They need to go, and the sooner the better. It was a disgrace. And that is the current leadership of CPA Australia!
Well members the Senate Hearing where the CPA board were asked to attend was held yesterday in Canberra, and I’m not too sure if any of you were able to watch it (as it was televised) but it was terrible.
I attended in person, and I would have to say if this is what the leadership of CPA Australia has descended to then what hope do we have.
As another person who attended said it was ‘excruciating to watch’.
My son and three of his fellow students from ANU attended, and I can pretty safely say from their responses that if this is what the accounting profession offers to young people in terms of leadership of one of its purportedly leadership organisations, then what hope do we have.
Radical surgery is needed.
It was disgraceful.
I am writing this email not just as an update but also as a letter to the Independent Review Panel. Something needs to be done quickly and it cannot be just an overview of the problems. Action, and mainly of the legal type, is required to not only sharpen up this current board but also to hold accountable all those who have allowed this disgraceful chapter in the history of CPA to occur.
Brief Introductory Comments
The whole board were asked to attend but in reality only three of the six did (J Dickson, G Wade, T Youngberry) with R Petty a no-show, and S Portelli and M Dolin by telephone (which in reality meant not there).
J Dickson tried his hardest not to answer every question with “can we take that on notice, or we complied with the law” but pretty much failed.
Tim Youngberry was there and that's about the best I can say - I can see why he was selected as a recent ring-in to the board to make up the numbers. Wow.
Graeme Wade you needed to be there to see his performance. He conveyed exactly why we have had to fight hard to expose all the failings at CPA Australia. It was just awful.
Felt like a parallel universe
It was an experience where I felt I was living on a different planet.
The only problem the board saw in all the failings exposed at CPA was that they could have improved the communication!
Wow, can you believe that.
- The only real problem was poor communication.
The marketing strategy focussed on Alex Malley and The Naked CEO, and the TV program was an outstanding success. But as soon as he left they removed it.
Alex Malley was an outstanding leader, but they forced him to resign.
CPA Australia Advice was a long game initiative and they had no regrets despite losing over $7 million in 19 months with an income of only $47,000, and with the directors and senior management of CPA Australia managing to pay themselves over $1.5 million in the process, and with a potential loss of $20 million looming.
The Singapore AGM was the best attended of all AGM’s and it was to show our loyalty to our Singapore members even though everyone except the board acknowledged that it was moved to Singapore to avoid difficult questions if held in Australia.
The remuneration of Alex Malley of $1.8 million was fine, and the termination payment of $4.9 million was subject to confidentiality and was okay, even though everyone knows it was way over the top.
The governance at CPA Australia was okay after undergoing a major review back in 2007, and the board do not appoint directors despite the fact that they have approved half of the Representative Council and it comprises many friendlies to maintain a gerrymander
Graeme Wade did not even know the details of the sponsorship with the NBL gift of $756,000 (if you believe that then you had best check to see if there are any fairies in the garden) even though Chairman of both CPA and the NBL at the time because he managed the conflict of interest to avoid it. Well what can I say to that one. The pub test might be good place to start.
Graeme Wade did not even know how many years he has served on the board (you are in your 12th year Graeme as everyone including you knows). Please Graeme the fairies in the garden are running amok trying to escape the pigs flying past.
On and on it went.
And sitting there listening to it one just felt anger and shame and how pathetic is CPA Australia if this is what our leadership is.
So my response is to address this email to the Independent Review Panel.
Email to the Independent Review Panel
Dear Ian, Su, Maryjane, and Bob,
We eagerly await your draft report on 15th September but can we say that after watching the board before the Senate Hearing yesterday we trust it is more than a summary of the issues.
They were pathetic and if this draft report does not give us cause for encouragement (see below for a few things I shall be looking for) then you will have failed us badly.
This is not trying to pre-empt your report. But it is in recognition of the fact that you have had privileged access to information and material at CPA Australia which we haven't, and that we expect something a little more hard-hitting than just a summary of the issues.
After watching our current board, we expect some firm remedial action.
And by that we want to see some legal remedies to redress these shortcomings.
It was absolutely painful to watch.
This current board showed no signs of any remorse or regret or responsibility or even recognition of the wrongs done.
Quite the contrary they actually were actively non-apologetic and defensive on many of the issues.
The example of CPA Australia Advice
Let me just take one example (but you could multiply this by 20, and there would still be more).
- In the 19 months to 31st December 2016 it had a total revenue of just $47,000 while incurring losses of $7,404,000. Yes read that again to believe it.
In just the 12 months to 31st December 2016 Graeme Wade paid himself $100,000 in directors fees from CPA Australia Advice. The three CPA senior managers (Malley, Awty, Hughes) and three other directors of CPA Australia (Carlin, Dolin, Petty) plus one other (Haddan) managed to pay themselves $1,000,000 from CPA Australia Advice. Keep in mind a new subsidiary with a total revenue of just $$46,000 in that year. What a gravy train. And the current board at the Senate Hearing said they were in this for the long haul.
The rest of the 14 staff managed to extract over $2,500,000 for themselves in that year. And remember this subsidiary had a total revenue of just $46,000 in that year.
IRP this needs immediate legal action. This needs urgent attention. It is a rort of the highest order. And to think that Tyrone Carlin and Richard Petty (two of the directors who managed to extract $70,000 each in directors fees from it) have high level positions at their universities (Sydney University and Macquarie University).
