Najib Ordered Kpmg Removed As 1mdb Auditor Ex Chair

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1MDB TRIAL | 1MDB’s former chairperson Che Lodin Wok Kamaruddin agreed that it was ex-prime minister Najib Abdul Razak who ordered for KPMG’s removal as the Malaysian sovereign wealth fund’s auditor.
Najib’s defence witness told the High Court in Putrajaya this afternoon about the international auditor’s removal over its refusal to sign off on 1MDB’s 2013 accounts.
Lodin (above) agreed with the prosecution’s assertion during today’s RM2.27 billion 1MDB abuse of power and money laundering trial against former finance minister Najib.
During cross-examination by deputy public prosecutor Kamal Baharin Omar, Lodin replied when shown three documents dated Dec 31, 2013.
One was 1MDB’s directors’ circular resolution, the second was the fund’s letter to KPMG, and the third was the Minister of Finance Incorporated (MOF Inc) letter signed by Najib.
1MDB is fully owned by the sole shareholder, the Minister of Finance Incorporated (MOF Inc), whose representative is the finance minister.
Kamal: The decision to remove KPMG, the proposal to end KPMG’s service, came from shareholder Najib?
Lodin: This is per the requirement under (1MDB) M&A (memorandum and articles of association), shareholder (being the MOF Inc).
Kamal: (The order) Came from Najib.
Lodin: Yes.
Kamal: The issue that KPMG had was over (1MDB’s) investment in Brazen Sky?
Lodin: Yes.
Intimidation
Previously, KPMG’s managing partner Johan Idris testified that he felt “intimidated” by Najib during a meeting at the accused’s house at Langgak Duta on Dec 15, 2013, where the ex-premier allegedly tried to pressure the auditor to just sign off on the accounts.
However, KPMG refused to sign off until they saw more documentation of 1MDB’s dubious overseas investment of US$2.3 billion in Brazen Sky.
Following the refusal, KPMG’s service as 1MDB’s auditor was terminated on Dec 31, 2013, and Deloitte was brought on board and signed off on the accounts the following year.
It should be noted that Najib testified denying ever pressuring Johan to get KPMG to sign the accounts.
During trial today, Lodin explained that 1MDB's management and KPMG had disagreement over the need for more documentation to substantiate the Brazen Sky investment.
He said that management had suggested for KPMG to fly to Hong Kong to verify the authenticity of the Brazen Sky investment.
1MDB’s ex-chairperson remarked that he found it a bit puzzling that KPMG was demanding a lot to sign off on the fund's accounts.
Lodin said that when Deloitte was brought on board in 2014, the international auditor had no issue in signing off on 1MDB’s 2013 accounts.
“Deloitte was happy to sign off; maybe KPMG is unique in their requirements, but this is not the standard in auditor (firms in general),” the defence witness mused, recalling his time being involved in a number of companies and dealing with major accounting firms.
‘1MDB didn’t act against Shahrol over mismanagement’
Lodin today agreed that 1MDB took no action against its then CEO Shahrol Azral Ibrahim Halmi over mismanagement linked to rushing its entry into a US$1 billion joint venture with Petrosaudi International Limited (PSI) on Sept 30.
During cross-examination by deputy public prosecutor Mustaffa P Kunyalam, the defence witness said the board under him then had awarded RM1.4 million bonus and 10 percent salary bump to Shahrol over his “outstanding performance”.
This was in spite of Lodin’s predecessor Bakke Salleh - before stepping down on Oct 19, 2009 - having raised misgivings over mismanagement involving Shahrol.
These were revealed in minutes of 1MDB board meetings chaired by Bakke on Oct 3 that same year, where he raised the issue of mismanagement under Shahrol.
Prosecutors contended that Shahrol followed directions from fugitive businessperson Low Taek Jho (Jho Low), whom they contended acted on the blessing of Najib.
During Mustaffa’s grilling, Lodin agreed that Bakke raised the misgiving based on the minutes produced in court.
Lodin agreed with the prosecutor over other minutes of a 1MDB meeting chaired by the witness in July 2013, which saw the directors agree to award Shahrol an 18-month bonus and 10 percent salary bump to RM99,000 a month.
When Mustaffa pointed out the minutes where the board mentioned that Shahrol exceeded expectations and gave outstanding performance, Lodin agreed that was what transpired in the meeting.
Mustaffa: Despite the allegation by Bakke over the claim of mismanagement, Shahrol was rewarded for it.
Lodin: That was Bakke, the assessment by the board then (under Lodin) perception was over the role played by Shahrol in promoting 1MDB. Bakke did not present his views to the board officially before resigning and walking away.
Mustaffa: I put to you that no action was taken against Shahrol, and he was rewarded as he acted under the instruction of Najib.
Lodin: At that point in time, I cannot say yes or no. At the time, the perception of management was quite different before we learnt of wrongdoing at 1MDB. We were looking at the objective of making a decision on increment and bonus for management.
Mustaffa: I put to you that there was no action against Shahrol (by the then Lodin-chaired board of directors) as the board knew that Shahrol’s action was on the orders and interest of Najib.
Lodin: No, there was a basis (for the bonus and salary bump for Shahrol).
Misgivings
According to the 1MDB board meeting minutes, Bakke had misgivings over management’s actions in the Malaysian sovereign wealth fund entering a joint venture with PSI with a lack of due diligence.
During the 1MDB trial back in 2019, Shahrol testified that his bonus and salary bump was due to Najib being happy with his performance.
Ex-1MDB chairperson Bakke SallehShahrol stepped down as 1MDB CEO in 2013.
Lodin was initially director of 1MDB in 2009, and became chairperson in October that year when Bakke resigned, and stayed at the fund until 2016.
The trial resumes tomorrow.
Prima facie case
On Oct 30 last year, the criminal court ordered Najib to enter his defence over four abuses of power and 21 money laundering charges involving RM2.27 billion from 1MDB.
Trial judge Collin Lawrence Sequerah ruled that the prosecution had succeeded in establishing a prima facie (answerable) case against Najib due to the strength of some 50 witness testimonies, which included those of Shahrol and Bakke.
Between early December last year and late January this year, Najib spent 26 days on the witness stand trying to raise reasonable doubt in the prosecution’s case.
The accused contended that he had neither knowledge nor involvement in wrongdoing at 1MDB.
The former Pekan MP also relied on the defence that he was given a donation promise by the late Saudi monarch King Abdullah during a meeting between them in Riyadh in 2010.
The accused has been serving a six-year jail sentence since August 2022 over a separate graft case involving RM42 million from SRC International, a former subsidiary of 1MDB.
The sovereign wealth fund’s stated purpose was to ensure long-term sustainable development while safeguarding the economic well-being of Malaysians.
MOF Inc also fully owned SRC.
Lead defence counsel Shafee Abdullah acted for Najib. - Mkini

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