US DOJ continues to seize Najib's son Riza Aziz's assets; meanwhile in Malaysia.......

by Ganesh Sahathevan



Riza Admits He Stole 1MDB Money - Pays US$60 Million!

Sarawak Report

While the Malaysian Government has yet to recover anything of significance from former PM Najib Razak and his family, the US Department Of Justice continues to identify and recover 1MDB linked  assets from  family members like step son Riza Aziz.

The US$ 60 Million settlement Riza and friends entered into with the DOJ in March last year (see Sarawak Report story above) does not seem to have stopped the DOJ from pursuing them for 1MDB linked assets.

In further action announced three weeks ago the DOJ announced that it had seized a further USD 38 Million in assets. See DOJ press release and documents below. Meanwhile in Malaysia Najib's 1MDB linked charges continue to be delayed,postponed and pushed on to no foreseeable conclusion.

END

References

First recall this report of a settlement in March 2018:

'Wolf of Wall Street' maker settles US lawsuit for $60 million  

Now see links at 

Download Proceeds of Sale of New York Real Estate

Download London Property in the Name of Red Mountain Global Ltd

Download Converted Equity in a Facilities Management Company Headquartered in Kentucky

Excerpt from document at the last link 

  The defendants in this action are: (1) up to $28,174,145.52 in escrow account number ‘7176 held by escrow agent Squire Patton Boggs (US) LLP at Huntington National Bank; 

(2) up to $1,148,739.35 in account number ‘6111 held in the name of Christopher Joey McFarland at Barclays Bank of Delaware; and 

(3) up to $162,486.88 in account number ‘9340 held in the name of Christopher Joey McFarland at Fidelity Investments, Inc., all of which being traceable to equity in COMPANY 1, a facilities management company headquartered in Newport, Kentucky (“DEFENDANT ASSETS”).

 3. The persons and entities whose interests may be affected by this action are Riza Shariz Bin Abdul Aziz, Christopher Joey McFarland,Nina Partners, LLC, Red Granite Investment Holdings, LLC, and Red Granite Pictures, LLC. 

InvolvingMalaysianSovereignWealthFund

Date 23/02/2019

http://www.mondovisione.com/media-and-resources/news/department-of-justice-us-seeks-to-recover-approximately-38-million-allegedly/?fbclid=IwAR1aLYJPBMg8ma_DE61xnG_glUGtztWHezepCac62aB7uEjYGu1kMZ4WuS4

The Justice Department announced today the filing of civil forfeiture complaints seeking the forfeiture and recovery of approximately $38 million in assets allegedly associated with an international conspiracy to launder funds misappropriated from 1Malaysia Development Berhad (1MDB), a Malaysian sovereign wealth fund.  Combined with civil forfeiture complaints filed in July 2016 seeking more than $1 billion in assets, and civil forfeiture complaints filed in June 2017 seeking approximately $540 million in assets, this case represents the largest action brought under the Department’s Kleptocracy Asset Recovery Initiative.  Assets now subject to forfeiture in this case total approximately $1.7 billion.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Nicola T. Hanna of the Central District of California, Assistant Director Robert Johnson of the FBI’s Criminal Investigative Division and Chief Don Fort of the IRS Criminal Investigation (IRS-CI) made the announcement.

According to the complaints, from 2009 through 2015, more than $4.5 billion in funds belonging to 1MDB were allegedly misappropriated by high-level officials of 1MDB and their associates.  1MDB was created by the government of Malaysia to promote economic development in Malaysia through global partnerships and foreign direct investment, and its funds were intended to be used for improving the well-being of the Malaysian people. 

“The complaints filed today demonstrate the Department of Justice’s steadfast commitment to recovering assets traceable to the alleged multi-billion dollar looting of Malaysia’s sovereign wealth fund,” said Assistant Attorney General Benczkowski.  “The Criminal Division and our law enforcement partners are committed to protecting the U.S. financial system and ensuring that the proceeds of overseas corruption and other criminal conduct find no safe haven here.”

“These new lawsuits target assets collected by corrupt officials and their associates through a massive scheme that stole billions of dollars from the people of Malaysia and laundered the proceeds across the world,” said U.S. Attorney Nick Hanna.  “Through a series of cases filed over the past three years, we have pursued a wide variety of assets purchased with stolen 1MDB funds, and so far we have successfully forfeited hundreds of millions of dollars. Collectively, these cases send a strong message that the United States cannot be used as a safe haven or a conduit for money pilfered by corrupt officials.”

