FEATURE
After a legal battle spanning more than eight months, a university professor and top governance expert has obtained access to a secretive “complaint” made against him by disgraced consulting giant PwC.
It reveals PwC’s complaint to the University of Wollongong — about alleged “factually incorrect” statements in a social media post by Associate Professor Andrew Schmulow — doesn’t point to a single “factually incorrect” statement.
After two failed attempts under freedom of information laws — which included PwC opposing release of the information — Dr Schmulow has now obtained the complaint after launching action in the NSW Civil and Administrative Appeals Tribunal.
The document has been released to Schmulow after PwC refused to appear before the Tribunal to give evidence.
The explosive case goes to the heart of academic freedom and the corrosive, often secret, impact of big money on public discussion.
It also goes to the heart of the PwC tax leaks scandal.
“It also goes to the heart of the PwC tax leaks scandal”
In March PwC made a complaint to the University of Wollongong, over a LinkedIn post by Dr Schmulow, who is an employee of the University, as well as being among those to have provided evidence to the parliament over the tax leaks scandal.
Schmulow, one of the nation’s top integrity experts, is a vocal and robust critic of corporate wrongdoing and illegality, including by PwC. (Schmulow and this reporter co-produce corporate governance podcast Corporate Grime).
Despite the University contacting Schmulow almost immediately after receiving PwC’s complaint, encouraging him to alter or delete the LinkedIn post — and warning him his post may constitute “misconduct” — it refused to provide him with the complaint itself.
Further, University correspondence obtained by The Klaxon reveals that, behind-the-scenes, PwC actively opposed Schmulow’s attempts to access the complaint.
The complaint was made on behalf of PwC Australia CEO Kevin Burrowes and PwC Australia partner Paddy Carney — both central players in the tax leaks scandal.
“The complaint was made on behalf of Kevin Burrowes and Paddy Carney”
Schmulow, a professor in law, applied to the University for the complaint under freedom of information laws. He was rejected. He applied for a review of the decision and was rejected again.
Each time Schmulow was provided with a version of the document the University had redacted to the point of being meaningless.
“You will find that some of the information has been redacted to overcome the considerations against disclosure,” the University said in a nine-page response to Schmulow on May 7.
“You will find that some of the information has been redacted” — University of Wollongong
The document provided by the University on May 7. Source: UoW
The University’s fight against releasing the document spanned many months at a cost to taxpayers of many thousands of dollars.
The University claimed releasing PwC’s complaint was against the “public interest”.
After his two failed freedom of information requests Schmulow took action in the NSW Civil and Administrative Appeals Tribunal (NCAT).
After PwC refused to appear before the Tribunal alongside the University to give evidence, the University handed over the document.
It’s what it doesn’t contain that is most revealing.
“It’s what the ‘complaint’ doesn’t contain that is most revealing”
The complaint was lodged by PwC Australia external lawyer Simon Sherwood, Melbourne partner of global corporate law firm Allens.
PwC Australia CEO Kevin Burrowes: Australian Senate
In the March complaint, PwC calls on the University to “investigate urgently” and “take appropriate action” to “ensure that the University’s social media policies are upheld” and “that Mr Burrowes and Ms Carney are caused no further harm”.
Yet — remarkably — the document reveals that PwC fails to point to a single “factually incorrect” statement it alleges to have been made by Schmulow.
“Associate Professor Schmulow recently posted content on his LinkedIn profile which includes statements in relation to the PwC Australia CEO, Mr Kevin Burrowes, and PwC Australia partner, Ms Paddy Carney,” it states.
“The statements made in relation to Mr Burrowes and Ms Carney are factually incorrect and are likely to cause both harm and personal distress”.
That’s it.
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The unredacted complaint. (The Klaxon has removed Sherwood’s mobile number). Source: UoW
In fact, the entire complaint cites just one statement from Schmulow’s LinkedIn post — and it has nothing to with any “factually incorrect” statements.
That issue, which the complaint shows was identified by PwC as a secondary matter, relates to a statement in Schmulow’s post statement regarding Burrowes’ appearance.
“Further”, the PwC complaint states. “One of the statements made in relation to Mr Burrowes includes disparaging comments about Mr Burrowes’ appearance”.
That aspect of the complaint was rejected out-of-hand by Schmulow immediately.
The Associate Professor was directly quoting — as he had clearly cited in his LinkedIn post — an article published in the Australian Financial Review.
