Opinion
Big four consultants inquiry brings back ghosts of banking royal commission
Elizabeth Knight
Business columnistSo far, the Senate inquiry into consulting firms hasn’t yet found another Peter Collins – no other rogue partner who brazenly leaked confidential government information for potential profit. But this is a long way from concluding the industry is clean.
Already, PwC has found Collins was not a lone wolf, given multiple partners have left after findings of some level of involvement or knowledge, or that they had exercised some corporate governance failure on the back of this tawdry tax scandal.
It is hard to imagine others in the industry don’t have skeletons that they would rather keep buried.
What’s under this industry’s hood?
Students of historical corporate scandals may remember that the Commonwealth Bank was in the frame back around 2016, brandished as the industry pin-up organisation for bad behaviour. It was the company thought most pivotal in the establishment of the financial services Royal Commission.
Other banks privately expressed their shock at CBA’s conduct, suggesting the financial services probe should be more aptly named the Commonwealth Bank royal commission.
With the value of hindsight, attempting to cast CBA as the industry’s rotten apple was a mistake in a league of its own.
By the close of that royal commission, the public became privy to a smorgasbord of misconduct from all four banks and a couple of other large financial organisations operating in the wealth management industry.
This laundry list included, but was not limited to: charging fees for no service, alleged bribery, forged documents, paper bags full of cash at a branch, repeated failure to verify customers’ living expenses before lending them money, mis-selling insurance to people who couldn’t afford it, and charging dead customers.
On top of this, Australia’s two largest banks – the CBA and Westpac – were ultimately fined a combined $2 billion for breaches of anti-money laundering laws.
Three of the four bank chief executives didn’t survive the findings, neither did two chairmen, and the overhaul of the financial services industry was unprecedented.
And this was an industry that was ostensibly well-regulated.
If sunshine is the best disinfectant, a royal commission into these mega consultants should blow away the clouds.
Thanks to one exposed incident at PwC and its cover-up, there are now growing calls for a royal commission into this industry.
Whether it takes the form of a royal commission or some other commission of inquiry, the public is entitled to know what is happening under this industry’s hood.
One of the loudest of calls for a royal commission came from KPMG partner-turned-whistleblower Brendan Lyon. He declared at the ongoing Senate inquiry into consultants that the big four used the “bastardisation of the partnership model” to create “a risk-free, tax-free and consequence-free model”.
During this inquiry, there has been an emerging theme that the partnership structure of the big four firms helps them escape the type of regulatory oversight and disclosure that other large private companies are subjected to.
Thus, it feels risky for any of the consultant firms to hold themselves up as true clean skins.
But on Tuesday, EY’s Australian head David Larocca took the opportunity to throw PwC under the bus and point out the differences between the two firms.
He labelled the conduct by rival PwC, which triggered the tax scandal engulfing the sector, as “deeply disturbing”.
Larocca told the Senate inquiry that at EY, “We don’t deliberately breach confidentiality, we don’t market tax minimisation schemes, we don’t use blanket legal professional privilege claims to frustrate regulators.
“Our business model is not built on condoning, rewarding or covering up this kind of thing.”
But before his evidence was complete, the sanctimonious approach had already backfired when Greens Senator Barbara Pocock attacked EY for its lack of disclosure.
“You distinguish yourself from PwC, and you’re telling us you’re different and that you are better [...] I go to the deed of how you have responded to the questions on notice that we have given you,” she said during a Tuesday public hearing of the inquiry.
“Those questions went to the partnership deed, which you have not supplied to us. We asked for earnings data for partners. You have decided not to supply that to us.”
If sunshine is the best disinfectant, a royal commission into these mega consultants should blow away the clouds.
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