“Today’s announcement is a testament to the FBI’s relentless effort to investigate kleptocracy and hold corrupt foreign officials accountable,” said FBI Assistant Director Johnson.  “At the onset of this investigation, we promised to work with our foreign and domestic partners to identify and return stolen assets to the Malaysian people.  This filing demonstrates our unwavering commitment to keep that promise.  We want to thank our partners, both domestic and foreign, for their hard work in helping to bring justice for the Malaysian people.  The recovery of these assets is another step in that direction.”

“The investigation into the misappropriation of the 1MDB funds represents a model for international cooperation in significant cross-border money laundering matters, and sends a message that criminals cannot evade law enforcement authorities simply by laundering money through multiple jurisdictions and through a web of shell corporations,” said IRS-CI Chief Fort.  “We are proud of the investigative work on this case and the work of our fellow law enforcement agencies in this and other complex financial investigations.”

As alleged in the complaints, the members of the conspiracy – which included officials at 1MDB, their relatives and other associates – diverted more than $4.5 billion in 1MDB funds.  Using fraudulent documents and representations, the co-conspirators allegedly laundered the funds through a series of complex transactions and shell companies with bank accounts located in the U.S. and abroad.  These transactions allegedly served to conceal the origin, source and ownership of the funds, and ultimately passed through U.S. financial institutions to then be used to acquire and invest in assets located in the U.S. and overseas.

As alleged in the earlier complaints, in 2009, 1MDB officials and their associates embezzled approximately $1 billion that was supposed to be invested to exploit energy concessions purportedly owned by a foreign partner.  Instead, the funds were allegedly transferred through shell companies and were used to acquire a number of assets, as set forth in the complaints.  The complaints also allege that the co-conspirators misappropriated close to $1.4 billion in funds raised through bond offerings in 2012, and more than $1.2 billion following another bond offering in 2013.  The complaints also allege that in 2014, the co-conspirators misappropriated approximately $850 million in 1MDB funds under the guise of repurchasing certain options that had been given in connection with a guarantee of the 2012 bonds.

The complaints filed today in the Central District of California identify additional assets traceable to the 2012 and 2013 bond offerings.  These assets include luxury real estate in London, proceeds from the sale of luxury real estate in New York City, and converted equity in a facilities management company headquartered in Kentucky.    

The FBI’s International Corruption Squads in New York City and Los Angeles and the IRS-CI are investigating the case.  Deputy Chief Woo S. Lee and Trial Attorneys Kyle R. Freeny, Jonathan Baum, Barbara Levy and Joshua L. Sohn of the Criminal Division’s Money Laundering and Asset Recovery Section and Assistant U.S. Attorneys John Kucera and Michael R. Sew Hoy of the Central District of California are prosecuting the case.  The Criminal Division’s Office of International Affairs is providing substantial assistance.

The Department also appreciates the significant assistance provided by the Attorney General’s Chambers of Malaysia, the Royal Malaysian Police, the Malaysian Anti-Corruption Commission, the Attorney General’s Chambers of Singapore, the Singapore Police Force-Commercial Affairs Division, the Office of the Attorney General and the Federal Office of Justice of Switzerland, the judicial investigating authority of the Grand Duchy of Luxembourg, and the Criminal Investigation Department of the Grand-Ducal Police of Luxembourg.

The Kleptocracy Asset Recovery Initiative is led by a team of dedicated prosecutors in the Criminal Division’s Money Laundering and Asset Recovery Section, in partnership with federal law enforcement agencies, and often with U.S. Attorney’s Offices, to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered assets to benefit the people harmed by these acts of corruption and abuse of office.  In 2015, the FBI formed International Corruption Squads across the country to address national and international implications of foreign corruption.  Individuals with information about possible proceeds of foreign corruption located in or laundered through the U.S. should contact federal law enforcement or send an email to kleptocracy@usdoj.gov (link sends e-mail) or https://tips.fbi.gov/.

A civil forfeiture complaint is merely an allegation that money or property was involved in or represents the proceeds of a crime.  These allegations are not proven until a court awards judgment in favor of the United States.

