KPMG Australia, cornered by the dirty play of its partners

Sydney“I found out that this email existed three weeks ago.” “No, that is not a satisfactory answer. Ms. Hoggett, did you write this email? Your name is on it.” “Yes, and I accept full responsibility for it.” “You were aware of it when you first wrote it. It was a conscious decision to write it and send it. This is not post-truth. Now you can say: ‘Oh! Now I am aware of it.’ When you wrote that email, you were a conscious, living, breathing person earning a million and a half dollars a year.”

Despite repeatedly denying it, Eileen Hoggett, former CEO of KPMG Australia, admitted under questioning by Senator Deborah O’Neil at the parliamentary committee investigating corporations and financial services that in 2023 she had sent an email to a colleague giving them permission to review some documents she had in her locker: “You must do it cautiously without many people knowing about it.”

The documents belonged to the real estate company Lendlease and included, among other things, appraisals of rivals such as PwC and Ernst & Young. Hoggett and other KPMG executives took them from their client’s board of directors to help other partners win contracts, for example, the bank Westpac. In fact, in a meeting in October 2023, Westpac’s chief auditor, Kim Lawry, took photographs of the documents even though she told the committee she did not remember doing so, and later accepted that she had sent them.

The scandal began in March when Senator O’Neil publicized the complaints of a KPMG employee who, after alerting the company to the executives' behavior in 2024, saw how they silenced them. “They have managed the whistleblower’s complaints very poorly,” recalls Ian Gow, author of the bookThe Big Four. It seems they have constantly lied about what they have done and investigated.”

KPMG commissioned reports from two external firms that initially found no evidence of malpractice and found it abusive to investigate the executives' emails. Now, however, the company faces up to seven different investigations and has lost major clients such as the banks ANZ and Macquarie, and Lendlease, which has left KPMG after 57 years.

Pressured by the high volume of contracts with the Big Four, the Australian government froze new contracts with KPMG in July and has commissioned a report that was to be delivered at the end of September, but it will be delayed until the end of October. Even so, as revealed by Politician the government has awarded new contracts to the consultancy worth 38.5 million Australian dollars, about 24 million euros, since July. For its part, according to theAustralian Financial Review, KPMG has received a third-party external report prepared by Principia Advisory which indicates that the whistleblower's version is true, in a company where managers sought profits at any cost, even by incentivizing employees to report fewer hours than those worked.

Following the open wound, most of the management team has resigned, including the CEO, Andrew Yates, and the chairman, Martin Sheppard. Partners such as Paul Rodgers, Kim Lawry, and Julian McPherson have also left the company, and Hoggett was fired in July, after it came to light that she had sent the email. The new CEO of KPMG, John Sams, has requested a loan of 100 million Australian dollars (about 60 million euros) from the international parent company, while pushing to defer the multi-million dollar fees for the use of the brand for two years.

“Consulting work is putting great pressure on auditors to turn a blind eye, as consulting is much more lucrative than auditing,” concludes Andy Schmulow, an associate professor at the University of Wollongong and a specialist in corporate governance.

Other cases

The KPMG scandal adds to a long list of problems for the Big Four. In Australia alone, in recent years PwC was caught (again by Senator O'Neil!) selling confidential information from the Australian government to clients like Google to save them taxes. Deloitte had to withdraw a nearly half-million-dollar report made with AI, and this year Ernst & Young has fired two employees for having fraudulently accessed the prime minister's banking information.

Schmulow asserts that it is behavior that “you would expect from a casino,” not from a group of people who should have an immaculate reputation. “It is an industry AND a profession that has completely lost its way”.