1 00:00:15,980 --> 00:00:17,620 NEWSREADER: PwC is under fire 2 00:00:17,620 --> 00:00:17,860 for leaking confidential tax secrets NEWSREADER: PwC is under fire from the government to companies... 3 00:00:17,860 --> 00:00:20,740 for leaking confidential tax secrets from the government to companies... 4 00:00:20,740 --> 00:00:24,780 Former PwC chief executive and a senior colleague quit their roles... 5 00:00:24,780 --> 00:00:29,060 There's been an egregious breach of trust with others in the industry... 6 00:00:30,740 --> 00:00:33,140 ANGUS GRIGG: It's one of the biggest scandals 7 00:00:33,140 --> 00:00:33,380 ANGUS GRIGG: to ever hit corporate Australia. 8 00:00:33,380 --> 00:00:36,460 to ever hit corporate Australia. 9 00:00:36,460 --> 00:00:36,700 I think the country to ever hit corporate Australia. 10 00:00:36,700 --> 00:00:40,780 I think the country is absolutely filthy with PwC. 11 00:00:40,780 --> 00:00:41,020 I think the country The nation's largest consulting firm 12 00:00:41,020 --> 00:00:43,460 The nation's largest consulting firm 13 00:00:43,460 --> 00:00:47,420 illegally used confidential government information 14 00:00:47,420 --> 00:00:50,060 to help its clients avoid tax. 15 00:00:50,060 --> 00:00:51,620 DEBORAH O'NEILL: And, at this point of time, 16 00:00:51,620 --> 00:00:55,460 who in their right mind would trust the word of PwC? 17 00:00:55,460 --> 00:01:00,340 It's just so shocking to me that anyone would behave like this. 18 00:01:02,380 --> 00:01:06,660 But this scandal is much bigger than just one firm. 19 00:01:07,580 --> 00:01:09,940 CHRIS WALLACE: It kind of happened in plain sight. 20 00:01:09,940 --> 00:01:10,180 CHRIS WALLACE: To a large extent 21 00:01:10,180 --> 00:01:11,420 To a large extent 22 00:01:11,420 --> 00:01:11,660 Australia's public service To a large extent 23 00:01:11,660 --> 00:01:15,580 Australia's public service was privatised before our very eyes. 24 00:01:15,580 --> 00:01:15,860 I mean, everyone has now kind of gone, Australia's public service was privatised before our very eyes. 25 00:01:15,860 --> 00:01:17,860 I mean, everyone has now kind of gone, 26 00:01:17,860 --> 00:01:18,100 I mean, everyone has now kind of gone, "Oh, my God, what just happened?" 27 00:01:18,100 --> 00:01:19,900 "Oh, my God, what just happened?" 28 00:01:21,140 --> 00:01:23,140 On this episode of Four Corners 29 00:01:23,140 --> 00:01:25,220 we go beyond PwC, 30 00:01:25,220 --> 00:01:25,460 talking to whistleblowers we go beyond PwC, 31 00:01:25,460 --> 00:01:28,540 talking to whistleblowers about a toxic industry 32 00:01:28,540 --> 00:01:32,460 that's ripping off taxpayers and trampling our democracy. 33 00:01:34,220 --> 00:01:36,660 WHISTLEBLOWER: They're absolutely prepared to break the rules, 34 00:01:36,660 --> 00:01:36,900 WHISTLEBLOWER: They're absolutely to be dishonest. 35 00:01:36,900 --> 00:01:38,220 to be dishonest. 36 00:01:38,220 --> 00:01:40,740 And, ultimately, it's taxpayers who are paying for this. 37 00:01:40,740 --> 00:01:44,140 What I don't hear is anybody calling it for what it is - 38 00:01:44,140 --> 00:01:44,380 What I don't hear is anybody an abuse of privilege and power. 39 00:01:44,380 --> 00:01:46,940 an abuse of privilege and power. 40 00:02:12,980 --> 00:02:15,820 They are the corporate titans 41 00:02:15,820 --> 00:02:20,340 with salaries and glimmering towers to match. 42 00:02:27,540 --> 00:02:29,220 Once dowdy accountants, 43 00:02:29,220 --> 00:02:33,500 the so-called 'Big Four' are today household names... 44 00:02:34,740 --> 00:02:39,740 ..PwC, KPMG, EY and Deloitte. 45 00:02:41,900 --> 00:02:43,180 In recent years 46 00:02:43,180 --> 00:02:43,420 they've embraced the far more In recent years 47 00:02:43,420 --> 00:02:47,220 they've embraced the far more lucrative and secretive world 48 00:02:47,220 --> 00:02:47,460 they've embraced the far more of management consulting. 49 00:02:47,460 --> 00:02:49,180 of management consulting. 50 00:02:50,780 --> 00:02:52,820 DEBORAH O'NEILL: There's no transparency. 51 00:02:52,820 --> 00:02:53,100 There is no register of who they're working for anywhere. DEBORAH O'NEILL: There's no transparency. 52 00:02:53,100 --> 00:02:55,940 There is no register of who they're working for anywhere. 53 00:02:55,940 --> 00:02:59,060 There is no public access to that information. 54 00:02:59,060 --> 00:03:01,620 These are closed worlds 55 00:03:01,620 --> 00:03:01,860 These are closed worlds which have been operating in their own little empires. 56 00:03:01,860 --> 00:03:05,700 which have been operating in their own little empires. 57 00:03:07,620 --> 00:03:10,580 Their reach extends from the boardroom 58 00:03:10,580 --> 00:03:10,820 Their reach to the very heart of government. 59 00:03:10,820 --> 00:03:13,060 to the very heart of government. 60 00:03:14,340 --> 00:03:19,700 Australia's spending on consultants is among the highest in the world. 61 00:03:22,220 --> 00:03:25,500 Government is the number-one customer in the world. 62 00:03:25,500 --> 00:03:29,260 The consultants are pretty much feasting on public service, 63 00:03:29,260 --> 00:03:29,500 The consultants are pretty much service delivery, policy advice. 64 00:03:29,500 --> 00:03:31,780 service delivery, policy advice. 65 00:03:31,780 --> 00:03:31,980 service delivery, policy advice. It's absolutely pervasive. 66 00:03:31,980 --> 00:03:33,940 It's absolutely pervasive. 67 00:03:33,940 --> 00:03:35,980 Consultants are everywhere. 68 00:03:37,820 --> 00:03:40,700 While these firms might have slick offices 69 00:03:40,700 --> 00:03:43,060 with sweeping views of Sydney Harbour, 70 00:03:43,060 --> 00:03:43,300 with sweeping views their biggest client is in Canberra. 71 00:03:43,300 --> 00:03:45,820 their biggest client is in Canberra. 72 00:03:45,820 --> 00:03:47,740 Over the last decade 73 00:03:47,740 --> 00:03:47,980 Australian governments Over the last decade 74 00:03:47,980 --> 00:03:50,740 Australian governments have paid the Big Four firms 75 00:03:50,740 --> 00:03:50,980 Australian governments a staggering $10 billion. 76 00:03:50,980 --> 00:03:53,660 a staggering $10 billion. 77 00:03:58,780 --> 00:04:01,900 We find big consultant partners 78 00:04:01,900 --> 00:04:05,660 peppered across Australian government departments. 79 00:04:05,660 --> 00:04:07,740 They're in the senior leadership teams, 80 00:04:07,740 --> 00:04:08,020 They're in the senior leadership teams, in agriculture, in the Federal Police, in finance. 81 00:04:08,020 --> 00:04:11,460 in agriculture, in the Federal Police, in finance. 82 00:04:11,460 --> 00:04:11,700 in agriculture, They're auditors internally 83 00:04:11,700 --> 00:04:13,220 They're auditors internally 84 00:04:13,220 --> 00:04:15,700 for a wide range of government departments. 85 00:04:15,700 --> 00:04:17,980 So, they're everywhere and they're really big. 86 00:04:19,340 --> 00:04:22,940 They're now very much part of the inner circle. 87 00:04:22,940 --> 00:04:26,540 But having them so close presents dangers. 88 00:04:26,540 --> 00:04:31,140 The PwC scandal has shown that confidential government information 89 00:04:31,140 --> 00:04:35,260 is not always safe in private-sector hands. 90 00:04:38,300 --> 00:04:42,820 We've certainly got a mounting body of evidence, which alarms me, 91 00:04:42,820 --> 00:04:48,700 about the reach of the large consultants into the public sector 92 00:04:48,700 --> 00:04:54,380 and the serious consequences for us as citizens, for our democracy, 93 00:04:54,380 --> 00:04:57,940 for the value that we get from very big spends 94 00:04:57,940 --> 00:05:01,220 and for the long-term capability of our public sector. 95 00:05:02,620 --> 00:05:04,100 The roof of Parliament 96 00:05:04,100 --> 00:05:08,060 lends a new perspective to this corporate insurgency. 97 00:05:12,780 --> 00:05:15,780 So, in Canberra, proximity is actually everything. 