PRESSURE from former prime minister Najib Razak led 1Malaysia Development Bhd (1MDB) to change auditors from KPMG to Deloitte after the former refused to sign off on the state investment firm’s 2013 accounts, the Kuala Lumpur High Court heard today.

Former 1MDB CEO Mohd Hazem Abdul Rahman said KPMG also did not want to sign off on 1MDB’s Brazen Sky investment as the firm was unhappy with the explanations given.

“KPMG did not close the 2013 1MDB financial report as it was unhappy with the documents and answers that were given.

“Because of Najib’s insistence on closing the 1MDB account and on the company’s reputation, the management suggested to the directors and shareholders to replace KPMG with Deloitte.

Hazem is the 10th prosecution witness in Najib’s graft trial, where he faces four counts of abuse of power to enrich himself with RM2.3 billion from 1MDB and 21 counts of laundering the same amount. He faces up to 20 years imprisonment, if convicted.

Previously, Hazem had recounted in court how Najib held a meeting at his home in Langgak Duta on December 15, 2013, with KPMG officials to resolve the matter, to no avail.

Hazem said Najib, who was then also finance minister, had questioned why KPMG was asking more questions when BSI Bank in Singapore had provided the necessary documents.

“Najib questioned why KPMG was raising suspicions about the investment’s underlying assets as BSI Bank had shown investment statements.

“Najib then said to (KPMG official) Johan Idris that he wanted KPMG to close the 1MDB account before December 31, 2013,” he said.

KPMG was 1MDB’s auditor in 2010, 2011 and 2012 but refused to sign off in 2013.

It was replaced by Deloitte, which was fined RM2.2 million last year over lapses in the 1MDB audit.

The trial resumes on Thursday.  THE MALAYSIAN INSIGHT

I was stunned when Najib approved 1MDB taking loan to buy back shares, says ex-CEO

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Mohd Hazem Abdul Rahman said 1MDB had decided to redeem the 49% share option granted to Aabar Investment PJS through two subsidiary companies.

KUALA LUMPUR: Former 1MDB CEO Mohd Hazem Abdul Rahman told the Najib Razak trial that he was taken aback when the former prime minister signed papers approving another US$975 million loan to buy back company shares from Aabar Investment PJS.

He said he had not “received any information” that 1MDB needed to borrow US$975 million, known as a facility loan, from Deutsche Bank to repay an earlier US$250 million bridging loan it had taken from the same bank.

“Datuk Seri Najib, who was the shareholder, had signed both resolutions required under the law,” Hazem said.

He added that his then colleague and chief financial officer Azmi Tahir was also equally in the dark.

He told the court that in 2014, 1MDB had decided to redeem the 49% share option granted to Aabar Investment PJS through two subsidiary companies.

The subsidiary companies – 1MDB Energy Ltd and 1MDB Energy (Langat) Sdn Bhd – were set up to enable 1MDB to acquire shares in two independent power producers (IPPs), Tanjong Energy Holdings Sdn Bhd and Mastika Lagenda Sdn Bhd.

The court previously heard that a total of US$3.7 billion was raised by Goldman Sachs, through bonds issuance, for both IPPs. Aabar assisted 1MDB Energy and 1MDB Energy (Langat) to obtain the bonds’ guarantee from IPIC.

Hazem said:”We needed to redeem the Aabar shares as it was an obstacle for us to be listed on Bursa Malaysia. The Securities Commission would reject our application if it found out other entities held shares in 1MDB Energy and 1MDB Langat.”

The witness said 1MDB had no choice but to take up the first Deutsche Bank loan of US$250 million as its investment in a fund manager company, Brazen Sky Ltd, could not be repatriated.

The prosecution contended that over US$175 million, from the US$250 million bridging loan, was paid to Aabar BVI’s BSI bank account, allegedly to “redeem the option given as additional security” to purchase the two IPPs.

Meanwhile, over US$690 million from the US$975 million facility loan was deposited in Aabar Seychelles’ account between Sept 3 and Sept 30, 2014.

The prosecution said it would adduce evidence to show that part of the US$1.23 billion, or RM49.9 million, had ended up in Najib’s bank account.

The hearing continues before High Court judge Collin Lawrence Sequerah on Sept 17.

Najib faces 25 charges of abuse of power and money laundering over alleged 1MDB funds amounting to RM2.28 billion deposited into his AmBank accounts between February 2011 and December 2014.  FREE MALAYSIA TODAY