KUALA LUMPUR (Nov 9): Lawyers of former prime minister Datuk Seri Najib Abdul Razak shifted the blame to 1Malaysia Development Bhd's (1MDB) ex-CEO Mohd Hazem Abdul Rahman for concealing and misleading audit firm KPMG during its audit of the state investment arm.
During the 1MDB-Tanore trial on Tuesday, Najib’s lawyer Mardhiyah Siraj Kumar was grilling Hazem on 1MDB’s bogus investments of US$2.3 billion in an unknown fund, Bridge Global SPC, which were made through Brazen Sky Ltd.
The lawyer asked Hazem about KPMG’s request for information on this investment in 2013 during an audit of the company, and said Hazem had, together with former chief financial officer Azmi Tahir and Jho Low's associate Terence Geh Choh Heng, contrived to deceive Najib and KPMG about the investment.
"You, Azmi and Terence [Geh] did this (misled Najib and KPMG) to the disadvantage of 1MDB," the lawyer said to Hazem, who disagreed.
Prior to that, she asked him about Azmi and him being under the control of the alleged mastermind Jho Low, who instructed them via email not to give any information to KPMG at a meeting with them.
“I put it to you that it was clear that you and Azmi were under the control of Jho Low as you carried out his instructions during the meeting with KPMG," Mardhiyah said.
“To an extent, yes," Hazem admitted.
Hazem testified last year that KPMG was dismissed in 2013 after the audit firm, which was appointed as 1MDB’s auditor on Sept 15, 2010, refused to sign off on 1MDB’s 2013 financial accounts even after a meeting with Najib at his residence.
Before its dismissal, KPMG — the second audit firm hired after Ernst & Young resigned in 2010 — had signed off on three unqualified audit reports for 1MDB for the financial years ended March 2010 to 2012.
Testifying further on the 2013 accounts, Hazem recalled that KPMG had, at the time, repeatedly insisted on details of the kinds of investments made through Brazen Sky and proof that 1MDB had invested in the SPC fund, given its claimed investment of US$2.3 billion in the fund.
However, he said the 1MDB management themselves did not have access to information about the investments as they were denied the documents by Jho Low — now a fugitive — and only had the investment statements issued by BSI Bank.
He also said Najib had pressured him to replace KPMG with another auditor due to their unfavourable audit.
But Mardhiyah then turned the heat up on the witness by asking him why he had to rely on Jho Low's emails to respond to KPMG’s queries.
"Why couldn't the management satisfy the reasonable request? Why couldn't you provide the information to your auditor? Why rely on Jho Low and his emails?" she asked.
"As I highlighted throughout the course of the proceedings, I relied upon the finance team and information given by Jho Low," Hazem replied.
"You relied on Jho Low because you were in it with Jho Low to conceal facts from the board,” the lawyer asserted.
"No," Hazem replied.
Brazen Sky Ltd was subsequently discovered to be a company incorporated in the British Virgin Islands by Low, and used as a vehicle to embezzle funds out of 1MDB.
In this 1MDB-Tanore trial, Najib has been charged with four counts of power abuse to enrich himself with RM2.3 billion from 1MDB, and 21 counts of laundering the same amount. He faces up to 20 years' imprisonment, if convicted.
The trial resumes on Wednesday morning.
The Edge is covering the trial live here.
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