Lyon fidgets and picks at his food as he declares that “everything is fine now”, although clearly everything is not fine. While the 43-year-old, who left KPMG in June 2021, is now in a different phase of his life, delighted that he and his wife are expecting their first child, this happy news leads back to another uncomfortable memory: when Lyon was summoned for constructive dismissal by KPMG the day before his wedding.

As the PwC tax affair – which exposed a tremendous conflict of interest at the Big Four consulting firm, and an abuse of a government relationship – continues to scandalise ­Parliament and the business world, events that consumed Lyon at KPMG for 14 months in 2020-21, and which came to light at a series of NSW Parliamentary hearings, are again under the microscope.

Like the PwC affair, KPMG’s scandal ­emanated from allegations of a serious conflict of interest – decisions rooted in corporate greed and a ­desperation to maintain the high-level, ­lucrative relationships that ensure a seemingly endless pipeline of contracts.

At KPMG, Lyon found himself caught between two warring government departments and what he saw as an attempt by some partners at the firm to rubber-stamp a flawed Treasury model, pulling the wool over taxpayers’ eyes. At PwC, ­partners used information the firm had gleaned advising the Australian Government to boost the fortunes of private clients. Each scandal involves allegations of a “profit before principles” mentality, which the public is now learning is embedded in the very business model of these professional services giants.

And giants they are. In the past four and a half years the Federal Government has paid KPMG $1.9 billion, Deloitte $1.5 billion, PwC $1.4 billion and Ernst & Young $1.1 billion, according to ­AusTender data. (This does not include state contracts, the basis of Lyon’s brief at KPMG.) They are huge employers, with 265,000 staff at KPMG, 328,000 at PwC, 415,000 at Deloitte and 365,399 at Ernst & Young.

And they go almost entirely unregulated.

The chair of the Parliamentary Joint ­Committee on Corporations and Financial ­Services, Labor Senator Deb O’Neill, has had the ­consulting sector on her radar since she led a Senate economics ­committee ­inquiry into foreign investment ­proposals. She cites Ernst & Young, which was assessing ­Alinta Energy’s compliance with ­Foreign ­Investment Review Board conditions while also acting as its internal auditor and doing advisory work. “I thought, who do these guys think they are? They are getting paid to do their own homework,” says O’Neill. “I was ­absolutely appalled, and that really started my nose twitching.”

Greens senator Barbara Pocock, who sits alongside O’Neill on the Senate committee, says she’s been “shocked every day” by what has come out about PwC and the level of ­infiltration of the consultants among all the corridors of power. “I think there are some very large issues about these conglomerates and the fact that they are amongst the largest firms on the planet and they have tentacles across the public and private sectors,” says ­Pocock. “I think there is a good case for a very systematic look at it.”

Lyon, in his first sit-down media interview since he testified about his former employer, puts it more bluntly. “I think there should be a Royal Commission,” he says.

The PwC scandal exploded into the public consciousness when it emerged the firm had helped multinational companies sidestep high-profile new laws (the so-called Google tax) by using confidential information it had gleaned from advising the government on the creation of those laws.

As ever, the cover-up was almost as bad as the initial misdeeds. After clinging to legal professional privilege, the firm attempted to make a scapegoat of the tax partner in charge, Peter Collins. But a report tabled by the Senate Finance and Public Administration Committee after a Question on Notice by O’Neill in May has revealed information was shared with 63 partners and staff. A special team, Project North America, had been set up to pitch PwC’s “unique” knowledge of Australia’s new tax laws to customers. It all happened while Tom Seymour was PwC boss; he stood down on May 8 after a discussion with the board of partners.

The Australian Federal Police has been called in to begin a criminal investigation – ­although it has its own potential conflict of ­interest. The AFP has several contracts with PwC, including two signed after the scandal broke, and AFP commissioner Reece Kershaw is friends with former NSW police commissioner Mick Fuller, who now works at PwC.

In the years since the global ­financial crisis, scrutiny has tended to fall on multi-tentacled investment bankers – it was a Rolling Stone article that evocatively described Goldman Sachs as a “vampire squid”. But should we have, in fact, been more worried about the trusted nerdy accountants who ended up infecting every level of state and federal governments, and who sit on most top-tier boards across the nation?

The Senate’s newly convened Inquiry into the Management and Assurance of Integrity by Consulting Services – set up in part because of the PwC scandal – continues to uncover reams of conflicts and questionable behaviours. Much of the attention has focused on the circumstances of the PwC scandal and response.

But on June 7, almost two years to the day since Lyon was constructively dismissed by KPMG, attention swung to his matter when the firm was called to testify before the ­Senate Committee.

