Ernst & Young, and KPMG relinquished their responsibilities in 2010 and 2013, respectively.
Testifying in his defence to a civil suit brought by 1MDB, Arul, who was also the group president, said he did not inquire into the matter as he was not with 1MDB then. He joined the company in January 2015.
He was testifying during cross-examination by 1MDB’s counsel, Lim Chee Wee, regarding the status of its Brazen Sky investment.
Lim: Did you engage with the stakeholders of your former auditors, EY and KPMG, to understand why they resigned or were terminated?
Arul: No.
However, he agreed with Lim that the auditors’ findings were “serious”.
Justice Raja Ahmad Mohzanuddin Shah Raja Mohzan interjected to ask Arul whether he had seen a reprimand report from KPMG. Arul replied that he did know of its existence.
Deloitte was appointed auditors to replace KPMG.
In the opening statement, it was revealed that Deloitte had been appointed after KPMG had raised serious concerns about the reliability of representations made by 1MDB’s management on the status of the Brazen Sky investment.
Deloitte repeatedly requested documents and meetings to independently verify the status of the investment.
Deloitte resigned as auditors on Feb 26, 2016.
Arul was appointed 1MDB director in January 2015 and redesignated as CEO and group president the following year.
In May 2021, 1MDB filed a lawsuit accusing Arul and former 1MDB chairman Irwan Serigar Abdullah of breach of trust and conspiracy which led to alleged losses of US$1.83 billion, linked to the company’s investment in 1MDB-Petrosaudi Ltd.
The funds were said to have been converted into a Brazen Sky Ltd investment, and were purportedly recoverable from the Bridge Global Fund.
1MDB also alleges that the pair misappropriated US$3.5 billion in company funds which was paid to Aabar Investments and another US$1.265 billion paid to the International Petroleum Investment Company (IPIC) on May 9, 2017.
1MDB further alleges that Irwan conspired with Arul to extend his employment agreement, resulting in a payment of RM2,905,200 to Arul in disregard of the company’s interests, leading to financial losses and damages.
The company is seeking US$6.59 billion in damages from the duo and an additional RM2.9 million from Irwan related to the extension of the employment agreement.
Arul’s defence is that he left it to the police, the Malaysian Anti-Corruption Commission, the national audit department, and Parliament’s Public Accounts Committee to investigate wrongdoings in the company.
He said his role as CEO was to implement a rationalisation plan aimed at turning the company around, settling its existing debts and kick-starting stalled projects, including Bandar Malaysia and TRX Development.
Irwan, who was appointed chairman by Minister of Finance Inc in May 2016, said he was appointed to specifically steer 1MDB through the rationalisation plan.
Lawyers Sanjay Mohan and Adam Lee appeared for Arul, while counsel Lavinia Kumaraendran and Mavin Thillainathan represented Irwan. Counsel Brendan Navin Siva and Raphael Kok are assisting Lim.
The hearing continues tomorrow.