98 00:05:15,780 --> 00:05:16,020 So, right down below me here, proximity is actually everything. 99 00:05:16,020 --> 00:05:17,580 So, right down below me here, 100 00:05:17,580 --> 00:05:19,020 it's the PwC building, 101 00:05:19,020 --> 00:05:20,700 which is closer to Parliament House 102 00:05:20,700 --> 00:05:22,660 than most government departments. 103 00:05:22,660 --> 00:05:22,860 than most government departments. Back over behind me, it's KPMG 104 00:05:22,860 --> 00:05:25,700 Back over behind me, it's KPMG 105 00:05:25,700 --> 00:05:29,220 alongside its biggest client, the Department of Defence. 106 00:05:29,220 --> 00:05:31,740 In the thick of it here - Ernst & Young. 107 00:05:31,740 --> 00:05:34,100 And then back over this side - Deloitte. 108 00:05:34,100 --> 00:05:34,340 And then back over this side - When it's laid out like this 109 00:05:34,340 --> 00:05:36,580 When it's laid out like this 110 00:05:36,580 --> 00:05:38,980 it really is quite striking. 111 00:05:40,780 --> 00:05:43,260 The explosion in the number of consultants 112 00:05:43,260 --> 00:05:46,540 followed a cull of 15,000 public servants 113 00:05:46,540 --> 00:05:50,220 after the Abbott government came to office in 2013. 114 00:05:50,220 --> 00:05:53,900 A cap on recruitment was also imposed. 115 00:05:53,900 --> 00:05:54,140 A cap on recruitment The intention had been to cut costs, 116 00:05:54,140 --> 00:05:57,580 The intention had been to cut costs, 117 00:05:57,580 --> 00:06:00,620 but consultants filled the vacuum. 118 00:06:00,620 --> 00:06:03,980 Federal government spending on the Big Four 119 00:06:03,980 --> 00:06:08,300 is now six times higher than it was 10 years ago. 120 00:06:10,340 --> 00:06:12,900 If you imagine 30 or 40 years 121 00:06:12,900 --> 00:06:16,900 of resource-stripping from the public service, 122 00:06:16,900 --> 00:06:19,540 flesh was taken off, got down to the bones. 123 00:06:19,540 --> 00:06:22,180 The bones are pretty osteoporotic now 124 00:06:22,180 --> 00:06:25,420 as a result of the inroads that consultancy firms have made. 125 00:06:25,420 --> 00:06:28,500 It's led probably to much higher levels of spending 126 00:06:28,500 --> 00:06:32,020 than in reality could be achieved under the traditional system. 127 00:06:32,020 --> 00:06:35,500 It was one of those boiling-frog problems, you know... 128 00:06:35,500 --> 00:06:39,460 Professor Chris Wallace is a historian and former public servant 129 00:06:39,460 --> 00:06:44,140 who has watched consultants gradually infiltrate the federal government. 130 00:06:44,140 --> 00:06:47,140 And, of course, Canberra's a really small place. 131 00:06:47,140 --> 00:06:51,900 Ex-public-service friends, ex-staffers, ex-politicians 132 00:06:51,900 --> 00:06:54,100 going to consulting firms, coming back. 133 00:06:54,100 --> 00:06:56,500 It's just completely routine in Canberra now 134 00:06:56,500 --> 00:06:58,180 and it's pretty much everywhere. 135 00:06:58,180 --> 00:07:03,300 It's a revolving door between consultancies and government 136 00:07:03,300 --> 00:07:03,540 It's a revolving door that keeps all sides employed. 137 00:07:03,540 --> 00:07:06,740 that keeps all sides employed. 138 00:07:06,740 --> 00:07:06,980 Many politicians, public servants, that keeps all sides employed. 139 00:07:06,980 --> 00:07:10,820 Many politicians, public servants, ex-staffers 140 00:07:10,820 --> 00:07:11,060 Many politicians, public servants, can be warehoused in consultancies, 141 00:07:11,060 --> 00:07:12,700 can be warehoused in consultancies, 142 00:07:12,700 --> 00:07:16,100 and when government changes or there's regime change of some kind 143 00:07:16,100 --> 00:07:17,460 in a particular part of government, 144 00:07:17,460 --> 00:07:19,500 they can, of course, come back from the consultancy, 145 00:07:19,500 --> 00:07:21,940 go into the public-service department 146 00:07:21,940 --> 00:07:23,740 and again be a friendly port of call 147 00:07:23,740 --> 00:07:26,260 for consultants they previously worked with. 148 00:07:31,300 --> 00:07:35,300 This revolving door continues to spin. 149 00:07:35,300 --> 00:07:40,060 Despite Labor pledging to curb the influence of consultants, 150 00:07:40,060 --> 00:07:44,380 the Albanese government has appointed three department heads 151 00:07:44,380 --> 00:07:46,620 straight from the big firms. 152 00:07:46,620 --> 00:07:48,980 Blair Comley running Health - 153 00:07:48,980 --> 00:07:53,220 he's just spent the past five years at Ernst & Young. 154 00:07:53,220 --> 00:07:56,500 Jim Betts, also briefly an EY partner, 155 00:07:56,500 --> 00:07:56,740 Jim Betts, now heading Infrastructure. 156 00:07:56,740 --> 00:07:58,780 now heading Infrastructure. 157 00:07:58,780 --> 00:08:00,380 And Natalie James - 158 00:08:00,380 --> 00:08:00,620 in charge And Natalie James - 159 00:08:00,620 --> 00:08:02,460 in charge of the Department of Employment 160 00:08:02,460 --> 00:08:02,700 in charge after four years with Deloitte. 161 00:08:02,700 --> 00:08:05,140 after four years with Deloitte. 162 00:08:11,100 --> 00:08:13,740 (WAVES CRASH) 163 00:08:13,740 --> 00:08:15,940 Labor Senator Deborah O'Neill 164 00:08:15,940 --> 00:08:20,340 played a key role in starting the parliamentary investigation 165 00:08:20,340 --> 00:08:22,180 into the big consulting firms. 166 00:08:23,140 --> 00:08:26,100 She's based on the New South Wales Central Coast. 167 00:08:27,260 --> 00:08:29,020 You know, once upon a time 168 00:08:29,020 --> 00:08:31,980 people were in awe of these companies, 169 00:08:31,980 --> 00:08:33,220 they had them on a pedestal, 170 00:08:33,220 --> 00:08:37,420 you know, PwC, KPMG, EY, Deloitte. 171 00:08:37,420 --> 00:08:41,900 You know, graduates would fight to get their foot in the door. 172 00:08:41,900 --> 00:08:46,180 The reality is these very secretive partnerships 173 00:08:46,180 --> 00:08:46,420 The reality have been shown to be places 174 00:08:46,420 --> 00:08:48,180 have been shown to be places 175 00:08:48,180 --> 00:08:51,220 where there needs to be a lot more transparency, a lot more sunlight. 176 00:08:54,100 --> 00:08:57,460 There have been failures from the other of the Big Four. 177 00:08:57,460 --> 00:08:57,700 There have been failures We know that they share staff. 178 00:08:57,700 --> 00:08:59,020 We know that they share staff. 179 00:08:59,020 --> 00:08:59,260 We know that information We know that they share staff. 180 00:08:59,260 --> 00:09:01,500 We know that information moves around between them. 181 00:09:01,500 --> 00:09:06,100 We know that information moves not only between players in the sector 182 00:09:06,100 --> 00:09:09,740 but between government and into the sector. 183 00:09:09,740 --> 00:09:11,980 And I don't think PwC is the only company 184 00:09:11,980 --> 00:09:15,540 to have figured out that it might be financially advantaged. 185 00:09:23,820 --> 00:09:29,540 It's KPMG that dominates the big government contracts. 186 00:09:33,860 --> 00:09:40,140 KPMG's largest public-sector client is the Department of Defence, 187 00:09:40,140 --> 00:09:44,620 accounting for more than two-thirds of its government business. 188 00:09:44,620 --> 00:09:49,780 That's $1.3 billion of taxpayers' money 189 00:09:49,780 --> 00:09:53,940 that's come its way over the last five years. 190 00:10:06,740 --> 00:10:08,380 I'm off to meet a whistleblower 191 00:10:08,380 --> 00:10:12,180 who was a senior official at the Department of Defence 192 00:10:12,180 --> 00:10:13,940 and claims to have been forced out 193 00:10:13,940 --> 00:10:15,980 after raising serious allegations 194 00:10:15,980 --> 00:10:19,100 about the infiltration of consultants. 195 00:10:26,980 --> 00:10:29,620 The whistleblower won't be identified 196 00:10:29,620 --> 00:10:32,660 fearing reprisals from the department. 197 00:10:32,660 --> 00:10:38,420 Instead, they've prepared a statutory declaration for Four Corners. 