Attachment(s): 

Download Proceeds of Sale of New York Real Estate

Download London Property in the Name of Red Mountain Global Ltd

Download Converted Equity in a Facilities Management Company Headquartered in Kentucky

Is KWAP's RM 4 Billion seized by Singapore hostage to Malaysia-Singapore Water Agreement negotiations?

by Ganesh Sahathevan


This writer has previously reported that the Singapore-Malaysia water agreements are not sustainable (see story copied and pasted below).

In the past few weeks Singapore ministers have had much to say about the water agreements.For example the Straits Times reported:

Singapore will fully honour the terms of the 1962 Water Agreement with Malaysia, including the price of water stipulated in it, and expects Malaysia also to do so, Foreign Minister Vivian Balakrishnan said on Monday (July 9).

Responding in Parliament to a question about bilateral relations with Malaysia, Dr Balakrishnan said the 1962 deal is "not an ordinary agreement".

"The 1962 Water Agreement was guaranteed by both Singapore and Malaysia in the 1965 Separation Agreement, which in turn was registered with the United Nations," he said.

"Any breach of the 1962 Water Agreement would call into question the Separation Agreement, which is the basis for Singapore's very existence as an independent sovereign state."

Water has been in the spotlight in recent weeks as an issue that could affect bilateral ties, after Malaysian Prime Minister Mahathir Mohamad criticised the water supply deal between Singapore and his country, saying the price at which water is sold to the Republic is "ridiculous".

An agreement signed between Singapore and Malaysia in 1962 allows Singapore to draw up to 250 million gallons of raw water from Johor daily at three sen (1.01 Singapore cents) per 1,000 gallons.

The Minister also said:

While Malaysia’s investigations into the 1MDB issue have intensified following its general election, Singapore has been thoroughly investigating 1MDB-related offences committed in Singapore since 2015, he noted.

Singapore has taken firm action against institutions and individuals, including criminal prosecutions, shut down two banks and fined others for regulatory breaches, and jailed and fined individuals convicted on 1MDB-linked charges.

“So far, we are the only jurisdiction to have done so. We have, in addition, cooperated fully with Malaysia’s official requests for information on 1MDB-related transactions,” he said.


However, Singapore has yet to say much about this very large billion dollar 1MDB issue:

In 2011, the former 1Malaysia Development Bhd (1MDB) subsidiary took a RM4.385 billion loan from KWAP at an interest rate of between 4.3% and 5.1% per year to fund strategic overseas investments in energy resources.

The total repayment period is 10 years, which would see interest servicing in the first five years of the loan, while the remaining five years would see the interest and principal paid up.

Last November, former second finance minister Datuk Seri Johari Abdul Ghani admitted that SRC was in financial difficulty due to problems it faced in recovering money it had deposited in BSI Bank's branch in Singapore.
This came after Singapore authorities shut down the bank's operations for breaching money laundering regulations in a development allegedly linked to 1MDB.

The above raised the obvious question: Is Singapore using that billion or more as a  bargaining chip in the ongoing disagreement over the water agreements?

This would not be the first occasion in which Singapore has used money owed Malaysia and Malaysians as a bargaining chip.Readers may recall this issue from the 1990s:

Veteran observers on both sides of the Causeway view it as representing a psychological breakthrough in the way the two countries approach contentious issues between them. Malaysia had accepted the fact of Singapore’s sovereignty over the railway land while Singapore had acknowledged Malaysia’s entitlement to some economic value for the railway land and stations that KTM had to give up. The agreement to relocate the KTM Station to Woodlands within a year has opened up the possibility of a resolution to other outstanding issues, if approached with the same spirit. These include the price of water supply from Johor to Singapore and the withdrawal of CPF savings by Malaysian workers and use of Malaysian airspace by the Singapore Air Force.

END

Thursday, February 11, 2016

Singapore ,1 MDB,a change of leadership & the water agreements: A public admission from Singapore that the water agreements are not sustainable

by Ganesh Sahathevan
In this post earlier in the week evidence was provided to show that the Singapore-Malaysia water agreements will need to reviewed, regardless of any arrangement the Government of Singapore may come to with  Najib Razak, the 65 year old  current prime minister of Malaysia.\:

Singapore & 1 MDB: Change of leadership may mean an adverse review of unsustainable water agreements

It has since come to this writer's attention that the issues raised in the above post had in fact been aired via  the Government owned and controlled Straits Times ,where the public have been warned :

The heavy rain and subsequent floods in Johor Baru are in a different catchment area from the Linggiu Reservoir, which is further upstream. While there has been some rain in the Linggiu Reservoir catchment, the water levels remain largely the same, at around 43 per cent.

