KPMG to identify ‘off the books’ whistleblowers post-hearing

As industry bodies call on the government to protect people who speak up and strengthen whistleblower protections at large firms, Senator Deborah O’Neill asked KPMG Australia’s new CEO John Sams to examine records and identify on how many occasions former CEO Andrew Yates engaged James McClelland – executive director and deputy counsel in the KPMG Office of General Counsel – to undertake investigations of whistleblower allegations without scrutiny from the board or the senior general counsel.

The calls were made at the recent Parliamentary Joint Committee on Corporations and Financial Services on the ethics and professional accountability at KPMG.

It followed “very emotional testimony” by McClelland, who was taking instructions from Yates around the internal investigations being carried out by KPMG Australia into whistleblower allegations of misconduct in the firm’s audit practices.

In his testimony at the hearing, McClelland expressed regret over the June 2024 internal report that initially dismissed the allegations made by the whistleblower.

McClelland also commented on the “nature and tenure” of the emails sent to the whistleblower on instruction from the firm. He apologised for file notes that were critical of the whistleblower, including one that claimed he was “seeking to throw mud at people” and “we want to be strong and firm”.

Earlier in the hearing, the former KPMG partners were ordered to disclose any payments made to whistleblowers over the past decade.

McClelland commonly used for investigations

O’Neill asked Yates if it was a common strategy to engage the deputy general counsel in such investigations and if he had previously employed this strategy. She added that there is no documentation that verifies that the firm ordered an investigation.

Yates admitted that McClelland had undertaken investigations of this nature before. However, when O’Neill asked how many whistleblower investigations were managed in this way, Yates refused to necessarily charactise all of them as whistleblower matters.

“We have a range of these matters… that move from whistleblowers through to HR matters. It was very common for Mr. McClelland to be the investigator,” Yates said.

Yates rejected O’Neill’s assertions that McClelland was always under his instructions and said he would investigate HR matters that might be directed by the HR department. However, O’Neill insisted that in this specific matter, McClelland was indeed under Yates’ direction.

Furthermore, O’Neill pointed out that the investigations stopped when the whistleblower signed and returned the settlement deed, and this was backed by former chair Martin Sheppard. She said a message was sent to the independent directors that “don’t worry, it’s all done. He signed the deed. That brings that matter to the end”.

“Was it just a nice, clean way for the two of you to finish it all off?” O’Neill said.

Yates said: “Absolutely not. This took up an inordinate amount of our time all the way through 2025, including the first half of 2025, largely by the amount of communication we were receiving.”

O’Neill fired back that this was only because the whistleblower was persistent in pursuing his allegations, and “was smart enough to figure out that he needed to keep going if he was actually going to get whistleblower status, because you refused to give it to him”.

Yates grilled on failure to investigate emails

At the hearing, Senator Paul Scarr recalled to Yates that McClelland “raised his disappointment (actually that understates it) with respect to the responses given to him by the partners who we interviewed”.

Furthermore, Scarr recalled, McClelland also said that (as per his understanding of McClelland’s evidence) he believed that having conducted those interviews, the next step would be to examine the emails and proceed to subsequent steps.

“He said that he then had a discussion with you, and the instructions were ‘just hold off, don’t go to that next step’. I want to give you an opportunity… what’s your recollection?” Scarr asked Yates.

Yates responded that he was “surprised” to hear that testimony by McClelland, stating that, as per his recollection of that period of time, when the document was found, he asked McClelland to commence an investigation immediately.

As for the scope, Yates said his only recollection of any conversation from him around scope was to not interview junior staff because “I felt that would be intimidating to those younger people in the firm”.

“Other than that, I have no recollection of limiting any scope,” Yates told Scarr at the hearing.

“In my mind, Senator, the investigation never really closed because we continued to get communication from the whistleblower on an ongoing basis, and it was not something I would normally do to manage the scope of investigation,” Yates said.

“That we continued to try and understand the great complexity that I found in this was that the facts kept moving, and it was very difficult, I found, to understand exactly what we were dealing with.”

Scarr pressed Yates further on why he did not insist and instruct McClelland to engage in a forensic examination of emails, which would have ultimately uncovered the evidence presented at the hearing.

Yates said: “Like I’ve said numerous times in these processes, if I had my time again, I would do that. That is why, ultimately, I took accountability for the shortcomings in the process.”

Yates also said ordering a forensic examination of emails was not something he would typically do when asking for an investigation to be undertaken, adding that he was not the “driver” of the scope for the investigation.

O’Neill retorted that she would beg to differ on this point.