PwC has agreed to a federal government order to stand down employees involved in the alleged misuse of confidential information, as scrutiny now turns to a potential conflict of interest in AFP’s use of the consultancy firm while it investigates the breach.
The public service has stepped up its response to PwC for sharing confidential tax policy information to drum up business, with the head of treasury referring the matter to police and finance ordering staff “directly involved in, or who had knowledge of, the significant breach” to be stood down.
On Thursday the Australian Financial Review revealed that finance secretary, Jenny Wilkinson, had emailed senior staff to advise that it had directed PwC to stand the relevant staff down “from all existing and future contracts under the management advisory services panel”.
Wilkinson then appeared at estimates confirming that PwC had agreed with the direction issued on 19 May and a recommendation for it to stand the staff down with respect to all commonwealth contracts until the review of PwC’s culture and governance to be led by Ziggy Switkowski is complete.
Wilkinson said the department had become aware on 2 May that the “breach of confidentiality was significantly broader than a single individual within PwC” and that PwC’s initial response “insufficiently addressed” the issues raised.
This raised “serious concerns about the broader culture in PwC and undermined our confidence in their earlier response”, she said.
Wilkinson said procurement rules would be changed to provide greater flexibility for contract managers to terminate a contract for material breach, after the home affairs minister, Clare O’Neil, blamed legal constraints for the government not going further to cancel existing PwC contracts.
Finance officials revealed that the commonwealth has a total of $255.2m contracts with PwC.
Earlier, AFP officials confirmed at Senate estimates that they had “received a report of crime” alleging “unauthorised use or disclosure of confidential information” in breach of the Crimes Act, leading to what is now an “active investigation”.
But scrutiny turned to the fact that the AFP has nine contracts with PwC, including seven related to PwC acting as its internal auditor.
The Greens senator, David Shoebridge, told reporters in Canberra that the AFP should “immediately” terminate the contracts.
“We cannot have a situation where the [AFP] is undertaking an investigation of [PwC] and at the same time [PwC] is their internal auditor with such access to the whole of the organisation.”
The AFP commissioner, Reece Kershaw, told Senate estimates he believed the public could be confident in its processes, citing involvement of its “sensitive investigation oversight board” to prevent PwC audit contracts impacting the criminal investigation.
Earlier, O’Neil told ABC Radio the government faces “legal constraints around existing contracts”. “We can’t break the law just because we’re the government.
“But we are doing everything we can to make sure there is accountability here.”
The now former PwC partner shared Treasury information on measures to bolster tax laws, including rules stopping multinationals from lowering their tax bill by shifting profits from Australia to other jurisdictions.
The New South Wales finance minister, Courtney Houssos, said she was considering a new plan that would slap multimillion-dollar penalties on businesses caught disclosing confidential government information.
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Houssos said tax consultancy allowed for the private sector to give input into the tax regime and that leaked information could help businesses and individuals avoid tax.
“The NSW government will not hesitate to come down hard on anyone who breaks trust with or takes unfair advantage of the people of NSW,” she said.
Treasury referred the matter on Wednesday night to the Australian federal police, who will consider if criminal charges should be laid.
They noted the “seriousness of the misconduct” in announcing their decision to involve the police.
PwC’s chief executive has also stepped down and the firm has announced an investigation into its governance, culture and accountability led by former Telstra boss Ziggy Switkowski, who sits on a number of corporate boards.
Finance department officials are set to be grilled on how the government plans to respond to the scandal.
The government has taken steps to strengthen the Tax Practitioners Board to stamp out unethical behaviour and flagged further action, but has yet to detail what that will look like.
The finance minister, Katy Gallagher, who will appear at a Senate estimates hearing alongside officials in Canberra on Thursday, has described the behaviour at PwC as “outrageous”.
She says it seriously challenged the trust between government and such private sector firms, and the government would be seeking to reduce its reliance on consultants.
The Greens want the government to ban such contracts.
Centre for Public Integrity research shows the volume of contracts with the “big four” consultancies – PwC, KPMG, EY and Deloitte – has surged 400% in the past decade.
In 2021/22, the public service contracted $1.4bn with the four firms.
On Wednesday, senators heard the attorney general’s department was “having another look” at a contract with PwC for managing workflow.
