Eileen Hoggett: KPMG Entitlements Lawsuit Hits NSW Supreme Court

• Former KPMG COO Eileen Hoggett has filed a preliminary discovery application in the NSW Supreme Court following her expulsion from the firm.
• KPMG expelled Hoggett over allegations she kept and shared confidential audit bid documents, which she denies recalling.
• Hoggett claims to have lost all retirement benefits and other entitlements, including a potential 'good leaver' payment, after 21 years as a partner.
• The dispute highlights KPMG's 'good leaver' policy and partnership deed provisions for partner departures and entitlements.
• This legal action occurs while ASIC investigates Hoggett and KPMG auditors for misconduct in a wider whistleblower scandal, which also led to the departure of KPMG's general counsel.

Ms. Hoggett highlighted to the parliamentary committee that her expulsion meant she received no entitlements, including accrued annual leave, the expected retirement payment she had contributed to for over two decades, and even her salary for the month leading up to her expulsion, characterizing it as a significant financial penalty.

Eileen Hoggett, formerly the Chief Operating Officer at Big Four accounting firm KPMG, has launched legal proceedings in the NSW Supreme Court. Her action takes the form of an application for preliminary discovery, following her expulsion from the firm amidst a broader whistleblower scandal. KPMG's decision to terminate Ms. Hoggett stemmed from allegations that she had retained physical copies of private audit bid documents from rival firms EY and PwC in her locker and subsequently shared them with colleagues to secure audit contracts.

KPMG's chief executive, John Sams, communicated to partners and staff that an email had been discovered in which Ms. Hoggett reportedly referenced these actions. However, during a recent appearance before the joint parliamentary committee on corporations and financial services, Ms. Hoggett denied recalling the presence of such documents in her locker, expressing her bewilderment at the termination. She described the expulsion as an unprecedented event within the partnership, noting that she was informed by the CEO via phone call and served with an expulsion letter shortly thereafter, without an opportunity for discussion.

The core of Ms. Hoggett's dispute revolves around substantial financial entitlements she claims to have lost due to her expulsion. After 21 years as a partner, she asserts that the firm's action resulted in the forfeiture of all her accrued retirement benefits. Under KPMG's 'good leaver' policy, long-term partners are typically eligible for a one-time payment equivalent to one-fifth of their total earnings over their final five years upon departure.

Furthermore, the firm's partnership deed outlines provisions for a 'discretionary retirement payment' for long-standing equity partners whose departure is requested by the chief executive with board approval. This payment would amount to nine months of their final year's salary. Ms. Hoggett highlighted to the parliamentary committee that her expulsion meant she received no entitlements, including accrued annual leave, the expected retirement payment she had contributed to for over two decades, and even her salary for the month leading up to her expulsion, characterizing it as a significant financial penalty. She is being represented in this matter by lawyer Bryan Belling.

This legal challenge unfolds against a backdrop of ongoing regulatory scrutiny. The Australian Securities and Investments Commission (ASIC) is currently conducting an investigation into Ms. Hoggett and several KPMG auditors concerning potential misconduct related to the whistleblower scandal. ASIC informed the parliamentary committee on September 3 that its investigation was 'well progressed,' though its scope might evolve as more information becomes available.

Adding to the firm's challenges, KPMG's general counsel, Louise Capon, departed last month. Her resignation followed calls for her to step down due to her alleged involvement in the unfolding scandal. The confluence of these events underscores a period of significant internal and external pressure for the professional services giant.

This case highlights the significant litigation risk associated with partner expulsion clauses and 'good leaver' policies in professional services firms. Lawyers advising partnerships or senior executives should review their partnership deeds to ensure clarity and enforceability of entitlement provisions, especially when disciplinary actions or misconduct allegations are involved, to avoid similar high-stakes disputes.

Source: Original reporting via the Australian Financial Review