KUALA LUMPUR, Malaysia – According to court documents seen by Reuters, Malaysia’s government and state fund 1Malaysia Development Berhad (1MDB) are demanding more than US$5.6 billion in damages from KPMG partners for alleged breaches and incompetence relating to a corruption crisis at the fund. KPMG disputed the claims on Friday (July 9) and promised to “vigorously” oppose the complaint, which was brought against 44 current and former partners and tied to its audit of 1MDB’s financial records from 2010 to 2012.
The claim, filed on Tuesday, is the latest in a series of proceedings brought by Malaysian authorities to recover billions of dollars missing from 1MDB in a scandal that has implicated high-ranking officials, banks, and financial institutions around the world.
READ: Malaysia’s 1MDB and its ex-unit are attempting to recoup US$23 billion in assets.
“All claims as reported in the news are disputed, and the claim will be strongly defended,” KPMG said in an emailed statement to Reuters, adding that the complaint had left it “disappointed.”
Due to the pending litigation, Malaysia’s finance ministry declined to speak further. It announced in June that it was in talks with the auditor to reach an agreement.
A request for comment from 1MDB’s lawyers was not immediately returned.
The plaintiffs claim that about US$3.2 billion was taken from 1MDB and its subsidiaries while KPMG was serving as the firm’s auditor.
The cash was part of a bigger sum of US$5.64 billion allegedly misappropriated from 1MDB between 2009 and 2014, damages that the plaintiffs claim could have been prevented if KPMG had gathered enough evidence to back up its audit findings.
According to the plaintiffs, a proper audit by KPMG would have revealed fraud risk warning signals that the firm would have been required to report, resulting in the earlier discovery of the 1MDB scandal.
The plaintiffs stated that they would seek the whole sum misappropriated, including interest and expenses.
READ: Malaysia’s AmBank settles with 1MDB for $432 million
The Malaysian government and MoF Inc, a statutory organization under the finance ministry, would also ask the KPMG partners for RM2.63 billion (US$627.83 million) to offset losses suffered in the bailout of 1MDB.
After refusing to sign off on 1MDB’s 2013 accounts, KPMG was fired as the fund’s auditor.
It told 1MDB in June 2018 that it should “now take all necessary steps to preclude any further or future reliance on the audit reports prepared by KPMG Malaysia for the financial years ended Mar 31, 2010 to Mar 31, 2012.”
Deloitte PLT, which replaced KPMG as 1MDB’s auditor, paid the Malaysian government US$80 million last month to settle accusations relating to its dealings with the fund.
At least six nations have launched inquiries into 1MDB, the Malaysian investment firm co-founded by former Prime Minister Najib Razak.
In a case involving 1MDB, Najib was convicted guilty of corruption and money laundering last year. He denies guilt and intends to appeal the decision./n