198 00:10:40,340 --> 00:10:42,460 Thanks very much. OK, good luck. 199 00:10:42,460 --> 00:10:43,660 Cheers. 200 00:10:51,500 --> 00:10:54,900 I've had a quick look at this, and it's pretty interesting stuff. 201 00:10:54,900 --> 00:10:56,220 Top line here? 202 00:10:56,220 --> 00:10:58,700 Serious allegations against KPMG 203 00:10:58,700 --> 00:11:01,860 and how they milked the Department of Defence. 204 00:11:03,900 --> 00:11:05,500 In just seven months 205 00:11:05,500 --> 00:11:10,740 our whistleblower witnessed KPMG seeking to over-charge Defence 206 00:11:10,740 --> 00:11:13,460 by at least $1 million. 207 00:11:13,460 --> 00:11:17,060 And that was just on a single proposal. 208 00:11:17,060 --> 00:11:22,460 The whistleblower claims KPMG charged for work never completed 209 00:11:22,460 --> 00:11:26,460 and billed for a consultant who wasn't even on the project. 210 00:11:26,460 --> 00:11:26,700 and billed for a consultant The stat dec went on to say: 211 00:11:26,700 --> 00:11:29,740 The stat dec went on to say: 212 00:11:51,220 --> 00:11:57,540 The whistleblower claimed connections helped KMPG win a big contract. 213 00:12:14,780 --> 00:12:19,060 Defence dismissed much of the complaint in 2016 214 00:12:19,060 --> 00:12:23,540 despite the whistleblower providing financial reports and documents. 215 00:12:23,540 --> 00:12:23,780 A spokesperson told us that: financial reports and documents. 216 00:12:23,780 --> 00:12:26,300 A spokesperson told us that: 217 00:12:29,700 --> 00:12:32,740 They added: 218 00:12:39,700 --> 00:12:43,580 What I don't hear is anybody calling it for what it is - 219 00:12:43,580 --> 00:12:46,420 an abuse of privilege and power. 220 00:12:46,420 --> 00:12:50,940 Senator O'Neill says consultants are exploiting weaknesses 221 00:12:50,940 --> 00:12:52,820 in the public service. 222 00:12:52,820 --> 00:12:53,060 These companies, not just in Australia, but around the world, in the public service. 223 00:12:53,060 --> 00:12:56,660 These companies, not just in Australia, but around the world, 224 00:12:56,660 --> 00:12:56,900 These companies, not just in operate a land-and-expand model, 225 00:12:56,900 --> 00:13:00,420 operate a land-and-expand model, 226 00:13:00,420 --> 00:13:00,660 operate a land-and-expand model, where they get in, sometimes under-price the first piece of work, 227 00:13:00,660 --> 00:13:04,820 where they get in, sometimes under-price the first piece of work, 228 00:13:04,820 --> 00:13:06,060 and once they get in 229 00:13:06,060 --> 00:13:09,500 then they expand their reach through familiarity. 230 00:13:11,380 --> 00:13:14,860 KPMG has had this 'land-and-expand' model 231 00:13:14,860 --> 00:13:15,100 KPMG has had on full display with Defence. 232 00:13:15,100 --> 00:13:18,180 on full display with Defence. 233 00:13:18,180 --> 00:13:20,340 Over the last decade it's won work 234 00:13:20,340 --> 00:13:20,580 that was initially valued Over the last decade it's won work 235 00:13:20,580 --> 00:13:24,860 that was initially valued at $1.1 billion 236 00:13:24,860 --> 00:13:29,140 but later increased to $1.8 billion. 237 00:13:29,140 --> 00:13:32,900 That's a $700 million increase. 238 00:13:34,700 --> 00:13:40,060 The whole business model of these companies is billable hours. 239 00:13:40,060 --> 00:13:40,300 The whole business model of The longer they stay there 240 00:13:40,300 --> 00:13:42,140 The longer they stay there 241 00:13:42,140 --> 00:13:42,380 the less efficiently The longer they stay there 242 00:13:42,380 --> 00:13:44,820 the less efficiently they do the job. 243 00:13:44,820 --> 00:13:48,540 It's about getting very, very close to government, 244 00:13:48,540 --> 00:13:51,540 finding out what's going on using the contacts, 245 00:13:51,540 --> 00:13:53,260 and then growing the business. 246 00:13:53,260 --> 00:13:55,660 (BIRDS SQUAWK) 247 00:14:01,660 --> 00:14:03,420 (BIRDS SQUALL) 248 00:14:09,300 --> 00:14:11,620 On a steely winter's morning 249 00:14:11,620 --> 00:14:11,860 in a fishing village On a steely winter's morning 250 00:14:11,860 --> 00:14:13,860 in a fishing village outside Melbourne 251 00:14:13,860 --> 00:14:14,100 in a fishing village we meet whistleblower number two. 252 00:14:14,100 --> 00:14:17,180 we meet whistleblower number two. 253 00:14:19,620 --> 00:14:24,500 He'd spent two years working for KPMG on Defence projects 254 00:14:24,500 --> 00:14:28,820 and backs up what our earlier whistleblower told us. 255 00:14:28,820 --> 00:14:32,100 WHISTLEBLOWER: A lot of rule-breaking had been normalised. 256 00:14:33,460 --> 00:14:38,500 He asked not to be identified as he still works in the industry. 257 00:14:42,140 --> 00:14:43,580 I absolutely had concerns 258 00:14:43,580 --> 00:14:48,100 about the quality of work that KPMG was doing for Defence. 259 00:14:48,100 --> 00:14:51,180 I would say that KPMG was doing work for Defence 260 00:14:51,180 --> 00:14:53,580 that ultimately wasn't needed. 261 00:14:53,580 --> 00:14:56,140 KPMG was simply happy, in my view, 262 00:14:56,140 --> 00:14:59,420 to propose these new works, get them signed off 263 00:14:59,420 --> 00:15:01,900 and reap the financial benefits. 264 00:15:02,860 --> 00:15:05,540 He claims those financial benefits 265 00:15:05,540 --> 00:15:08,420 extended to telling KPMG staff 266 00:15:08,420 --> 00:15:13,700 to bill Defence for work that was never performed. 267 00:15:13,700 --> 00:15:17,860 I was instructed to record my time spent on internal projects 268 00:15:17,860 --> 00:15:19,500 against Defence codes. 269 00:15:19,500 --> 00:15:21,340 I think KPMG, in my experience, 270 00:15:21,340 --> 00:15:25,020 are absolutely prepared to break the rules, to be dishonest, 271 00:15:25,020 --> 00:15:28,620 to work in ways that would be unacceptable in normal business 272 00:15:28,620 --> 00:15:31,540 to win more business from the Commonwealth. 273 00:15:31,540 --> 00:15:34,220 And, ultimately, it's taxpayers who are paying for this. 274 00:15:35,700 --> 00:15:39,660 He told us KPMG walked a fine line 275 00:15:39,660 --> 00:15:42,460 when it came to cooling-off periods, 276 00:15:42,460 --> 00:15:44,500 designed to prevent firms profiting 277 00:15:44,500 --> 00:15:47,900 from confidential government information. 278 00:15:47,900 --> 00:15:54,060 In 2019 KPMG hired Peter Corcoran, a senior Defence official, 279 00:15:54,060 --> 00:15:58,340 to run its government cyber-security business in Canberra. 280 00:15:58,340 --> 00:16:02,380 He was banned from working with Defence for 12 months. 281 00:16:02,380 --> 00:16:06,180 We obtained an email titled "Chocks away" 282 00:16:06,180 --> 00:16:11,500 congratulating Corcoran for creating a "storm front of work." 283 00:16:24,540 --> 00:16:29,260 Just two paragraphs later he added: 284 00:16:37,780 --> 00:16:42,860 He says it was a toxic environment for staff at KPMG. 285 00:16:42,860 --> 00:16:46,740 WHISTLEBLOWER: It was pretty vicious and competitive. 286 00:16:46,740 --> 00:16:49,140 There was a lot of intimidation, harassment and bullying. 287 00:16:49,140 --> 00:16:53,300 I was told in one week of three individual cases of harassment. 288 00:16:53,300 --> 00:16:57,740 I tried to raise that within KPMG, and was pretty much rebuffed. 289 00:16:57,740 --> 00:16:59,140 What sort of harassment? 290 00:16:59,140 --> 00:17:03,140 It ranged from sexual harassment to workplace bullying 291 00:17:03,140 --> 00:17:08,860 to making people feel pretty unvalued. 292 00:17:09,940 --> 00:17:13,420 Despite being warned that his career would suffer, 293 00:17:13,420 --> 00:17:17,620 he contacted the KPMG whistleblowers' hotline. 294 00:17:17,620 --> 00:17:19,860 Did you get any more work at KPMG? 295 00:17:19,860 --> 00:17:23,340 No, I didn't. And my contract wasn't renewed. 