RCI to resolve 1MDB

1MDB controversy warrants setting up RCI Published on: Saturday, June 11, 2016



 What is 1Malaysia Development Berhad in the context of management and accounting/auditing?

 Is it a public company aka sovereign fund owned by the Government/Ministry of Finance or owned by others including the Prime Minister/Finance Minister and others including private individuals?

The status is very important as all the directors of the 1MDB should know where they stand. Unless, we know what it is, we have been fed nothing worthwhile so as I went to the Commission of Companies Malaysia (SSM) to find the fact but nothing was available.

 I am now wondering why New Straits Times Editor Mustapha Kamil quit over 1MDB after 26 years. Was he a parrot of sorts when WSJ was nominated for the Pulitzer Prize in April for its reporting on corruption allegations surrounding 1Malaysia Development Bhd?

 We all want to know the root causes of 1MDB as it had grown so big within a few years so unlike most big companies that have slogged for years to reach anything like it. How big is the group really? Big may not mean strong in its parameters if one very busy man does it all. There are lots of publicity – good or bad – of 1MDB based on banking information obtained by Sarawak Report (SR) and Wall Street Journal (WSJ) and that is a tip of the iceberg as only a few bank transactions from start to finish were exposed so far.

 The lack of information to the people mainly by blocking many websites or news items in the Internet is not helping at all and many denials by the people in the thick of action – proper or illegal – only give rise to more suspicion. I would “specialise” myself into the works of auditing of the few public auditors and the Government’s Auditor General on the developments of 1MDB.

 The little publicity on the auditors albeit too late to stop the rotting of the socalled “sovereign fund” of Malaysia is injustice to the people of Malaysia. Is it what in 1MDB considered a fraud and or misappropriation or embezzlement? Isn’t it the duty of auditors to detect frauds in their work apart from routine auditing? It should be the auditors to expose frauds and not any other whistleblowers like SR and WSJ.

 We know some auditors have grown very big and maintain their positions over decades. Now we know how they have become big and stay so big to be intimidating at most times. Good luck to those big 3, 4 or 5 firms but the people must be given due justice when such people have insights to the “truth” of the firms they audited.

 We can learn something specific from those infamous cases like Enron and Worldcom both audited by the same very big firm then albeit built up with sincerity and honesty by Arthur Anderson as a young man of 28. So who do we blame now for the disappearance of that firm?

 It is not only the three very big public auditing firms at fault here but it would appear the Auditor General is also at fault.

 The circumstances had been murky and have become murkier by the days with lots of unverified denials by various parties and that is where the auditors – 3+1 – have the sole proprietary role to expose to the people for it is their duty to do so without fail. Instead, what do were hear? Silence all round?

 Let’s now see how the 3+1 auditors performed so far as per Public Accounts Committee (PAC). Ernst & Young (EY) was the first auditor appointed on March 25, 2009, but had its contract terminated on September 15, 2010, before 1MDB submitted its first financial statements for the financial year ending March 31, 2010. Then KPMG appointed on September 15, 2010, had its contract terminated by 1MDB’s shareholders on December 31, 2013, and also before the submission of 1MDB’s 2013 financial statements. On December 31, 2013, Deloitte was appointed as 1MDB’s auditors.

Deloitte has audited the 2013 and 2014 accounts of 1MDB. Audit of 2015 accounts is still outstanding.

