Where’s 1MDB suit against former auditor KPMG?

 

MP SPEAKS | Yesterday, 1MDB and its former subsidiary, SRC International Sdn Bhd filed a total of 21 suits against various parties, including former prime minister Najib Abdul Razak, former 1MDB office bearers like Che Lodin Wok Kamaruddin, and former chief executive officers (CEOs) of 1MDB Shahrol Azral Ibrahim Halmi, Arul Kanda Kandasamy and Mohd Hazem Abdul Rahman.

Also named in the suits are fugitive businessperson Low Taek Jho (Jho Low), his father Larry Low Hock Peng, sister Low May Lin and Jho Low's close associate Eric Tan Kim Loong.

1MDB has also filed separate suits against foreign banks Deutsche Bank, JP Morgan and Coutts & Co.

The government should be applauded for finally filing these suits more than a year after the Sheraton Move as the preparation for many of these were commenced during Pakatan Harapan’s short 22-month reign.

However, conspicuously missing from the list of suits is a case against KPMG Malaysia who audited 1MDB financials for three years from March 2010 to March 2012.

Earlier on March 3, Deloitte Malaysia has already agreed to a settlement with the government with a payment of US$80 million (about RM320 million) for its role in failing to properly audit 1MDB financials from March 2013 to March 2015.

However, despite a clear case against KPMG for failing its audit duties, the international audit firm has thus far been recalcitrant and has refused to arrive at a settlement with the government.

KPMG has failed to take into consideration the material disclosures of the transactions which took place in 1MDB’s then US$1 billion investment to form an aborted joint venture with Petrosaudi International Limited (PSI) in 2009-2010, including at least US$700 million that was siphoned to Jho Low’s company, Good Star Limited.

KPMG had performed the arguably record-breaking feat of signing off the March 2010 financial audit within three weeks after being appointed in September 2010, after the original auditors Ernst & Young (EY) were sacked for refusing to sign-off the accounts.

The auditors were satisfied that the US$1 billion investment which was converted into a Murabahah loan was sufficiently backed by a corporate guarantee from PSI. This was despite PSI had only US$150,000 in paid-up capital. Worse, KPMG did not require PSI to provide any financial statement or records to demonstrate that it was able to fulfil its guarantee, in the event of default.

KPMG’s failure and negligence has resulted in 1MDB further lending another US$800 million to PSI’s subsidiary in 2011. The United States Department of Justice (US DOJ) has shown that the overwhelming bulk of these additional funds have also been misappropriated by Jho Low and his associates. 1MDB had lost all of the US$1.8 billion which was lent to PSI’s subsidiary.

When I had repeatedly questioned Najib in Parliament on 1MDB financials, the former finance and prime minister had repeatedly emphasised that the company was audited by reputable international auditors, KPMG and hence there was no basis for my scepticism and suspicions of financial shenanigans. KPMG had in effect, colluded with the Najib administration by allowing itself to be used by kleptocrats to cover up their misfeasance.

We call upon the Finance Ministry to give no quarter to KPMG who is clearly not remorseful of its role in the worst case of global kleptocracy investigated by the US DOJ. Since Deloitte Malaysia has settled the matter more than two months ago, 1MDB must commence the legal suit against KPMG immediately. - Mkini

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TONY PUA is Damansara MP.

The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.