296 00:17:23,340 --> 00:17:23,580 No, I didn't. What's been the cost to you? 297 00:17:23,580 --> 00:17:26,060 What's been the cost to you? 298 00:17:26,060 --> 00:17:27,860 I lost close to 20 kilos in weight. 299 00:17:27,860 --> 00:17:29,900 I lost enamel from my teeth. 300 00:17:29,900 --> 00:17:32,500 My legal costs are still increasing, 301 00:17:32,500 --> 00:17:32,740 and I think in the end I'm likely My legal costs are still increasing, 302 00:17:32,740 --> 00:17:36,580 and I think in the end I'm likely to have incurred more cost 303 00:17:36,580 --> 00:17:40,180 than I ever earned from my work at KPMG. 304 00:17:42,340 --> 00:17:46,660 KPMG's chief executive declined to be interviewed. 305 00:17:46,660 --> 00:17:46,900 In a statement the firm said KPMG's chief executive declined to be interviewed. 306 00:17:46,900 --> 00:17:48,660 In a statement the firm said 307 00:17:48,660 --> 00:17:50,100 the whistleblower's complaints 308 00:17:50,100 --> 00:17:50,315 the whistleblower's complaints not being renewed. 309 00:17:50,315 --> 00:17:51,580 had nothing to do with his contract not being renewed. 310 00:17:51,580 --> 00:17:56,580 KPMG said it had investigated claims made by a former contractor in 2019 311 00:17:56,580 --> 00:18:00,740 and there was no evidence to support over-billing of Defence. 312 00:18:00,740 --> 00:18:04,740 As to Peter Corcoran's continued contact with his old colleagues, 313 00:18:04,740 --> 00:18:04,980 KPMG said: contact with his old colleagues, 314 00:18:04,980 --> 00:18:06,900 KPMG said: 315 00:18:18,860 --> 00:18:24,100 Over the last decade KPMG's Defence business has soared. 316 00:18:24,100 --> 00:18:30,340 Its annual Defence billings peaked at almost $450 million last year - 317 00:18:30,340 --> 00:18:30,580 Its annual Defence billings peaked a six-fold increase. 318 00:18:30,580 --> 00:18:32,380 a six-fold increase. 319 00:18:32,380 --> 00:18:32,620 This has coincided with KPMG's a six-fold increase. 320 00:18:32,620 --> 00:18:38,700 This has coincided with KPMG's targeting of former Defence staff. 321 00:18:39,660 --> 00:18:41,580 Four Corners' research shows 322 00:18:41,580 --> 00:18:43,460 that over the last five years 323 00:18:43,460 --> 00:18:48,980 almost 100 former Defence staff have moved to KPMG. 324 00:18:52,380 --> 00:18:55,100 You know if you've got a very senior public servant 325 00:18:55,100 --> 00:19:00,580 with that immense, deep departmental knowledge and extraordinary Rolodex, 326 00:19:00,580 --> 00:19:00,820 with that immense, deep departmental knowledge and extraordinary Rolodex, you know, they know everybody, 327 00:19:00,820 --> 00:19:02,340 you know, they know everybody, 328 00:19:02,340 --> 00:19:03,620 they're a familiar face 329 00:19:03,620 --> 00:19:06,260 that the consultant can then roll into the department 330 00:19:06,260 --> 00:19:06,500 that the consultant when pitching for work. 331 00:19:06,500 --> 00:19:07,940 when pitching for work. 332 00:19:07,940 --> 00:19:10,140 It just raises the degree of comfort 333 00:19:10,140 --> 00:19:13,420 that government departments have when hiring consultants. 334 00:19:13,420 --> 00:19:15,940 And, of course, it's a two-way street. 335 00:19:22,300 --> 00:19:25,340 (RADIO NEWS THEME MUSIC PLAYS) 336 00:19:25,340 --> 00:19:28,100 RADIO PRESENTER: Good morning. Welcome to AM. I'm Sabra Lane... 337 00:19:28,100 --> 00:19:30,100 I think if go right and then left. 338 00:19:30,100 --> 00:19:32,820 I'm on my way to see one of the senators 339 00:19:32,820 --> 00:19:36,540 who's made it her business to follow the money. 340 00:19:36,540 --> 00:19:39,900 Greens Senator Barbara Pocock helped kick off the Senate Inquiry... 341 00:19:39,900 --> 00:19:44,180 And the Defence Department is squarely in her sights. 342 00:19:50,820 --> 00:19:53,100 BARBARA POCOCK: I just ran into Senator O'Neill. 343 00:19:53,100 --> 00:19:57,300 So, Labor have moved for another new piece of inquiry. 344 00:19:58,260 --> 00:20:01,380 Consultants breed secrecy, she says, 345 00:20:01,380 --> 00:20:05,060 enabling governments to avoid accountability. 346 00:20:05,060 --> 00:20:06,980 If you can sit here. OK, good. You're there. 347 00:20:06,980 --> 00:20:07,780 Yeah. Thank you. 348 00:20:11,300 --> 00:20:14,460 For every dollar that you spend on a consultant, 349 00:20:14,460 --> 00:20:16,020 you remove the possibility 350 00:20:16,020 --> 00:20:18,500 that a senator can ask a question in estimates about... 351 00:20:18,500 --> 00:20:19,860 Why is that? 352 00:20:19,860 --> 00:20:22,380 They're not exposed to estimates, 353 00:20:22,380 --> 00:20:25,500 they aren't exposed to questions on notice 354 00:20:25,500 --> 00:20:29,100 unless they're inside an inquiry and affected by an inquiry. 355 00:20:29,100 --> 00:20:32,820 So, a whole lot of the key transparency devices and tools 356 00:20:32,820 --> 00:20:33,060 So, a whole lot of the key for our parliament 357 00:20:33,060 --> 00:20:34,300 for our parliament 358 00:20:34,300 --> 00:20:38,820 are prevented from really looking at the big spend on consultants. 359 00:20:38,820 --> 00:20:41,580 Big impact on democracy. Has that undermined democracy? 360 00:20:41,580 --> 00:20:44,140 It has certainly undermined democracy. Absolutely. 361 00:20:44,140 --> 00:20:44,380 It has certainly And you have to ask 362 00:20:44,380 --> 00:20:45,420 And you have to ask 363 00:20:45,420 --> 00:20:45,660 is one of the intentions of moving And you have to ask 364 00:20:45,660 --> 00:20:49,340 is one of the intentions of moving so much of the government spend 365 00:20:49,340 --> 00:20:49,580 is one of the intentions of moving outside the public view, 366 00:20:49,580 --> 00:20:51,180 outside the public view, 367 00:20:51,180 --> 00:20:52,940 is it deliberate strategy 368 00:20:52,940 --> 00:20:55,540 to give certain governments, 369 00:20:55,540 --> 00:20:57,620 you know, cover for what they want to do? 370 00:20:57,620 --> 00:21:02,780 We've certainly got a mounting body of evidence, which alarms me, 371 00:21:02,780 --> 00:21:08,020 about the reach of the large consultants into the public sector. 372 00:21:08,020 --> 00:21:08,260 about the reach of the large Defence is a black box 373 00:21:08,260 --> 00:21:10,300 Defence is a black box 374 00:21:10,300 --> 00:21:10,540 for many of us who look at government, Defence is a black box 375 00:21:10,540 --> 00:21:13,580 for many of us who look at government, 376 00:21:13,580 --> 00:21:15,820 and I think we need a lot more transparency, 377 00:21:15,820 --> 00:21:17,260 a lot more accountability 378 00:21:17,260 --> 00:21:17,500 a lot more accountability and evaluation of the contracting services 379 00:21:17,500 --> 00:21:20,220 and evaluation of the contracting services 380 00:21:20,220 --> 00:21:21,620 into Defence and more broadly. 381 00:21:21,620 --> 00:21:23,420 (ALARM RINGS) Do you need to go and vote? 382 00:21:23,420 --> 00:21:27,140 I do! Looks like a red... Yes. OK. OK. Good. OK. 383 00:21:27,140 --> 00:21:28,540 So, here we go. 384 00:21:28,540 --> 00:21:30,140 (ALARM CONTINUES RINGING) 385 00:21:30,140 --> 00:21:31,780 Sorry to interrupt. 386 00:21:31,780 --> 00:21:32,020 We might walk with you if that's OK. Sorry to interrupt. 387 00:21:32,020 --> 00:21:35,780 We might walk with you if that's OK. Walk with me. Come with me. 388 00:21:35,780 --> 00:21:36,020 We might walk with you if that's OK. After just a year in the senate 389 00:21:36,020 --> 00:21:37,860 After just a year in the senate 390 00:21:37,860 --> 00:21:41,220 Barbara Pocock has locked onto her target. 391 00:21:41,220 --> 00:21:43,980 I really think Australian taxpayers are being ripped off, 392 00:21:43,980 --> 00:21:44,220 I really think Australian taxpayers and it's unethical. 393 00:21:44,220 --> 00:21:45,460 and it's unethical. 