KPMG Australia faces parliamentary grilling over misuse of confidential client information

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By Lin Lin

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First blowout of the day

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By Daniel Ziffer

There are an astonishing amount of witnesses to get through today... at least 38.

And that includes the re-call of KPMG Australia and KPMG International staff later in the day.

There was meant to be a break now at 9.30AM and we're blowing through that. Going to be a long day!

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Fines aren't a deterrent for misconduct by accountancy firms: O'Neill

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By Jason Dasey

Senator Deborah O'Neill has referenced a previous scandal related to a big four firm, as KPMG Australia's conduct is investigated by the parliamentary hearing.

Former PwC Australia CEO Tom Seymour resigned in 2023 over a massive government tax leak scandal, but was fined a mere $15,000 by Chartered Accountants Australia New Zealand.

Senator O'Neill said it was a laughable amount, given the struggles of everyday Australians.

But Ainslie van Onselen, CEO of Chartered Accountants Australia New Zealand, says her organisation is a private membership body that is powerless to inflict punitive fines.

Accountancy body 'concerned' that KMPG didn't call

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By Jason Dasey

Senator Deborah O'Neill asked Chartered Accountants Australia New Zealand about how it interacted with KPMG Australia when the allegations unfolded that the big four fim misused confidential information of its client, Lendlease.

Ainslie van Onselen, CEO of Chartered Accountants Australia New Zealand, revealed that she wasn't kept in the loop by KPMG Australia CEO Andrew Yates, who resigned last month,

O'Neill: "Does it concern you that Mr. Yates didn't bother to call you?"

Van Onselen: "Yes it does, Senator."

O'Neill: "What does that say about the culture of KPMG?"

Van Onselen: "What I think it says in relation to the individuals involved who were partners of KPMG, it's extremely serious conduct and I'm disgusted by it. It's basic 101 stuff. So in terms of ethics principles, Confidentiality of documents is 101."

KPMG re-cap: Lendlease 'they shouldn't have done that'

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By Daniel Ziffer

We've just heard from Lendlease CEO Tony Lombardo and chair John Gillham.

The construction giant has used KPMG to audit the books for 68 years. This scandal kicked off because confidential information from the company was misused by the consulting firm to try and win more work from other big companies.

Some of the key elements:

A failure of trust, according to Lombardo "They shouldn't have done that".

"Trust is crucial"

Chair John Gillham expanded:

"We've already taken a formal decision to change auditors. ... the question of trust is an interesting one. The capital markets, the debt markets, they all rely on [trusted information] ... it's right at the heart of how we act, this is a very disappointing set of circumstances."

They are stuck with KPMG to do this audit and probably the half-year one as well:

Gillham again:

"There's disruption and additional cost. There are thousands of good people in KPMG, let's be clear about that ... what's apparent is a few very senior people had a grave misuse of confidential [information]."

No-one in the current Lendlease audit is "anywhere near" the allegations of investigation, he says.

Finally, Lendlease has asked for more detail about the scandal and been denied. It wants documents relating to just itself, but KPMG is claiming 'legal professional privilege' for documents about Lendlease.

Lombardo: "They have not shared with us the documentation…"

Senator: "They denied you?"

Lombardo: "Yes Senator we have asked that question and they have denied"

BHP warns potash project in Canada will cost much more than first expected

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By Lin Lin

The mining giant now expects total investment for Stage 2 to be US$6.9 billion, up from its original estimate of US$4.9 billion. It will start producing towards the end of 2031.

In a release issued after markets closed yesterday, BHP said the increase is mainly due to inflation in construction labour and materials, as well as a more detailed review of the project's scope and schedule.

BHP says it still expects the project to deliver long-term value, with Jansen Stage 2 forecast to produce about 4.36 million tonnes of potash a year once ramped up.

But the higher costs mean BHP expects to take an impairment charge of about US$2.3 billion on its investment in the project.

'Unauthorised access is very concerning'

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By Jason Dasey

Next up at the parliamentary hearing are four representatives of Chartered Accountants Australia New Zealand.

Its chief executive officer Ainslie van Onselen says the organisation is "very deeply disappointed and frustrated" at the alleged behaviour of KPMG Australia.

She says confidentiality of audits is "non negotiable" and "unauthorised access is very concerning", adding she is "disgusted".

Ms van Onselen added that 12 active investigations were underway, including three that came from self reporting by KPMG partners .

'Documents were misused': Lendlease

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By Jason Dasey

Lendlease CEO Tony Lombardo was asked at the parliamentary hearing about his current view of the culture and ethics of KPMG Australia.

"It's disappointing to be in this sitatuion to have documents that were misused," Mr Lombardo said.

"We had a trusting relationship with our auditor, but this creates a lot of questions."

Earlier, chairman John Gillam was probed about allegations that KPMG breached trust and confidentiality.

"I think we had the same expectation as any company of its auditor that they will do their job to the best of their professional abilities, and they will observe, without fail, the confidentiality that they are of the access to the books and records that they must have," Mr Gillam said.

Wall Street closes the shortened trading week in the green

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By Lin Lin

Housekeeping note that US markets will be closed on Friday for the Juneteenth holiday.

That means Wall Street has wrapped up what has been a consequential week for markets as investors processed Middle East developments and a hawkish pivot from new Federal Reserve chair Kevin Warsh.

US stocks closed out the week in positive territory. The S & P 500 gained 0.9% for its 11th week in the green from 12. The Dow Jones advanced 0.7% for the week, while the Nasdaq jumped 2.4%.

'Fundamental breach of trust': Lendlease

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By Jason Dasey

Lendlease chairman John Gillam is talking about the timing of when the company will change auditors.

He's already said that Lendlease won't use KPMG Australia for its future audits.

