meetings with Luke Sayers in which he brought to his attention that the ATO was concerned that PWC was encouraging and facilitating tax evasion, to which Luke Sayers' response has been, I do not recall.
that old chestnut. So Barbara Pocock has said that any consultancy firm that Luke Sayers runs should be banned from getting government work. He's currently getting hundreds of millions of dollars or tens of millions of dollars of government work. And that any future consultancy firm that he runs should be subject to at least a five year ban on getting any government work. She then goes on to say consultancies should be required
to publish their client lists so that we can then say, hang on a minute, why is KPMG advising the Victorian government on reducing smoking harm at the same time as advising British American tobacco on how to get around the regulations to reduce smoking harm, that sort of thing.
Anthony (27:15)
That's quite unreasonable. I mean, that should be the case as it is. And the fact that it's not in the main report is concerning. Now, just I think just to clarify there, because this often gets a little bit confusing. So you've got the Senate inquiries looking into an issue. You'll usually have senators from the representatives in the both major parties, a Green Senator, perhaps an independent. But a lot of the time you'll see these reports will be spoke quite a bit of the time. You'll see they'll be split along party lines. So you'll have, you know,
the ALP Senator saying one thing and the Liberal one saying another and it sort of becomes political. In other cases, you'll have the majority report saying one thing and you'll have a dissenting report. So perhaps you'll have most senators that say ALP and there's one coalition senator. In this case, we've got the major report, which all senators have agreed to. But on top of that, Senator, Green Senator Barbara Pocock has said, this is how we really need to go. We need to go much further. And it's really important and spot on in so many cases.
Andy (28:14)
She then says consultancies must declare any conflicts of interest and if they fail to declare a conflict of interest, they must be slapped with a five -year ban. That any consultancy body that's being investigated must not be allowed to tender for new work until those investigations are concluded, that they must create a register of banned firms and individuals. She says in recommendation 11,
that anybody who's tendering for government work should not be allowed to do so if they've made a party political donation in the preceding 12 months. She's just an absolute tour de force, Barbara Pocock. She's nailing it at every single turn. The Center for Public Integrity, which is a think tank that is comprised of retired judges and retired auditors general, and some of the most eminent and respectable and respected people in society have
constantly come out and said, party political donations from big industry is a cancer. It is a cancer on the body politic and it is the reason why big firms get away with breaking the law and it's the reason why they get all of the plum contracts. You know, there have been so many people who run small consultancies who've contacted me to say, I can do this work. I can do it better and cheaper than one of the big four, but I can't even get a look in.
because I'm not allowed to be on the procurement board. Who's on the procurement board? The big four. And who sets the terms for who can be on the procurement board? The big four. It's a mafioso cabal where one hand washes the other. She goes on at recommendation 12 to provide a number of suggestions on how to stop the revolving door so that we don't have cabinet ministers walking out of parliament and walking straight into a job at
PWC, although I have to say in the case of scumbag Morrison, he tried to get a job at PWC and even they wouldn't have him. Recommendation 15, if you provide audit services to the Australian government, you mustn't be allowed to provide consulting services. Spot on, she's nailed that one. Establish an independent regulator for the consulting industry. Put a stop to the misuse of legal professional privilege.
She recommends greater transparency in confidential tax settlements. So this is an interesting one. If Joe Soap doesn't pay his taxes, then you can expect to be crucified upside down and be made to pay all of the taxes that are outstanding plus a big fine. But if you're BHP or you're Frank Lowy, and there are questions about whether you've
paid all of the taxes that you owe and there's figures of several hundred million dollars that are being bandied about in the amounts that you owe in the case of, for example, BHP. And the next thing we hear, instead of going to court, BHP engaged in a confidential tax settlement with the tax office and agreed to pay $10 million. What happened to the other 190 million? Nobody knows because it's all confidential. This shit's got to stop, man. This is not due process. This is not equality under the law. This is not
fair treatment of ordinary members of the public versus big corporations. This is just racketeering and mafioso conduct. She says,
Anthony (31:47)
It's absurd that these things are happening in secret. It's taxpayer funds if it's a big corporate not paying its taxes. And that's a massive disincentive, I mean, a deterrence if you're going to be, if names going to be up in the spotlight. So that it's all done behind the scenes is remarkable. And I think this PwC issue has brought a lot of that to the surface into the public arena where you've got the tax practitioners board and the ATO, the Australian Taxation Office, arguing that they couldn't share information with each other because of these laws.