 Recently, the Auditor General submitted a “special” audit report but marked “OSA”. I wonder how would the auditors (3+1) react to my views to be elaborated below. The facts before us is that EY failed to complete the job for any year and also failed to alert all the shareholders including the general public as it was deemed a Sovereign Fund in early years. Obvious fraud and the likes was on the menu of the audit papers. KPMG on the other hands completed audit for 2010, 2011, 2012 – three long years in a stretch and possibly also issued “clean and unqualified” audit reports for the three years and well done or not? Now which years were related to the fraudulent payments as exposed now? Now Deloite had done two years plus another in progress for 2015, and also happy to be retained as auditors for those years with questioned transactions. Did Deloite also issue “clean and unqualified” audit reports for the two years? For EY and KPMG, the issue of unavailable documents was raised hence the premature terminations and Deloite has no complaint over documents? So what is the real situation since 2009? Now we have to address the “OSA” audit report of the Auditor General (AG) for his failing to handle the supervisory audit since 2009 as it has been deemed a Government agency. What is the AG trying to convey to the people who are taxpayers? What is the purpose of such an “OSA” audit report unheard of if only the PM can see it? Is the PM the sole ‘boss’ of the 1MDB? If anyone wants me to give a better and precise report on the management, accounting and auditing of the 1MDB, please let me have copies of the accounts in particular the cash flows statements and the balance sheets with respective schedules of assets and liabilities for the purpose of matching those transactions. With those audited accounts, I would be in the right position to highlight something like I did in an AGM of a public listing company recently for a “black dot” affairs giving rise to the unreliability of the annual report as likely prepared jointly by the said company and the big 4 audit firms. In the consequences of Enron and WorldCom, the auditor was dissolved with massive punitive measures financial or otherwise. Do we expect such moves to appear in auditors 3+1? Is the AG too old now, too? So let’s come to 1MDB, as who is or are responsible for the failure since 2009 when 3+1 auditors could have “arrested” the rot or frauds in the earlier years causing less of a headache now. Also what about the management/directors board of 1MDB to be absolved of all responsibilities of what we hear today? All past and present directors must be held accountable for the demise of 1MDB and who is/are going to pay for the massive outstanding debts of such a short period? Can the auditors just walk away as if nothing has happened? Should not they be held accountable to the debts accumulated over 5 or 6 years by apportionment of the respective years of frauds and the likes not detected and not alerted and for the overlook/lack of transparency. It is most unfair that the country be brought down by latest adverse financial developments in the declining rates of currency exchanges, stock exchange depression, foreign funds flying away, and whatever adverse image of the nation due to one company. Taxpayers should not foot the massive debts or national resources not sold off to foreigners to pay off the debts due since 1MDB is likened as a dormant “volcano”. How can such a company 1MDB be granted tax reliefs/incentives for a period of 10 years even now frauds have been exposed? It is also most unfair that Sabah and Sarawak be deemed not affected by the debacle of 1MDB. The truth of 1MDB is all out there no matter how it is hidden given the resources in the cyber sphere. I call for a Royal Commission of Inquiry to resolve the crisis and apportion blame for compensation of damages to whoever had been involved one way or another. http://www.malaysiakini.com/letters/344644 RCI to resolve 1MDB What is 1Malaysia Development Berhad in the context of management and accounting/auditing? Is it a public company aka sovereign fund owned by the Government/Ministry of Finance or owned by others including the Prime Minister/Finance Minister and others including private individuals? The status is very important as all the directors of the 1MDB should know where they stand. Unless, we know what it is, we have been fed nothing worthwhile so as I went to the Commission of Companies Malaysia (SSM) to find the fact but nothing was available. I am now wondering why NST editor Mustapha Kamil quits over truth and 1MDB after 26 years. Was he a parrot of sort when WSJ was nominated for the Pulitzer Prize in April for its reporting on corruption allegations surrounding 1Malaysia Development Bhd? We all want to know the root causes of 1Malaysia Development Bhd (1MDB) as it had grown so big within a few years so unlike most big companies that have slogged for years to reach anything like it in 1MDB. How big is the group really? Big may not mean strong in its parameters if one very busy man does it all. There are lots of publicity – good or bad – of 1MDB based on banking information obtained by Sarawak Report (SR) and Wall Street Journal (WSJ) and that is a tip of the iceberg as only a few bank transactions from start to finish were exposed so far. The lack of information to the people mainly by blocking many websites or news items in the Internet is not helping at all and many denials by the people in the thick of action – proper or illegal – only give rise to more suspicion. So in this article, I would “specialise” myself into the works of auditing of the few public auditors and the Government’s Auditor General on the developments of 1MDB. The little publicity on the auditors albeit too late to stop the rotting of the socalled “sovereign fund” of Malaysia is injustice to the people of Malaysia. Is it what in 1MDB considered a fraud and or misappropriation or embezzlement? Isn’t it the duty