Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on March 21, 2022 - March 27, 2022

A former banker with BSI Bank based in Singapore told a US court that he had lied to 1Malaysia Development Bhd’s (1MDB) auditor KPMG in 2012 about the true nature of assets kept in an account that invested in a fund managed by Bridge Partners.

Kevin Swampillai said on March 16, 2022, in the New York trial of ex-Goldman Sachs banker Roger Ng that Terence Geh Cho Heng of 1MDB told him KPMG would be asking about the account that was supposed to hold liquid assets valued at US$2.3 billion. Geh, who was 1MDB’s executive director of finance, told him not to reveal to the auditor that the only assets were two illiquid drilling ships.

This was told by Swampillai when he answered questions posed by Ng’s lawyer Marc Agnifilo.

 

And where was this meeting, do you remember?

It was at the BSI office in Singapore.

 

Okay. So the KPMG folks came to you?

That’s correct.

 

And at the time, KPMG was the auditors for 1MDB?

That’s correct.

 

And KPMG, in fact, had conducted an audit of 1MDB or was in the process of doing so?

They were in the process of doing so.

 

And I think you testified that at some point, Terence Geh contacts you ... And Terence Geh said, in substance, to not disclose to KPMG that the two drill ships were the only assets of 1MDB?

That’s correct.

 

You knew that the drill ships were the only assets of 1MDB in the Bridge fund, right?

That’s correct.

 

When Terence Geh says to you don’t tell KPMG what the assets are, you say that you are going to have to run that request up to a supervisor at the bank?

I didn’t tell Terence Geh that specifically, though I did raise this up with my supervisor.

 

Okay. And fair to say you came back to Terence Geh and said it’s your job, 1MDB, to try to make sure that KPMG doesn’t ask that question?

Yes. I took pains to — well, clearly, Terence was saying don’t talk about the drill ships, that information is never to come up, and I basically told Terence, well, it’s your job to manage the audit in such a way that they don’t ask those questions.

 

Okay. But when you had the meeting with KPMG, they did ask those questions?

That’s correct.

 

And what did you say?

Well, I was caught off guard. You know, I was in a position where, you know, I had the client in the room. The client had given me instructions, don’t talk about what’s underlying those funds, and then, clearly, Terence had not done a very good job in terms of managing the auditor and there was the auditor asking me a very direct, pointed question. So, unfortunately, I lied and I gave the impression or raised specifically to the auditor that, I used words to the effect that the assets were liquid in nature, that they were in cash, they [had] not been deployed yet, they will be deployed at some point, the asset manager will invest those monies, words to that effect.

 

So you used the word “liquid”. Liquid in banking means something that can be converted to cash quickly or easily.

That’s correct.

 

All right. And fair to say that these drill ships were not liquid assets?

That’s correct.

 

So when you said you lied, you lied about the nature of the assets, you said they were liquid when you knew they were not liquid?

That’s correct.

 

And am I right that KPMG actually asked you what the assets were?

Yes, I believe they did, meaning that, okay, you say that the assets were liquid in nature, can you tell me what they are.

 

And you said things that weren’t true?

That’s correct.

 

The US$2.3 billion that was parked in a Cayman-registered fund was a point of contention that 1MDB had with its auditors, and when KPMG refused to sign the FY2013 accounts unless it was provided with more proof of the nature and value of the Cayman fund plus a few others, they were sacked as auditor on the instruction of Datuk Seri Najib Razak and replaced by Deloitte.

The Edge had published various articles questioning the authenticity of the assets as well as the credibility of Bridge Partners. In a story in the Nov 17, 2014, issue titled “Who are the Bridge Partners?”, we pointed out that it is a very small outfit and two founding partners were previously censured by market regulators in Hong Kong and Singapore. We also highlighted in another article “The high-risk nature of Bridge Global Absolute Return Fund” that the prospectus of the fund stated that investors could lose everything and questioned 1MDB’s decision to put money in such a fund.

Swampillai and a few other BSI bankers — Yak Yew Chee, Yeo Jia Wei and Yvonne Seah — received kickbacks from the various 1MDB transactions. Swampillai, a Malaysian, has been banned from working in the financial industry in Singapore. Yak, Yeo, Seah were jailed 18 weeks, 30 months and two weeks respectively.

The Swiss-based BSI was ordered to shut its operations in Singapore.

 

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