These laws weren't always in place at some stage. They've been introduced. And as Barbara Pocock mentioned at the Senate inquiry and others, it looks like these laws have been introduced, enacted purely to protect the vested interest, the big end of town. And I mean, that's clearly what's going on because no one served by having this happen in secret. And the argument the ATO puts forward is that, look, if we need to negotiate, we need trust and transparency, we need trust when dealing with these corporates.
If we come out and say things about it in the open, then they're not going to deal with us. Well, hang on, you're the ATO. They can't just decide they're not dealing with you. You're the ATO. So it's not an issue of, you know, you have to play smoke and mirrors with them to get them to pay the taxes. So it doesn't stand up on a logical basis.
Andy (33:03)
And look at the perverse incentives that are created. If I was advising BHP on their tax liabilities and I said, look, here's $200 million worth of tax that you owe, but I tell you what, let's just not pay it. And the directors of BHP turn around to me and go, my God, well, what will happen if we get caught? Well, if we get caught, we'll negotiate a settlement. Well, what will that, you know, will that be much more than the $200 million we owe? No, no, no, no, no. It'll be one -tenth of what we owe. So, best case scenario, we walk away with $200 million in tax evasion.
Worst case scenario, we walk away with 90 % of what we, of that tax evasion. It's a set of perverse incentives and it creates moral hazard and it's not acceptable. She goes on to say, partners who are partners in big audit firms should not be allowed to sit on bodies like the tax practitioners board. Cause what they do is they get in there and they nest, right? These guys from these big firms, they nest. They get in there.
and there'll be a couple of partners from KPMG and there'll be a couple of partners from PWC and they'll look after one another. They'll even look after partners from other firms who are pinned for breaking the law because the attitude is, well, today it's the other firm, but tomorrow it might be my firm. So you scratch my back, I'll scratch yours. She says, and the final point that she makes, which is absolutely spot on, she says, the Australian Greens recommend that the Senate consider options available to it.
in relation to KPMG's misleading and incorrect evidence to the inquiry. So in other words, when Andrew Yates went before parliament and lied repeatedly, he lied about somewhere between four and six times about whether KPMG uses Power Maps. He was excoriated at the time and he got some bad press. He's still CEO of KPMG.
Anthony (34:52)
And this is setting up maps and looking at government departments and saying who, so they know who to target within departments in order to maximise the amount of money they can get from them.
Andy (35:01)
So you can influence pedal and so that you can subvert and suborn and corrupt and subject to corrosion, rational, scientific, arm's length, fair and justifiable procurement using taxpayer funds. And it's just sickening man.
so he went before parliament and he was asked whether KPMG used power maps. He said, no, no, we don't use power maps. So Barbara Pocock held up a power map written by KPMG and she said, what's this? And he said, nah, nah, that's a relationship map. We don't call that a power map. So Deborah O 'Neill interrupted Barbara Pocock and she said, sorry, can I just remind Mr. Yates about the question?
was that I asked him a question on notice, right? So they had time to read it and carefully consider their answer. This isn't a case of I misspoke. The question that you were asked was, do you use power maps, relationship maps, influence maps, or maps by any other name in which you map out your relationship with people in a government department, whether your relationship with them is good, bad, or indifferent, so that you can approach them to get preferential treatment in the...
in government procurement. That was the question that you asked. So then he said, maybe we answered the question too narrowly. You know, it's a bit like that answer strikes me as changing your tie when you shat your pants. It's just ridiculous, man. What do you mean you misspoke? What do you mean you interpreted it too narrowly? The question that you asked was so broad and so all encompassing.
that the only answer is, I'm sorry, I lied with a straight face. So then they came back about six months later, again, Andrew Yates, and the first thing he said was, look, you know, we interpreted your previous question a little bit too narrowly, and I'd like to correct the record. That's the next lie. They didn't interpret it too narrowly. And the correct thing to have said would have been to say, Chair, I want to apologize.
humbly, respectfully, with the whole of my heart, with all of my heart, for the way in which we have misled not just you, but the people you represent, we the people of Australia. That was a disgraceful thing to do. We are ashamed of what we've done. We have brought ignominy on ourselves and I promise you, we will never ever do something like that again. That would have been the correct way to phrase what happened previously. Instead, he said,
we interpreted it too narrowly. So then Barbara Pocock said to him, okay, you were then asked another question. You were asked to give us all the other evidence that you have of how you've used Power Maps. Have you done that? Yes, yes, we've done that. Okay, so let me show you what you've done. You've sent us what you call is a Power Map. And then Deborah O 'Neill said, it took us two minutes of searching on the internet to find this isn't a Power Map. This is an organizational chart that you plagiarized.
that you cut and pasted off a government department website, turned it from portrait mode to landscape mode, and took out the department's name on the top and put KPMG's name on the top, and then sent this to us and said, here, this is the only other power map we use. This is not a power map, Mr. Yates. Now I'm asking you again, have you sent us all of the other power maps you use? Yes, yes, we have. So then Barbara Pocock held up another power map and she said, you didn't send us this one. This is a KPMG power map of the New South Wales Health Department. What about this one?
