Kristin Stubbins - Acting Senior Partner

Tracey Kennair - Chair, Board of Partners

PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay
Barangaroo, New South Wales, 2000
Australia

19 May 2023

Re: Notice of Proposed Actions under the PwC IL Regulations

To: PricewaterhouseCoopers

I write as the Global General Counsel and Secretary of PricewaterhouseCoopers

International Limited (“PwC IL”), on behalf of the Network Leadership Team (the “NLT”),
to provide formal notice under the PwC IL Regulations of the following determinations
relating to PwC Australia (the “Firm”) and resulting required actions.

The Firm’s actions and omissions in relation to matters currently under review by the
Australian Senate Finance and Public Administration References Committee (the “Senate
Inquiry”), particularly in light of the history of related matters and the handling of those
matters, have caused a breakdown of trust and confidence in the Firm and significant
damage to PwC’s reputation. As such, the NLT has determined that the Firm is a
Defaulting Firm under PwC IL Regulation 21.1(A) and that, as a consequence, remedial
actions need to be taken. This letter summarizes the reasons for the NLT’s determination
along with the immediate next steps that the NLT believes are necessary to seek to
address the matters giving rise to the determination.

The NLT’s determination is based on the following:

x Historical behavior across a number of matters has caused an erosion of trust and
confidence in the Firm and damage to PwC’s reputation:
o Over the course of the past several years, the Firm has been responding to
various inquiries and claims relating to certain of the activities and practices
of its TLS business, including inquiries from the Australian Tax Office (ATO),
promoter penalty proceedings, claims of false statements relating to

PricewaterhouseCoopers International Limited

300 Madison Avenue, New York, NY 10017, T: (646) 471 3000, F: (813) 286-6000
PricewaterhouseCoopers International Limited is registered in England number 3590073.
Registered Office: 1 Embankment Place, London WC2N 6RH.
 assertions of attorney-client privilege, findings of confidentiality breaches and
inadequate identification of conflicts of interest by the Tax Practitioners
Board (the “TPB”) and other matters (collectively, the “Tax Matters”);
o In addition, a series of public hearings and disclosures have shed light on the
Firm’s involvement in consulting engagements that have been beset by poor
risk management practices, evidenced gaps in professional judgment and
exposed the Firm to further public scrutiny and criticism (collectively, the
“Consulting Matters”). These include, among others, a matter in which the
Firm was engaged by a government agency to evaluate a tax recovery practice,
determined that the agency had overstated the benefits of the practice and
then allegedly acceded to the agency’s request not to produce a critical report
(while still collecting its engagement fees);
o The Consulting Matters and Tax Matters, in particular the TPB matter, have
now become the focus of the Senate Inquiry and intense public criticism of the
Firm;
o The Firm made public statements that improperly downplayed the severity of
the TPB matter and minimized the significance of the underlying behaviors,
which have given rise to significant adverse media, both domestically and
globally;
o Evidence produced to the TPB and publicly released in the Senate Inquiry
indicates that members of the Firm’s leadership had information that should
have caused them to question the conduct of the partners involved but that
they did not do so. The publication of this evidence and the Firm’s public
response have further eroded trust and confidence in the Firm;
o The Firm’s public response to recent disclosures also must be considered
against the back-drop of earlier representations made by the Firm in response
to notice of behavior and culture issues. In 2020, after a series of contentious
reviews and a promoter penalty proceeding by the ATO, the Firm received
findings from the ATO that the behaviors of its tax practice were concerning
and that those behaviors indicated that “PwC was primarily concerned with
expanding its market share and winning new work,” with “no contemplation
to engaging with our office around contentious structures being proposed in
response to the introduction of the MAAL provisions”. In response to these
findings, the Firm commissioned a review and put in place a series of process
changes. In connection with that review, (See March 2021 Quigley Report at
21), it was noted that the Firm would need to demonstrate that positive
behavioral and cultural changes have been made. The Firm’s public
statements about the TPB matter, which relates to the same underlying period
and conduct, reflect a failure to demonstrate the cultural change that it
committed to two years ago; and
o In addition, in responding to media and other inquiries relating to these
matters, the Firm failed to work collaboratively with and keep Network

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 leadership apprised of relevant facts and circumstances, thereby hampering
the Network's ability to respond.

