Former KPMG partner’s foggy memory a ‘misjudgement’, apologies ‘flying around’

Former KPMG partner Eileen Hoggett revealed to the Parliamentary Joint Committee on Corporations and Financial Services at the KPMG ethics and accountability public hearing on Friday (14 August) that following her expulsion from the firm’s partnership, she did not receive her annual leave, long service leave, or any retirement benefits.

“Expulsion means that I get no entitlements. So I don’t get my accrued annual leave, I don’t get the retirement payment which I contributed to as a partner for 21 years, and I did not get paid for the last month up until the date of my expulsion,” Hoggett said.

“So, [it is a] significant financial penalty.”

This is despite her former colleagues, former partner of audit and assurance Kim Lawry and former national managing partner of audit and assurance Julian McPherson, telling the committee that they would be receiving entitlements in line with the firm’s retirement agreement following their voluntary retirement by the end of this month.

Senator Paul Scarr noted that Hoggett is the first partner to have been expelled in the firm’s history. This followed Hoggett’s 33-year tenure with the firm from her start as a 20-year-old graduate.

“I’m trying to ascertain why the firm took this particular action with regard to me based on one conduct matter,” Hoggett said.

“I’ve never had a conduct matter. It seemed that there was not an opportunity for me to engage with the firm around the action that they took against me.”

“I’m focused on my outcomes, not the outcomes of other partners … I’m looking at all possibilities to explore that further,” Hoggett told the committee.

At the hearing, Hoggett said that she did not recall printing out the Lendlease documents and putting them in her locker, despite saying that no one had access to her locker except for her executive assistant.

“I don’t actually recall printing those documents and storing them in my locker,” she said.

“I don’t believe my PA would ever give access to my locker without my authority.”

“In recent weeks, I have been made aware of new evidence, which has caused me to recognise that some of my previous recollections, and therefore some of the answers I gave in interviews, were not accurate. I am truly sorry for that,” Hoggett said in her opening statement.

“I have racked my brain ever since you stood up in Parliament and talked about the locker. Trying to reconcile that comment with my recollection, I didn’t recall that. This is … a misjudgement, and this is not what my clients, our firm or I expect of myself,” Hoggett told Senator Deborah O’Neill.

“There are a lot of apologies flying around; you don’t need to apologise to me or to us,” O’Neill said to an apologetic Hoggett at the hearing.

Ex-KPMG Australia chair admits process failure in audit scandal

The former KPMG Australia chairman has acknowledged that the “end-to-end” processes implemented in the investigation of whistleblower allegations of audit misconduct did not deliver the required outcomes.

Martin Sheppard appeared at the Parliamentary Joint Committee on Corporations and Financial Services last week (14 August) for the oversight of ASIC, the Takeovers Panel, and the corporations legislation. The hearing is scrutinising the accounting firm’s ethics and professional accountability over its audit practices and the treatment of whistleblowers who disclose misconduct within the firm.

During the hearing, Greens Senator Barbara Pocock questioned each partner on whether they individually accept responsibility for the initial investigation of the whistleblower’s allegations being “essentially completely inadequate” and “very, very far from robust”.

The question was particularly pertinent as Senator Deborah O’Neill pointed to a “pivotal” email written by former chief operating officer Eileen Hoggett to her personal assistant, where she refers to the confidential documents relating to the Lendlease audit, which were retained in a locker at KPMG’s Sydney office.

The email from May 2023 said: “I think we confidently allow him to look at the printed version in my locker when he [director on the Lendlease audit] is back in Sydney. He needs to do it sensitively without letting too many people know [smiley face emoji].”

O’Neill said this email has “contradicted a long denial that there was the sharing of confidential information”.

Given the disclosure that this email proof was available in the records as the investigation unfolded, Pocock asked the former partners how they view their leadership in relation to the long period of time the public has waited to know what really happened at KPMG Australia.

Sheppard responded by referring to an announcement on 30 May where he apologised to clients and others “that this process had taken too long and hadn’t got to the nub of the issues quickly enough, that we hadn’t given enough attention to issues raised by the whistleblower”.

“I stand by all of those today,” Sheppard said, adding that he listened with interest to the perspective of their clients like Westpac, Macquarie Group, Optus, and Dexus, who also appeared at the hearings.

“Frankly, I don’t disagree with their perception of things. I think end-to-end, our processes didn’t deliver the outcome that we needed to. As the chair of the board, I have had a governance responsibility for that overall, even though I wasn’t part of the subcommittee that had carriage on it, but I absolutely had that responsibility. I think with the benefit of hindsight, there were lots of things along that process which needed to be better.”

Sheppard also admitted that there is a “difficult tension” between partner-directors and independent directors on the firm’s board. He said he has always “grappled” with the challenge around the fact that there is no framework that governs partnership. Instead, he said, “the overriding instrument that the partnership is beholden to is the partnership agreement”.

“By virtue of that construct, as with the law firms, the senior partner or chair has been the primary governor of that instrument. I do feel that the professions work hard over many years to try and bridge that gap, anticipating what might be better,” Sheppard said, noting that the firm has tried appointing independent directors.

He added that the move by KPMG Australia to appoint an independent chair and have independent representation on the board is a “step in the right direction”.

“But I would make the point that there still is no clarity around what the governing body of the profession is,” he said.

O’Neill retorted that she will never be able to hear the word “independent” in the same way again after what she called the “abuse” of the term and given the allegations levelled against the accounting firm by the whistleblower.

Greens senator calls for regulatory reform at the big four accounting firms

Following the hearings, Pocock slammed KPMG leaders in a statement for being “gold class exemplars” of greed trumping ethics at every turn, and said KPMG is “morally bankrupt”. She added that the hearing reinforced the case for a major revamp of governance, regulation, surveillance, and penalties at the big four accounting firms.

“The big four’s governance is a farce. They have lost their social licence, and they cannot be trusted. Self-regulation has failed. It is time for root and branch structural reform,” Pocock said.

“Labor needs to put an end to their special treatment on board rules and regulation, tax, public reporting, professional liability, and whistleblower protections. The government must review all contracts with KPMG and ban them from government work. They must break up and regulate the big four, and increase penalties for dishonest behaviour and ethical failures.”