Haul up earlier auditors to explain 1MDB’s debts, says DAP

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KUALA LUMPUR (Feb 16): DAP today suggested that the Public Accounts Committee (PAC) should summon not only international auditor Deloitte Malaysia but also KPMG, which had previously audited the accounts of 1Malaysia Development Bhd (1MDB), to explain the company’s liquidity crunch.

Its publicity chief, Tony Pua, in hailing the move by PAC chairman Datuk Nur Jazlan Mohamad, who announced the possibly of calling up 1MDB to explain its precarious financial position, said this would ensure that the answers were verifiable with the two independent auditors.

Deloitte Malaysia had signed off on 1MDB's accounts on November 3, but the strategic investment fund was unable to repay its RM2 billion debt due less than a month later.

In a statement today, Pua also urged PAC to summon KPMG, which audited the fund from 2010 to 2013.

He added that apart from the 2010 report where KPMG raised an “emphasis of matter”, the auditor gave 1MDB a clean bill of health for all subsequent reports.

"It was in those years that 1MDB first invested with an unknown Middle-Eastern company, Petrosaudi International, before the funds were mysteriously reallocated to an investment fund in Cayman Islands.

"KPMG would also be able to enlighten the Parliamentary Committee the reasons they resigned as the auditors of 1MDB at the end of 2013," he added.

Pua said that the testimony of the auditors would be crucial in uncovering the truth behind the fund's RM42 billion accumulated debts.

It had also been reported that 1MDB had erased all historical data and email records from all personal computers and handheld devices belonging to employees and in their email servers.

Pua said that if this was true, the records held by auditors would be critical in determining the real position of the company.

The Petaling Jaya Utara MP also expressed confidence that both Deloitte and KPMG would have taken steps to protect the integrity of all relevant documents in their possession, especially after the experience of audit firm Arthur Andersen, which collapsed after it was discovered that documents related to failed energy company Enron were shredded.

"Since 1MDB president and group executive director Arul Kanda Kandasamy has openly welcomed ‘public scrutiny as ‘a good thing’… we will certainly look forward to 1MDB’s date with a bipartisan PAC to prove that the company has nothing to hide.”

Arul had on Friday, said that the government-backed company had settled the RM2 billion loan, six days before bankers were to trigger a default.

However, he did not disclose the sources of fund, although The Malaysian Insider had, citing sources, reported the loan was settled with money from tycoon T. Ananda Krishnan.

In an interview published by Mingguan Malaysia, Arul said Ananda's role on the matter was mere speculation.

The payment is a last-minute reprieve for 1MDB – a cross between a sovereign fund and a private investment firm wholly owned by the Ministry of Finance.

Its debt woes were seen as pressuring the ringgit and Malaysia's sovereign credit rating.