x Based on a review of the information available relating to these matters and the
Firm’s response to them, it is apparent that:
o The Firm failed to undertake an appropriate root cause analysis to understand
the reasons for the behaviors in these matters and identify meaningful
remediation steps;
o The Firm did not conduct adequate investigation of the underlying behaviors
in order to assess accountability, nor did its Ethics leader or others in
leadership or governance of the Firm identify the need to address behaviors
that did not live up to our Code of Conduct or values where those behaviors
arose in connection with practice matters
o As a result, there has been little to no accountability for the actions and
inactions of those responsible for these matters, and the actions that have
been taken were unduly delayed;
o There has been inadequate focus on identifying and addressing actual or
apparent conflicts of interest and sensitive situations and inadequate
attention to building and maintaining an ethical culture; and
o There has been inadequate disclosure to and consultation with the Network.

We believe that these matters also have materially prejudiced or are likely to materially
prejudice the objectives of the PwC Network in Australia. In addition, the Firm’s acts and
omissions have exposed multiple member firms and clients across the network to potential
risk and reputational harm.

The Firm has taken certain steps to respond to the above failures, including requesting that
Tom Seymour step down as Senior Partner, appointing a new Acting Senior Partner,
removing two other senior leaders from the Executive Board and appointing Tony O’Malley
to serve as Chief Risk and Ethics leader. The Firm also has taken or committed to take
various other steps in responding to legal and regulatory proceedings relating to the Tax
Matters and in response to the TPB matter and Senate Inquiry, and it recently appointed
Ziggy Switkowski AO to lead an independent review of the Firm’s governance, accountability
and culture and make recommendations. Given the ongoing reputational damage and the
severity of the breakdown of trust and confidence in the Firm, as well as the acknowledged
need for improvements in governance, accountability and culture, Network investigation,
monitoring and supervision is deemed necessary.

Remedial Actions
Pursuant to Regulation 21.1, the NLT may impose “whatever Remedial Action it deems fit
upon a Defaulting Firm.” The NLT has delegated authority to the Network Chairman and
members of the Global Leadership Team (“GLT”) to design remedial actions to address the

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matters identified above, prevent their recurrence and resolve the breakdown in trust and
confidence arising from the Firm’s actions and omissions (including the failures described
above). As of this time, the remedial actions below are required.

1. Cooperation with Network Investigation: The Network has retained counsel

and commenced an investigation relating to the above matters. Pursuant to
Regulation 20.2 (E) the Firm shall promptly make available all documents,
information and assistance reasonably required in the investigation. As has been
discussed, we will coordinate this investigation with Tony O’Malley and Meredith
Beattie.

2. Network Representative : A Network Representative is necessary to work with the

Firm and monitor certain areas in order to ensure that the Firm is responding
appropriately to the matters addressed in this letter and to the broader loss of trust
and confidence and reputational damage that is ongoing in the market and in the
Network. The Network Representative will be an advisor to the Acting Senior Partner
and serve as Network monitor with respect to the Remedial Actions required by this
letter. The Firm is required to cooperate with the Network Representative, which
includes, among other things, cooperation in responding to all information requests
made by the Network Representative or by other members of the GLT on behalf of the
NLT. Among the matters to be monitored and reviewed by the Network
Representative are the various commitments to remedial action made by the Firm in
connection with the Tax Matters, the Consulting Matters, the Senate Inquiry and the
actions taken with respect to those commitments; decisions relating to the Firm’s
ongoing response to the Senate Inquiry and other related matters; the independent
review of governance, accountability and culture and resulting recommendations; and
significant decisions relating to the leadership and governance of the Firm as
described below. The Network intends to identify a single individual, who will be
responsible to the NLT and for coordinating with the GLT, to serve in this role. In the
interim, we will identify the person(s) who will serve as the Network Representative
and update the designation as needed.

3. Network Participation: The Firm shall include the Network Representative in all
meetings of the Firm’s Executive Board. In addition, the Firm shall include the
Network Representative on the steering or other oversight committee for any projects,
programs, or other reviews or initiatives that the Firm has commenced or may
commence that arise out of or are related to the Tax Matters, the Consulting Matters,
the Senate Inquiry, other related matters and associated events, and related reviews of
governance, accountability and culture (e.g., Project North). The Network
Representative shall be a full member of any such committee and given full
participatory rights as all other members. In addition, the Network Representative

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 will be consulted with respect to decisions relating to the matters at issue in the
Senate Inquiry or the response to the inquiry.

