Najib applied pressure for 2013 1MDB financial audit to be closed
The former chief executive officer of 1Malaysia Development Berhad (1MDB) told the Kuala Lumpur High Court today that he was under pressure from Datuk Seri Najib Tun Razak to ensure the 1MDB’s 2013 financial audit report was closed.
Mohd Hazem Abdul Rahman, 48, said that at that time the KPMG audit firm had yet to close the audit report because it was not satisfied with the documents and answers provided with regard to Brazen Sky Ltd’s investments as submitted by BSI Bank, which is the fund manager of the account.
Brazen Sky was established by Jho Low and managed by his proxy as one of the ways to divert 1MDB investment money in PetroSaudi Oil Services Ltd (PSOSL).
Hazem said that after a meeting held at the Najib’s residence in Langgak Duta at 9 pm on Dec 15, 2013, KPMG was supposed to close the 2013 1MDB financial report after taking into account the reasons given and that Najib, as the shareholder, knew about the Brazen Sky investments.
The 10th prosecution witness in the case, however, said that KPMG still did not close the 2013 1MDB financial report as it was not satisfied with the documents and answers provided.
“Because of pressure from Datuk Seri Najib to close the 1MDB account and the company’s reputation, the management suggested to members of the board of directors (1MDB BoD) and shareholders to replace KPMG with Deloitte.
“The decision was made because I faced pressure from various parties, mainly from Datuk Seri Najib who contacted me several times through my mobile phone to ensure the 2013 1MDB financial audit report was closed.
“I had no other suggestions apart from proposing to the BoD to replace KPMG with Deloitte,” he said in his testimony at Najib’s corruption trial involving RM2.3 billion in 1MDB funds.
Hazem said that based on the Directors’ Circular Resolution (DCR) dated Dec 31, 2013, among the reasons KPMG’s services as the 1MDB auditor was terminated and replaced by Messrs Deloitte KassimChan was due to KPMG’s failure to close the 1MDB financial audit report for 2013.
He said that throughout his tenure as CEO, he knew of Deloitte closing the 1MDB account for the financial years of 2013, which was the year Deloitte replaced KPMG, 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 Low himself made plans to liquidate Brazen Sky’s investments, adding that by the end of 2014, only US$1.3 billion from the US$2.3 billion had been repatriated to Malaysia.
Relating the meeting at Najib’s residence on Dec 15, Hazem said also present were Jho Low and KPMG representative Datuk Johan Idris.
He said that at the meeting, Najib, as the shareholder of 1MDB, told Johan that he knew about Brazen Sky’s investments and he (Hazem) believed that Najib knew all about the status of the investment because he had been briefed by Low and Yak Yew Chew of BSI Bank during a meeting on Nov 28, 2013.
Hazem said that during the (Dec 15) meeting, KPMG had asked Najib whether he, as 1MDB shareholder, knew about Brazen Sky’s investments and the former prime minister answered in the affirmative.
“Other than that, Datuk Seri Najib asked why KPMG kept raising doubts regarding the underlying asset investment when the BSI Bank itself had shown the investment statement.
“After all, the 1MDB was dealing with reputable parties. Datuk Seri Najib had also told Datuk Johan that he wanted to see KPMG close the 1MDB account before Dec 31, 2013, to which Datuk Johan did not answer him,” he said.
He said that in 2013, KPMG had pressured 1MDB numerous times to provide detailed documents regarding Brazen Sky’s investments but Jho Low forbade it and did not give any documents to the 1MDB management to assist in KPMG’s audit, other than the investment statement issued by the BSI Bank.
He said KPMG was so disappointed that it sought a meeting with the shareholders, which is the Malaysian government represented by Najib, be held and the purpose of the meeting was for KPMG to impress upon the 1MDB management that everything was known to the shareholder, namely Najib.
1MDB funds used to purchase land in Ayer Itam, Penang
The High Court today was also told that part of the funds from the USD 3 billion in bonds issued by 1MDB for the Bandar Malaysia and Tun Razak Exchange (TRX) projects was used for the purchase of land in Ayer Itam, Penang.
Hazem said the land purchase was among UMNO’s initiatives while campaigning for the 13th General Election (GE-13) in May 2013.