394 00:21:45,460 --> 00:21:48,780 (ALARM CONTINUES RINGING) 395 00:21:49,740 --> 00:21:51,460 I've got to dash. 396 00:21:51,460 --> 00:21:54,980 (ALARM CONTINUES RINGING) 397 00:21:54,980 --> 00:21:56,620 I was beginning to wonder 398 00:21:56,620 --> 00:22:01,900 how the consultancies had managed to keep us in the dark for so long. 399 00:22:03,420 --> 00:22:07,940 (HUBBUB) 400 00:22:11,020 --> 00:22:16,260 I'm back in Melbourne to meet a man who I hoped might have some answers. 401 00:22:18,260 --> 00:22:21,980 Adam Evans is himself a consultant. 402 00:22:24,860 --> 00:22:27,820 So, why are people so angry about what you've done? 403 00:22:27,820 --> 00:22:28,060 So, why are people so angry I think... (SIGHS) 404 00:22:28,060 --> 00:22:29,540 I think... (SIGHS) 405 00:22:29,540 --> 00:22:32,860 Well, I've probably broken the code, right? 406 00:22:32,860 --> 00:22:35,180 As the owner of a small firm, 407 00:22:35,180 --> 00:22:39,180 he's miffed at how the big guys dominate government work. 408 00:22:39,180 --> 00:22:39,420 he's miffed at how the big guys Democratising the data 409 00:22:39,420 --> 00:22:40,740 Democratising the data 410 00:22:40,740 --> 00:22:40,980 and giving it to people Democratising the data 411 00:22:40,980 --> 00:22:43,660 and giving it to people to enable them to ask more questions 412 00:22:43,660 --> 00:22:47,660 I think is gonna make... HAS made some people uncomfortable. 413 00:22:49,940 --> 00:22:51,620 I'd heard it's hard to find out 414 00:22:51,620 --> 00:22:56,900 how much taxpayer money the big consulting firms are really getting. 415 00:22:57,860 --> 00:22:59,780 Adam Evans says they shuffle 416 00:22:59,780 --> 00:23:03,500 between multiple business names and numbers, 417 00:23:03,500 --> 00:23:03,740 between multiple KPMG his prime example. 418 00:23:03,740 --> 00:23:06,500 KPMG his prime example. 419 00:23:07,860 --> 00:23:11,300 KPMG is referred to a lot of different ways. 420 00:23:11,300 --> 00:23:15,860 It has at least a dozen different business names registered. 421 00:23:16,820 --> 00:23:19,300 In practical terms what does it mean to the average person 422 00:23:19,300 --> 00:23:22,500 trying to understand how government money is spent? 423 00:23:22,500 --> 00:23:24,060 It makes it very, very hard 424 00:23:24,060 --> 00:23:28,060 to understand from the government's page, the government's website, 425 00:23:28,060 --> 00:23:28,300 to understand from the government's how...as KPMG is the example, 426 00:23:28,300 --> 00:23:32,060 how...as KPMG is the example, 427 00:23:32,060 --> 00:23:32,300 how many contracts they've been how...as KPMG is the example, 428 00:23:32,300 --> 00:23:35,460 how many contracts they've been awarded, what the value is 429 00:23:35,460 --> 00:23:38,300 and what they were called when the contract was awarded. 430 00:23:39,260 --> 00:23:40,900 His database also shows 431 00:23:40,900 --> 00:23:46,820 KPMG's success at up-selling the federal government. 432 00:23:46,820 --> 00:23:51,220 There's been nearly 4,000 contracts issued over the 10-year period 433 00:23:51,220 --> 00:23:53,460 totalling $1.64 billion, 434 00:23:53,460 --> 00:23:57,500 with 1,904 contract amendments. 435 00:23:58,460 --> 00:24:04,580 That's nearly $1 billion in additional revenue for KPMG. 436 00:24:04,580 --> 00:24:07,780 It's about a 60% uplift of the original contract values. 437 00:24:07,780 --> 00:24:08,020 It's about a 60% uplift Wow, that's a lot of money. 438 00:24:08,020 --> 00:24:09,740 Wow, that's a lot of money. 439 00:24:09,740 --> 00:24:09,980 That's a significant Wow, that's a lot of money. 440 00:24:09,980 --> 00:24:12,300 That's a significant amount of money. 441 00:24:14,500 --> 00:24:17,140 It's management advisory 101 - 442 00:24:17,140 --> 00:24:20,180 get a contract and make it longer, 443 00:24:20,180 --> 00:24:22,580 and sell more people in. 444 00:24:22,580 --> 00:24:26,380 It's a strategy of increasing revenue and profit 445 00:24:26,380 --> 00:24:29,660 generally intended to keep pace with the client's needs. 446 00:24:29,660 --> 00:24:29,900 generally intended to keep pace They would be looking to increase 447 00:24:29,900 --> 00:24:31,140 They would be looking to increase 448 00:24:31,140 --> 00:24:33,980 their revenue, their market share and their dominance. 449 00:24:33,980 --> 00:24:36,900 Five consultants on billable work 450 00:24:36,900 --> 00:24:39,900 is worth a lot more money to the shareholders than one. 451 00:24:39,900 --> 00:24:43,100 Do you think that the interests of the consultant 452 00:24:43,100 --> 00:24:46,940 don't necessarily always align with the interest of the Commonwealth? 453 00:24:46,940 --> 00:24:52,860 It's a very tricky relationship to navigate. 454 00:24:59,100 --> 00:25:04,500 Australia's tax office is itself navigating this tricky terrain. 455 00:25:05,460 --> 00:25:07,940 It has no shortage of consultants 456 00:25:07,940 --> 00:25:08,180 moving in and out It has no shortage of consultants 457 00:25:08,180 --> 00:25:11,740 moving in and out of its revolving doors. 458 00:25:15,180 --> 00:25:20,300 The upper echelons of the Tax Office are stacked with former consultants. 459 00:25:20,300 --> 00:25:24,780 Amazingly, two of them, whose salaries are funded by us taxpayers, 460 00:25:24,780 --> 00:25:28,500 are still receiving payment from their former employers. 461 00:25:28,500 --> 00:25:28,740 are still receiving payment The ATO has confirmed this to us 462 00:25:28,740 --> 00:25:30,980 The ATO has confirmed this to us 463 00:25:30,980 --> 00:25:31,220 but refused The ATO has confirmed this to us 464 00:25:31,220 --> 00:25:34,380 but refused to disclose their identities. 465 00:25:37,100 --> 00:25:38,820 It's a conflict of interest. 466 00:25:38,820 --> 00:25:39,060 And even if it's declared, It's a conflict of interest. 467 00:25:39,060 --> 00:25:42,260 And even if it's declared, how do you manage that properly? 468 00:25:42,260 --> 00:25:44,540 Alright, so, these are conflicts of interest 469 00:25:44,540 --> 00:25:44,820 Alright, so, these are conflicts of interest that are now being discovered as people look more and more. 470 00:25:44,820 --> 00:25:48,420 that are now being discovered as people look more and more. 471 00:25:51,740 --> 00:25:54,020 Tax Commissioner Chris Jordan 472 00:25:54,020 --> 00:25:59,180 spent a decade as chairman of KPMG New South Wales. 473 00:25:59,180 --> 00:26:02,300 His second-in-charge, Jeremy Hirschhorne, 474 00:26:02,300 --> 00:26:02,540 His second-in-charge, also came from KPMG. 475 00:26:02,540 --> 00:26:05,340 also came from KPMG. 476 00:26:05,340 --> 00:26:10,180 Two other senior managers came over from EY. 477 00:26:10,180 --> 00:26:13,820 And three of the ATO's top IT people 478 00:26:13,820 --> 00:26:18,340 were previously employed by tech consultancy Accenture. 479 00:26:18,340 --> 00:26:21,660 Two of them still hold shares in the company, 480 00:26:21,660 --> 00:26:26,620 which has won $1.4 billion worth of work from the Tax Office 481 00:26:26,620 --> 00:26:26,860 which has won $1.4 billion worth over the past decade. 482 00:26:26,860 --> 00:26:29,180 over the past decade. 483 00:26:29,180 --> 00:26:29,380 The ATO told us over the past decade. 484 00:26:29,380 --> 00:26:30,660 The ATO told us 485 00:26:30,660 --> 00:26:30,900 The ATO told us framework and process 486 00:26:30,900 --> 00:26:33,340 they have "a robust framework and process 487 00:26:33,340 --> 00:26:36,020 "for managing conflicts of interest" 488 00:26:36,020 --> 00:26:39,740 and less than 10% of its senior executives 489 00:26:39,740 --> 00:26:42,820 had come from the big consultancies. 490 00:26:44,180 --> 00:26:48,140 The consulting firms are your major alternative employer, 491 00:26:48,140 --> 00:26:50,380 and they pay extremely well. 492 00:26:50,380 --> 00:26:50,580 So, this is where and they pay extremely well. 493 00:26:50,580 --> 00:26:51,980 So, this is where 494 00:26:51,980 --> 00:26:52,180 So, this is where the moral hazard starts to arise. 