1MDB: Don't rely on two past financial statements

Men walk past a 1 Malaysia Development Berhad (1MDB) billboard at the fund's flagship Tun Razak Exchange development in Kuala Lumpur.
Men walk past a 1 Malaysia Development Berhad (1MDB) billboard at the fund's flagship Tun Razak Exchange development in Kuala Lumpur.PHOTO: REUTERS

Malaysian state fund takes precautionary measure, pending outcome of US lawsuits

1Malaysia Development Berhad (1MDB) yesterday said that no one should rely on its 2013 and 2014 audited financial statements, following the United States' claim that more than US$3.5 billion (S$4.8 billion) was misappropriated from the embattled state investor.

Last Wednesday, the US Department of Justice (DOJ) filed civil lawsuits to seize about US$1 billion in assets allegedly bought with money stolen from 1MDB.

The audited accounts span the period from April 2012 to March 2014, with subsequent filings delayed as the company became embroiled in numerous graft allegations.

1MDB, formed in 2009 and whose advisory board was led by Malaysian Prime Minister Najib Razak until May this year, previously said all its affairs were in order.

"The board has decided that, as a precautionary measure, the 2013 and 2014 audited financial statements of 1MDB should no longer be relied on by any party, pending final and conclusive determination by a court of law of certain alleged facts, as described in the complaint," it said in a statement, referring to the DOJ lawsuits.

But the 1MDB board of directors said it remained "confident that no wrongdoing has been committed by 1MDB and that the past audited financial statements continue to show a true and fair view of the company's affairs at the relevant points in time".


The civil action announced by the US Attorney-General last week named Datuk Seri Najib's stepson Riza Aziz and their associate Low Taek Jho among those who allegedly used the funds diverted from 1MDB.

Mr Najib was not named, but a "Malaysian Official 1" was mentioned 36 times in the complaint. The official was described as a relative of Mr Riza and someone who had control over 1MDB, having received US$681 million of the money laundered out of the state fund.

The amount matches a deposit made into Mr Najib's private account in 2013, which was confirmed in January by Malaysian Attorney-General Apandi Ali.

Tan Sri Apandi had cleared Mr Najib of wrongdoing, affirming his claim that the bulk of the money was a political donation from Saudi Arabia's royal family.

The 2013 and 2014 accounts span a period during which 1MDB raised US$6.5 billion in bonds, of which it said US$1.4 billion was deposited with a subsidiary of Abu Dhabi sovereign fund International Petroleum Investment Company. But the two state funds are now locked in arbitration as the Middle Eastern firm says it never received the money.

1MDB said yesterday it is committed to finding a new auditor to replace Deloitte, which told 1MDB in February of its intention to resign.

Meanwhile, Inspector-General of Police Khalid Abu Bakar yesterday said the police investigation into 1MDB is ongoing and should not be rushed. He said recording the statements of some witnesses could take weeks because many documents have to be checked as well.

"If you want us to do a good job, we have to do it properly."

A version of this article appeared in the print edition of The Straits Times on July 27, 2016, with the headline '1MDB: Don't rely on two past financial statements'. Print Edition | Subscribe