Has the Department of Finance entirely lost the plot? Has its thinking about the PriceWaterhouseCooper scandal — that the matter can now be swept under the carpet and PwC brought in from the cold — infected a police force itself compromised by its relationships with PwC?

It’s not an idle question, nor an exhuming of ancient history. Particularly in the week ahead in which politicians, business leaders and others debate how national productivity is to be improved. One can be sure that the business lobbies will be suggesting, as they always do, that the biggest barrier to improved productivity is government, over-regulation, high taxes and poor management of the public sector.

Normally such statements can be dismissed for the self-serving nonsense that they usually are. In any event, the government complacently says to itself that any disasters of poor management or maladministration occurred during the Morrison years, that the public sector has since been reformed and could not be in better fettle. Wasn’t this the popular verdict when Labor was returned in a landslide earlier this year?

Yet there are clear signs that the Department of Finance itself, and perhaps the public sector generally, has not changed in any significant way, and brings to bear on problems of good and honest government much the same mindset that it applied during the Morrison years.

Years when the department was aware of fundamental illegalities in various grant programs — including sports rorts — but chose to ignore ministerial and prime ministerial breaches of the law. Years when people associated with the department devised a scheme for handouts to business on demand but somehow neglected to establish rules for return of money not spent or not spent on the purposes for which it was given. This, at a time when the government was implementing a cruel and merciless, and fundamentally illegal, program of demanding the return of any welfare benefits its computers believed (wrongly) to have been overpaid. Finance did not implement Robodebt but ran its ruler over and approved the plan.

By contrast the business welfare scheme saw billions handed out to businesses who claimed that their turnover was down by at least 30% because of COVID lockdowns. That may have been good so far as keeping the economy lurching along. But the lack of government scrutiny, or proper stewardship of the money meant that at least $30 billion was not spent in the way intended. Some businesses claimed it but did not have reduced turnover and were not eligible. Some spent some of the money for proper purposes, but still had much money left over when the music (and the business festivities) stopped. No one was asked to return money. Indeed, the government was itself embarrassed by the lack of checks and balances and devised an alibi which let the architects of the scheme off the hook: apparently, it was always intended to be a straight handout with no thought of ever asking for the money back.

Always ask who is paying for the independent review

It is one of the rich ironies of life that departmental secretaries under the new regime commissioned a former Finance secretary to examine whether the new (post-Morrison) public service was now reformed and that the multiple sins could not occur again. No doubt most of the secretaries, (heads of department in the Morrison era) are very relieved. At least they now know that the public service commission will hold all its inquiries in secret, so they are safe from criticism or discouragement.

Although most of what was involved in the PwC scandal occurred during the period of Coalition Government, managing its aftermath was a problem for the Albanese Government. Up to now, at least, ministers have managed reasonably well, in part because of popular outrage at the barefaced lack of integrity and honour involved under the previous government. But that management also sat nicely with an election promise that government was going to crack down on the over-use of outside consultants, the switch to whom had impoverished the intellectual energy and planning capacity of the public service. This is a promise that ministers have largely kept, except in the defence system where mates, cronies and former colleagues infest the consultancy industry and have rendered themselves so essential that they now more or less decide how the money is divvied up between the profit motive and the public interest. Neither patriotism nor self-sacrifice inhibits the rapacity of defence consultants, whether formerly from the services, the department or the ministry. It’s a self-reproducing system but does not produce exemplary results of getting essential defence equipment more cheaply, on time, or on budget.

But it is doubtful that the public, or the Senate, which did most to show the dimensions of the scandal and the imposition on the public purse, will be happy about a report which considers PwC now rehabilitated. Balls, I say.

PwC became somewhat emblematic of the sins of the consultancy industry, but its primary sin was bad enough. A senior tax lawyer at PwC sat on a government board which discussed ways of closing down multinational tax dodging. He, and some players, decided they would monetise this inside knowledge by trolling for work among those intended to be affected, with well-informed advice on countering the strategies. It involved breach of confidence. Unethical behaviour. A complete lack of integrity. Inside knowledge. It illustrated the risk of thousands of consultants in big firms having conflicts of interest.

After a long and extensive investigation, spanning the best part of a decade, the facts seem broadly clear enough. It would be stretching it to say that the facts emerged because of the complete co-operation of PwC management, which is still withholding internal reports from the various investigatory bodies, in particular the information they shared with international partners. Once it was clear that it was in trouble, it fessed up and sacked, or let go, everyone involved in the project, pretending to give full disclosure of its naughtiness. Nonetheless, information had to be wrenched from the firm, and some is still withheld. Part of its self-imposed penance after the ban was to sell off, for a token sum, its government consultancy operations, but the parent body plans to re-enter that market in a few years.

The PwC way of controlling the information flow and withholding relevant information

PwC has had a nifty, but not very compelling way of appearing frank and contrite. It has commissioned scads of reports, sometimes reports about reports, which disarmingly attack the organisation’s culture, management style, and ethical systems, with announced programs for reform and becoming an ideal system. They commission reports on management shake-ups and new reporting structures, and make partners attend ethics courses. They commission retired chief justices and former Telstra chief executives to say, in effect, that based on what they have been told, they are satisfied things have changed. We can take the integrity of the reviewers for granted, but it is PwC which controls the information flow. Their anticipatory actions appear to make unnecessary truly independent investigations, but in fact make them more essential.

One can see from the Finance report appendix that the senators whose outrage got the story going are not impressed with Finance’s performance. They note that Finance has relied substantially [I would say almost entirely] on PwC assessments, such as the Webb Henderson review and from verbal statements by PwC representatives “in closed hearings”, Senators Richard Colbeck, Deborah O’Neill and Barbara Pocock say. They want the bans to continue.