495 00:26:52,180 --> 00:26:54,060 the moral hazard starts to arise. 496 00:26:54,060 --> 00:26:54,300 If you're in a public-service the moral hazard starts to arise. 497 00:26:54,300 --> 00:26:56,060 If you're in a public-service position 498 00:26:56,060 --> 00:26:56,300 If you're in a public-service and you're dealing with consultants 499 00:26:56,300 --> 00:26:57,780 and you're dealing with consultants 500 00:26:57,780 --> 00:27:00,780 and you think, "Well, that's my alternative employer," 501 00:27:00,780 --> 00:27:03,140 are you gonna be a bit more keen to hire them? 502 00:27:04,540 --> 00:27:10,500 PwC is case study in just how cosy these relationships can be. 503 00:27:11,460 --> 00:27:13,140 Hi. I'm James Downie. 504 00:27:13,140 --> 00:27:16,140 I'm the CEO of the Independent Hospital Pricing Authority. 505 00:27:17,740 --> 00:27:19,580 Until mid last year 506 00:27:19,580 --> 00:27:24,140 James Downie headed an independent government agency 507 00:27:24,140 --> 00:27:29,420 that advises on the price of hospital services and medical equipment. 508 00:27:29,420 --> 00:27:29,660 that advises on the price of hospital PwC was a consultant to his agency. 509 00:27:29,660 --> 00:27:34,020 PwC was a consultant to his agency. 510 00:27:34,020 --> 00:27:37,380 As well as working for the health agency, 511 00:27:37,380 --> 00:27:40,580 PwC also worked for the very companies 512 00:27:40,580 --> 00:27:45,140 who could profit from the agency's pricing advice. 513 00:27:45,140 --> 00:27:48,180 When conflicts of interest like this arise 514 00:27:48,180 --> 00:27:49,620 the big firms say they have 515 00:27:49,620 --> 00:27:51,540 checks and balances in place 516 00:27:51,540 --> 00:27:54,140 to protect their clients. 517 00:27:55,420 --> 00:27:58,860 I think the notion of 'sterile corridors' is laughable. 518 00:27:58,860 --> 00:28:01,380 And I can tell you that many of the whistleblowers 519 00:28:01,380 --> 00:28:04,940 who ring me and talk about conflicts of interest 520 00:28:04,940 --> 00:28:05,180 who ring me think they are laughable. 521 00:28:05,180 --> 00:28:06,420 think they are laughable. 522 00:28:06,420 --> 00:28:09,300 People have lunch together, they socialise together, 523 00:28:09,300 --> 00:28:10,540 they exchange information. 524 00:28:10,540 --> 00:28:12,060 We're humans. 525 00:28:13,020 --> 00:28:16,300 When James Downie left his government job - 526 00:28:16,300 --> 00:28:16,540 When James Downie you guessed it - he joined PwC. 527 00:28:16,540 --> 00:28:19,900 you guessed it - he joined PwC. 528 00:28:19,900 --> 00:28:23,860 Now he's back with the health pricing body, 529 00:28:23,860 --> 00:28:27,700 this time as a PwC consultant. 530 00:28:27,700 --> 00:28:31,380 PwC said it has "rules and processes" 531 00:28:31,380 --> 00:28:34,700 to manage conflicts of interest. 532 00:28:34,700 --> 00:28:34,940 James Downie said to manage conflicts of interest. 533 00:28:34,940 --> 00:28:36,820 James Downie said the health pricing body 534 00:28:36,820 --> 00:28:37,060 James Downie said did not require him 535 00:28:37,060 --> 00:28:38,460 did not require him 536 00:28:38,460 --> 00:28:41,780 to complete a cooling-off period. 537 00:28:52,300 --> 00:28:55,100 The idea behind hiring consultants 538 00:28:55,100 --> 00:29:00,260 was to bring some business savvy to an inefficient public service 539 00:29:00,260 --> 00:29:03,420 to make the bureaucracy more responsive. 540 00:29:03,420 --> 00:29:07,540 But in many cases the opposite has happened, 541 00:29:07,540 --> 00:29:07,780 But in many cases especially on big projects. 542 00:29:07,780 --> 00:29:10,580 especially on big projects. 543 00:29:12,140 --> 00:29:15,020 For consultants there's few more lucrative jobs 544 00:29:15,020 --> 00:29:18,460 than overhauling a government IT system. 545 00:29:18,460 --> 00:29:20,020 In early 2020 546 00:29:20,020 --> 00:29:22,220 Deloitte landed just such a job 547 00:29:22,220 --> 00:29:23,700 and struck it big 548 00:29:23,700 --> 00:29:23,940 with a deal that would increase and struck it big 549 00:29:23,940 --> 00:29:28,500 with a deal that would increase almost five-fold in value. 550 00:29:28,500 --> 00:29:34,300 But it is how Deloitte won this deal that is now under serious scrutiny. 551 00:29:35,260 --> 00:29:37,540 NEWSREADER: Those who've lost their jobs in the pandemic 552 00:29:37,540 --> 00:29:40,780 flood Centrelink offices and the MyGov website 553 00:29:40,780 --> 00:29:44,500 as the government backflips on claims the site was hacked. 554 00:29:45,700 --> 00:29:49,460 Deloitte was tasked with upgrading the MyGov website 555 00:29:49,460 --> 00:29:53,180 after it was overwhelmed at the start of the pandemic. 556 00:29:57,820 --> 00:30:01,900 There's lots of probity questions that need answers there. 557 00:30:01,900 --> 00:30:02,140 There's lots of probity questions None of it looks good to me. 558 00:30:02,140 --> 00:30:03,580 None of it looks good to me. 559 00:30:06,420 --> 00:30:07,940 In March 2020 560 00:30:07,940 --> 00:30:09,580 Deloitte signed a contract 561 00:30:09,580 --> 00:30:09,820 with the federal government's Deloitte signed a contract 562 00:30:09,820 --> 00:30:13,380 with the federal government's Digital Transformation Agency. 563 00:30:15,620 --> 00:30:19,100 The contract wasn't even awarded in writing. 564 00:30:19,100 --> 00:30:24,180 It was granted verbally and without a competitive tender. 565 00:30:26,060 --> 00:30:30,300 That contract would start at $9.5 million 566 00:30:30,300 --> 00:30:33,500 then balloon to $28 million. 567 00:30:33,500 --> 00:30:40,940 All up Deloitte's work on the project would cost taxpayers $47 million. 568 00:30:40,940 --> 00:30:41,180 All up Deloitte's work on the project The Auditor-General was scathing. 569 00:30:41,180 --> 00:30:44,260 The Auditor-General was scathing. 570 00:30:44,260 --> 00:30:44,500 He said the Deloitte contract The Auditor-General was scathing. 571 00:30:44,500 --> 00:30:49,340 He said the Deloitte contract failed in 12 areas of evaluation, 572 00:30:49,340 --> 00:30:52,340 including offering taxpayers value for money. 573 00:30:52,340 --> 00:30:56,340 It was revealed Deloitte charged daily consulting rates 574 00:30:56,340 --> 00:30:58,580 above those recommended by the agency 575 00:30:58,580 --> 00:31:02,460 and its payments were not even linked to results. 576 00:31:03,420 --> 00:31:05,700 A government audit earlier this year 577 00:31:05,700 --> 00:31:10,860 found MyGov fell well short of what had been promised. 578 00:31:10,860 --> 00:31:14,260 Although other parties had worked on the project, 579 00:31:14,260 --> 00:31:16,540 a source with direct knowledge of it 580 00:31:16,540 --> 00:31:22,860 said it would have been easier if Deloitte had never been involved. 581 00:31:23,820 --> 00:31:29,180 Deloitte also declined our invitation for an interview. 582 00:31:29,180 --> 00:31:31,820 In a statement the firm said it was 'proud' of its work 583 00:31:31,820 --> 00:31:32,060 on the MyGov website. it was 'proud' of its work 584 00:31:32,060 --> 00:31:33,940 on the MyGov website. 585 00:31:33,940 --> 00:31:34,180 on the MyGov website. procurement processes' were followed. 586 00:31:34,180 --> 00:31:38,700 It said 'appropriate procurement processes' were followed. 587 00:31:38,700 --> 00:31:38,940 It blamed the cost increases procurement processes' were followed. 588 00:31:38,940 --> 00:31:40,660 It blamed the cost increases 589 00:31:40,660 --> 00:31:45,620 on software licences and changes requested by the government. 590 00:31:53,900 --> 00:31:56,140 Look, profit was number one, and every time... 591 00:31:56,140 --> 00:32:01,820 Brendan Lyon knows how enmeshed the big consultancies are with government 592 00:32:01,820 --> 00:32:06,180 and how they use these relationships to profit handsomely. 