Embattled firm sent into lockdown on day new CEO Michael Ebeid is announced
Updated ,first published
KPMG’s incoming chairman, Michael Ebeid, was forced to apologize just hours after he took office after emails emerged describing his Senate speech that brought to light whistleblower allegations against the company containing “completely false” information.
On Thursday, the parliamentary committee investigating the scandal released an email Ebeid sent to other KPMG board members shortly after Labor senator Deborah O’Neill spoke in March announcing allegations that the whistleblower had misused confidential audit information.
“As we know full well, many of the statements he made, including the timeline of events, are completely false, and he raised all of these Whistleblower issues before going through the HR process to exit the firm, which falsely makes this look like retaliation,” Ebeid said in his March 25 email.
When Ebeid’s appointment as chairman – which still needs to be formalized – was publicly confirmed on Thursday morning, he said he would “put integrity at the heart of everything we do and drive culture and governance reforms”.
On Thursday afternoon, Ebeid was forced to apologize, saying he was not aware of all the facts when he sent the email and that he now understood the seriousness of the whistleblower’s allegations and the shortcomings of KPMG’s response. “Based on what I know now and the information that has been provided to me since then, I would not have written that email, and I regret that I did,” he said.
Greens senator Barbara Pocock, who sat on the inquiry committee, said: “Appointing Mr Ebeid to the ‘independent chairmanship’ of KPMG Australia is KPMG’s version of ‘cleansing’. It is difficult to take this seriously.”
This adds to a busy week for KPMG, which has included its Sydney headquarters being quarantined on Wednesday due to a threat from an employee.
“KPMG was notified late yesterday morning that a member of staff had made a threat and immediately implemented emergency response procedures,” a spokesman said. “Around noon, we were told the individual was in police custody and staff were informed that the potential threat had been resolved.”
A NSW Police spokesman said: “The individual’s mental health issues have been dealt with and there is no need for further police intervention.”
The incident was first announced on the Instagram page Australian Corporate. The nature or motivation of the employee’s threat is unclear.
KPMG said Ebeid’s appointment was the first step under an action plan announced last week to address integrity issues.
“I agreed to take on this role because I believe in and respect KPMG. Despite the challenges the firm faces, my determination to support its important work is even stronger. I believe KPMG can recover, rebuild, and emerge a better firm,” Ebeid said.
“My role is to strengthen independent oversight, put integrity at the heart of everything we do, and promote the cultural and governance reforms needed to build trust.”
Ebeid, who has been on KPMG’s Asia-Pacific board since last year and is the 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 whistleblowing scandal.
“Appointing a new CEO is a critical next step,” Ebeid said.
“We are adding an independent selection panel and working with external organizations, including Riverstone Associates and Korn Ferry, on executive succession. I expect the board to approve the new CEO before the end of July.”
There is no allegation that Yates or Sheppard were involved in any misconduct, only that partners at the firm were unhappy with how whistleblowers were handling their allegations.
KPMG also responded to major changes proposed by the federal government on Wednesday to tackle the industry’s cultural issues; These could include forcing consulting giants to divest auditing services that are core to their business and reducing the number of partners allowed to as few as 400.
KPMG said it was “actively involved 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 in the wake of the PwC tax scandal but progress stalled until KPMG’s current scandal came to light in March this year.
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Colin Kruger is senior business correspondent for the Sydney Morning Herald and The Age newspapers.Connect via email.
