Zhao Boji and Daniel Zhang, the lost elites of the 'Andersen Gang'
On the weekend of April 13-14, an open letter written in March by "a group of PwC partners" went viral in the auditing circle. The letter pointed the finger at PwC China Chairman, Chief Partner and CEO Paul Poon for PwC's deep involvement in the Evergrande fraud scandal, and listed Paul Poon's "five major sins," including his Arthur Andersen background, the "200 million club," and internal partner conflicts, among others, with substantial information.
Currently, PwC is facing the same predicament Arthur Andersen once did. Paul Poon, who carries Arthur Andersen's legacy and was a key figure in the Evergrande project, naturally becomes the primary target for accountability. However, before the Evergrande incident's fallout fully materializes, PwC is already embroiled in internal strife, which appears somewhat "undignified" to outsiders.
Coincidentally, Daniel Zhang, also an Arthur Andersen alumnus known as "Xiaoyaozi," is caught in a public opinion storm due to Joseph Tsai's recent reforms and reflections on Alibaba, with his past business strategies for Alibaba being completely negated.
Whether it's Paul Poon or Daniel Zhang, these former elites of the "Arthur Andersen gang" seem to be experiencing career setbacks in different fields simultaneously.
Paul Poon, the "Scapegoat"
Paul Poon currently serves as PwC's Asia-Pacific and China Chairman, Chief Partner, and CEO, and is a core member of PwC's global leadership team. He is also a member of the National Committee of the Chinese People's Political Consultative Conference and an accounting expert consultant for the Ministry of Finance.
Paul Poon began his career in Toronto, Canada, in 1984, returned to Hong Kong in 1992, and became an Arthur Andersen partner in 1995. Later, when Arthur Andersen's Greater China audit business merged with PwC, he became a PwC partner.
At PwC, Paul Poon implemented bold reforms, advocating "Be game changer" to drive innovative transformation and embrace the internet. One of the most explosive pieces of news was that PwC became one of the first Big Four accounting firms in Hong Kong to accept Bitcoin payments.
In 2002, Paul Poon was appointed to PwC's China and Hong Kong management committee. In 2003, he was stationed in Beijing as the lead partner for the energy, utilities, and mining sectors. In 2005, he was promoted to PwC China's Audit Lead Partner. Since 2011, he has served as PwC Asia-Pacific's Audit Lead Partner.
Notably, during his tenure as PwC's audit business head from 2005 to 2013, Paul Poon secured Evergrande as a "major client," setting the stage for PwC's later entanglement in the Evergrande fraud scandal.
The anonymous letter disclosed numerous key details, with its core demand being essentially one: the Evergrande project was Paul Poon's responsibility, and "he must bear the blame."
The letter listed Paul Poon's "crimes" as follows:
1. PwC is currently controlled by Arthur Andersen alumni led by Paul Poon, and Arthur Andersen collapsed due to the Enron scandal. Almost all of PwC's audit quality management roles are held by Arthur Andersen partners, including retired ones.
2. Within PwC, some repeatedly opposed issuing unqualified audit reports for Evergrande but were eventually forced out.
3. PwC has a "200 million club," Paul Poon's inner circle of fewer than 10 members who split 200 million annually. The letter suggests freezing their assets to compensate Evergrande investors.
4. Paul Poon once boasted that under his leadership, PwC's EPEP partner income reached historic highs, the highest among the Big Four. His annual salary from PwC is HKD 50 million, taxed at only 7.5%.
5. Evading international network quality checks. PwC's global network periodically reviews member firms' audit quality. Paul Poon allegedly hired retired senior PwC US partners as lobbyists for PwC China and Hong Kong to conceal actual audit quality issues.
The letter further revealed that the Ministry of Finance is investigating PwC. This global Big Four audit firm is mired in deep trouble.
As a result, Paul Poon hastily convened an emergency PwC partner meeting on April 14 to address these "completely false and incorrect allegations." However, no meeting details have been disclosed yet, casting doubt on the anonymous letter's authenticity.
How Paul Poon will counterattack has become the market's focal point.
Notably, the letter mentioned that July to September 2024 is when PwC partners assess performance and determine profit-sharing. If any retaliation occurs, especially against veteran PwC partners, a second open letter will be issued, along with partial work documents.
It seems Paul Poon's "career crisis" is unlikely to conclude before his retirement.
Daniel Zhang's "Awkward" Situation
Besides Evergrande, the letter also implicated another major company facing operational challenges—Alibaba.
It stated: "When U.S. regulators (PCAOB) later reviewed Alibaba's audit work papers, an international quality oversight partner involved remarked that PwC China's audit quality had deteriorated to an unimaginably poor level."
Without concrete evidence, the statement's validity remains unclear. However, given that Alibaba's then-CEO Daniel Zhang also hails from Arthur Andersen and PwC, it raises concerns about Alibaba's true financial health.
Daniel Zhang graduated from Shanghai University of Finance and Economics in 1995 and joined Arthur Andersen. After its merger with PwC, he became a PwC member, serving as a senior manager at PwC's Shanghai office from 2002 to 2005.
He later left auditing for Shanda Interactive Entertainment, holding roles as CFO and VP. In 2007, he joined Taobao, rising through Taobao Mall (later Tmall) president to Alibaba Group COO, overseeing core businesses like Taobao, Tmall, Alibaba, Cainiao, and wireless, earning the nickname "Xiaoyaozi." He became Alibaba Group CEO in May 2015 and Chairman in September 2019.
Why Daniel Zhang? "His strength lies in translating lofty strategies into actionable plans, turning the abstract into concrete," a peer noted. His decisiveness and ability to execute strategies embody the elite ethos of the "Arthur Andersen gang."
Jack Ma praised Daniel Zhang highly, citing his exceptional business acumen, steadfast leadership, and computer-like logic and analytical skills.
In June 2023, Daniel Zhang stepped down as Alibaba Group's Chairman and CEO. Just as he seemed to retire gracefully, Joseph Tsai, Alibaba's Vice Chairman, recently criticized some of Daniel Zhang's decisions at an internal meeting, sparking market waves.
Joseph Tsai directly stated that Daniel Zhang over-prioritized diversification, neglecting core business stability and innovation. He also mentioned challenges in Alibaba's global expansion, such as U.S.-China trade war restrictions on Alibaba Cloud and tighter domestic data security regulations, hindering globalization efforts.
Recently, Joseph Tsai admitted in an interview that Alibaba had fallen behind in recent years, forgetting its true customers and neglecting user experience.
Joseph Tsai's reflections have left Daniel Zhang in an "awkward" position.
Upon closer examination, Alibaba's strategic missteps occurred during Daniel Zhang's tenure. He shifted focus to the B2B market, overlooking C2C user needs, ultimately weakening Alibaba's e-commerce dominance.
Now, Joseph Tsai, who took over from Daniel Zhang, is implementing sweeping reforms across business, organizational strategy, and executive appointments, correcting the course set during the "Daniel Zhang era."
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