PwC Australia weighs more sales as Kristin Stubbins faces attack

PwC Australia acting CEO Kristin Stubbins is under mounting pressure to swiftly deliver the findings of its internal inquiry into the tax scandal that has engulfed the consultancy firm.

PwC Australia might hive off further parts of the business as part of a $1 deal with Allegro Funds, as its acting chief executive Kristin Stubbins told NSW parliament it would deliver the findings of an internal inquiry into a scandal haunting the firm “very soon” amid growing political pressure.

On Sunday PwC announced it would sell its government consulting and parts of its risk advisory business to private equity players Allegro Funds in a bid to cauterise the damage to the operation, which has faced a steep fall-off in new work.

But PwC told NSW parliament the firm was still finalising what parts of the business would form part of the transaction with Allegro Funds, noting more business units could be lopped off.

This could see PwC units that carry out actuarial work – for NSW government insurer iCare among other government clients – transfer to the new government consulting business. The firm’s restructuring unit also could be on the block, The Australian’s DataRoom column reported.

Appearing before a NSW parliament upper house inquiry on Monday, Ms Stubbins said the firm had brought in two legal firms to investigate how far confidential government tax information was circulated inside the professional services giant.

Ms Stubbins said the firm would reveal the names of “anyone who has done anything wrong”.

PwC has already handed a list of 63 names of staff and partners involved in the leak to the Senate but asked they not be published amid concern of prejudicing an investigation by the Australian Federal Police.

PwC has faced weeks of growing criticism over its use of confidential tax briefings to create strategies for clients to minimise their tax in response to new laws implemented in Australia in 2016.

The firm was slapped with a scathing report in the Senate last week over its engagement with the issue, with senators warning the firm was failing to properly engage with an effort to get to grips with the size of the scandal that went undisclosed within PwC for years.

But Ms Stubbins told a NSW government inquiry into use and management of consulting ser­vices that the firm would prevent any partners from PwC who were involved in the tax scandal from taking up roles in the new Allegro business.

PwC Australia acting CEO Kristin Stubbins and PwC Australia partner Nathan Schlesinger giving evidence at the NSW parliamentary inquiry on Monday. Picture: Jane Dempster

PwC announced the deal on Sunday, but the firm said the terms of the transaction were still being hammered out and were set to be finalised by the end of July.

Some approvals have already been sought from politicians and senior public servants to sell the government consulting business.

PwC’s government consulting business accounts for almost 20 per cent of the firm’s overall Australian revenues.

PwC’s auditing work for a variety of government departments and bodies has been under threat since the tax scandal exploded in Senate estimates. Reserve Bank of Australia governor Philip Lowe has warned PwC won’t win future contracts until it reckons with the scandal, which he said would require the firm to show “complete transparency”.

But Ms Stubbins revealed in parliament the firm had only started examining the scandal six weeks ago, after a dossier of emails were tabled in parliament by the Tax Practitioners Board revealing the widespread sharing of confidential government tax briefings within PwC.

This is despite PwC former head of international tax Peter Collins, who breached multiple confidentiality agreements with the commonwealth, leaving the firm in October last year.

Mr Collins was banned by the Tax Practitioners Board from being a tax agent in December last year, in a move that was published in January.

Ms Stubbins said PwC didn’t know of the issues “way back to 2015” and learned Mr Collins had signed confidentiality deeds with the Department of Treasury only in March 2021. But she said the firm was preparing to finalise its “root cause analysis” into the scandal “very shortly”.

“We have been doing a very, very thorough investigation involving help from two external law firms, and so we will expect to announce consequences, you will see that publicly, and they will be severe,” Ms Stubbins said.

“I would also just note that we are also engaging with and co-operating with external regulatory authority authorities as well as part of those investigations into the tax matters.”

Ms Stubbins told the inquiry the firm had “no reason to believe” any issues similar to that exposed in the tax scandal “relate to the NSW government” contracts PwC held. “But obviously, if we did have specific instances, we will deal with those instances … through our consequence management process and notify the relevant people,” she said.

Inquiry chair and Greens MLC Abigail Boyd asked Ms Stubbins if PwC’s sale of its government consulting business was an “admission” the firm could not stop conflicts of interest with its commercial work.

But Ms Stubbins said it was not. “It’s an announcement that looks at the situation and what is best for our people today and to ensure continuity of service to our government clients,” she said. “There will be no question around management of conflicts at all in a completely different business.”

Ms Stubbins faced her own questions over conflicts of interest before the NSW inquiry, which heard she sat on the board of South Eastern Sydney Local Health District between 2012 and 2016 and was the chair of the finance and performance committee during the time its financial recovery plan was prepared.

This plan saw PwC awarded a large amount of work. Ms Stubbins said she recused herself from decisions being made around the move to hand PwC the work.