Please note that we are NOT proceeding with the provisional liquidation, but this article is for the public record for why we considered this serious option and what we did.

We did this because we are proud members of the accounting profession. Over decades, all members have built the CPA brand, not just CPA Australia (CPAA). We demonstrate it when we prepare your tax returns or provide you competent personal or business financial advice with integrity.

The CPA Australia Board know who we are and why we were forced to do what we had done. Our reputations and standards have been put unnecessarily at serious risk. This crisis was a management and not a membership problem.

Should you trust your professionally recognised accountant?

Accountants are the ultimate custodians of the financial system and your personal life’s savings. Uniquely we have international standards and ethics that we are expected to comply with at all times. We are the only internationally self-regulated profession in the world. We wanted to protect you from another systemic global financial crisis arising out of poor corporate governance and ethics at the top end of town.

Our hand is being forced to go public for the first time on this serious issue. This story is told here so we can continue to protect you the public.

Not for profits are most at risk, because we trust them to do the right thing and are usually too busy or don’t have access to the financial and intellectual resources to challenge an obtuse and self-serving Board and management.

When the very people ultimately in charge stop doing their job, we would be guilty of being complicit if we did nothing. A true professional does not use “I am too busy” as an excuse.

This characteristic is why you trust our profession in the first place. We share how we responded to that call in the hope this can help you someday.

Can we no longer trust our not for profit governance system?

The CPA Australia governance failure sends an ominous warning to all virtuous Not For Profits and their members in Australia.

An opinion piece from FCPA member Professor Sandra Van Der Laan outlined the crisis in trust was such that CPA Australia needs a mechanism “to enter voluntary administration”.

We thank Professor Van Der Laan for her assistance as a member of our group.

This is as much about the ethics at the core of our identity as a profession as it is about good governance.

The take-home message is we all need to ‘still trust but verify’ and “still watch closely and do not be afraid to see what you see” as famously said by the late US President Ronald Reagan.

We believe we are not the only ones hurt by the very people we trusted to run our favourite professional/community organisation. This year CPA Australia’s scandalous news headlines and a Federal Senate Inquiry makes it clear it can happen to you.

It happened to us, a group of well educated and astute accounting professionals with the influential CPA Australia. This story is a lesson on how you can tell if it is happening to you and what you can do about it.

It is clear we are all vulnerable to be blindsided by charismatic leaders of questionable character. These people are supposed to uphold the highest ethical standards and are the custodians of our good intentions of the membership and the communities they serve. The Board and senior management of CPAA left us feeling betrayed, ridiculed and in the dark. They used our noble cause to selfishly pursue and profit in our name for their self-interest at significant expense to the greater good.

This was knowingly fuelled by membership apathy who are too busy to care and constant stonewalling and censorship of those that did speak up.

We are an international virtual CPA member group called the Transition Strategy Team ‘TST’ who decided doing nothing is not an option. Our media shy CPA Members that could no longer watch from the sidelines and did something about it because it was our professional duty and it was in the public’s interest. This duty is why we now share this story with you.

The truth is there were many hands involved. This dimension is the unreported true story that may have been the final straw that brought the house down – you be the judge.

The burning of the family home that nobody cared about.

What would you do when the tenant of your family home changes the lock without your knowledge and starts burning the house from within while you watch helplessly outside being able to do absolutely nothing about it?

Since 2013, this is what it has felt like for my colleagues and me as a CPA Member watching helplessly from the front gate of the burning house. When we went to knock on the door for answers from the tenant (CPA Australia board and management), we were confronted by a fortress of lawyers and legal speak (King & Wood Mallesons) and delay tactics. We then went to the local fire station (Australian Securities and Investments Commission – ASIC) for assistance, and they only stood by to watch the house burn. This experience is why we organised a legal battering ram to break the door down (Supreme Court Letter of Demand Corporations law s.461 – no-confidence motion against the Board) to remove the self-appointed occupants and custodians who had stolen our good name and profession for their gain. The CEO was paid $4.9m in termination pay which is a case in point, and millions had been doled out to the Board and management.

The house is still smouldering, and there is proof some of the old tenants are still there. Are the new tenants living in fear or being groomed for a continuation of the same? The new tenant (Chair Peter Wilson) has alarmingly thrown cold water over our continued concerns with his claims recently in the national media that it was excusable that the former Chair did not know of these indiscretions which seems to indicate nothing has changed.

