KPMG Malaysia partners hit with US$5.6 billion government suit

15 July 2021 2 min. read

Dozens of current and former partners of KPMG Malaysia have been hit with a mammoth legal suit in relation to the 1MDB affair, with the government seeking more than $5.6 billion in damages.

KPMG’s Malaysia partnership has been sued by the government for a whopping US$5.6 billion in damages stemming from the firm’s role in the 1MDB scandal, as per multiple reports. In total, 44 current and former partners are facing legal action for alleged negligence during KPMG’s term as the state investment fund’s auditor between 2010 and 2012, yet the firm has told Reuters that the claim will be “vigorously contested.”

KPMG’s audited financial statements during that period were later withdrawn by the firm as “invalid” due to the withholding of relevant documents, determined as not a ‘true and fair’ assessment of 1MDB’s financial affairs. Nevertheless, court documents seen by Reuters and confirmed by the Ministry of Finance allege audit breaches and negligence in failing to prevent the large-scale misappropriation.

KPMG Malaysia partners hit with US$5.6 billion government suit

According to the lawsuit, jointly lodged by the Malaysian government and 1MDB, some $3.2 billion was misappropriated during the three years of KPMG’s watch, with the contention that further fraudulent activities may have been forestalled had KPMG been suitably diligent in obtaining sufficient evidence to support its audit statements. The claim also seeks additional costs and interest accrued.

Reporting by Bloomberg suggests that the suit makes reference to interest of at least $1.4 billion accruing from the total sum as of early May, while Reuters notes that the Malaysian government and MoF Inc, a body under the finance ministry, would also seek around $625 million from the defendants to cover losses incurred in bailing out 1MDB – although it’s unclear if this in addition to or part of the overall figure.

The publication also noted that the Malaysia’s finance ministry had declined to comment any further, citing sub judice, while at the time of writing KPMG Malaysia has yet to release a full public statement on behalf of partners involved. The lawsuit comes despite an apparent statement from the ministry last month that it had been negotiating a settlement with KPMG, and follows a flurry of recent activity in the case.

As part of an effort to recoup more than $23 billion in assets, 1MDB in May lodged 22 civil suits in the Kuala Lumpur courts, including claims ranging from $800 million to $1.1 billion against local and international units of Deutsche Bank, J.P. Morgan, and Coutts & Co.

Fellow Big Four firm Deloitte, which was previously fined $500,000 for failures related to 1MDB, recently settled the case against it for $80 million.