New KPMG chair under fire over ‘false’ whistleblower claims

Incoming KPMG chairman Michael Ebeid has been forced to apologise just hours into his tenure, after emails emerged in which he described a Senate speech that brought whistleblower allegations against the firm to light as containing “completely false” information.

On Thursday, the parliamentary committee looking into the scandal released an email from Ebeid to other KPMG board members sent just after Labor senator Deborah O’Neill’s March speech publicising the whistleblower’s allegations that the firm had misused confidential audit information.

“As we know well, many of the statements she makes are completely false including the timeline of events and that he had raises (sic) all these Whistleblower issues before he entered the HR process to exit the firm, which falsely makes it look like retaliation,” Ebeid said in the email dated March 25.

When Ebeid’s appointment as chair – which still needs to be formalised – was publicly confirmed on Thursday morning, he said he would “would make integrity central to everything we do, and drive the cultural and governance reforms.”

On Thursday afternoon, Ebeid was forced to make an apology, saying he was not aware of the full facts when he sent the email and now recognised the gravity of the whistleblower’s claims and the shortcomings of KPMG’s response. “From what I now know and the information I have been provided since that time, I would not have written that email and am sorry for sending it,” he said.

Greens senator Barbara Pocock, who is on the investigating committee, said: “Appointing Mr Ebeid to ‘independent chair’ at KPMG Australia is KPMG’s version of a ‘cleanup’. This is hard to take seriously.”

It added to an eventful week for KPMG that included its Sydney headquarters being forced into lockdown on Wednesday over a threat from an employee.

“KPMG was advised late yesterday morning that a staff member had made a threat and immediately implemented emergency response procedures,” a spokesman said. “We were advised around midday that the individual was under police care and updated staff that the potential threat had been resolved.”

A NSW Police spokesman said: “The person was dealt with under mental health and there is no further police action required.”

The incident was first reported by Instagram page The Aussie Corporate. The nature of the employee’s threat or its motivation is unclear.

KPMG said Ebeid’s appointment was the first step under the action plan unveiled last week to address integrity issues.

“I have agreed to take on this role because I believe in and respect KPMG. Despite the challenges the firm is facing, my resolve to support its important work is even stronger. I believe KPMG can recover, rebuild and emerge a better firm,” Ebeid said.

“My mandate is to strengthen independent oversight, make integrity central to everything we do, and drive the cultural and governance reforms needed to build confidence.”

Ebeid, who has been on KPMG’s Asia-Pacific board since last year and is a former boss of SBS, said his immediate priority was to appoint a new chief executive after former boss Andrew Yates was forced to resign over the whistleblower scandal.

“The new CEO appointment is a critical next step,” Ebeid said.

“We are adding an independent selection panel and working with external agencies, including Riverstone Associates and Korn Ferry, on executive succession. I expect the board to confirm the new CEO before the end of July.”

There is no suggestion Yates or Sheppard were involved in any misconduct, only that partners at the firm were unhappy of their handling of the whistleblower allegations.

KPMG also responded to the huge changes being proposed by the federal government on Wednesday to deal with the industry’s cultural problems, which could include forcing the consulting giants to spin off the audit services that are the core of their business, and slashing the number of partners allowed to as few as 400.

KPMG said it has been “actively engaging in the Treasury review process and will continue to work constructively with government and industry as the options paper progresses”.

“KPMG continues to support reforms that strengthen governance, transparency, auditor independence, firm-level regulatory oversight and public confidence in the profession,” a spokesman said.

The changes being considered were first proposed following the PwC tax scandal but progress stalled until KPMG’s current scandal came to light in March this year.

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