KPMG International denies any connection to 1MDB

-A +A

KUALA LUMPUR: KPMG International has denied any relationship or connection to 1Malaysia Development Bhd (1MDB) following recent allegations by whistle-blower site Sarawak Report that the audit firm “cooked the books” when auditing the debt-laden state investment firm.

Sarawak Report on Tuesday revealed that Tom Wethered, the general counsel for KPMG International Cooperative global chairman John Veihmeyer, stated that the corporate headquarters had no involvement in the matter because the KPMG network represented nothing more than a “Swiss cooperative of happy Helvetic-brand sharers”.

He explained that no one at the headquarters was responsible for what their fellow franchise holders were up to, and they were just there to help and advise when required.

“Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services.

“No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to bind or obligate any member firm.

“KPMG International does not have any relationship with — or connection to — 1MDB,” Wethered wrote in an email to Ganesh Sahathevan, a Sydney-based Malaysian investigative financial journalist, who challenged Veihmeyer to give his response to the allegations.

Ganesh asked whether KPMG International was aware of any of the transactions relating to 1MDB outlined in the expose.

“Much of what reported was in the public domain since at least 2014. Hence, there is also the question of why the global board took no action despite that fact?” he wrote in an email addressed to Veihmeyer.

Last week, Sarawak Report exposed 1MDB’s annual report ended March 31, 2010, and email transactions that indicated how 1MDB allegedly concealed the loss of US$700 million, which was the sum siphoned out of its joint venture with the little-known oil company PetroSaudi.

The firms that gave 1MDB clean bills of health were the Malaysian offices of global accounting firms Deloitte and KPMG.

Sarawak Report said those who assume that accreditation by KPMG represents some form of guarantee of high standards, quality control, centralised monitoring and disciplinary process to ensure high standards of accountancy practices must therefore stand disappointed.

“According to KPMG’s top legal eagle, theirs is a form of franchise that has its cake and eats it at the same time. Name bearers get to carry the brand but without any form of accountability.

“If KPMG Malaysia assists in the cover-up of a billion-dollar heist of public money, it turns out that their global headquarters in Amsterdam merely refers you to the cantons of Switzerland and their company’s new corporate structure — which is accountability free,” the site said.

Lack of clear accountability

Sarawak Report cited that the KPMG website and numerous articles made reference to the guarantee of quality that its brand lent to its affiliates across the world.

“The KPMG Global website concedes that its head officers provide policies, even regulations. But there is no mention of enforcement.

“The global board is the principal governance and oversight body. The key responsibilities of the board include approving long-term strategies, protecting and enhancing the KPMG brand, and approving policies and regulations.

“There is no single line of accountability within the organisation ... although there is a deluge of information about the values and quality that this network of affiliated firms is striving to achieve, there seems to be a lack of clear accountability within the structure of the organisation.

“Without accountability and enforcement structures, the high values and claims of integrity that pack out KPMG’s corporate messaging are surely effectively meaningless? What better example than this latest abdication of responsibility over the scandal of 1MDB?” Sarawak Report asked.

The site also highlighted how former KPMG global head Michael Andrew spoke about the company upholding its “duty to the broader community” during an interview he gave to The Star.

Andrew was quoted as saying that the KPMG brand is “all about being independent and objective because the firm and its employees have a public interest of responsibility to the broader community”.

He said: “If we don’t meet the governance standards, people won’t have confidence in our business. Integrity is at the heart of everything we do.

“This is ensuring that we understand that our duty is to the broader community than just to any particular client or particular transaction. Because if we do some work, which turns out to be incorrect, it’ll affect our global brand.”

Despite KPMG’s commitment to the broader community, Sarawak Report said the public was never informed about the siphoning of US$700 million in public funds — out of the fund in the case of 1MDB.

“And now it turns out that KPMG Global regards itself as having no responsibility at all in the matter.

“If it’s more widely recognised that KPMG Global exerts so little quality control over its branches, the reputation on which this ‘cooperative’ relies might very well lose a lot of its lustre,” the site said. — The Malaysian Insider

 

This article first appeared in The Edge Financial Daily, on March 27, 2015.