Lyon was a staffer in the Howard ­Government, working for Joe Hockey and Bruce Baird; he quietly built his credentials, influence and connections on all sides of politics during a lengthy stint as chief executive of industry lobby group Infrastructure Partnerships Australia from 2006 to 2018. He was part of an Infrastructure Financing Working Group with senior public servants and representatives of the infrastructure, banking, superannuation and taxation sectors, including then Shadow Minister for Infrastructure Anthony Albanese. Albanese called out Lyon at an infrastructure conference in 2015 for his help developing policies aimed at facilitating new private sector investment in infrastructure. The Australian Financial Review reported Lyon’s appointment to KPMG in 2018 as part of the firm’s strategy to expand its infrastructure business.

That same year, Albanese gave a speech to Infrastructure Partners Australia, praising Lyon: “Brendan is a man of integrity, vision and intellectual depth who has the national interest as his motivation in his working life.”

Lyon does appear to be one of those rare beasts who wants to give back to his country, even if he concedes he was lured by the promise of great minds as well as “overseas trips and a nice house” that he thought would come with joining a Big Four firm. But later, as it all ­unravelled around him, he knew he would no longer be on the “Aspen” track filled with ski trips, waterfront houses and top-notch private schooling for the children-to-be.

Lyon had been working at KPMG for two years, tackling various transport infrastructure projects, when he was asked to conduct a rapid assessment for the NSW Government’s Transport for NSW in February 2020. The brief: a high-level structural model for rail operations, plus reviewing a black box financial structure that the NSW Treasury had created for assessing the value of transport assets. Complicating the assignment, to say the least, was that ­Treasury had created its models with the help of a separate team within KPMG.

KPMG’s decision to take on work for the two divisions has since come under serious scrutiny. As Lyon told a subsequent NSW ­parliamentary hearing, “they tried to back two horses”.

Within a matter of weeks Lyon felt as if he was “facing massive interference and accelerating conflict” as he exposed the model another team had created for Treasury, which he said “only factored in benefits and ignored cash costs that would hit the budget”.

In an incomprehensible development, the partner from the separate team was appointed second lead on Lyon’s project for Transport. When Lyon ­discovered that this partner had led the Treasury work, he raised his concerns about having them on his team in a phone call with the KPMG risk team three weeks after he ­started on the project.

An internal committee was formed to ­manage any issues between the NSW Treasury and Transport – run by KPMG’s “relationship partner” for Treasury, and including Andrew Yates, KPMG’s chief executive. The committee met weekly and sometimes more. Every meeting “was a fight”, Lyon says. “I would be attacked, and respond – and then be informally disciplined for being aggressive.”

There was also a weekly meeting with ­Treasury and Transport officials and again, “fights happened each week”, says Lyon. In heated testimony at parliamentary hearings into the matter, then Treasury Secretary Michael Pratt railed that “Mr Lyon was highly derogatory towards his own colleagues at KPMG in internal emails, and was in fact investigated by KPMG for his own behaviours”.

Despite the barriers, Lyon filed a draft report to Transport in May 2020. “It must be the pig-headed Irish blood in me,” he says with a weak smile. In the draft report he concluded that the Transport Asset Holding Entity (TAHE) model had not been properly assessed for its operational, safety or financial impacts, and was premised on highly aggressive accounting by KPMG and flawed financial analysis by the firm’s Treasury team. Pratt rang KPMG, and demanded changes to the draft.

Days later, the first of ­several internal ­complaints was launched against Lyon. He was accused of drinking a beer while on a 7pm Zoom call, and of breaching covid restrictions and being “racist”. As a result, Lyon was called into a meeting with his superiors.

When Lyon issued another report in­October 2020, Treasury commissioned its own report from another KPMG team, without ­tender, which ­directly contradicted Lyon’s ­financial assessment. The KPMG conflict group had met without telling Lyon, and accepted the work. “I was constantly pressured to change my results because they were humiliating for the Treasury and highly inconvenient for KPMG given its very close relationships with particular officials,” he says.

In November 2020, throwing caution to the wind and ignoring all the internal warnings, Lyon filed his final ­report, which exposed a $10 billion-plus misstatement of the NSW ­budget. The result was ugly. Worse than he’d expected. “I didn’t expect it to be as explicit, basic, unsophisticated, or bad as it was,” Lyon says as his mind goes back to that difficult place and he starts tapping his fingers.

On November 19, 2020, Pratt emailed Lyon stating: “You either correct the errors or remove all references to Treasury modelling, which is not for you to comment on.” Lyon ­responded two minutes later with: “Mike, I’m sick of being bullied by you. Grow up [and] tell the truth.” Pratt responded nine minutes later by writing to senior partners at KPMG: “You obviously have a partner who refuses to take counsel and is out of control … I expect you to take action.”

Did he feel close to a breakdown over the emails and meetings, and eventually a forced resignation with lawyers on both sides at the meeting? “No,” he responds. “But I’ve only just started sleeping through the night in the last couple of months… I bear the scars, and I’ve gone through periods where I drink too much. It was a horrible experience.”