“I think the issue is that nobody knew. Apart from the [old] board and the management, who had a commercial-in-confidence obligation to the company of executing the strategy, nobody knew what it cost”

~ Peter Wilson 11 October 2017

Taking on Goliath! – who is CPA Australia?

CPA Australia represents over 160,000 members. It is an accounting professional membership body. It stands for executing competency with integrity amongst our peers, the profession and the community. It disciplines naughty accountants who do the wrong thing by those of you who rely on your accountant. It is the biggest self-regulated not for profit professional body in the southern hemisphere. It has an annual income of $180 million a year. It also has an army of lawyers at its disposal.

Why did we muster up the unprecedented resolve required to liquidate a 130 years old professional body?

Our hands were forced. We wanted to see changes at the top. We sought to fix the Board governance controversy out of the media eyes. It was too embarrassing to watch. It was our duty to protect our name. Most importantly we wanted to protect you from a second global financial crisis. Accountants are the trusted gatekeepers to the financial system. If it cannot look after itself, it cannot look after others.

Since early 2010, CPA Australia appeared fuelled by a cocktail of ego and ignorance. People feared to speak up, those that did were either ignored or censored from engaging their concerns with the membership. For others, this was just too big to change. Some blinded by the glossy media advertisements and events, inferring everything looks ok. Arguably the majority were apathetic in wanting to engage with the facts. ‘I am too busy’ is a common phenomenon. This justification was very disappointing to note.

In the end, apathy was the real enemy of accountability and management knew and capitalised on this.

Thankfully a special protection in the Corporation Law Section 461(1)(k) meant that you do not need to chase down a laborious and an impractical target for Extraordinary General Meeting to be heard and recognised, just a good enough argument to put the Board on notice.

Why being part of a reputable professional body is critical for society to function?

If a self-respecting profession cannot demonstrate it can regulate itself, it can only attract more Government regulation in reply. This call arose after the many corporate collapses in the 1980’s. The profession was threatened by the Government. We had learned our lesson and set up the Accountants Professional Ethics and Standards Board (APESB). We have fewer collapses today for a reason. Most importantly it would have meant that our profession and related organisations could no longer be trusted.

A high profiled not for profit accounting professional body is expected to lead in protecting the community’s financial security (i.e. protect your hard earned money) their members and their clients’ interests.

When your own international professional accounting standard and ethics begin to fall, so does everyone’s reputations. Once you lose a person’s trust, you go bust, like we saw in the last Global Financial crisis in 2008. The US caused these problems because they departed from the standards. How soon we forget.

We do not want to see this happen again to Mum’s and Dad’s investors and the people you care about.

How did we the TST help change the Board?

This timeline is a chronological list of events that prove S. 461 may have worked. You decide.

Like most we were shocked to read daily headlines like these that were bringing our profession into disrepute:

1.March to July 2017 – Some of the rolling national news headlines from that rocked the profession from the Australian Financial Review:

moreover, the outgoing and conflicted Chair of the Australian Securities & Investments Commission (ASIC), Greg Metcalf who recently stated audit standards were so low that we risk a second Enron scandal, said absolutely nothing about CPAA as it was going through its national media turmoil.

Some key points reported in the national media….

• Both Ian Mc Phee, Chair of the Independent Review Panel (IRP) into CPAA, and Greg Metcalf had endorsed the sacked CPAA CEO Alex Malley’s book the Naked CEO. This factor may explain their deafening silence.
• Arguably conflicted, Ian McPhee was appointed by the outgoing Board to investigate the CPAA Board and management governance problems. McPhee was suddenly elevated to Chair by default after the initially announced Chair, Sir Angus Houston (another book endorser) resigned. Ian McPhee released the CPA independent review panel’s interim report which accepted a record $4.9m payout in a Not For Profit without seeing the contract. The panel surprisingly finds nothing unusual to look into further.

• The new CPA board chair, Peter Wilson is quoted that ‘not knowing’ is an acceptable justification for poor governance.