593 00:32:06,180 --> 00:32:06,420 and how they use these relationships If ever you need to back a horse, 594 00:32:06,420 --> 00:32:07,740 If ever you need to back a horse, 595 00:32:07,740 --> 00:32:10,220 you back the horse called self-interest. 596 00:32:11,060 --> 00:32:15,100 He was a partner at KPMG until 2021, 597 00:32:15,100 --> 00:32:19,660 but made the mistake of giving frank and fearless advice 598 00:32:19,660 --> 00:32:22,860 to the New South Wales Government on its rail assets. 599 00:32:22,860 --> 00:32:27,580 It wasn't what the government wanted to hear. 600 00:32:27,580 --> 00:32:31,140 So, they're using consultants to get the answer they want, essentially? 601 00:32:31,140 --> 00:32:33,380 Well, I mean, I think in many instances that we're seeing 602 00:32:33,380 --> 00:32:33,620 Well, I mean, I think they're starting with the answer 603 00:32:33,620 --> 00:32:35,140 they're starting with the answer 604 00:32:35,140 --> 00:32:39,500 and then there is a process of evidence-making that goes around it. 605 00:32:39,500 --> 00:32:43,060 There's a huge amount of pressure to get the answers that are needed. 606 00:32:43,060 --> 00:32:43,300 There's a huge amount of pressure For Brendan Lyon 607 00:32:43,300 --> 00:32:45,260 For Brendan Lyon 608 00:32:45,260 --> 00:32:48,620 the required answer was an accounting fudge 609 00:32:48,620 --> 00:32:51,460 cooked up by the New South Wales Government. 610 00:32:51,460 --> 00:32:57,340 The plan was to understate the cost of maintaining the rail assets 611 00:32:57,340 --> 00:33:02,900 to make the state budget appear far healthier than it actually was. 612 00:33:02,900 --> 00:33:06,100 When Brendan Lyon wouldn't go along with this, 613 00:33:06,100 --> 00:33:06,340 When Brendan Lyon a new report was commissioned, 614 00:33:06,340 --> 00:33:08,060 a new report was commissioned, 615 00:33:08,060 --> 00:33:12,500 which said what the New South Wales Government wanted to hear. 616 00:33:12,500 --> 00:33:15,380 The profession exists so that we can all have trust 617 00:33:15,380 --> 00:33:18,340 in the way that corporations, not-for-profits, 618 00:33:18,340 --> 00:33:18,580 in the way that corporations, governments and everybody else 619 00:33:18,580 --> 00:33:19,940 governments and everybody else 620 00:33:19,940 --> 00:33:20,180 account for the monies governments and everybody else 621 00:33:20,180 --> 00:33:23,020 account for the monies that they have. 622 00:33:23,020 --> 00:33:24,820 I guess if we start to see an erosion 623 00:33:24,820 --> 00:33:25,060 I guess if we start to see in ethics and professional standards 624 00:33:25,060 --> 00:33:26,980 in ethics and professional standards 625 00:33:26,980 --> 00:33:28,300 in one side of the business, 626 00:33:28,300 --> 00:33:29,780 it's very hard to say 627 00:33:29,780 --> 00:33:32,260 that that's not gonna be a risk across the rest of it. 628 00:33:32,260 --> 00:33:34,620 So, what were you forced out for? 629 00:33:34,620 --> 00:33:34,860 I was forced out because I wouldn't play the game, So, what were you forced out for? 630 00:33:34,860 --> 00:33:37,540 I was forced out because I wouldn't play the game, 631 00:33:37,540 --> 00:33:41,380 because I upset the then New South Wales Treasury Secretary 632 00:33:41,380 --> 00:33:42,620 because I wouldn't sign off 633 00:33:42,620 --> 00:33:42,860 because I wouldn't sign off on results that misstated the state's accounts by $10 billion. 634 00:33:42,860 --> 00:33:47,940 on results that misstated the state's accounts by $10 billion. 635 00:33:47,940 --> 00:33:51,380 What does it tell us how the big consulting firms operate? 636 00:33:51,380 --> 00:33:54,540 I'd say that it was not the sort of culture where bad news was welcomed. 637 00:33:54,540 --> 00:33:57,580 It was more of a glee club around revenue. 638 00:33:57,580 --> 00:34:02,180 And no questions asked about what you're gonna do for it. 639 00:34:02,180 --> 00:34:04,420 I guess I was just surprised by the... 640 00:34:04,420 --> 00:34:06,780 ..you know, by the naked motivation 641 00:34:06,780 --> 00:34:09,180 to get cash to ensure that the firm 642 00:34:09,180 --> 00:34:09,420 is continuing to turn over to get cash to ensure that the firm 643 00:34:09,420 --> 00:34:12,500 is continuing to turn over more than $2 billion a year. 644 00:34:13,460 --> 00:34:18,060 The Auditor-General eventually forced the New South Wales Government 645 00:34:18,060 --> 00:34:20,940 to correct this budget fudge. 646 00:34:20,940 --> 00:34:25,180 KPMG has faced no sanction. 647 00:34:26,140 --> 00:34:30,820 In my example, every single person that was involved on the other side 648 00:34:30,820 --> 00:34:34,460 is in a more senior position than they were at the time. 649 00:34:34,460 --> 00:34:37,820 That shows that there is no consequence internally, 650 00:34:37,820 --> 00:34:40,060 there's no consequence professionally. 651 00:34:45,300 --> 00:34:49,580 KPMG has acknowledged that mistakes were made 652 00:34:49,580 --> 00:34:52,980 but rejects many of Brendan Lyon's allegations. 653 00:34:53,940 --> 00:34:57,380 KPMG said it complied with guidelines 654 00:34:57,380 --> 00:34:57,620 on conflicts of interest KPMG said it complied with guidelines 655 00:34:57,620 --> 00:35:01,580 on conflicts of interest and professional ethics. 656 00:35:04,140 --> 00:35:07,180 (ORCHESTRAL MUSIC PLAYS) 657 00:35:19,420 --> 00:35:22,020 We felt taxpayers were owed a better explanation 658 00:35:22,020 --> 00:35:24,580 about how their billions have been spent, 659 00:35:24,580 --> 00:35:27,420 so, we've come here to one of Sydney's wealthiest suburbs 660 00:35:27,420 --> 00:35:31,020 to ask KPMG chief executive, Andrew Yates, 661 00:35:31,020 --> 00:35:31,260 to ask KPMG chief executive, not only about the money 662 00:35:31,260 --> 00:35:32,500 not only about the money 663 00:35:32,500 --> 00:35:32,740 but also about not only about the money 664 00:35:32,740 --> 00:35:35,020 but also about the allegations of misconduct 665 00:35:35,020 --> 00:35:38,060 we've heard from three separate whistleblowers. 666 00:35:38,060 --> 00:35:38,300 we've heard Let's go and see if he's home. 667 00:35:38,300 --> 00:35:39,820 Let's go and see if he's home. 668 00:35:44,020 --> 00:35:50,420 KPMG Australia earned more than $2 billion in revenue last year. 669 00:35:50,420 --> 00:35:50,660 KPMG Australia earned more It's the only Big Four firm 670 00:35:50,660 --> 00:35:52,580 It's the only Big Four firm 671 00:35:52,580 --> 00:35:52,820 that has not disclosed It's the only Big Four firm 672 00:35:52,820 --> 00:35:57,620 that has not disclosed how much its chief executive is paid. 673 00:35:57,620 --> 00:35:57,860 that has not disclosed The other three pay their CEOs 674 00:35:57,860 --> 00:36:00,100 The other three pay their CEOs 675 00:36:00,100 --> 00:36:05,980 between $2.5 million and $4.5 million a year. 676 00:36:07,220 --> 00:36:09,420 (BUZZER RINGS) 677 00:36:09,420 --> 00:36:11,460 (METAL CLANKS, DOGS BARK) 678 00:36:11,460 --> 00:36:13,380 (RINGING CONTINUES) 679 00:36:13,380 --> 00:36:14,980 (NEARBY CLANKING) 680 00:36:14,980 --> 00:36:16,660 (DOGS BARK) 681 00:36:16,660 --> 00:36:18,980 (RINGING CONTINUES) 682 00:36:18,980 --> 00:36:19,980 (DOGS BARK) 683 00:36:19,980 --> 00:36:23,060 (RINGING CONTINUES) 684 00:36:23,060 --> 00:36:23,300 That's a bit disappointing. The dogs (RINGING CONTINUES) 685 00:36:23,300 --> 00:36:26,820 That's a bit disappointing. The dogs are in, but he doesn't appear to be. 686 00:36:29,140 --> 00:36:30,620 These big firms 687 00:36:30,620 --> 00:36:30,860 don't have to front up These big firms 688 00:36:30,860 --> 00:36:32,420 don't have to front up to shareholders, 689 00:36:32,420 --> 00:36:32,660 don't have to front up file accounts 690 00:36:32,660 --> 00:36:34,140 file accounts 691 00:36:34,140 --> 00:36:36,940 or, it seems, talk to us. 692 00:36:40,580 --> 00:36:43,620 (BIRDS TWITTER) 693 00:36:48,820 --> 00:36:52,100 The rise of the so-called 'consultocracy' 694 00:36:52,100 --> 00:36:57,740 has coincided with an increasingly insecure public service. 