Public Statement regarding EY’s Enforceable Voluntary Undertaking with the ATO in relation to a former EY Partner

Earlier today the Federal Court made orders varying the suppression order that prevented the naming of EY in relation to the Commissioner of Taxation's (Commissioner) proceedings against a former partner of EY.

The order was varied following EY making an application to the Court to amend the suppression order to allow EY to identify itself as the firm referred to in proceedings. The suppression orders remain in place in respect of the identity of a number of other parties affected by the proceedings, including the former partner.

EY elected to make the application to vary the suppression order to demonstrate our commitment to transparency and given the significant uncertainty that the proceedings have created in the market.

Those proceedings allege the former partner proposed a tax exploitation scheme to the partner’s clients.

EY is not named as a party to the Commissioner's proceedings and the Commissioner makes no allegations of wrongdoing by EY in the proceedings.

Upon being made aware of issues regarding the former partner’s behaviour, EY’s leadership was immediately informed and EY initiated quality reviews, as well as initiating a number of associated workstreams.

EY established the former partner acted in isolation and without the approval of EY, and contrary to the firm’s well-established policies and procedures.

The former partner was terminated for cause in August 2022 after disclosing that they received in excess of $700,000 in unauthorised financial benefits in connection with the client transactions subject to the proceedings.These unauthorised financial benefits, received in relation to the transactions described in the proceedings, gave EY cause for concerns about the former partner’s transactions, advice and conduct.

EY has cooperated fully with regulators throughout this process and will continue to do so.

Through these events EY has identified opportunities to introduce additional controls that strengthen the monitoring of compliance with the relevant policies and procedures.

On 13 September 2023, EY entered into an enforceable voluntary undertaking with the Commissioner as a commitment to undertake these improvements. The enforceable voluntary undertaking is the first such undertaking EY has entered into with the Commissioner and includes undertakings that EY will:

• continue to apply EY’s management processes for breaches of EY Policy; 
• provide additional training on EY’s Gifting Policy and specific aspects of EY’s Tax Policies; 
• provide regular updates on progress of these matters and their effectiveness. 

EY has notified CAANZ and the Law Society that Court proceedings have been issued by the Commissioner against a former partner, and had previously notified CAANZ regarding the enforceable voluntary undertaking.

David Larocca, Oceania CEO and Regional Managing Partner said: “The former partner’s absolutely unacceptable conduct led to their termination in August 2022. Their termination is a clear demonstration that their conduct was, and is, completely contrary to the firm’s values and code of conduct.

“The allegations also involve deeply disappointing behaviour and actions by the former partner that contravene a range of firm policies that have been in place for many years. EY is very clear that the behaviour alleged against the former partner are the isolated actions of a rogue operator, and are in no way reflective of the way we do business.”

“We fell short in this instance and I regret that we didn’t identify and stop this behaviour earlier. The undertaking reflects our strong commitment that when we fall short, we learn from it, take the necessary actions and in this case, make the necessary changes to strengthen compliance with our policies. A number of legal avenues are being pursued by EY against the former partner.”

The former partner’s name is still subject to the suppression order, and EY is prevented from providing any further details which could identify the former partner, taxpayers, and witnesses, as this would be in breach of the Court’s order.

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Media Contact:
 

Shane Allison
+61402219963 | shane.allison@au.ey.com

Eloise Robertson
+6140284818 | eloise.robertson@au.ey.co