Malaysia, 1MDB seek over $5.6b in damages from audit firm KPMG

The 1MDB sign as seen through a car. Photo: Bloomberg TV

Malaysia’s government and state fund 1Malaysia Development Berhad (1MDB) are seeking over $5.6 billion in damages from KPMG PLT for alleged breaches and negligence linked to a corruption scandal at the fund, court documents seen by Reuters showed.

Audit firm KPMG on Friday denied the allegations and pledged to “vigorously” contest the suit filed against 44 current and former partners and linked to its audit of 1MDB’s financial statements between 2010 to 2012.

The suit, which the finance ministry confirmed had been filed on Tuesday, is the latest in a series of suits filed by Malaysian authorities to recover billions of dollars missing from 1MDB in a scandal that has implicated high-level officials, banks and financial institutions around the world.

“All allegations as reported in the news are refuted and the claim will be vigorously contested,” KPMG said in an emailed statement to Reuters, noting it was “disappointed” with the suit.

Malaysia’s finance ministry declined to comment further due to sub judice. In June, it said it was negotiating a settlement with the auditor.

Lawyers for 1MDB did not immediately respond to a request for comment.

According to the lawsuit, the plaintiffs allege that about $3.2 billion were misappropriated from 1MDB and its subsidiaries during the period KPMG served as the firm’s auditor.

The amount was part of a larger sum of $5.64 billion allegedly siphoned from 1MDB between 2009 and 2014 – losses that could have been avoided if KPMG had obtained sufficient evidence to support its audit findings, the plaintiffs allege.

A proper audit by KPMG would have identified fraud risk warning signs which the firm would have had a duty to report and which would have led to the discovery of the fraud at 1MDB sooner, the plaintiffs said.

The plaintiffs said they would seek the full amount misappropriated, including interest accrued as well as additional costs.

The Malaysian government and MoF Inc, a statutory body under the finance ministry, would also seek 2.63 billion ringgit ($627.83 million) from KPMG to cover losses incurred in bailing out 1MDB.

KPMG was sacked as 1MDB’s auditor after it refused to sign off on the fund’s 2013 accounts.

In June 2018, it said it had informed 1MDB to “immediately take all necessary steps to prevent any further or future reliance on the audit reports prepared by KPMG Malaysia for the financial years ended 31 March 2010 to 31 March 2012″.

Deloitte PLT which took over as 1MDB’s auditor after KPMG, paid $80 million to Malaysia’s government last month to settle claims related to its dealings with 1MDB.

At least six countries have opened investigations into 1MDB, co-founded by former prime minister Najib Razak.

Last year, Najib was found guilty of corruption and money laundering in a 1MDB-linked case. He denies wrongdoing and is appealing the verdict.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.