695 00:36:57,740 --> 00:37:02,300 Chris Wallace has seen this first-hand. 696 00:37:03,180 --> 00:37:06,660 You need to kind of remember how the system used to work. 697 00:37:06,660 --> 00:37:11,300 The public service in a traditional Westminster system, which we had, 698 00:37:11,300 --> 00:37:14,140 is permanent, it's merit-based, it's completely apolitical 699 00:37:14,140 --> 00:37:14,380 is permanent, it's merit-based, and you're there for life. 700 00:37:14,380 --> 00:37:15,620 and you're there for life. 701 00:37:15,620 --> 00:37:17,100 And at the very top 702 00:37:17,100 --> 00:37:17,340 departmental heads And at the very top 703 00:37:17,340 --> 00:37:20,340 departmental heads could give frank and fearless advice 704 00:37:20,340 --> 00:37:23,420 because they weren't in fear of losing their job. 705 00:37:23,420 --> 00:37:23,660 because they weren't in fear But in recent decades that's ended. 706 00:37:23,660 --> 00:37:26,300 But in recent decades that's ended. 707 00:37:26,300 --> 00:37:26,540 Departmental heads But in recent decades that's ended. 708 00:37:26,540 --> 00:37:28,780 Departmental heads are now on five-year contracts. 709 00:37:28,780 --> 00:37:31,020 So, if you're a senior public servant, 710 00:37:31,020 --> 00:37:32,980 everybody knows if you tell the truth 711 00:37:32,980 --> 00:37:35,260 and it's not what your minister wants to hear now, 712 00:37:35,260 --> 00:37:35,500 and it's not what your minister you'll get fired. 713 00:37:35,500 --> 00:37:36,740 you'll get fired. 714 00:37:36,740 --> 00:37:38,620 Do you think governments like consultants 715 00:37:38,620 --> 00:37:40,260 because they give them the answer they want? 716 00:37:40,260 --> 00:37:41,980 Put yourself in a consultant's shoes - 717 00:37:41,980 --> 00:37:44,380 you wanna get repeat billings, right? 718 00:37:44,380 --> 00:37:46,220 Repeat business is the most profitable. 719 00:37:46,220 --> 00:37:48,220 If you tell a government what it doesn't want to hear, 720 00:37:48,220 --> 00:37:48,460 If you tell a government are you gonna get rehired? 721 00:37:48,460 --> 00:37:49,900 are you gonna get rehired? 722 00:37:58,340 --> 00:38:01,460 That's what happened to Brendan Lyon. 723 00:38:01,460 --> 00:38:06,780 Standing up to KPMG came at great personal cost. 724 00:38:10,060 --> 00:38:12,420 BRENDAN LYON: I am not a perfect human being. 725 00:38:12,420 --> 00:38:12,700 BRENDAN LYON: I am not a perfect human being. I'm not trying to say that I sort of walk around like ethical Jesus, 726 00:38:12,700 --> 00:38:16,580 I'm not trying to say that I sort of walk around like ethical Jesus, 727 00:38:16,580 --> 00:38:16,860 but when you're being asked to do something that you know is wrong, I'm not trying to say that I sort of walk around like ethical Jesus, 728 00:38:16,860 --> 00:38:19,420 but when you're being asked to do something that you know is wrong, 729 00:38:19,420 --> 00:38:23,740 it's sometimes time just to stand up and do the right thing. 730 00:38:27,500 --> 00:38:29,180 When you're facing a lot of pressure, 731 00:38:29,180 --> 00:38:29,460 you do things that you need to do to cope. When you're facing a lot of pressure, 732 00:38:29,460 --> 00:38:31,460 you do things that you need to do to cope. 733 00:38:31,460 --> 00:38:34,220 You drink too much, you smoke too much, you... 734 00:38:35,180 --> 00:38:37,940 ..you spend periods of time inside with all the windows shut 735 00:38:37,940 --> 00:38:40,500 thinking about how it could be different. 736 00:38:40,500 --> 00:38:44,100 Look, I lost about 29 kilograms in an eight-month period 737 00:38:44,100 --> 00:38:46,260 because of the pressure that was on me. 738 00:38:46,260 --> 00:38:46,500 because of the pressure That's not healthy. 739 00:38:46,500 --> 00:38:47,740 That's not healthy. 740 00:38:47,740 --> 00:38:47,980 The mental-health impacts That's not healthy. 741 00:38:47,980 --> 00:38:50,940 The mental-health impacts were material and ongoing. 742 00:38:56,580 --> 00:38:59,620 (PENSIVE MUSIC PLAYS) 743 00:39:04,020 --> 00:39:07,900 The consultants know winter has arrived. 744 00:39:10,540 --> 00:39:12,340 The Albanese government has pledged 745 00:39:12,340 --> 00:39:16,140 to cut its spending on consultants and contractors 746 00:39:16,140 --> 00:39:20,420 by $3 billion over the next four years. 747 00:39:20,420 --> 00:39:23,060 And the new National Anti-Corruption Commissioner 748 00:39:23,060 --> 00:39:27,620 has signalled consultants are squarely in his sights. 749 00:39:29,060 --> 00:39:32,140 You know, we've all been slow to join the dots 750 00:39:32,140 --> 00:39:35,020 to work out what's really going on here. 751 00:39:35,020 --> 00:39:38,700 This is not about a few consultants behaving badly. 752 00:39:38,700 --> 00:39:42,980 It's about the systematic replacement of a once-fearless public service 753 00:39:42,980 --> 00:39:46,260 with voracious private-sector operators 754 00:39:46,260 --> 00:39:46,500 with voracious driven by profit, not public good. 755 00:39:46,500 --> 00:39:50,140 driven by profit, not public good. 756 00:39:50,140 --> 00:39:50,380 The question is driven by profit, not public good. 757 00:39:50,380 --> 00:39:54,660 The question is is it too late to fix it? 758 00:39:54,660 --> 00:39:58,300 I think we need stronger governance of what's going on. 759 00:39:58,300 --> 00:40:02,140 When things go wrong I think we need real consequences. 760 00:40:02,140 --> 00:40:03,900 Now, I grew up on a mallee farm 761 00:40:03,900 --> 00:40:07,620 where my dad measured value in bags of wheat and bales of wool. 762 00:40:07,620 --> 00:40:07,860 where my dad measured value We're a long way from that. 763 00:40:07,860 --> 00:40:09,340 We're a long way from that. 764 00:40:09,340 --> 00:40:11,020 And I know as a taxpayer, 765 00:40:11,020 --> 00:40:13,740 and I've lived my life amongst ordinary people, 766 00:40:13,740 --> 00:40:13,980 and I've lived my life they are horrified 767 00:40:13,980 --> 00:40:15,220 they are horrified 768 00:40:15,220 --> 00:40:15,460 and they're in my inbox they are horrified 769 00:40:15,460 --> 00:40:17,460 and they're in my inbox every day now saying, 770 00:40:17,460 --> 00:40:20,140 "What is going on? What is this money for? 771 00:40:20,140 --> 00:40:23,540 "Why are we spending so much on basic activities?" 772 00:40:23,540 --> 00:40:24,780 You've gotta have consultants, 773 00:40:24,780 --> 00:40:29,700 and even back in the day, before the system started decaying, 774 00:40:29,700 --> 00:40:29,940 and even back in the day, consultants were sometimes used. 775 00:40:29,940 --> 00:40:32,100 consultants were sometimes used. 776 00:40:32,100 --> 00:40:33,780 The public service cannot possibly 777 00:40:33,780 --> 00:40:36,380 have every single element of expertise 778 00:40:36,380 --> 00:40:36,620 have every single element in a deep and timely way 779 00:40:36,620 --> 00:40:38,220 in a deep and timely way 780 00:40:38,220 --> 00:40:39,500 all the time. 781 00:40:39,500 --> 00:40:43,340 And using public-sector advice wisely 782 00:40:43,340 --> 00:40:46,500 in conjunction with limited consulting input - 783 00:40:46,500 --> 00:40:47,500 fantastic. 784 00:40:47,500 --> 00:40:49,140 But this pervasion, 785 00:40:49,140 --> 00:40:53,940 this absolute permeation of the public service as a whole 786 00:40:53,940 --> 00:40:58,820 has really led to a decaying standards of advice, of integrity. 787 00:40:58,820 --> 00:41:02,140 And, you know, without systemic change, 788 00:41:02,140 --> 00:41:05,340 it's gonna be very difficult to turn around. 789 00:41:06,540 --> 00:41:08,540 Captions by Red Bee Media 790 00:41:08,540 --> 00:41:10,740 Copyright Australian Broadcasting Corporation