Major setback for KPMG in Australia: Confidential data scandal sparks Victorian government ban

KPMG Australia has stopped bidding for new Victorian government contracts as scrutiny intensifies over allegations that employees misused confidential client information to secure business.

According to media reports, KPMG will not participate in new Victorian government tender processes until September 30, while the state government reviews allegations of confidential data misuse.

KPMG will also withdraw from ongoing tender discussions, except where projects involve urgent requirements, unique capabilities or continuity of previously delivered services, Bloomberg reported.

A Victorian government spokesperson described the allegations as a “serious matter”.

“KPMG has agreed not to participate in new Victorian government tender processes while the show-cause process is under way, and to withdraw from current tender processes,” the spokesperson said.

KPMG confirmed that its Australian business had agreed to pause new bids for Victorian government contracts.

Millions of dollars in contracts at risk

The decision is a major setback for KPMG’s public sector operations, with the firm holding millions of dollars worth of government contracts.

According to government tender disclosures, KPMG has contracts worth about A$24 million with the Victorian government and is part of consortium arrangements involving larger projects valued at around A$195 million.

The firm will still be allowed to participate in some existing tender processes if they involve urgent requirements, specific expertise or continuity of essential services.

Recent Victorian contracts include a four-year agreement with the Education Department worth A$173,000 and a three-year A$107,000 contract with Ports Victoria.

KPMG faces wider government restrictions

The Victorian restrictions come after KPMG agreed to stop bidding for federal government work and contracts in the Australian Capital Territory, Western Australia, New South Wales and Queensland until at least September 30.

The Australian Financial Review reported that KPMG has also been barred from Victorian government contracts until at least October and has been asked to withdraw from ongoing contract discussions.

The firm is facing mounting financial pressure as it loses public and private sector work, with reports of possible job cuts and further reductions in partner pay.

KPMG Australia had already reduced partner pay by 20% for the previous financial year and is reportedly preparing to cut hundreds of jobs.

Former executive expelled

The restrictions follow KPMG’s admission that former chief operating officer Eileen Hoggett stored printed copies of confidential Lendlease board documents in her locker, shared them with colleagues and repeatedly lied about the matter.

The admission relates to one of the most serious allegations raised by a former employee, which KPMG had previously denied.

In response to Bloomberg queries, KPMG said newly appointed chief executive John Sams expelled a partner after new evidence showed confidential customer data had been kept in a locker at the firm’s Sydney office.

Sams told partners the conduct was “totally unacceptable” and said it was unacceptable that it took so long for the full truth to emerge.

Whistleblower allegations trigger major crisis

According to Reuters, KPMG has faced intense scrutiny from the Australian government and major corporate clients since whistleblower claims emerged in March alleging staff used confidential information to win lucrative audit contracts.

The scandal involves allegations that information from companies including Lendlease and Optus was shared among staff bidding for audit work involving major companies such as Westpac, Dexus and Telstra.

The crisis has triggered a leadership overhaul, with the former chief executive, audit head, chairman and several senior audit partners leaving the firm.

New CEO promises reforms

John Sams took over as chief executive after interim leader Stan Stavros was appointed following Andrew Yates’ resignation in May.

Sams said he was prepared to take difficult decisions to rebuild trust and address governance failures.

“I do not underestimate the task ahead but commit to our clients and people that I am prepared to be courageous, take the tough decisions and lead the changes we need to set us on the right path,” Sams said.

He added that the firm had significant work ahead on culture, leadership and governance.

“We have serious work to do on our culture, our leadership and our governance and it will take resolve and endurance,” Sams said.

Multiple investigations underway

KPMG is facing separate investigations from the Australian government, the Australian Securities and Investments Commission, the Tax Practitioners Board and Chartered Accountants Australia and New Zealand.

The Department of Finance had earlier raised concerns about KPMG’s handling of the allegations, saying it learned about some claims through media reports despite requesting direct communication.

The department warned that transparency failures could affect KPMG’s eligibility for government work before the firm was later restricted from federal contracts.

KPMG’s business faces pressure

KPMG employed about 9,000 people in Australia, including nearly 700 partners, in the financial year ending June 30 last year.

The firm reported revenue of more than A$2 billion ($1.4 billion), but the ongoing scandal has put pressure on its reputation, government contracts and relationships with major clients.

Long-time client Lendlease has said it will replace KPMG as its auditor.