KUALA LUMPUR, Sept 15 — The former chief executive officer of 1Malaysia Development Berhad (1MDB) told the High Court here 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 wanted businessman Low Taek Jho or Jho Low and managed by his proxy as one of the ways to divert 1MDB investment money in PetroSaudi Oil Services Ltd (PSOSL).
Mohd Hazem said that after a meeting held at the Najib’s residence in Langgak Duta here 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.
Mohd 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.
Mohd Hazem said he informed Jho Low about the matter and Jho 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, Mohd 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 (Mohd Hazem) believed that Najib knew all about the status of the investment because he had been briefed by Jho Low and Yak Yew Chew of BSI Bank during a meeting on Nov 28, 2013.
Mohd 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.
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.