• Finally, the outgoing ASIC chair criticises ‘inaction’ of Auditors while ASIC takes no action in response to any of the concerns of CPA members over months while this saga was playing out in the media. The TST group directly approached ASIC and received no assistance even to be present for a meeting. ASIC is a toothless watchdog. It is a concern to read these headlines ASIC accused of lack of accountability since Medcraft’s departure. See Medcraft jointly launching CPA Advice in 2015 with then CEO reported by the AFR at the time:

• This public apology on behalf of the old CPA Board by then Chair Jim Dickson still has not been circulated to CPA members.

[Source: Senate Economics Legislation Committee 5th September 2017]

2. 10th June 2017 – When doing nothing is no longer an option! 

The Australian Financial Review provides an excellent summary of the hijacking of CPAA. We will pick up the story when we felt doing nothing was no longer an option.

Our focus, the seven week period starting on the 10th of June, where a group of 20+ members that came to be known as the national TST (Transition Strategy Team) had collectively agreed to consult each other on what to do next. The group drew from a broad international cross-section of the CPA membership.

We were the largest consultative and cohesive group in Australia from small to large (2nd tier) public practice, CFO’s from listed companies, CPAA staff and representatives and recognised Professors and leaders in academia on the topic.

The key strategy was to tap into our networks, the media, corporate lawyers, other smaller syndicate groups and individuals, Federal politicians such as Christopher Pyne and Senator Nick Xenophon to gather intelligence and influence a positive outcome.

No line of inquiry was not exhausted. Many individual members spent significant time and sums of money on company and data related searches, social media resources and interstate and local meetings to validate any allegations and ensure there was a consensus.

We realised CPAA was censoring/gagging discussion in formal CPAA networks and was not keen to provide access to all members via the national InTheBlack magazine for members to express their concerns. Members, unless they read and followed the national news headlines, were likely still unaware of the problem. CPAA drew little attention to the issues raised in their traditional membership email communication.

Social Media to the rescue – facebook and fake news…

On June 10th after recruiting like-minded members via LinkedIn, we formalised a private Facebook group. These members wanted us to remain discrete and away from media attention. No one individual was actively seeking a national Board position. We wanted to engage in a constructive solution supported by a live and robust factual debate. All that were concerned were invited to attend including the much-cited Rebels.

The weekly meetings were video recorded and minuted under the Chatham House Rule and applying Corporate Governance principles. Everybody received notice and training about how to conduct ourselves and the need for confidentiality. This convention would ensure nothing was off the table, and we could be frank.

The “Killing Bambi” (provisional liquidation) solution was the title of a presentation coined and delivered by David Dahm FCPA (whom I invited to be the inaugural Chair of the TST). I had flagged to David my concerns for some years about CPAA as the standard setter. At the time David had a health care meeting with Senator Nick Xenophon who expressed at the beginning of the meeting his concerns about CPAA CEO Alex Malley. Much to David’s embarrassment, the Senator questioned why the accounting profession model would be a good model with the problems they were currently having.

Killing Bambi was the ‘emergency break glass’ option should all other options be exhausted such as an Extraordinary General Meeting (EGM). On legal advice by lawyer and former OneTel Liquidator Michael O’Neill, by placing CPA Australia into a provisional liquidation and then an administration, this would allow the following;

1. to remove the Board, change the Captain’s pick Directors;
2. amend the Constitution and governance procedures, so Director elections are more open and transparent which does not unreasonably lock out a member’s voice and
3. to investigate the appropriateness of multi-million dollars management and sponsorship deals and unusual accounting practices;
4. Restore our professional standing with the Professional Standards Council and The national Tax Agent Board. The national professional indemnity scheme the (‘PSC’) expressed concern that CPAA had set up a financial planning arm. They deemed we were no longer a profession because we sold financial products. In a separate inquiry, the national Tax Practitioners Board showed concern CPAA was not accountable to our membership. This devaluation has had a marked impact on practitioners costs, the nature of their work and would result in lesser protection and higher fees to their clients and the community.