Professor Schmulow’s March 7 LinkedIn Post. Source: LinkedIn
The business day after receiving PwC’s complaint, the University contacted Schmulow.
“The complaint from PWC’s legal representatives raises concerns that in your post referred to below, you made statements regarding two PWC employees (outlined below) that are “factually incorrect”.
He was told the complaint was from “PwC’s lawyers” in “relation to a post on LinkedIn” which “references Mr Kevin Burrowes and Ms Paddy Carney” that are “factually incorrect”.
That also included making “disparaging comments about Mr Burrowes’ appearance”.
Schmulow responded:
“I cannot address the complaint in question unless and until I have seen it, had time to assess it and take advice,” he wrote to the University on March 13.
But on the point regarding Burrowes’ appearance — the AFR piece had described Burrowes as having a “resting bulldog face” — Schmulow was unequivocal.
“What I can and will do here and now is address one particular aspect of the complaint which has been outlined,” he wrote.
“This aspect of the complaint is vexatious and I reject it in its entirety”.
He said there was “no point in pursuing me” for “referring to the PwC CEO Kevin Burrowes as ‘resting bulldog face’.”
“This was not my description of him, and I made that clear in my post.
“As I stated, this was the description of him given by the Australian Financial Review, authored by Neil Chenoweth — one of Australia’s most respected journalists.
“If Allens or PwC has a problem with that description they should take it up with Nine Media and or the AFR,” he wrote.
“Thank you for giving me some small measure of insight into what has been complained of” — Dr Schmulow
Professor Andrew Schmulow. Source: ABC News/John Gunn
Schmulow continued:
“Thank you for giving me some small measure of insight into what has been complained of.
“I look forward to receiving the full complaint in due course,” Schmulow wrote.
“I look forward to receiving the full complaint in due course” — Dr Schmulow
The University dropped the matter after a meeting with Schmulow a short time later.
But it refused to provide him with the actual complaint.
Schmulow persisted — which has now exposed the remarkable situation.
The Associate Professor — who is internationally renowned, and has provided advice to the United Nations on corporate governance — has heard nothing from PwC and where it stands with its “complaint”.
The Klaxon put questions to Burrowes on May 8 about the complaint. He and PwC refused to respond.
Both he and PwC refused to respond when asked again last week.
Carney also refused to comment.
The Klaxon’s questions to PwC on May 8. We received no response.
Early last year it was revealed PwC took secret Australian Government tax policy data — gleaned while providing “advice” on new laws to prevent multinationals avoiding Australian tax — and spruiked it to multinationals seeking to avoid Australian tax.
A cache of internal PwC documents reveal the involvement of scores of PwC officials around the world, including in the US, UK, Singapore and Ireland.
Linklaters
PwC lodged its complaint with the University on March 8 — just weeks after explosive revelations threatening to undermine PwC’s extensive efforts to “contain” the global tax leaks scandal to Australia.
Schmulow was involved in revealing that PwC Australia Partner Paddy Carney was also a director of PwC’s global entity, PwC International.
The revelations showed Carney was entitled to a copy of the so-called “Linklaters” report, which PwC has been refusing to provide to authorities and the Australian parliament for over a year.
Conducted for PwC by US law firm Linklaters, the investigation looked at the tax leaks scandal outside Australia.
It was completed by at least September last year, it names at least six PwC officials across the globe, dubbed the “dirty six” by the Senate inquiry into consultancies.
Remarkably, PwC Australia CEO Burrowes — a long-time PwC UK boss who was parachuted into Australia after the tax scandal broke — has told parliament he can’t access the Linklaters report.
That’s because, he says, it was commissioned by PwC International.
He says PwC International won’t give him or PwC Australia the report, citing legal “professional privilege”.
However.
By law, directors of a company are entitled to all a company’s documents, a requirement essential to them fulfilling their role.
And Carney, who is Burrowes’ subordinate at PwC Australia, is a director of PwC International.
That is what Schmulow’s — characteristically robust — March 7 LinkedIn post was about.
Professor Schmulow speaks with the ABC about PwC’s secretive “complaints” on May 15. Source: ABC
The Mandarin on February 15 revealed that there was a PwC Australia partner was also a director of PwC International.
On February 22 The Klaxon revealed it was Paddy Carney.
Schmulow posted to LinkedIn about it on March 7 and PwC lodged its secretive complaint with the University on March 8.
“The complaint is a nothing burger. There’s no ‘there, there’,” says Schmulow.