“When former prime minister Datuk Seri Najib Tun Razak attended one of the campaigns in Penang, he stated in a ceramah (campaign speech) that the land purchased would be developed by 1MDB to build an affordable housing project in Ayer Itam, Penang,” Hazem said.
When asked by DPP Mohamad Mustafa P Kunyalam how he knew that 1MDB funds were used to purchase the land, Hazem replied: “I was present at the ceramah”.
Hazem, however, did not elaborate on the land acquisition.
Meanwhile, he said 1MDB board members had also never agreed for the USD 3 billion in funds to be used to repay the company’s debt, and that it was only meant for the Abu Dhabi-Malaysia Investment Company (ADMIC) joint venture and for financing TRX.
“Of the USD 3 billion in bonds issued, only about USD 2.7 billion nett was received by 1MDB’s subsidiary, 1MDB Global Investment Limited (1MDB GIL) after deducting all administrative costs and deposited in 1MDB GIL’s account at the BSI Bank (BSI) in Lugano, Switzerland.
“Around March 2013, I was told by 1MDB lawyer Jasmine Loo that the funds will be invested in BSI Singapore. At the time, there was still no need to use the funds because 1MDB did not have any projects to be funded (at the time),” he said.
Hazem said he was aware that the decision to invest funds in BSI Singapore had strayed from the original purpose the bonds were issued for.
“The funds were also never handed over to ADMIC. I know this because I know Jasmine’s instructions are instructions from Jho Low, which also came from Datuk Seri Najib,” he said.
Hazem said in September 2013, he had contacted Low to ask for permission to bring back the 1MDB funds kept abroad to finance the acquisition of independent power plant JIMAH Energy Ventures.
“Jho Low, however, informed that the funds cannot be used, because it is for UMNO. After hearing this, I also understood that Datuk Seri Najib was controlling the funds for UMNO.
He said the company then had to source funds for the acquisition through another loan, which frustrated him, and he became concerned about the company’s growing debt.
Hazem said at the time he resigned from 1MDB, there was still money left in the 1MDB GIL account, half of which had been invested by the fund manager at BSI Singapore.
“The money was also used in mid-2013 to purchase Ayer Itam Estate Lands land in Penang for about RM1 billion, repay the debt from Standard Chartered bank of about RM2 billion and may have also been used to pay other loan interests.
“I did not have access and control over the funds even though I was the CEO and I had repeatedly made requests to Jho Low to bring home the funds to finance 1MDB’s needs,” he said.
According to Hazem, the response received from Low was that the funds could not be brought home as it was required for UMNO.
“But I was informed by the then 1MDB chairman, Tan Sri Lodin Wok Kamaruddin that Datuk Seri Najib did not allow the funds to be brought home. Although no clear reason was given, I had to abide by this because it came from Datuk Seri Najib.
“So, I understood that indeed, all these matters were in his (Najib’s) knowledge, and I had to comply with the instructions,” he said.
Najib, 67, is facing 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.
Sept 14, Najib’s 1MDB Trial: Day 48
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Sept 2, Najib’s 1MDB Trial: Day 46
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Oct 30, Najib’s 1MDB Trial: Day 27
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Oct 21, Najib’s 1MDB Trial: Day 24
Oct 17, Najib’s 1MDB Trial: Day 23
Oct 16, Najib’s 1MDB Trial: Day 22
Oct 14, Najib’s 1MDB Trial: Day 21
Oct 10, Najib’s 1MDB Trial: Day 20
Oct 9, Najib’s 1MDB Trial: Day 19
Oct 8, Najib’s 1MDB Trial: Day 18
Oct 7, Najib’s 1MDB Trial: Day 17
Oct 1, Najib’s 1MDB Trial: Day 16
Sept 30, Najib’s 1MDB Trial: Day 15
Sept 26, Najib’s 1MDB Trial: Day 14
Sept 25, Najib’s 1MDB Trial: Day 13
Sept 24, Najib’s 1MDB Trial: Day 12
Sept 23, Najib’s 1MDB Trial: Day 11
Sept 19, Najib’s 1MDB Trial: Day 10
Sept 18, Najib’s 1MDB Trial: Day Nine
Sept 17, Najib’s 1MDB Trial: Day Eight
Sept 10, Najib’s 1MDB Trial: Day Six
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Aug 28, Najib’s 1MDB Trial: Day One
Aug 28, Najib’s 1MDB Trial Begins