In photos posted last Friday( November 13,2015, on the Facebook page of Minister for the Environment and Water Resources Masagos Zulkifli  )  the water level at the Linggiu Reservoir was shown to have dropped significantly. 

The water level at the reservoir is at its lowest due to low rainfall and this in turn impacts how much Singapore can draw from the Johor River. Singapore can tap 250 million gallons of water a day from the river, which can meet up to 60 per cent of the country's needs.

PUB said that from January to last month, there were about 100 times when Singapore was temporarily unable to withdraw water from the river .


Last week, Minister for the Environment and Water Resources Masagos Zulkifli said if the situation does not improve, more may have to be done to conserve water. This includes restricting, for the first time, the use of water for non-essential activities such as washing cars and operating water fountains.


(See full story below).


The probability that Singapore is trying to do what it can to ignore the 1 MDB scandal in order to secure its future supply of water via some agreement with Najib Razak, as foolhardy as that may seem, is greater given this admission.Readers are reminded that the Government of Singapore has for more than a decade boasted that it is self-sufficient with regards its need for water.
This Straits Times headline from 2014 is but one example:

Saying goodbye to water woes-Treated used water is helping Singapore achieve near self-sufficiency

END 

JB downpour fails to raise reservoir level

PUBLISHED

 NOV 18, 2015, 5:00 AM SGT

FACEBOOK

823S'PORE MAY CUT WATER USE IF JOHOR RESERVOIR LEVEL STAYS LOW

Carolyn Khew

 

Monday's two-hour downpour which caused massive floods in parts of Johor Baru has done little to raise historically low water levels in the Linggiu Reservoir - a key cog in Singapore's water supply.

National water agency PUB said it will continue to monitor the situation closely, and Singaporeans will be told early if there is a need to restrict water use here.

"The heavy rain and subsequent floods in JB are in a different catchment area from the Linggiu Reservoir, which is further upstream," a PUB spokesman told The Straits Times yesterday. "While there has been some rain in the Linggiu Reservoir catchment, the water levels remain largely the same, at around 43 per cent."

The water level at the reservoir is at its lowest due to low rainfall and this in turn impacts how much Singapore can draw from the Johor River. Singapore can tap 250 million gallons of water a day from the river, which can meet up to 60 per cent of the country's needs.

PUB said that from January to last month, there were about 100 times when Singapore was temporarily unable to withdraw water from the river .

In photos posted last Friday, the water level at the Linggiu Reservoir was shown to have dropped significantly. FACEBOOK PAGE OF MASAGOS ZULKIFLI

LITTLE RAIN IN CATCHMENT

The heavy rain and subsequent floods in Johor Baru are in a different catchment area from the Linggiu Reservoir, which is further upstream. While there has been some rain in the Linggiu Reservoir catchment, the water levels remain largely the same, at around 43 per cent.

PUB SPOKESMAN

Last week, Minister for the Environment and Water Resources Masagos Zulkifli said if the situation does not improve, more may have to be done to conserve water. This includes restricting, for the first time, the use of water for non-essential activities such as washing cars and operating water fountains.

Senior research fellow Cecilia Tortajada, from the Institute of Water Policy at the Lee Kuan Yew School of Public Policy, said that if the reservoir water levels do not improve by next month despite the north-east monsoon, which is expected to set in then, such restrictions may have to kick in.

"It would send a clear message to the population that there is a limit to how much water is available and that it needs to be conserved, even after the monsoon season starts," she said, pointing out that many cities around the world enforce water restrictions during the dry season.

The reservoir was built in 1994 by Singapore. It keeps sea water out of the Johor River by releasing water into it. This ensures that the river water is not too salty to be treated by the Singapore-run treatment plant there.

PUB has been running desalination and Newater plants at high capacity to keep local reservoir stocks healthy. Currently, Singapore's four Newater plants can meet up to 30 per cent of the nation's water needs. PUB hopes to expand this to 55 per cent by 2060. PUB also aims to build two more desalination plants. Currently, desalination or treated sea water can meet up to 25 per cent of Singapore's needs.