So that's another lie he's told. And get this right, Subha Banerjee, who works in the federal government, in a federal government department, has hired KPMG on a million dollar contract or $1 .3 million contract to teach ethics. You could not make this shit up.
On what basis does he think KPMG is qualified to teach ethics? Maybe he thinks they're qualified to teach a lack of ethics.
Anthony (38:58)
at every turn of the clock.
This issue, it's against the law to mislead the Senate. So if someone's misled the Senate so clearly, and we all saw it, it's all on the record, it's disappointing that the inquiry itself isn't actually taking action. The broader inquiry, the broader senators haven't made that recommendation. That's only one side recommendation from Barbara Pocock, or at least they haven't put that forward as a recommendation. I mean, what's the point of having laws if no one enforces them? And it's sort of...
And disrespecting the Senate like that is a major issue. And I mean, why is the next person not going to try their hand and make up a story if you've got no chance or pretty much no chance of being held to account?
Andy (39:47)
Yep, and if you can get away with that stuff, then what incentive is there on people to provide testimony that isn't anything other than PR spin? we'll go and give them some PR puff lines. And if it doesn't work out, well, nothing will happen. They're all too shit scared to take us on. We're KPMG. We run this place. We run this town.
Anthony (40:07)
And they repeatedly made the point that you're under oath. There are penalties involved for not telling the truth. There's a lack of enforcement there, which is a shame.
Andy (40:22)
And what does it say about the partners at KPMG? That the partners at KPMG haven't turned around to each other and said, you know, it's probably not a good look for us to be represented by a CEO whose reputation is now radioactive. So maybe we should acknowledge that and we should get ourselves another CEO, not these guys. Yates is still in charge because their attitude is, Canberra, mate, we run this town.
Anthony (40:47)
Speaking of PwC and the Senate inquiry and people giving answers that weren't correct, the current PwC Australia CEO, Kevin Burrows, now he was jetted in from Singapore via the UK to head the Australian operations after we lost the Australian CEO or the Australian CEO departed over the tax leak scandal. Now he was asked about what his salary was when he gave evidence in October last year.
Andy (41:14)
Can I just clarify something? He came in to replace a CEO by the name of Tom Seymour, who wasn't sacked just because of the tax leak scandal. Seymour was sacked because Seymour said only one person was involved, a guy by the name of Peter Collins. No one else was involved and there's nothing to see here. And then it emerged that not only were other people involved, the other people included Tom Seymour.
So we've got a pattern of people who are CEOs of the biggest and most powerful and up until recently most prestigious audit and assurance firm in this country, a pattern of pathological lies.
Anthony (42:02)
There was this issue of there being 63 names in these emails, which goes again to the secrecy that the tax practitioners boards handed over this 144 page cache of PWC emails, dealing a lot of this, discussing the tax structures, the whole issue at the heart of the scandal. And you've got Seymour coming out and saying, it's only Peter Collins. And sure enough, look, there were some other names in there and I'm one of them. So there you go.
Andy (42:28)
So the current CEO, he's a fellow by the name of Kevin Burrows. Those of you who've listened to my previous podcasts will know he's my good friend, Kevin Burrows. He's the fellow who had his lawyers send letters of complaint to Wollongong Uni about ways in which I'd criticized him. And when he went before the Senate, he was asked how much money he earns in his position.
and he said 2 .4 million. And then he said he misspoken it was actually 2 .8 million. Now the first thing I'd like to point out is when you're running an accounting firm, my understanding of the epistemological root of the word accounting is the word counting. So I find it a bit odd that you can't get it right whether it's 2 .4 or 2 .8 and it's become this
easy little get out of jail free card this phrase, I misspoke. I misspoke. I misspoke when I gave testimony to the Senate. I referred to attorneys general when I meant auditors general. I can understand misspoking when you misspeaking when you use the word alternate instead of the word alternative. That to me is what constitutes misspeaking when there's a subtle difference in the words and you use the wrong words. 2 .4 doesn't sound a lot like 2 .8.