Mr Gillam has described the alleged behaviour against KPMG as "a fundamental breach of trust" and "a grave misuse".

He says the change of auditors will take place as quickly as possible, with a provider "untainted by this" scandal.

"We are deeply discontented with that behaviour," he said of the allegations against KPMG Australia.

Lendlease won't use KPMG for its audits in future

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By Jason Dasey

Proceedings are underway now in Canberra for the Parliamentary Joint Committee on Corporations and Financial Services hearing investigating allegations against KPMG Australia.

To start things off are two senior leaders from Lendlease.

Lendlease CEO Tony Lombardo and its chairman John Gillam are the first of around 30 witnesses to appear at today's hearing.

The construction giant has been at the heart of the damaging allegations against KPMG.

Mr Gillam says Lendlease won't use KPMG for its future audits.

"We've already taken a formal decision to change auditors. and we've advised our security holders of that via an ASX release. We've advised ASIC, we've advised KPMG," Mr Gillam said.

In 2024, a KPMG whistleblower raised concerns with the firm's senior leadership team hat confidential board papers from Lendlease were used to pitch for and win audit contracts from other firms, including Westpac and Dexus.

ASX futures lower, but Wall Street rebounds

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By Lin Lin

Is it possible to offer some sort of explanation or comment as to why the ASX would point to a reduction on the opening when overseas influences point to an increase in the ASX. Futures traders seem to see something that others may not.

- Colin

Good morning Colin, thanks for the question.

My take is that the US rally wasn't as broad-based as the headline numbers might suggest. The Dow, which is made up of a wider mix of industrial and consumer companies, was only modestly higher, while the bigger gains came from the tech-heavy Nasdaq and, to a lesser extent, the S & P 500.

The ASX simply doesn't have the same exposure to those large technology/chipmaker names that drove Wall Street higher.

Instead, Australia's market is much more heavily weighted towards banks, miners and energy companies.

With commodities such as oil and gold softer, and no equivalent tech sector to drive gains, that might be one contributing factor as to why ASX futures are pointing lower this morning.

IPO hype can fade fast: Morningstar

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By Lin Lin

Morningstar's market strategist Lochlan Halloway said in his note that the buzz around SpaceX’s market debut had echoes of Guzman y Gomez in 2024, perhaps the highest-profile IPO on Australian shores in recent memory.

The Mexican fast-food chain surged after listing in 2024, but the share price has since fallen sharply from its highs, as sales momentum slowed and investors reassessed its growth story.

He noted that the lesson is that a successful IPO does not always make a good long-term investment.

The Guzman float had all the ingredients to make it pop: a compelling founder with skin in the game, scarcity, retail excitement, and evidence of growth. SpaceX had all this too, and enjoyed a similarly stellar start to life as a listed company.

But what makes a successful IPO does not necessarily make a good long-term investment.

His analysis of 650 Australian IPOs over the past decade found newly listed companies often enjoyed strong first-day gains, but that enthusiasm could fade quickly. By six months after listing, the median IPO was down almost 20 per cent from its offer price.

When it comes to SpaceX, they are focused on valuation based on the fundamental analysis of the business, rather than some function of momentum, liquidity or sentiment.

We think the stock is worth US$63, and if we’re right, then at today’s price of roughly US$200, your money is better invested elsewhere. And looking through our numbers, I’d hardly call us “pessimistic” on SpaceX’s prospects. Maybe we don’t value it as richly as Elon and the market, but our fair value estimate still implies a forward price-to-revenue multiple of 30 times. Price-to-revenue!

'Accountants being held accountatable'

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By Jason Dasey

Who ever said the life of an accountant was a boring one, only about numbers?

The Parliamentary hearing into explosive allegations against KPMG Australia certainly blows that premise out of the water.

The ABC's Chief Business Correspondent Ian Verrender references Monty Python as he digs deeper into the claims against one of the Big Four consultancy firms.

Read more here, ahead of today's Parliamentary hearing, which is due to begin very soon:

Defiant KPMG ahead of Senate hearing

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By Jason Dasey

The Parliamentary hearing into allegations that KPMG Australia misused confidential client information will begin in a few minutes time, but already there's been a dramatic development.

Ahead of the hearing, KPMG has decided not to comply with a parliamentary committee order to hand over documents related to its data misuse allegations.

"We appreciate that this is not the response the committee was seeking," KPMG chairman Martin Sheppard wrote in a letter tabled by Labor's committee chair. Deborah O'Neill.

The committee will hear from 13 current and former KPMG partners along with executives from Lendlease, Ashurst, Allens and the Australian Securities and Investments Commission after explosive allegations from a whistleblower.

The firm initially denied most of the allegations, but has apologised to the whistleblower and is now conducting a fourth investigation. It has conceded three occasions where client data was misused, but claims the material accessed was insignificant.

The allegations have forced out KPMG Australia chief executive Andrew Yates and former head of audit Julian McPherson, while chief operating officer Eileen Hoggett stepped down from her leadership role.

This is shaping as a dramatic day in Canberra.

KPMG Parliamentary hearing kicks off today

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By Lin Lin

Big Four consulting firm KPMG Australia is facing a public grilling in Canberra today, as parliamentarians examine allegations around the misuse of confidential client information.

More than 30 people are expected to give evidence, including current and former senior KPMG personnel, clients, lawyers and board members.

The hearing follows allegations KPMG misused confidential information from property developer Lendlease to help win work with other major corporate clients.

KPMG has acknowledged its handling of a whistleblower and its own investigation into the allegations fell short of the firm’s standards.

The hearing is scheduled to run 8:15am-6:30pm AEST.

Key KPMG witnesses are scheduled for 9:45am-1:15pm.

My colleagues at the ABC business team will be keeping across the developments throughout the day on the blog and across ABC platforms.