Professor Asit Biswas, distinguished visiting professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, said Singapore needs to think seriously about developing a long-term, drought-resistance plan.

With climate change and multi-year droughts in countries like Australia, there is a very high probability that the region may be hit by a prolonged multi-year drought within the next two to four decades, and not just one lasting a few months, he said.

He also added that Singaporeans may have taken a reliable water supply for granted, pointing out that water-rationing last took place here from April 1963 to February 1964.

Prof Biswas said: "More than a generation has now grown up without having faced a serious drought needing water-rationing."

PwC and 1MDB: The Southern Bank takeover suggests PwC does not have the skills for this job;and has itself caught in (another) conflict of interest

by Ganesh Sahathevan 

First posted on Sahathevan Blog on 12 July 2018

Faiz is 1MDB exco chairman, part of PwC services to the company


Interesting to see that PwC has broken a cardinal rule -you cannot audit yourself-in the search for fees.The Edge reported:

1Malaysia Development Bhd (1MDB) said yesterday Datuk Mohammad Faiz Azmi’s appointment as its executive committee (exco) chairman forms part of services provided by PricewaterhouseCoopers Advisory Services Sdn Bhd (PwC) to 1MDB.

“Pursuant to the announcement made on the appointment of the exco members on June 25, 2018, the board of directors is pleased to clarify that Datuk Mohammad Faiz Azmi’s appointment as the chairman of the exco is part of the scope and services provided by PricewaterhouseCoopers Advisory Services Sdn Bhd to 1MDB.

“PwC is assisting the board and the exco in recovering 1MDB’s assets and in managing the company’s debt,” 1MDB said in a statement.

On June 25, 1MDB announced Mohammad Faiz’s appointment to the exco that was entrusted with managing the day-to-day running of the company.

Besides Mohammad Faiz, other members of the exco are Datin Rashidah Mohd Sies and Datuk Wan Mohd Fadzmi Wan Othman.


Unfortunately,  that is not all. Faiz is also believed to have advised Bumiputra-Commerce Holdings Bhd on its takeover of Southern Bank Bhd. He missed some gaping holes in Southern Bank's balance sheet ,which then became ,at least in part , too big to hide by 2000 when BCHB got (you guessed it) PwC to audit the audited accounts. The RM 160 Million overstatement of accounts was quite likely an understatement.



Compared to the 1MDB losses, the Southern Bank losses were all local and easily proven. Faiz and PwC could not uncover that loss;it is hard to see how they will unravel the 1MDB mess.

END

Reference 

Analysts: Overstatement of SBB’s assets no impact on BCHB

By Gan Yen Kuan

553 words

4 June 2007

The Edge Financial Daily

THEDGE

English

(c) 2007 The Edge Communications Sdn Bhd

Southern Bank Bhd’s (SBB) “inappropriate accounting treatment” that resulted in an overstatement of RM160 million in its net assets as at Dec 31, 2005 (FY05) will not have a significant impact on Bumiputra-Commerce Holdings Bhd (BCHB), said analysts.

MIMB Investment Bank Bhd research head Pong Teng Siew said the overstatement, representing 2.4% of the RM6.7 billion BCHB paid for SBB, would possibly be treated as goodwill, thus the only impact on BCHB’s book would be the increase in goodwill.

“It’s not something that is really significant. Accounting treatment issues are always contentious. It’s not as major as to the Transmile case,” he told The Edge Financial Daily.

Another analyst said BCHB would just need to restate the amended figure in its FY05 results report.

“It’ll be just standardising the financial reporting (of SBB) to follow BCHB’s standards including provision policy. It will not affect its earnings,” he added.

The Edge weekly reported on May 21, quoting sources, that BCHB hired PricewaterhouseCoopers (PwC) to determine if SBB’s FY05 financial statement reflected a “true and fair disclosure” of its financial position then. Deloitte KassimChan audited SBB’s FY05 financial statement.

The issue was relevant in so far as it was not known to what extent BCHB had relied on the 2005 financial statements when pricing SBB.

Following the news report, BCHB told Bursa Malaysia last Friday that PwC’s review of SBB’s FY05 audited financial statements revealed there were indeed “inappropriate accounting treatments” of certain transactions.

