Malaysia files suit against KPMG partners for $5.64B: Report

The Malaysian government, government-run strategic development company 1MDB and their units filed a lawsuit seeking more than $5.6 billion from 44 KPMG Malaysia partners for their role in auditing the company.

The lawsuit filed on Tuesday alleges that KPMG committed breaches of contract and negligence in its audit and certification of 1MDB’s financial statements for the financial years 2010 to 2012. 1MDB has been embroiled in a scandal over misappropriation of funds for much of the past decade.

The lawsuit was first reported by the Edge newspaper. Malaysia’s Finance Ministry confirmed that legal action was taken against the 44 partners over 1MDB. KPMG Malaysia said in a statement that “all allegations as reported in the news are refuted and the claim will be vigorously contested by the partners.”

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The 1MDB scandal set off investigations in Asia, the U.S. and Europe, and led to a historic change in government in 2018. Goldman Sachs Group Inc. last year admitted its role in the biggest foreign bribery case in U.S. enforcement history, reaching multiple international settlements in the billions of dollars to end probes into its fund-raising for 1MDB

The statement of claim alleged that more than $5.6 billion had been misappropriated from 1MDB and its subsidiaries to benefit former Prime Minister Najib Razak and his associates between 2009 and 2014. Of that sum, about $3.20 billion was misappropriated during the three financial years that KPMG was its auditor.

The claimants said that KPMG’s audited financial statements between 2010 to 2012 “did not give a true and fair view” of the state investment fund’s financial affairs. Had KPMG not been negligent, it would have prevented further misappropriations in the following years, they said.

As of May 6 this year, interest of at least $1.43 billion has accrued from the $5.6 billion sum, it added.

KPMG was terminated as 1MDB’s auditor in December 2013 during the audit of that year’s financial statements, the accounting firm had previously said in a statement on its website.

The firm in 2018 retracted its 1MDB audit reports as it didn’t have access to relevant documents that were declassified by the Mahathir Mohamad administration, 1MDB said in a statement that year.

Malaysia last month received $80 million from Deloitte PLT in a settlement over the firm’s audit of 1MDB and its former unit SRC International between 2011 to 2014. Malaysia received the first payment of 1.8 billion ringgit ($432 million) from AMMB Holdings Bhd. in settlement over the local lender’s involvement in the 1MDB scandal, according to the finance ministry.

— With assistance from Yantoultra Ngui