Even if it does, well, you're head of an accounting firm, so you'd expect that you'd have some measure of accuracy when it comes to a difference of almost half a million dollars. So anyway, he said that he earned 2 .8 million. And then with lots of other questions, all about the linklater's report that's owned and commissioned and paid for by PwC International, he gave the impression he said that he'd sent PwC International emails.
and they hadn't responded to those emails or they'd said, no, they refused to release the report and there's really nothing he can do and it's kind of out of his control. Then later it emerged that what he hadn't told the inquiry was that PwC International had specifically appointed him to be the CEO. And then in the last week, what had emerged, what has emerged is that the 2 .8 million is also not correct. Turns out,
it's actually 4 million. And where does the other 1 .2 million or 42 % difference come from? Payments that he gets from, wait for it, PwC International. So he's on their payroll, he's paid by them, he's their employee, and he's their spokesbot sitting in Australia going, sorry, we can't get hold of the Linklater's report because it's possessed by an entity in a galaxy far, far away and there's nothing I can do about it. In addition to which,
The board of directors of PwC International includes an individual by the name of Patricia Carney. Patricia Carney is a partner of PwC Australia and as a board member of PwC International, she will either have seen or will be entitled to see the link later's report. So the more the more questions that are asked here, the more it becomes evident that PwC International has taken a decision and they've said Australia
What's Australia? Where's Australia? That's somewhere down at the ass end of the world. Nah, fuck them. Listen, they ask for things, just tell them to get stuffed. They're not important. They're a tiny little boil on the butt of humanity. We don't need to pay them any respect. Just lie. Just tell them we said no. We may be stuck in the ass end of the world, but we're a G20 economy. We're a G8 economy. You can't claim to be a global audit and assurance firm if you don't have a footprint in Australia. And even if we were
Even if we were bloody Jamaica, for God's sake, or Bhutan, it doesn't matter. If you're going to operate in this country, show some bloody respect to the people who make this country, who live in this country, and who send their representatives to parliament and who've given you an instruction, give us a report so that we can see who else in your network conspired to attack Australia, to undermine the rule of law, to obfuscate the activities of the Australian Tax Office.
and to disrespect the authority of his Australian Majesty the King.
Anthony (46:51)
And I think that sort of just gets us to where the frustration in that, yes, they're treating us with complete disrespect, the Australian public with complete disrespect, but they're getting away with it. That's the tragedy.
Andy (47:05)
Getting away with it and from December of this year, they'll be getting taxpayer funds again.
Anthony (47:10)
Precisely. And I mean, as we've written about at the Klaxon, there's this PwC Indigenous Consulting we've mentioned before. Now on that same day that they came out and said, look, December 1, we'll have a decision by, they said, look, we're giving the green light to PwC Indigenous Consulting. Now, PwC Indigenous Consulting claims to be not part of PwC, or PwC says it's different. That's despite it being called literally PwC's Indigenous Consulting, because PwC owns just 49 % of it, the other.
51 % owned by two Indigenous Australians. But it's sort of just, it's more to smoke and mirrors. You dig into it, they're receiving millions of dollars of contracts and they've given them the green light. And on that same day, so three things happened. The third thing was that there was a, the lobbyists register was updated to show that PWC had new corporate lobbyists in Canberra. Both of them running a company, both of them former ALP senior staffers. So there you go, all in one day.
Andy (48:08)
And you know, the point you make that PwC Indigenous Consulting is 49 % owned by PwC Australia, that means that whatever profits PwC Indigenous Consulting makes and whatever dividends they declare, 49 % of those will go back to the mothership, a mothership that is supposed to be banned from sucking down any more taxpayer funds. This is a vampire squid and its tentacles.
Anthony (48:32)
for some.
Andy (48:39)
have gone into every single orifice of the body politic.
Anthony (48:46)
Alright, we might leave it there.
Andy (48:48)
Thanks, Anthony. It's always as always a pleasure. And thank you so much to our listeners for taking the time and trouble to listen to what we have to say. We appreciate your support and your patronage more than you can imagine.
Anthony (49:02)
Thank you so much and head to theclaxon .com .au and just click on support, sign up for $10 a month. Just sort of help the Claxon keep afloat. We're breaking the big stories and we need your assistance. Thank you so much for listening.