“The only explanation is that they were trying to intimidate and frighten me” — Andrew Schmulow
“So why make it? And why go to such lengths to keep it secret?
“The only explanation is that they were trying to intimidate and frighten me,” he says.
Says Schmulow: “Paddy Carney would have had a particular axe to grind. It was my research with Tom Ravlic at the Mandarin that uncovered that she sits on the PwC International Ltd board, and that she would be entitled to see the Linklaters report”.
“Paddy Carney would have had a particular axe to grind” — Andrew Schmulow
The Klaxon’s February 22 report. Source: The Klaxon
Schmulow’s March 7 LinkedIn post said:
“Their CEO [Burrowes] has lied when he said he can’t get the report,” Schmulow wrote in early May.
“His employee, Paddy Carney has, or is entitled to, a copy, as a director of the holding company based in the UK (PwC International Ltd).
“The same Paddy Carney who was fingered as being complicit in the original tax secrets betrayal and stood down from her Australian leadership role”.
PwC’s secret complaint, it has now been revealed, didn’t point to any of these claims — or any others — as being “factually incorrect”.
Analysis suggests a possible reason why.
It is correct that as a director of PwC International Carney is entitled to the Linklaters report by law.
And it is also correct that Carney stood down from an Australian leadership role over the tax leaks scandal.
“The Chairs of the Governance Board [Carney] and its designated risk committee have decided to step down from their respective roles”, PwC announced in May last year in response to the scandal.
The moves were announced as part of “further actions” to “enhance the firm’s governance, accountability and culture”.
They were “in addition to the leadership actions already announced”, PwC said.
Carney declined to comment when contacted by The Klaxon. She directed us to PwC Australia’s public relations department, which refused to respond to questions.
Paddy Carney
PwC has been repeatedly accused, including by the Senate inquiry into consultancies, of using “legalese” and “plausible deniability” in attempts to “quarantine” the scandal to Australia.
That’s despite the cache of worldwide internal PwC emails.
It’s also despite its Linklaters report not only examining the affair internationally — but naming at least six PwC officials around the world.
Yet unequivocal and unrelenting demands for the report by Australian authorities and the Australian parliament have been unsuccessful.
In February Australian Taxation Office second commissioner Jeremy Hirschhorn said PwC was “deliberately hiding” the report and using the “difference between their local firm and the international firm” to do so.
The Senate inquiry interim report was titled: “PwC: The Cover-up Worsens the Crime”.
Senate inquiry chair, Liberal Senator Richard Colbeck told Burrowes that PwC was treating the inquiry — comprised of members of each of Australia’s major political parties — with “disrespect” and it was “deadly serious” about obtaining the Linklaters report.
“I don’t differentiate between you as PwC Australia and PwC as an organisation,” Colbeck said on February 9.
“If we don’t see the report, it ain’t going to be pretty”.
They haven’t seen the report.
“If we don’t see the report, it ain’t going to be pretty” — Liberal Senator Colbeck
Carney, who has been with PwC for 32 years, has been a director of PwC International at all times since April 28, 2017, UK company filings show.
Paddy Carney. Source: LinkedIn
On August 2 Carney fronted the Parliamentary Joint Committee on Corporations and Financial Services — comprised of members of both houses of parliament — and was quizzed over her access to the Linklaters report.
The extremely important event was largely overlooked by the nation’s media.
Carney’s responses — and the lack of them — raise extremely questions going to the heart of the entire tax leaks scandal.
“Carney’s responses raise extremely questions going to the heart of the entire tax leaks scandal”
When asked about the Linklaters report, Carney told the Parliamentary Joint Committee she did not have access to it because she had been “recused”.
Inquiry chair, ALP Senator Deborah O’Neill asked: “Was that because it was seen as a conflict of interest?”
Carney responded only: “I was recused”.
Carney provided no information as to why she was “recused”; what she had been “recused” from; when she had been “recused”; or whether she had “recused” herself or had been “recused” by PwC International’s other directors.
“I was recused” — Paddy Carney
Not only do the circumstances around the “recusal” remain completely opaque – the move appears highly unusual logically.
PwC International Limited, registered in the UK, represents the “PwC global network”. Its 18 directors are PwC officials from 12 countries, including the UK, US, Australia, Malaysia, Switzerland and Luxembourg.
The international tax leaks scandal originated in Australia.