This was our last resort. Unexpectedly it became the frontrunner after other collective group efforts failed to raise the 5% of total members in support for an EGM to remove the Board in the anticipated timeframe. Despite national media attention, the Spill Team had received 3,455 supporters by the end of July 2017. Reaching over 50% of target was in of itself an achievement given it was done without any assistance from the CPAA board. Indeed, the Board provided the member register to Brett Stevenson after being legally required to do so but not without expressing its reluctance to comply with this order to other CPA members ironically by email. The irony was these same emails were omitted from the register as provided affording no right of reply. The Board also declined a request to forward views on behalf of imminent CPA members and advertising channels via the member magazine InTheBlack were closed leaving only the prospect of a $160,000 postage cost which in of itself was prohibitive to pursue further. Some of these factors were referenced by Senator Xenophon at the Senate Hearing as ‘making it impossible’ for members to communicate with each other and described the privacy concerns as a ‘red herring’. So as the spill effort fought on, TST was again forced to revisit our only remaining TST option of Killing Bambi. Prolonging the reputational damage further was unconscionable. We needed a more timely resolution.

Here is a timeline of significant reported events in the four months after the unexpected choice of Singapore for the AGM held 28 April 2017 for TST:

• 30 May – Tyrone Carlin resigns as president and chair of CPAA.
• 1 Jun – Remuneration of Board and Key Personnel released to much criticism. Calls for Alex Malley to stand down.
• 2 Jun – Senator Xenophon introduces bill to make it easier for members to communicate
• 5 Jun – Express warning sent from TST to a senior politician.
• 6 Jun – AFR references joint launch of CPA Advice in June 2015 while describing the relationship of CEO and ASIC chair as a ‘Bromance’.
• 7 June – CPAA Directors Richard Alston, Kerry Ryan resign.
• 10 Jun – Private Facebook created as it was agreed the CPA reputation was in free fall and perception of no urgency from Board to address it.
• 11 Jun – CPAA Director David Spong resigns.
• 14 Jun – CEO called to front board.
• 15 Jun – *TST Meeting No 1 group form and agree to work together. ABC reports bullying claims by the CEO although CPA Australia says it has no records of the complaints.
• 16 Jun – CPAA Directors Deborah Ong, Jennifer Lang & Martin Hourigan resign. CPAA board use emergency power to appoint Tim Youngberry as 6th Director to remain quorate. CPAA Board reaffirms support for CEO. Independent Review Panel (IRP) created to avoid ongoing criticism.
• 17 Jun – Reports ASIC is undertaking preliminary investigations into directors for breach of duties in Australian Financial Review.
• 20 Jun – The Australian Financial Review reports additional past claims of bullying by the CEO. CPA Australia indicated that these complaints were referred to an independent review and the allegations not substantiated.
• 22 Jun – *TST Meeting No 2 and importance of Corporate Governance presented to the group. The groups decide to continue to support an EGM to remove Directors and see if 5% target reached by the end of July. NSW Divisional Council demands the board step down immediately.
• 23 June – CEO sacked. $4.9m payout and details of the contract declared commercial-in-confidence and not shared.
• 27 Jun – CPA Advice loses CPA Public Practitioners their Professional Standards Council (‘PSC’) indemnity cap for selling financial products and competing with their members. (note it was later revealed that CPA board knew of this conflict in 2015 but proceeded regardless).
• 28 Jun – *TST Meeting 3 – Pro Bono Lawyer invited to present on strategic options after the EGM attempt looks unlikely to reach the 5% target by the end of July.
• 3 Jul – Terms of reference amended for IRP after criticism it was too narrow, and the Chair was conflicted as he previously publicly endorsed the sacked CEO. Sir Angus Houston makes shock exit as IRP chair and replaced by Ian McPhee (both endorsed CEO’s book).
• 13 Jul – *TST Meeting 4 – ‘Killing Bambi’ presented by TST Chair David Dahm and lawyer Michael O’Neill adds commentary in Q&A session after. It was agreed to move to issue a letter of demand (LoD), requesting the Board resign and call for an EGM or we would move to provisionally liquidate and appoint an administrator to sort out the mess. At least one TST member is needed to be named as a client for this to proceed. All members were invited to be named in the letter of demand. A draft letter was to be prepared.
• 21 Jul – 6 TST members (TST6) formally agree to sign up to the client engagement agreement with Michael O’Neill lawyers. The draft letter circulated for final approval and anticipated release by the end of the week.
• 27 Jul – Spill effort reach 3,455 supporters (but need 6,000) to remove the directors. Reputational damage of further prolonged media attention considered unsustainable. (The CPA board had refused all requests to forward any message, InTheBlack advertising channel denied and member register provided to Brett Stevenson omitted emails leaving a prohibitive cost of $160,000 to communicate with members.)