4. Financial Matters: The Firm will consult with the Network Representative relating
to material financial matters outside the ordinary course of business, provide the
Network Representative with information on its quarterly financial results and
consult with the Network Representative on decisions on reserves or provisions
relating to the Tax or Consulting Matters or related potential liabilities.

5. Accountability Decisions: All decisions relating to the accountability of

individuals for the matters under review in the Senate Inquiry and related matters,
the Network investigation or the governance, accountability and culture review, and
the related consequences to be imposed, must be reviewed by and agreed with me and
the Network Representative.

6. Substantive Decisions Affecting Firm Leadership, Partners or

Governance: The Firm shall consult with the Network Representative regarding
any substantive decisions that affect firm leadership, personnel or governance,
including but not limited to the appointment or removal of leaders or governance
representatives and the hiring of external parties to partner-level roles relating to the
TLS or public sector businesses. The Firm shall not implement any such decisions
until agreed by the Network Representative.

7. Communications and Media Inquiries: The Firm shall cooperate with PwC’s
Global Corporate Affairs and Communications group in preparing communications or
talking points or conducting webcasts that relate or refer to the Tax Matters, the
Consulting Matters, the Senate Inquiry and other related matters; the results of the
independent review of governance, accountability and culture and resulting
recommendations; and significant decisions relating to the leadership and governance
of the Firm (the “Topics”). The Firm shall not issue or distribute any such
communications until the Network Communications Leader and the Network
Representative have reviewed and approved.

8. Regulatory Submissions: The Firm shall not provide to any regulator or other
governmental or legal authority any formal, significant or substantive submissions or
responses (whether oral or written) regarding any of the Topics until the Network
Representative and I have reviewed and approved the materials.

9. Updates to the Network: The Firm and the NLT, or its designated persons, shall
meet on a monthly basis (or any other period that the Firm and the NLT agree on) by
video conference. The Firm and Network Representative shall provide monthly
updates regarding the status of the matters described herein and on any other topics
identified by the Firm or the NLT.

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 10. Interim Measures: In order to protect the reputation of the PwC Network and
avoid further prejudice to the objectives of the PwC Network in Australia during the
pendency of the Supervised Remediation, certain interim measures are necessary:

a. The Network will appoint a Governance Advisor to assist the Board of Partners
in its oversight role. Once appointed, the Governance Advisor will work with
the Board of Partners to agree the best approach to the Advisor’s participation.

b. As a matter of best practice, the General Counsel should be a member of the

Executive Board, reporting to the Senior Partner, and the General Counsel or
her designee should attend all meetings of the Board of Partners. It is our
understanding that the Firm has not followed this practice. Recognizing that
the independent review of governance, accountability and culture will produce
recommendations on the Firm’s overall governance approach, as an interim
measure the Firm should implement this practice.

c. The Network Representative may also identify additional necessary interim

measures including, but not limited to, those relating to leadership,
management positions and scenario planning, and, if so, shall notify the Firm
of such measures and agree an implementation timeline.

The expectation is that the Firm and the Network will work expeditiously and in good faith to
agree on a remediation plan addressing the above matters

Pursuant to Regulation 21.1(B), all costs and expenses including costs for the time incurred
by representatives of the Network, including the Network Representative, the Governance
Advisor and other PwC member firms in completing the remediation are to be borne by the
Firm.

The NLT will assess the need for additional remedial measures based on reports from the
Network Representative of the Firm’s progress and compliance with the requirements of this
letter.

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If the Firm is unwilling to accept a Network Representative, a Governance Advisor and the
terms of this letter, it must inform me, as the NLT’s designee, in writing by no later than
Tuesday, May 23, 2023. In that event, the NLT will recommend to the Global Board
appropriate actions to protect the PwC Network including potentially the suspension or
removal of Territory Senior Management in accordance with Regulation 22 and/or cessation
of the Firm’s membership in the PwC Network pursuant to Regulation 23.

Yours sincerely,

Diana Weiss
Global General Counsel

cc: Bob Moritz

Carol Stubbings
Kevin Burrowes
Lisa Sawicki

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