PUTRAJAYA: A former chairman of 1Malaysia Development Berhad (1MDB) testified in the High Court today that KPMG acted unfairly towards the company by requesting additional documents related to a USD2.3 billion investment in Brazen Sky Ltd in Hong Kong, which subsequently delayed the finalisation of 1MDB’s 2013 financial statement.
Tan Sri Che Lodin Wok Kamaruddin, 75, stated that KPMG’s refusal to approve the financial statement stemmed from its disagreement with the 1MDB board of directors’ proposal for the auditors to travel to Hong Kong to verify the investment.
“First, there was a delay. Then, there was a disagreement on how it (auditing) should be done,“ said the 12th defence witness.
He was responding to cross-examination by deputy public prosecutor Kamal Baharin Omar at former prime minister Datuk Seri Najib Tun Razak’s trial for allegedly misappropriating RM2.3 billion in 1MDB funds.
Kamal Baharin suggested to the witness that the additional documents requested must have been of significant importance, as KPMG, in fulfilling its duty as auditors, went so far as to withhold approval of the 2013 financial statement.
Che Lodin responded that KPMG may have had its own specific requirements that were not necessarily standard industry practice.
“We have all the reports from BSI Bank about the USD2.3 billion investment in Brazen Sky. Maybe their standards are unique.
“When we replaced KPMG with Deloitte, Deloitte was happy to sign off on the financial statement,” said Che Lodin, suggesting that KPMG’s request might have gone beyond the typical requirements of an audit exercise.
The witness further confirmed that a meeting regarding the matter took place on Dec 31, 2013, at Najib’s residence in Langgak Duta, attended by representatives from KPMG, including its then-managing partner, Datuk Johan Idris.
Kamal Baharin: Do you know what documents were requested by Datuk Johan?
Che Lodin: They want to look at this investment in Brazen Sky in the form of a segregated portfolio. I’m not an accountant or an auditor, so I’m not too familiar with what they wanted.
KPMG’s refusal to sign off on the financial statement ultimately led to its removal as 1MDB’s auditor by the board of directors. They were subsequently replaced by Deloitte.
On Oct 30 last year, Judge Datuk Collin Lawrence Sequerah ordered Najib to enter his defence after ruling that the prosecution had established a prima facie case against him.
Najib, 71, faces 25 charges, including four counts of abusing his position to accept RM2.3 billion in bribes from 1MDB funds and 21 charges of money laundering involving the same amount.
The hearing resumes tomorrow.