7 Days from Letter of Demand release:

• 28 Jul (LoD Day)- Letter of Demand (LoD) finalised and sent via email to Jim Dickson as Chair of CPA Australia, all directors individually, the acting CEO and copied to ASIC investigators. The LoD requires Board to step down or call an extraordinary general meeting with a written reply required in 7 days.

The Letter of Demand was 11 pages but below is the relevant section:

• • 31 Jul (Day +3)- TST concerns were to be tabled at an emergency meeting of all State Council Presidents.
  • 1 Aug (Day +4)- Hard Copy of Letter of Demand received by registered post at CPA Head Office in Melbourne.
  • 2 Aug (Day +5)- CPA Representatives advise Senate Committee under oath that Board does not see stepping down as in best interest at this time. Justify not providing email addresses to Brett Stevenson due to privacy concerns. Senators highly critical of this at Senate Hearing and Senator Nick Xenophon labels it a ‘Red Herring’.

• 4 Aug (Day +7)- Letter from CPA Legal confirm board has decided to all step down on 30 Sept 2017. This later conflicts with Board announcement of staggered departure to 31 December allowing a period of handover. AFR declare victory for the rebel members seeking change. The AFR and the media were not aware of the TST group’s Letter of Demand, so it did not report on it.

a) CPA Australia Legal representation respond within the seven days as requested:

b) Concurrent CPA Australia Board Announcement of staggered directors exit:

c) AFR Reports “Triumph” while struggling to explain the Board’s sudden change of heart:

A lot can change in 2 days

Now let me be clear, we are not claiming that this group was the sole catalyst to the board stepping down, but it would be remiss of the people in the know to entirely dismiss the influence it may have had on the proceedings.

The TST is part of the complete story, and that context added.

Killing Bambi in legal terms

It seemed counter-intuitive, but we explored all the options we found Section 461(1) of the Corporations Act 2001 (Act) provided the answer. Under this section, the Court can order that a company be wound up and a liquidator appointed provisionally. Under section 461(1)(e), (f) and (g) of the Act a provisional liquidator can be appointed where directors have acted in their own interests rather than the interests of the members as a whole and where the affairs of a company are being conducted in a manner that is oppressive or unfairly prejudicial to the interests of members as a whole.

Further, under section 461(1)(k) of the Act, a Court can appoint a provisional liquidator on what is known as the “just and equitable ground”. A lack of confidence in the conduct and management of a company’s affairs lies at the foundation of applications for winding up a company on the just and equitable ground. Such a lack of confidence lay at the heart of our concerns.

Now don’t let the term liquidation distract you. The chance of CPAA being found to be insolvent was considered very remote. In anticipation of the liquidator acting in the membership body’s best interest, it was envisaged that the provisional liquidator would investigate past misconduct, amend the constitution to return the democratic process of electing directors to its members and then hand the company back to a new board, duly elected under a redrafted constitution.

Thus, CPAA would be clear of all the shackles that came with its contorted constitution and other hidden “commercial in confidence” contractual arrangements. The liquidator could also revisit all these old contracts and investigate past misconduct. The provisional liquidation option seemed perfect, but the biggest obstacle was the way it would be perceived given the term had such terminal connotations.

Explaining the paradox of what felt akin to killing CPAA as presenting the most logical strategic option to save it was tough to articulate for this reason.

We spent some time meticulously canvassing consensus that it was the only way forward. The nuclear option was not taken lightly. Many more subtle approaches were carefully considered and exhausted long before.

The fact that ASIC and the Board refused to meet to discuss this application speaks overwhelmingly about how impotent ASIC are in resolving such issues. They were happy for the matter to end up in the Supreme Court. The Board were provided multiple opportunities to meet and discuss, but all ignored. The Board resignation had put an end to our application, however many of our concerns remain unanswered, so we continue to keep our options open.

To be fair most of the new Board members except for the Chairs have been in contact. They have been made privy to the TST correspondence. We remain patient in waiting to see when the final old Board members leave to witness the real change to occur in the New Year. Seeing substance override form will define our next steps. Hopefully, no further action will be required. Time will tell.

