EY caught up in alleged Australian coal quality scam

29 November 2022 Consultancy.com.au 2 min. read
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Professional services firm EY has become embroiled in an alleged Australian coal quality scam, accused by an anonymous whistleblower of having turned a blind eye to the fraudulent behaviour.

The claims of misconduct against the global mining companies were raised in parliament by independent MP Andrew Wilkie, and are somewhat reminiscent of a previous incident which landed EY’s Middle East branch in hot water.  

According to Wilkie, he has received thousands of documents from a whistleblower said to be an executive within the coal industry, which purport to show that miners TerraCom, Anglo American, Glencore and Peabody together with the Macquarie Bank and auditor EY as intermediaries engaged in activities to inflate the quality of Australian coal exports – thereby increasing its price and minimising pollution-related import restrictions.

EY caught up in alleged Australian coal quality scam

“They’re paying bribes to representatives of their overseas customers to keep the whole scam secret. And this has allowed them to falsely claim, for years, that Australian coal is cleaner than coal from elsewhere, even though it’s often simply not true,” Wilkie alleged in parliament on Monday, with a number of fellow independent MPs including former Boston Consulting Group principal Kate Chaney backing his calls for an enquiry.

The allegations centre around the supposed manipulation of results in tests conducted by laboratory ALS to suggest the coal, destined for markets in India, South Korea, China and Japan, was of a higher quality than originally found. ASIC has since confirmed that its extensive investigation into possible misleading market disclosures by TerraCom are well advanced, including by way of the regulator gaining access to a PwC forensic report on the matter.

Despite some admissions from ALS, the companies allegedly involved in putting pressure on the lab giant to massage the results have strenuously denied any wrongdoing.

For EY’s part, while the firm hasn’t commented on the recent accusations of willful ignorance, it did originally get the ball rolling on the scandal by contacting ASIC to call into question an “alleged matter” as to PwC’s TerraCom investigation that it felt hadn’t yet been resolved.

However, it’s not the first time the global accounting and consulting firm has been caught up in claims of commodity export skullduggery. In 2014, a Dubai-based internal EY whistleblower says he was forced out of the partnership after raising concerns over client Kaloti Jewellery International, which had been shipping gold coated in silver to avoid import restrictions. The case would ultimately cost EY’s Middle East branch over $11 million in damages.