It said these accounting treatments related to “inappropriately valuing certain derivative financial instruments entered into by SBB, not writing down in full the collateral value and wrongly writing back specific provisions made on certain foreclosed properties relating to non-performing loans aged seven years and above, and non-expensing of certain costs incurred.”

BCHB added that these accounting treatments had been corrected in its book as at June 30, 2006, and that no further amendments or corrections were required.

Asked what might have led to the “inappropriate accounting treatment”, Pong said the management might have practised “earnings management”.

“All companies are trying hard to show a smoother earnings growth. It’s a matter of interpretation (of the financial reporting standards). If this (earnings management) is wrong, then almost all companies are guilty,” he said.

BCHB had also said it would deliberate further on possible courses of action to enhance corporate governance and professional standards.

Commenting on these courses of action, Pong said that would likely mean internal control rather than legal action towards those accountable for the incident.

“I doubt so (legal actions). It will be more of ensuring that all staff adhere to accounting standards,” he said.

However, another analyst said directors were always held accountable for such fraud, and BCHB’s so-called courses of action may possibly mean bringing the case to civil court.

“Of course, (they will take legal action) if they want to. There can be arguments over what ‘inappropriate’ means. Is it just inappropriate according to their standards, or an utterly illegal practice?” he said.

Meanwhile, BCHB group chief executive Datuk Nazir Razak told The Edge Financial Daily that “the announcement is comprehensive enough”. He declined to elaborate.

The Edge Communications Sdn Bhd.

Document THEDGE0020071101e364000ko

Posted 12th July 2018 by Anonymous

PwC is Goldman Sachs' auditor,;PwC appointed by the Malaysian Govt to examine Goldman Sachs 1MDB transactions

by Ganesh Sahathevan

From Goldman Sachs 2017 Annual Report:


We were appointed by the directors on August 10, 1982 to audit the financial statements for the period ended November 25, 1983 and subsequent financial periods. The period of total uninterrupted engagement is 35 years, covering the periods ended November 25, 1983 to December 31, 2017. 


Nick Morrison (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London March 29, 2018


Despite that history, Malaysia's new government and Minister for Finance announced last year:

Newly appointed auditor for 1Malaysia Development Bhd (1MDB) PricewaterhouseCoopers (PwC) has completed its preliminary report and the Government plans to make the final report public, according to Finance Minister Lim Guan Eng.

In a press conference at Parliament today, Lim said the preliminary report gathered that 1MDB did not comply with basic corporate governance or management principles.

“From what we gathered in PWC's preliminary report, basic good corporate governance or management principles were not complied with. We want to make this public — people have the right to know — but let us get it done properly first, it is a preliminary report,” he said.

The Minister's confidence in PwC's work is touching, but one must ask why this obvious, blatant conflict has not been made better known to the Malaysian public.

Also, it is no excuse to say that PwC is the only auditor in Malaysia untainted by 1MDB.There are other firms who can, and are better known  in the business of forensic audits and investigations.

END

References

From Sarawak Report

Don't Ask Us! - KPMG Global's Astonishing Response on 1MDB

• 24 March 2015
   
• 15

1MDB is not anything to do with us – Global Chief of KPMG, John Veihmeyer

For weeks the mantra of the chairman of 1MDB’s governing Advisory Board (Malaysia’s Prime Minister) has been that the management of the fund has been ‘cleared’, because the accounts were ‘forensically’ audited by international accountancy firms of global standing.

The firms who have given 1MDB clean bills of health have been the Malaysia branches of the accountancy giants Deloitte and KPMG.

Malaysia’s top team at KPMG – no accountability to HQ?

However, last week Sarawak Report demonstrated evidence pointing to a series of sharp practices on the part of KPMG during the audit process for the year ending March 2010.

These enabled 1MDB to conceal the loss of USD$700 million, which was the sum siphoned out of its joint venture with the little known oil company PetroSaudi.

Following this expose, the Sydney-based Malaysian investigative financial journalist, Ganesh Sahathevan, directly challenged the Global Chairman of the company, John Veihmeyer, to give his response to the allegations.

Sahathevan asked whether KPMG Global had been aware of any of the transactions relating to 1MDB outlined in the expose?  He added that:

“much of what has been reported was in the public domain since at least 2014, and hence there is also the question of why the Global Board took no action despite that fact?”