For Lyon, the whole experience of taking on a Big Four firm and losing would have remained private – he had signed a non-disclosure agreement when he left the firm – but the spat between the two powerful clans of NSW Treasury and Transport was leaked to the press. Evidence supplied to the media included information that Lyon had not been aware of or had access to. Lyon was subpoenaed to give ­evidence before a 2021-2022 NSW Public Accountability Committee. He told the hearing that senior public servants and his own firm pressured him to change his report and described the “professional, ongoing attacks” he had been subjected to.

The parliamentary inquiry and a review by the Auditor-General backed up Lyon’s view on the financial burden of TAHE for NSW public finances. “It’s very clear and very obvious that there was already a decision that had been made and had been reflected in the state’s account some years before, meaning that the error actually left multibillion dollar black holes in the reported budget,” says Lyon, thinking back. “The reaction of the Treasury Secretary at the time was, it was going to work at any cost. And that flowed down ultimately through the pressures that I experienced sitting around it.”

As the PwC scandal blew up in May and June this year, KPMG came out swinging. It condemned PwC for the tax scandal and ­attempted something of a mea culpa for past wrongs, including the TAHE scandal and a sorry episode in which 1000 staff cheated on professional exams. It said it supported the need for increased regulatory oversight.

KPMG chief executive Andrew Yates told the Senate inquiry: “There have been cases in the past where we have made mistakes. In regard to high-profile cases over recent years that involved our firm, such as the matter involving the NSW Government’s Transport Asset Holding Entity and the exam cheating matter, we made mistakes. However, we used what were difficult experiences for our firm as ­opportunities to improve the way we work.”

Facing questions on the exam cheating, Yates told the Committee: “it’s an incredibly painful issue for us and has been very damaging reputationally, there’s no denying that.”

“This was an awful, unacceptable thing, but it was a breach of internal code of conduct,” he said. “We felt that ... the sanctions that were applied were appropriate.”And on the handling of the TAHE matter, Yates told the Committee: “We were in a complex situation. And the way that we would talk about that, is that we focus purely on the real conflict, ‘Were the two scopes of work operating independently of one another?’ And they were ... I’ll say, again, we got it wrong. In terms of how we thought about that.”

In an email to staff, Yates and KPMG chair Alison Kitchen stated: “As a firm we have not got everything right. And with 10,000 people working on complex and high-profile projects, there may be cases where we fall short of what is expected.”

Clearly, as Lyon acknowledges, there are plenty of top-tier ethical people who work at professional services firms. But his own ­experience, and now the PwC scandal, have highlighted the lack of regulatory oversight that has allowed these firms to become ­contentious and conflicted.

Indeed, the evidence heard in recent months has sparked a whole new probe — a fresh parliamentary inquiry comprising Senators and MPs will scrutinise the consulting industry as a whole. Its wide-ranging terms of reference will cover the ­partnership structures of the Big Four.

When the Peter Collins matter came onto Senator Deb O’Neill’s radar she immediately knew there was a lot more to it. “My dad always said you have two ears for listening,” she says, adding that her years of teaching children ­before becoming a senator give her an understanding of when someone is being “crafty”.

“When I started asking the questions [of the TPB], I thought this is pretty serious. It ­involves a person basically committing an act of treason against their own country. It’s knowingly ­taking information from your ­fellow citizens to advantage a corporate entity for profit. It’s ­pretty egregious. And it became pretty clear to me, as I listened, that it would be impossible for Mr Peter John Collins to have monetised this by himself.”

An interim report by the committee published in late June described PwC engaging in “a calculated breach of trust”. “It is clear that the desire for personal gain trumped any obligations that PwC had to the Commonwealth of Australia and its citizens,” it states, adding: “PwC engaged in a deliberate strategy over many years to cover up the breach of confidentiality and the plan by PwC personnel to monetise it”.The report also noted the committee would be reporting on a “wider range of matters” arising from the inquiry into the management and assurance of integrity by consulting services “which extend to the larger consulting industry.”

O’Neill stops short of calling for a ban of ­government contracts with PwC, but says the architecture of the professional services sector is in clear need of a review. She says Collins’ ­behaviour was not only condoned but actively harnessed for profit. “His information should have hit a titanium wall but instead it meant fertile soil and PwC grew what it thought would be an incredible money tree,” she says. “And they didn’t do it alone, they did it with international partners.”

As Lyon explains, partners in these global firms all share in the wealth of the business. As he discovered, if one questions the work of ­another – particularly if it’s a higher fee earner – then it threatens the profitability of all. The firms stress their internal controls keep conflict at bay. But, asks O’Neill: “How do you separate yourself from yourself?”

The burning question thrown up by the PwC and KPMG’s TAHE scandals is why ­governments and their agencies spend so much money on consultants in the first place.

