Ex-CEO says Najib pushed for closure of 1MDB audit report

A former 1MDB CEO told the High Court yesterday that he was pressured by Najib Razak to ensure that the company’s financial audit report for 2013 was closed.

Mohd Hazem Abdul Rahman said the KPMG audit firm had yet to close the report at the time as it was not satisfied with the documents and answers connected to Brazen Sky Ltd’s investments as submitted by BSI Bank, which was the fund manager of the account.

Brazen Sky was established by fugitive businessman Low Taek Jho, better known as Jho Low, and managed by his proxy as one of the ways to divert 1MDB investment money in PetroSaudi Oil Services Ltd.

Hazem said KPMG was supposed to close the report after a meeting at Najib’s residence in Langgak Duta here at 9pm on Dec 15, 2013, taking into account the reasons given and that Najib, as the shareholder, knew about the Brazen Sky investments.

However, he said KPMG did not do so as it was not satisfied with the documents and answers given.

“Because of pressure from Najib to close the 1MDB account and the company’s reputation, the management suggested to members of the board and shareholders that KPMG be replaced with Deloitte.

“The decision was made because I faced pressure from various parties, mainly from Najib who contacted me several times through my mobile phone to ensure that the 2013 1MDB financial audit report was closed.

“I had no other suggestions apart from proposing to the board that KPMG be replaced with Deloitte,” he said in his testimony at Najib’s corruption trial.

Hazem said based on the directors’ circular resolution dated Dec 31, 2013, among the reasons KPMG was replaced by Messrs Deloitte KassimChan as 1MDB’s auditor was its failure to close the report for 2013.

He said throughout his tenure as CEO, he knew of Deloitte closing the 1MDB account for the financial years of 2013 and 2014.

“However, in 2014, Deloitte put pressure on the management to prove or explain again in detail the investments in Brazen Sky.

“I was under enormous pressure because the detailed investments in Brazen Sky could not be explained. Deloitte then decided that the 1MDB account would not be closed if 1MDB did not provide the detailed information. This means Deloitte decided that Brazen Sky’s investments be liquidated and the money repatriated to Malaysia,” he said.

Hazem said he informed Jho Low about the matter, and that Jho Low himself made plans to liquidate Brazen Sky’s investments.

By the end of 2014, he said, only US$1.3 billion of the US$2.3 billion had been repatriated to Malaysia.

Hazem said Jho Low and KPMG representative Johan Idris were also present at the Dec 15 meeting at Najib’s residence.

At the meeting, he said, Najib, as the shareholder of 1MDB, told Johan that he knew about Brazen Sky’s investments.

He said he believed that Najib knew about the investments because he had been briefed by Jho Low and Yak Yew Chew of BSI Bank in a meeting on Nov 28, 2013.

During the Dec 15 meeting, he said, KPMG asked Najib whether he, as the 1MDB shareholder, knew about Brazen Sky’s investments.

He said the former prime minister answered in the affirmative.

“Other than that, Najib asked why KPMG kept raising doubts on the underlying asset investments when BSI Bank itself had shown the investment statement.

“After all, 1MDB was dealing with reputable parties. Najib also told Johan that he wanted to see KPMG close the 1MDB account before Dec 31, 2013,” he said, adding that Johan had made no reply.

He said in 2013, KPMG had pressured 1MDB many times to provide detailed documents regarding Brazen Sky’s investments, but that Jho Low forbade this.

He said Jho Low had not given any documents to the 1MDB management to assist in KPMG’s audit apart from the investment statement issued by BSI Bank.

He said KPMG was so disappointed that it sought a meeting with the shareholders, that is the Malaysian government represented by Najib.

He said the meeting was for KPMG to impress upon the 1MDB management that everything was known to the shareholder, namely Najib.

Najib faces four charges of using his position to obtain gratification amounting to RM2.3 billion in 1MDB funds, and 21 counts of money laundering involving the same amount.

The trial before judge Collin Lawrence Sequerah continues.