Recasts and writes through with new admission

By Christine Chen and Renju Jose

SYDNEY, June 19 (Reuters) - KPMG Australia staff shared sensitive information about telecom firm Optus with another internal team bidding for an audit contract for its rival Telstra TLS.AX in a breach of ethics, the firm's chairman told a parliamentary hearing on Friday.

The admission confirms whistleblower allegations that KPMG earlier said were unsubstantiated in previous internal and external investigations.

In the second major scandal to hit a Big Four accounting firm in Australia since 2023, KPMG has been under fire after the whistleblower alleged it misused confidential board papers from real estate company Lendlease LLC.AX to support bids for major audit tenders for Westpac WBC.AX, a large bank, and Dexus DXS.AX, a property firm.

Lendlease-related allegations have dominated headlines thus far and the acknowledgement of the improper handling of the Optus information will only pile more pressure on KPMG.

"The Optus, Telstra matter emerged very recently," Chairman Martin Sheppard told lawmakers, adding that unredacted information about Singapore Telecommunications STEL.SI-owned Optus moved "through an ethical divider" when it shouldn't have.

Sheppard was one of several current and former KPMG executives hauled before a day-long parliamentary hearing to give evidence about the scandal.

KPMG Australia's former CEO, Andrew Yates, said that the Optus-related evidence, which emerged from an investigation by law firm Allens, had prompted his resignation last month.

"That was the day I realised that there were things here that could have been found earlier," he told the hearing.

The Telstra job was ultimately awarded to Deloitte.

Yates was also grilled over the time KPMG took to inform affected parties of the whistleblower complaints.

Lendlease was only informed about the allegations in May 2025, a year after the accusations were first raised internally.

Lendlease Chairman John Gillam told the hearing that KPMG's actions were a "fundamental breach of trust". The company recently announced it would drop KPMG as its auditor, ending a near seven-decade relationship.

Yates said he had not disclosed the whistleblower complaint to Optus and could not recall when Westpac and Dexus were informed.

KPMG QUESTIONED OVER WHETHER PARTNERSHIP STRUCTURE WORKS

Lawmakers also suggested further regulation of the Big Four accounting firms could be necessary.

Greens Senator Barbara Pocock accused KPMG of having "leapt over any ethical consideration" in pursuit of commercial gain, drawing parallels with the high-profile 2023 PwC tax leaks scandal.

She questioned whether further changes were needed to tighten oversight of the firms which are regulated as partnerships instead of companies.

That means they are not subject to supervision by the Australian Securities and Investments Commission, which has strict reporting requirements. Instead they are regulated by state-based laws.

"Is the partnership structure now non-functioning in this circumstance? We are here the second time around, PwC and now you," Pocock asked.

Deborah O'Neill, a senator from the ruling Labor party, echoed those sentiments and asked if there were bad apples in the firm or "is the whole barrel rotten?"

"I don't see myself as a bad apple," Yates replied.

"And nor do I see the firm to be full of bad apples. We are a large, complex organisation and we're fallible."

Asked why it took so long to share the complaint with the firm's senior leadership, Yates said he felt reluctance at the time to share the issue with 680 partners.

O'Neill responded that under a company structure, there would have been an executive responsible for such matters.

"But the structure you have means everybody is responsible for everything that you do, jointly with you."