As such, it would appear extremely important time for PwC International to closely involve its sole Australian director, Carney, as it sought to understand and deal with the major scandal.
“It would appear extremely important time for PwC International to closely involve its sole Australian director”
Carney’s “recusal” is also curious, because, in any event, PwC International was explicitly focused on the scandal outside Australia. That was the entire reason for its Linklaters report — which names at least six PwC officials from around the globe.
“In any event, PwC International was explicitly focused on the scandal outside Australia”
Schmulow agrees.
“Absolutely — I don’t believe that she would really have been so intent on recusing herself,” he said.
“And I think that if she did recuse herself, the only reason why she would have done so would be for plausible deniability”.
“I think that if (Carney) did recuse herself, the only reason why she would have done so would be for plausible deniability” — Dr Schmulow
Timeline:
Feb 15: Mandarin reveals a PwC Australia partner is also a PwC Global partner
Feb 22: The Klaxon reveals it’s Paddy Carney
March 7: Schmulow’s LinkedIn post
March 8: PwC lodges complaint with University
Apr 17: Scmulow applies for complaint under FoI
May 7: University rejects Schmulow’s FoI
May 17: Scmulow lodges an appeal of FoI decision
June 5: University rejects Schmulow’s FoI appeal
June 11: Scmulow lodges NCAT action
July 29: NCAT directions hearing
Aug 1: PwC say they won’t “join” or “be heard” in case
Nov 13: University releases the complaint to Schmulow
Black Ink
In its first refusal of Schmulow’s freedom of information request, the University said that providing the unredacted document could deter complainants from coming forward; “prejudice the effective exercise” of the “University’s functions”; and could “reasonably be expected to reveal an individual’s personal information”.
Yet, the only “personal information” the complaint contains is the names of Schmulow, Burrowes, Carney and PwC’s lawyer Sherwood.
University information compliance coordinator Cassandra Garcia, the “decision maker”, said there had been an “objection to the release of some of the information”.
The “objection” did not mean the University “cannot release the information” but “I must take it into account when making my decision”, she wrote.
Schmulow’s May 17 application for a review of the decision was again rejected, the University providing him with its 12-page decision on June 5.
University of Wollongong lawyer Rebecca Watts, the “decision maker” this time, also cited “personal information“ in rejecting releasing the document.
A “substantial” consideration was objection by PwC.
“A “substantial” consideration was objection by PwC”
“UOW have also consulted with individuals to whom the personal information relates…and have received an objection to the release of that personal information,” Watts writes.
“As such, I consider this to be a substantial consideration against disclosure of that personal information.” (Her emphasis).
Allens partner Simon Sherwood. Source: Allens
There were fewer redactions but the document still remained effectively meaningless.
Crucially, the censoring hid the fact that there was no substance to PwC’s complaint — given it had failed to identify any actual “factual accuracies” made by Schmulow.
This fact was known only to PwC and the University.
“This fact was known only to PwC and the University”
The document provided by the University on June 5. Source: UoW
On June 11 Schmulow appealed the decision to the NSW Civil and Administrative Tribunal (NCAT).
An initial hearing was held on July 29 by NCAT senior member Deborah Ziegler.
On August 1 the University’s lawyers, Sparke Helmore Lawyers of Sydney’s Martin Place, told the Ziegler that PwC Australia did “not wish to be heard or join the proceedings”.
“Had Burrowes or Carney joined the proceedings, they would have been open to discovery”
Had Burrowes or Carney joined the proceedings, they would have been open to “discovery”, meaning Schmulow and his lawyers could subpoena them for documents.
“If they had joined the proceedings we could subpoena (Carney and Burrowes) and do discovery up and down,” Schmulow said.
“That would have been a catastrophe for PwC”.
“That would have been a catastrophe for PwC” — Dr Schmulow
On September 17 the University said it had decided to release the complaint. After “third party review rights” had expired, it released the document to Schmulow on November 13.
In a statement, the University of Wollongong said freedom of information laws required it to “follow certain processes” and that it “considers a range of factors including privacy and confidentiality”.
Schmulow said PwC had used University confidentiality protocols, “which are designed to protect the weak against the powerful”, in its bid to silence him.
He says the costs to the University, which was “cutting staff due to funding cuts”, was likely “in the tens of thousands of dollars”.
“PwC tried to cook up a complaint, then tried to slink away from it — and threw the University under the bus,” Schmulow said.
“I think it would be gentlemanly for them to reimburse the University for the University’s costs”.
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