Real change is truly a collective effort

It helps to have the truth on your side too especially when mounting your case. I also witnessed first hand, herculean efforts by just a few members to bring this to membership attention and they know who they are. My LinkedIn connections throughout the above period act as a testament.

It is their experiences painstakingly detailed in the complete Letter of Demand by our legal counsel, Michael O’Neill, no stranger to high profile cases having run the OneTelliquidation centred around breaches of director duties and involved James Packer and Lachlan Murdoch. Michael was instrumental in helping us ride this wave of change to the shore, and his support is something we will never forget.

However, in any disagreement, there will ultimately be a time for compromise, and at some point, guns need be holstered for the healing to begin.

The AFR may have declared this

“The most successful campaign against a large member group in modern Australian history”

~ AFR – 16th August 2017

be that as it may, I am more reserved in my assessment.

If the IRP and the Senate Enquiry with Senators Hume, Xenophon and Dastyari all failed to view Malley’s termination contract detailing the $4.9m termination payout nor sight the CPA Advice Business Case which cost public practitioners their liability cap, then what chance do ordinary members have when asking the same questions?

ASIC overtly told the market by way of Medcraft’s parting statement that ASIC sees ‘appalling audits’ but take no action using Enron in the same breath. I fear we will look back at this interlude as the market warning we should not have missed.

The CPA constitution remains a blueprint on “How To Hijack an Association” in its current form. The new CPA board are well aware of this concern.

A Board announcement on the 10th October 2017 said the mostly refreshed board had the expertise to get change moving on a governance front immediately but action speaks louder than words.

Remember the opportunity for a captain’s pick remains under the current constitution and any perception that the new board are going soft on the clean up will be easily spotted. The harsh truth is that even if this is called out, are we all too exhausted to care? I still care, and I am not alone.

It is not just accounting at risk – it is the public interest

Not for profits fill the gaps when our government and commercial entities fail to provide much-needed goods and services. This support cannot be left to chance. We must preserve their integrity, or the losses will be far higher for our community.

Government oversight is a real risk if Greg Medcraft’s warning about ‘appalling audits‘ is accepted at face value, and the government does not guarantee a better outcome for the community if it ensues.

The health sector shows similar signs of this too. A Government taskforce recommended government set the course curricula for medical school rather than the profession via the Health Education Accreditation Board. The current Royal Australian College of Physicians disputes show similar governance problems. Currently, a Board Member is litigating against the entire Board on the grounds of a lack of openness and transparency and financial mismanagement. Similar attempts and disputes to ’modernise the Constitution have occurred with Royal Australian College of General Practice and bullying claims made at the Royal Australian College of Surgeons.

Even in sport, Cricket Australia share similar problems for paying excessive management remuneration when the not for profit is making losses. We believe the incidence of this is more common than we think. Until we speak up and start talking about the solutions things can only go from bad to worse, until it is too late.

The Senate Committee indicated in 2.12 of their final report that they would expand their CPAA investigations and I wonder if any of the above would fuel the further concerns that might trigger bringing this about? It is clear all not for profit board members now have a lot to consider after the above events in 2017, not just the CPA Australia Board. We all do well to take ownership of this problem while we can and before somebody gets hurt.

Final Thought

Why did we have to go to such extremes? I just wonder how things might have been different had those first seven CPA Australia directors chosen to stay on rather than abruptly resigning in protest. This outcome will never be known, but the accepted convention of directors to resign in protest needs rethinking. Surely it is easier to lead change from inside rather than outside the tent, and this is why we are not going anywhere.

We need to remain ever vigilant. By sharing this story, you create Board self-awareness and promote a self-audit process. You never know it may help an organisation you care about or even scare it into doing the right thing.

Lastly, I would like to acknowledge the ongoing support of the members inside and outside of TST with special mention to our Chair David Dahm FCPA and pro bono lawyer Michael O’Neill. David assisted in co-authoring this article with Michael’s legal and technical assistance. Uppermost in our minds was a desire to document for the public record what transpired in a bid to highlight the significant challenge facing all Not For Profits as the ongoing debate of these matters is in the public interest.

[Editor Note] This was first published on my (Will Camphin's) 
Linkedin profile 24th November 2017 and received 
many positive comments in support. It is republished here for 
those not on that platform as it is in the public interest.