of auditors to detect frauds in their work apart from routine auditing? It should be the auditors to expose frauds and not any other whistleblowers like SR and WSJ. We know some auditors have grown very big and maintain their positions over decades. Now we know how they have become big and stay so big to be intimidating at most times. Good luck to those big 3, 4 or 5 firms but the people must be given due justice when such people have insights to the “truth” of the firms they audited. We can learn something specific from those infamous cases like Enron and Worldcom both audited by the same very BIG firm then albeit built up with sincerity and honesty by Arthur Anderson as a young man of 28. So who do we blame now for the disappearance of that firm? It is not only the 3 very big public auditing firms at fault here but it would appear the Auditor General is also at fault. The circumstances since 2009 had been murky since 2009 and have become murkier by the days with lots of unverified denials by various parties and that is where the auditors – 3+1 – have the sole proprietary role to expose to the people for it is their duty to do so without fail. Instead, what do were hear? Silence all round? Lets now see how the 3+1 auditors perform so far as per Public Accounts Committee (PAC). Ernst & Young (EY) was the first auditors appointed on March 25, 2009, but had its contract terminated on September 15, 2010, before 1MDB submitted its first financial statements for the financial year ending March 31, 2010. Then KPMG appointed on September 15, 2010, had its contract terminated by 1MDB’s shareholders on December 31, 2013, and also before the submission of 1MDB’s 2013 financial statements. On December 31, 2013, Deloitte was appointed as 1MDB’s auditors. Deloitte has audited the 2013 and 2014 accounts of 1MDB. Audit of 2015 accounts is still outstanding. Recently, the Auditor General submitted a “special” audit report but marked “OSA”. I wonder how would the auditors (3+1) react to my views to be elaborated below. The facts before us is that EY failed to complete the job for any year and also failed to alert all the shareholders including the general public as it was deemed a Sovereign Fund in early years. Obvious fraud and the likes was on the menu of the audit papers. KPMG on the other hands completed audit for 2010, 2011, 2012 – three long years in a stretch and possibly also issued “clean and unqualified” audit reports for the three years and well done or not? Now which years were related to the fraudulent payments as exposed now? Now Deloite had done two years plus another in progress for 2015, and also happy to be retained as auditors for those years with questioned transactions. Did Deloite also issue “clean and unqualified” audit reports for the two years? For EY and KPMG, the issue of unavailable documents was raised hence the premature terminations and Deloite has no complaint over documents? So what is the real situation since 2009? Now we have to address the “OSA” audit report of the Auditor General (AG) for his failing to handle the supervisory audit since 2009 as it has been deemed a Government agency. What is the AG trying to convey to the people who are taxpayers? What is the purpose of such an “OSA” audit report unheard of if only the PM can see it? Is the PM the sole ‘boss’ of the 1MDB? If anyone wants me to give a better and precise report on the management, accounting and auditing of the 1MDB, please let me have copies of the accounts in particular the cash flows statements and the balance sheets with respective schedules of assets and liabilities for the purpose of matching those transactions. With those audited accounts, I would be in the right position to highlight something like I did in an AGM of a public listing company recently for a “black dot” affairs giving rise to the unreliability of the annual report as likely prepared jointly by the said company and the big 4 audit firm. In the consequences of Enron and Worldcom, the auditor was dissolved with massive punitive measures financial or otherwise. Do we expect such moves to appear in auditors 3+1? Is the AG too old now too? So lets come to 1MDB, as who is or are responsible for the failure since 2009 when 3+1 auditors could have “arrested” the rot or frauds in the earlier years causing less of a headache now. Also what about the management/directors board of 1MDB to be absolved of all responsibilities of what we hear today? All past and present directors must be held accountable for the demise of 1MDB and who is/are going to pay for the massive outstanding debts of such a short period? Can the auditors just walk away as if nothing has happened? Should not they be held accountable to the debts accumulated over 5 or 6 years by apportionment of the respective years of frauds and the likes not detected and not alerted and for the overlook/lack of transparency. It is most unfair that the country be brought down by latest adverse financial developments in the declining rates of currency exchanges, stock exchange depression, foreign funds flying away, and whatever adverse image of the nation due to one company and one person. Taxpayers should not foot the massive debts or national resources not sold off to foreigners to pay off the debts due since 1MDB is likened as a dormant “volcano”. How can such a company 1MDB be granted tax reliefs/incentives for a period of ten years even now frauds have been exposed? It is also most unfair that Sabah and Sarawak be deemed not affected by the debacle of 1MDB when everything is not going well in both the states, yet the Chief Ministers of both state seem to have resigned to all the lies and denials of one person and his gang. The truth of 1MDB is all out there no matter how it is hidden given the resources in the cyber sphere. I call for a Royal Commission of Inquiry to resolve the crisis and apportion blame for compensation of damages to whoever had been involved one way or another. Joshua Y. C. Kong