‘Necessary and immediate’: KPMG chair to resign after damning hearing

KPMG’s chairman Martin Sheppard and two senior partners will quit the firm, becoming the latest leaders to resign over the consultancy’s handling of whistleblower allegations that it misused confidential client information.

Sheppard will be replaced by an independent chairman, while two other senior KPMG partners, Paul Rogers and former chief operating officer Eileen Hoggett, will also leave the partnership.

KPMG Australia’s interim chief executive Stan Stavros said “the decisions announced today are necessary and immediate”.

“We did not meet the standards expected of us, and we recognise the impact this has had on the whistleblower, our people, our clients and the community.”

Sheppard’s appearance before a public Senate committee hearing on Friday proved to be the final straw for KPMG partners who had watched the firm’s disastrous response to the scandal unfold.

This includes Sheppard being forced to backflip on KPMG’s use of legal professional privilege to shield documents relating to its interactions with law firms Ashurst and Allens over the matter.

Rogers and Hoggett were both implicated in one of the most serious breaches identified so far: gaining access to confidential Lendlease board documents, including rival bids to audit the company. Lendlease chairman John Gillam described that as a “grave misuse of their access privileges” on Friday.

The parliamentary hearing on Friday was told how the firm’s HR team recommended a $78,000 fine for Hoggett but former chief executive Andrew Yates halved this to just $40,000. Rogers was fined $22,000 over his misconduct. That amounted to a fraction of the annual bonus for both.

Hoggett told the hearing that she was under ASIC investigation and therefore was limited in her testimony. “I have been provided very strict confidentiality protocols that I must adhere to, and so providing any information here today compromises the important work that I think ASIC are doing around that matter,” she said.

Late last month, Sheppard accepted the resignations of Yates and audit head Julian McPherson after KPMG confirmed the allegations that confidential client data had been shared and potentially used to win new business with other clients.

But Sheppard resisted internal and external pressure to take personal accountability for the firm’s years-long delay in publicly confronting the scandal, until now.

After a bruising parliamentary hearing where KPMG executives were questioned on Friday, Labor senator Deborah O’Neill, who triggered the scandal in March when she revealed the damning whistleblower allegations, questioned whether the firm’s current leadership team could clean up its culture.

On Monday, in an ABC interview, O’Neill slammed Sheppard – a former partner at the firm – for continuing to defend the group at Friday’s public senate hearings. She said the firm had yet to get to grips with the scale of its failure.

“You’d have to look at the performance of the leadership team there the other day and wonder what on earth they think they’re doing,” she said. “I don’t think KPMG fully understand the problems that they have generated, and I don’t know that the team to clean up this mess is there.”

The firm spent much of the hearing arguing that it should not have to provide the investigating committee with documents relating to its investigations of the whistleblower and his claims. KPMG argued they were legally protected. But late in the day, Sheppard relented.

Stavros said the committee had highlighted issues that included “unethical behaviour by senior personnel and the human impact of KPMG’s handling of the whistleblower”.

“KPMG Australia is focused on ensuring those failings are understood, addressed and not repeated,” Stavros said in a statement.

After the hearing, the anonymous whistleblower tabled documents about their experience and alleged that KPMG had made changes to its work policies in an attempt to fire him within weeks of his complaint in 2024.

“A person who makes a protected disclosure and within two weeks receives a denial from the eligible recipient and a subsequent threat of termination is not being invited to cooperate,” the whistleblower said in one of their statements published by the Senate committee after the hearing.

The whistleblower attempted to disclose the matter to KPMG International, which he said essentially refused to deal with him and referred him back to the local firm.

“I do not say this lightly, but at a leadership and governance level, I believe KPMG, locally and globally, is presently an organisation that cannot be trusted,” the whistleblower said in his statement to the committee.

Former KPMG Australia CEO Gary Wingrove – who was recently appointed to run the global firm – was among those appearing at the hearing and defending the role that his international office played in dealing with the whistleblower.

“We took this incredibly seriously, and we engaged with the whistleblower multiple times over months to understand the concerns he was raising. The issue was that he refused to provide us with information that would allow us to look into the matter properly, and indeed also insisted that we not speak to KPMG Australia about the matter,” Wingrove said.

Lendlease is preparing to dump KPMG as its auditor and the federal government has effectively suspended the firm from winning any further business for several months.

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