CPA Australia has given them ‘an overdraft’ of $20 million to finance this, and to Feb 2017 over $12 million had already been drawn down.
The auditor did not see any of this of material significance to make any comment in the CPA Australia accounts, and of course consolidated accounting rules were used to hide both the liability and the assets in the respective accounts so that nothing was shown in our annual report because it al just ‘contra’d out’.
To cap it off some of the directors managed to get paid over the CPA Australia constitutional limits because they said it was a separate fully owned subsidiary and thus those caps did not apply. Crikey the only test that would pass would be the Enron one. Just create as many subsidiaries as you like and the constitutional limits of CPA Australia become meaningless.
This is why Ian, we expect real action and legal action at that to redress these wrongs.
We know Maryjane you are a litigation lawyer (and a good one at that from what we have heard) so we would like to imagine that you will be looking closely at many of these matters to ensure appropriate legal action and redress is taken.
Surely we cannot allow them to get away with this. Forget what your divisional presidents consultative group say (they can be rightly adjudged as being the ‘silent ones’ - they certainly should not be able to command any more respect now).
We have a very big bank balance at CPA Australia and we can afford to take legal action against these officers, directors and the auditor. We expect that to be looked at very closely on many of the issues.
After watching the Senate hearing yesterday and seeing the almost arrogant way they refused to take any responsibility and were almost dismissive of there being any issue with these matters, we expect redress.
Just take CPA Australia Advice as a case study to how you need to look at all the issues. I mean even Tyrone Carlin managed to pay himself $70,000 in 2016 in directors fees which is almost double the total revenue for the year, along with his handsome Chairmans fees from CPA Australia and of course his full time salary as Deputy Vice-Chancellor of Sydney University.
Where does this stop and someone says enough is enough. We need to hold some people accountable here.
Who on the board and on the executive at CPA Australia or the subsidiary said anything about this? It seems it was total silence and they just quietly accepted these massive payments.
Breach of directors duties is on area to seriously look at.
This has to be addressed in your draft report.
My response to members regarding the IRP report has been to just hold fire, that they have promised to deal with the issues, and we need to give them a chance. Lets just wait for the interim report to see.
Well after watching the current board in action yesterday I will be quite upfront and say I shall be looking for some quite specific items to be addressed to know whether you are fair dinkum. Please do not say it is all up to the new board which was pretty much the standard response yesterday from the current board when a difficult question was asked.
This IRP Report will be the plan of action for the new board so let’s be realistic here Ian, and not play these games of ‘passing the buck’. You know we all have major reservations and hesitations with the board selection process currently, and that includes the divisional representatives and presidents who you are using as a consultative group (the great silent ones). I would suggest you use their consultative advice sparingly and rather look at the real issues.
But Ian I have taken you and the other members on face value and based on what you have told us that you will ‘dig deep’ and not ‘leave any stone unturned’ (my words but I think that captures your assurances to us pretty fairly).
Litmus Tests of the Draft Independent Report
These are the things I will be looking for. My little litmus tests (so to speak).
- Major governance review with a view to a new constitution, and members directly voting for directors. This is why I see this new board as just an interim board until a new fully and properly elected board can be in place once we have the governance review and a new constitution.
Salaries of Board, Senior and Middle management at CPA Australia to be reduced immediately by 50%.
Legal action to recoup the $4.9 million termination payment to Alex Malley, and for those responsible to be held legally accountable.
Legal action to look at oppression of minority shareholders by the board in relation to disabling the Find A CPA function, removing contact details of members from the website, and generally doing what they could to prevent the issues being raised with the wider membership.
Legal action to look at the directors breaching their legal duties and responsibilities, especially in relation to CPA Australia Advice where the board and senior managers were able to pay themselves in excess of $1.5 million over a 19 month period when the total revenue was only $47,000. Also in relation to the financial viability of the model and their gross incompetence to allow this to ever develop.
Legal action to recover the directors fees paid in excess of the CPA Australia constitution by establishing a fully owned subsidiary to avoid them (the Enronisation factor). They could create as many fully owned subsidiaries as they like to avoid their constitutional obligations. We do not accept that as passing the ‘pub test’ and expect legal action to redress it.
Legal action against the auditor for failure in his duties to provide a true and fair view opinion on CPA Australia especially in relation to CPA Australia Advice, and over the constitutional payments of directors fees, and in relation to the s202B statement.
CPA Australia has plenty of money in the bank to take legal action and we expect it to be done.
CPA Australia can be restored but only if radical action is taken, and I believe that requires legal action against the directors and officers of CPA Australia, and the auditor. If there is even a whiff of success then so we should act. The benefits are not just in terms of the actual decision or verdict but the process itself will provide the main benefit.
CPA Australia has become the laughing stock to so many people in the marketplace and the pathetic performance of the board yesterday at the the Senate Hearing just confirmed that. We need urgent and radical action.
I write this before your report because we are looking to this report to provide the catalyst for CPA Australia to be restored. We do not want a softly spoken healing professional report which just lists all the issues.
We expect (and not unreasonably so I would suggest) that you will make some very definite proposals for action and recommendations that reflect your privileged access.
What we uncovered was funded on the ‘smell of an oily rag’, and with little access to the real data. That is not the case with the Panel, and we expect much more.