Lyon believes it’s as simple as ­wanting a big brand name to endorse their views. “There has been a razor sharp focus on wanting to get the brands of very large consulting and accounting firms to evidence particular decisions that have been made,” he says. “It’s quite unhealthy.”

Graeme Samuel, former chair of the Australian Competition and Consumer Commission, believes it’s worse than that. In his view, governments, and many companies too, don’t have faith in the quality of their people. Describing much of the work being done by consultants as a “waste of money”, he points to the fact they are often getting public servants to do the work for them anyway. “I take a very tough and strong view,” says Samuel. “I don’t believe we need to be hiring consultants to do all this work. It says to me that those kinds of leaders who do this aren’t fit to be CEOs, or chairs, or leading the organisation. They don’t have the courage of their convictions.”

And that’s before the issue of conflicts is ­considered. “There is such an inherent conflict when you’re being asked to advise on something and you know that you have other clients who are going to benefit from a contradictory or a ­conflicting position,” says Samuel. “Someone is going to be done a disservice, either the party that you’re now advising as part of the consultancy or the client that would benefit from a breach of the conflict. You can’t have it both ways.” That’s why Samuel advocates for a ­splitting of audit work from consulting, and ­dismisses the idea of Chinese Walls between ­divisions as ridiculous.

Senator O’Neill says the partnership structure of consultant and auditing firms is also fraught. She says that even if a partner has the desire to put their earnings at risk and make an internal complaint about conflicts, there are too many other stakeholders with a vested interest in keeping the status quo.

“There is a disincentive to be a whistleblower, and I think of that song Hotel California,” she says. “You can check out any time you like, but you can never leave.”

The partnership structure at these financial ­giants is certainly opaque. And as their ­headcounts grow, so too does the constant need for more money to come in the door.

Lyon recalls that about one year into his time at KPMG, the infrastructure specialist sensed he might have a cultural clash when, during a session in Melbourne for new ­partners, he was told they were “all sales ­people first”.

“There is no stick at the moment,” says Senator Pocock of the penalties they face for doing the wrong thing.

Says Lyon: “There’s always going to be a role for experts to come in and help governments, but when the incentives aren’t there for them to apply professional knowledge in a disciplined way, and when there’s no accountability… it means there’s a pretty expedient choice ­between profit and principle.”

“Principles don’t drive profit.”

In May, Lyon was announced as Professor of Practice in the Faculty of Business and Law at his alma mater, the University of Wollongong. He insists that ethics will be a significant part of the course. “When you talk about the Big Four, ethics, integrity, financial ­intelligence and professional acumen is what they should be delivering,” he says. “I want to give young people ... the confidence to know that those fundamental ­underpinnings do matter.”

Working out exactly when to action their ethics might seem tricky in the early days of a professional’s career, when it can often be ­better to go along to get along. “But if they are being asked to do something that’s fundamentally different to what they think they should do, then hopefully they will have the confidence to know that even if they are sacked or resign they will still be able to go on and be a professional,” says Lyon.

Whistleblowing will also be part of his course. Lyon himself didn’t meet the definition of one under the NSW Public Interest Disclosures Act, because due to his non-disclosure agreement with KPMG he only spoke out when subpoenaed, but he describes the ­protections under the Act as “pathetic”.

He points to the Auditor-General’s description of NSW Treasury having conducted “doctor shopping” to, as Lyon puts it, “back up the fiction that was on their state accounts”.

He wants these kinds of issues to be debated among his students.

Lyon’s career has moved on. In July 2021 he started his own infrastructure firm, Project Partners – with clients following him across. It’s clear for Lyon the promise of working at one of the Big Four was not what he thought it would be. Not long after starting at KPMG he was asked to make a promotional video for the firm, or “The Firm” as he calls it, comparing it to the Tom Cruise thriller in which a young lawyer joins a lucrative partnership and is expected to make a number of compromising decisions. “The point I made in the video was that coming into a firm with all of these amazing array of skills and capabilities was a great opportunity to accentuate discussions that need to happen,” Lyon says. “I certainly didn’t think I would get dragged into ... a large fight around how to not tell the truth to the taxpayers.”

Coming in, he had feared being “too commercial” for a Big Four firm. Instead, he found the opposite to be true. “I thought I was joining a very rigid accounting firm where I might test the internal controls by being too commercial, but in the end I found that I was too rigid for the sorts of behaviours and incentives that I saw.”

As for how his recovery is going, Lyon says he feels tense and “tight around the head” over the thought of potentially being called up when the committee kicks off again later this month.

But there are a few silver linings, including his job at the university, and also the knowledge that throughout all the difficulties with KPMG, he remained true to his values.

“I’m the same person coming out of all this as I was going in,” he says. “Just with a few extra scars.”