Apart from being cut off from the right to tender to government, and the impact of measures it took itself with guilty partners, no public penance has been paid by PwC, nor have any criminal or contractual proceedings lawsuits occurred. This is the beauty of effectively being in charge of the investigation into yourself and taking the initiative with the contrition.

There is little doubt of the liability of the firm. Whether charged as a crime, or a breach of contract, or perhaps actionable civil misfeasance, the government has suffered damages, including lost revenue. It has had confidential information abused. PwC probably breached explicit undertakings.

It appears that the police investigation is focused on whether a crime has occurred and, if so, by whom. It recently told the Department of Finance that no-one it is investigating is any longer with the firm. It has been a long investigation with no results so far. But what the investigation seems to have failed to do is to consider the liability of the whole firm – the joint and several liability of each of the thousands upon thousands of PwC partners, most of whom do not advise on tax, or operate from Canberra or deal with government departments.

Why every PwC partner is liable, even if not involved in the scheme

It might seem stiff that a PwC partner in, say, Hobart should be civilly, and perhaps criminally, liable for the dishonesty and malfeasance of a partner far away. That’s something lobbyists have been pressing on ministers, and on government departments, and perhaps police.

Surely, one might think, only those with a guilty mind and criminal intentions should be punished?

But that is not the way that partnerships work. Each PwC partner gets considerable tax advantages because of the partnership structure of the firm. The community’s quid pro quo is that each of the partners is personally liable for penalties imposed on the firm. If the total penalty is not paid, every partner can be sued simultaneously for the whole sum until enough has been collected to satisfy the debt. The law is not concerned with how the business divvies up shares if the whole debt is paid.

Perhaps some partners didn’t know about it. Tough. They should have established a governance structure that allowed them to be more aware of the dodgy practices of some of the firm’s top earners. That’s what PwC claims to be doing now, as a part of showing that from now on, it will be lily-white. That’s up to it but cannot be considered public recompense.

If PwC faces a sexual harassment allegation, or sacks a partner without due process, or it offers wrong advice negligently, those affected might sue it. The firm has managing partners who sort these matters out, including paying off settlements or liabilities on behalf of all partners. Only in theory is there a whip-around. But what if the penalty for the misconduct of partners was astronomical?

When cases such as the PwC scandal in Australia break, managing partners have the experience of seeing how similar multinational partnerships here and overseas handle the crisis. It is clear that ‘fessing up and being proactive (even if being economical with the truth) is the best strategy. They consult lawyers and begin negotiations with regulatory agencies at once. They make admissions. They hope first to avoid having to pay too much in damages, and to keep the penalties in the civil sphere rather than, as in some cases, with managers in jail.

In some cases, jail for some is inevitable, but there is bargaining about damages to limit its extent. In the US, at least, they have Club Fed for top level white-collar criminals, not Alcatraz or Alligator Island.

Police should go beyond the individual malefactors and seek to recover the damage done

It is not true to say that police investigators should not, in principle, assess the liability of the firm, because it is alien to ordinary police functions. Police or WorkSafe inspectors do not hesitate to charge a company or a partnership if it is responsible, for, say, the lack of maintenance of a vehicle involved in an accident, or permitting illegal drugs to be sold on premises. Likewise civil penalties are not focused only on individual managers if, say, cardboard manufacturers form a cartel with their competitors to raise prices, or big supermarkets mislead customers about the savings on goods.

Based on overseas cases and that the unethical and illegal scheme created by PwC managers and partners involved ripping off the public purse, I would think that police should criminally charge the whole firm. Given that jail would be out, a typical negotiated fine or penalty should be of the order of $1 billion. One needs an enormous penalty sum such as that so that future managers and partners of similar operations will have to think twice about the risks involved trying to rip off the community.

My fear is that professional and legal lobbying, including effusive hints from the powers that be, will be directed in persuading police to look only for manifestly guilty men (they are all men). Police might even forbear, reasoning that if the powers that be aren’t interested in pursuing the matter, why should they? Justice?

It certainly seems clear that officials in Finance have no interest in the further pursuit of penalties. Last week it released its “examination of the ethical soundness of PwC Australia”. It is a tribute to the generous supply of reports commissioned and paid for by PwC that its officers resorted to not much more than a cut and paste job. Almost all the words in the report were as supplied by PwC. A few lame sentences have Finance “noting” some remarks, and occasionally “considering” that various mechanical actions, such as restructure and having ethics seminars “support” the cultural change that “was needed”.

As at the public service commission, it seems that in Finance people believe that cultures change by new hierarchies, lectures, seminars and occasional checks of understanding of probity issues and conflict of interest. It’s blah blah cover-your-bum stuff that matters only if there is action. There is no discussion of leadership, example, openness, transparency or day-to-day accountability.

It goes without saying that Finance does not appear to see itself as some sort of representative of the victim — the taxpayer — in this process. Finance officers played no role in bringing the scandal to light, nor showed any zeal even in having PWC thrown out of the consultancy pool. It was Treasury which did that. It “owns” the exclusion by way of Senator Katie Gallagher’s role as minister and control over the tender process.

Finance has shown no interest in getting the facts out, or even in getting PWC to hand over more documents. The tone of the report is that PwC has suffered enough, but there is no weighing of that “suffering” — trite as it is — compared with the damage to the revenue, trust and confidence in the consultancy system, and perhaps the shattering of the idea that Finance, and its supervision of the Financial Management Act is an important constitutional bulwark of honest government.

With servants like these, we need a massive increase in the size and proactive investigative power of the Audit Office. It might be good if it started by examining the performance of Finance itself.

Republished from The Canberra Times, August 2025

The views expressed in this article may or may not reflect those of Pearls and Irritations.