KPMG whistleblower scandal claims scalp of Westpac board member

The KPMG whistleblower scandal has claimed another scalp, with Westpac board member and former KPMG partner Peter Nash stepping down from the bank effective immediately to limit any “ongoing distraction” over his role in the firm winning the bank’s lucrative audit work in 2024.

The bank defended the process it used to select KPMG for the contract, telling the stock market on Wednesday that Nash had declared his past connections to the firm and was not on the committee that made the decision. But he had sat in on meetings and stayed at the house of KPMG’s chairman while the consultancy was bidding for the audit work.

In a release to the ASX, Westpac said Nash will retire effective July 1. “With recent attention on Peter’s former roles and relationships at KPMG, he has decided now is the right time to retire from the board to limit any ongoing distraction for the Company,” Westpac chairman Michael Ullmer said.

KPMG’s success in winning the Westpac contract featured among the allegations made by the whistleblower, who said the concentration of KPMG partners at Westpac compromised the integrity of the selection process.

One of the more controversial aspects that has emerged since the scandal broke was Nash staying at the home of KPMG’s chairman Martin Shepherd, and his partner, KPMG executive Suzanne Bell, before the lucrative contract was awarded. Sheppard was forced to resign over the scandal, as have other senior KPMG executives.

Gregg said he remained satisfied by the integrity of Westpac’s selection process for KPMG. The bank has also requested further information from KPMG.

“The structure of Westpac’s audit tender process was robust. Peter declared his past connections with KPMG and was not on the selection committee, however he acknowledges the perception of bias that may have been created by his relationships,” Gregg said.

Nash said in the ASX statement: “It’s been a privilege to serve Westpac’s people, customers and shareholders over the past eight years.”

The news came the same day that Labor senator Deborah O’Neill, a key figure in both the PwC tax scandal and KPMG whistleblower scandal, warned that partners in the consulting giants will fight to protect their own interests against the massive changes being proposed to deal with the industry’s cultural problems.

“We’ve seen, in the partnership structure, the flourishing of self-interest over professionalism. We’ve seen a lack of accountability,” she said at a press conference unveiling the proposed changes in an options paper on Wednesday.

“That structure has allowed the flourishing of a culture that people will fight tooth and nail to protect because it is in their financial interest to do so,” she said.

“I think it goes to the culture that needs to be disrupted that we’ve seen manifest itself in the public place through PwC and the KPMG matters.”

Federal Assistant Treasurer Daniel Mulino said the shake-up could include forcing the consulting giants to spin off the audit services that are the core of their business, and potentially more than halving the number of partners allowed to as few as 400. The current maximum for accounting partnerships generally is 1000 partners and the changes he is considering would apply to the whole industry.

Greens senator Barbara Pocock chided the government for taking so long to address reforms that were first proposed more than two years ago, saying the strongest options canvassed by the government should be implemented rapidly. “The time for talk is over, now is the time for action,” she said.

Auditors play a crucial role in the financial markets by signing off on company accounts that are then relied on by investors, including superannuation giants. But there have long been concerns about risks to their independence when they are part of groups that also sell consulting services to corporate clients.

One of the most radical proposals in the paper is to effectively break up the consulting giants, a step known as “structural separation”, forcing them to only offer either business advice or auditing.

Mulino insisted the government would be keeping an open mind as it consults the sector on the proposed changes, but O’Neill warned that profound change is needed to “disrupt” a rotten culture.

“The clean-out of a few at the top of what appears to be a profoundly unhealthy, unethical culture simply won’t cut it,” she said.

EY, Deloitte and PwC all issued statements acknowledging the release of the options paper and would engage with the process to strengthen trust in the profession. KPMG did not respond to a request for comment.

The Centre for Public Integrity welcomed the proposals and signalled its intent to advocate for aggressive reform, including breaking up the consulting and audit divisions of the big four.

Professional accounting body Chartered Accountants Australia and New Zealand welcomed the proposed changes as it seeks to keep its members accountable.

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