KPMG’s international image – a massive global firm

The rapid response Sahathevan received from KPMG merits reading in full, because it puts paid to any assumptions that a local branch of this ‘global network’ of accountancy firms can be relied upon to maintain any sort of acceptable standard laid down by a central authority.

The General Counsel (top lawyer) for Mr Veihmeyer states that the corporate headquarters has no involvement in the matter, because the KPMG network represents nothing more than a ‘Swiss Cooperative’ of happy Helvetic brand sharers.

In short, he explains, no one at HQ is responsible for what their fellow franchise holders get up to. They are just there to help and advise when required.

Dear Mr Sahathevan

I refer to your email below addressed to Mr John Veihmeyer, Global Chairman, KPMG International Cooperative (KPMG International).

I am the General Counsel of KPMG International and am responding on behalf of Mr Veihmeyer.

KPMG International is a Swiss Cooperative. 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”.

Yours faithfully

Tom Wethered

Malaysians and others, who had assumed that accreditation by KPMG represented some form of guarantee of high standards; quality control; centralised monitoring and disciplinary process to ensure high standards of accountancy practice 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 whatsoever:

“nor does KPMG International have any such authority to bind or obligate any member firm” [Tom Wethered]

Franchise without accountability?

If a Malaysian were to find dog meat in his McDonald’s burger in KL, he would expect to receive some response from the company HQ from under its golden arches in California – and doubtless he would.

By contrast, if KPMG Malaysia assists in the cover-up of a billion dollar heist of public money, it turns out that their global HQ in Amsterdam merely refers you to the cantons of Switzerland and their company’s new corporate structure, which is accountability free.

Having their cake and eating it 

Mr Wethered’s response that “KPMG International does not have any relationship with, or connection to, 1MDB”  represents a stark contrast, however, with the firm’s own publicity material.

The KPMG website and numerous articles make reference instead to the guarantee of quality that their brand lends to its affiliates across the world.

KPMG’s own website, under the banner line “Acting With Integrity”, declares:

“KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We have more than 155,000 outstanding professionals working together to deliver value in 155 countries worldwide.”

On the other hand, scrutiny of this KPMG website soon makes plain that behind the fine words and sentiments there is indeed what appears to be a significant dearth of actual governance in this corporate structure:

ABOVE ALL, WE ACT WITH INTEGRITY

We are constantly striving to uphold the highest professional standards, provide sound advice and rigorously maintain our independence….

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 strategy, protecting and enhancing the KPMG brand, and approving policies and regulations

There is no single line of accountability within the organisation.

Leadership

Internationally, the affairs of KPMG are the responsibility of several bodies.

Aspirations, but can they be enforced?

The controls that would lead the third party readers of its audit reports to feel comforted that quality control is enforced, appear to be missing, as indicated by the letter sent by KMPG’s top counsel.

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?

KPMG’s Positive PR

The legal counsel of KPMG seems therefore to be entirely correct in his statement that the global headquarters can wash its hands entirely of this little fracas over in Malaysia.

Star Interview with former Global Head Michael Andrew presented a very different state of affairs.

Yet, as Mr Sahathevan and others suggest, this is not the public face of the company.

Certainly, the ‘Swiss Cooperative’s’ corporate PR does not accurately represent this state of affairs and basic lack of governance.

Take for example the recent ‘Up Close And Personal’ article by Malaysia’s Star Newspaper about the role of the recently retired Global Chairman of KPMG.

In his interview Mr Andrew told the Star that clients in KL had the right to expect the same level of service as in Europe.

He also said that the company upheld its “duty to the broader community”:

KPMG’s brand, Andrew says, is all about being independent and objective because the firm and its employees has a public interest of responsibility to the broader community.

“We have to ensure that we uphold the governance standards in every country for our multi-national clients. They expect the same standards in Kuala Lumpur as they do in Johannesburg, Frankfurt or New York,” he says.

He adds that corporate governance defines the KPMG brand. “If we don’t meet the governance standards, then 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,” he says.

Every three months, KPMG employees are required to sign a declaration to maintain their independence around their audit clients. [The Star Online 10th Aug 2013]

However, despite that commitment to the broader community, in the case of 1MDB the public was never informed about the siphoning of $700 million in public funds out of the fund, thanks to KPMG Malaysia’s accountancy practices.

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

Were it to be 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.