Ex-1MDB CFO: Jho Low told Najib not to say much to KPMG, gave instructions on what to say

KUALA LUMPUR, Nov 16 — Now-fugitive Low Taek Jho had in a 2013 email instructed then prime minister Datuk Seri Najib Razak on what to say in a meeting with 1Malaysia Development Berhad’s (1MDB) auditor KPMG, and had even told the prime minister not to have long conversations with the audit firm, the High Court heard today.

Former 1MDB chief financial officer Azmi Tahir said this while testifying as the 12th prosecution witness in Najib’s trial, where the former prime minister is facing 25 charges in relation to more than RM2 billion of allegedly misappropriated 1MDB funds.

Azmi said he had attended a December 15, 2013 meeting between KPMG and 1MDB at Najib’s house, with the auditors wanting to hear directly from Najib himself to seek explanations and find out what he knew about 1MDB’s purported overseas investment of US$2.318 billion.

Azmi said he had on the same day received an email from Low — better known as Low Taek Jho — sent out from the latter’s email account [email protected], with the email title being “Urgent: Briefing Package for YAB PM”.

Saying that Low had prepared a strategy to answer questions from KPMG, Azmi said the email from Low included the strategy for the meeting with KPMG.

Azmi said Low’s strategy was that the meeting must be attended by 1MDB board of directors’ chairman, 1MDB’s CEO and 1MDB’s CFO together with Najib, adding that Low had also directed that only Datuk Johan Idris and Ahmad Nasri Abdul Wahab would have to attend to represent KPMG.

In describing the meeting strategy in the email, Azmi said in Malay: “Jho Low instructed for Najib to not talk too much with KPMG, and must say that Najib was briefed and knows about all the investments and transactions in 1MDB and is confident with the existing documents.”

Azmi then read out an excerpt from the original email which was written in English: “As YAB PM has been briefed by the chairman of 1MDB and management of 1MDB on several occasions, YAB PM is recommended not to engage in a lengthy discussion with KPMG over the issues, although YAB PM may offer them a brief opportunity to air their views. YAB PM to state clearly he has been briefed and heard both sides, and is aware of the transactions and comfortable with them given all the facts.”

Azmi said that when he went to Najib’s house for the meeting on that day, he had seen the prime minister already having a copy of Low’s email.

Azmi said that Najib had discussed the points — outlined by Low in the email — with KPMG’s representative Johan, having also noted that only Johan attended the meeting for KPMG as other representatives from the audit firm were not allowed to enter Najib’s house.

“In this matter I found that, even though I am the CFO in 1MDB, where audit is directly under my jurisdiction, however it was Jho Low that had arranged for all documentation and talking points to Datuk Seri Najib to answer queries raised by KPMG,” Azmi said today.

By December 2013, the auditor KPMG had yet to sign off on its audit for 1MDB’s financial statement for the financial year ending March 31, 2013, as it was still pressing 1MDB for further details on the company’s alleged US$2.318 billion investment abroad.

The alleged investment by 1MDB — via six promissory notes claimed to be worth US$2.3 billion but now known to be worthless pieces of paper — were “invested” through 1MDB’s special purpose vehicle Brazen Sky Limited in the purported Cayman Island-based hedge fund Bridge Global Absolute Return Fund SPC, with the Singapore branch of Swiss bank BSI Bank acting as the “fund manager” of the purported investment. This is now said to be a sham investment.

Azmi said that Najib had at the December 15, 2013 meeting asked why KPMG was still raising its doubts about 1MDB’s investment’s underlying assets when BSI Bank had shown the statement for the investment, with Najib having also told KPMG to close the audit by December 31, 2013.

But with KPMG still not signing off on the 2013 audit after the meeting with Najib as it was dissatisfied with the documents and answers provided on the US$2.318 billion investment, Azmi said that 1MDB terminated this audit firm’s contract at the end of 2013 and replaced it with another “Big Four” audit firm known as Deloitte.

Azmi spoke of Deloitte’s efforts at finding out more about 1MDB’s purported US$2.3 billion overseas “investment” by meeting with BSI Bank in Singapore in January 2014, and later going to BSI Bank’s headquarters in Lugano, Switzerland to find out more.

Azmi said Deloitte had also requested to meet with the purported investment’s fund manager Avestra as well as Aabar which was said to guarantee 1MDB’s special purpose vehicle Brazen Sky Limited’s investment in Bridge Global Absolute Return Fund SPC.

Azmi said this was after the fund manager BSI Bank informed him that Aabar was guaranteeing the investment, and after he had shared this information with Deloitte as it could affect Deloitte’s audit.

Azmi said that in mid-2014, Deloitte as well as 1MDB represented by Azmi himself and his deputy Terence Geh had then met with Aabar, with Aabar’s representative confirming that the company was guaranteeing the investment and also providing a guarantee letter to Deloitte.

Azmi said Deloitte had also questioned Aabar about its multiple collaborations including with Aabar’s parent company Abu Dhabi’s International Petroleum Investment Company (IPIC) together with 1MDB such as the IPIC guarantee of 1MDB bonds, with Aabar’s representative describing this as being part of a government-to-government deal.

Azmi said he was surprised to hear from fund manager Avestra that Aabar was guaranteeing the investment as he did not know about this from the start in 2012, noting that Avestra had said Aabar’s guarantee started from 2012 or since Brazen Sky was established.

Azmi said 1MDB’s board of directors had sometime in June to August 2014 met in Lugano, Switzerland with the intention of getting confirmation from BSI Bank that the investment funds were being well-managed by the bank.

Azmi said Deloitte had later agreed to sign off on 1MDB’s financial statements for the financial years 2013 and 2014 after the audit firm completed its audit, adding that Deloitte had not raised any issue throughout the signing off process for the 2013 and 2014 audits.

Azmi said that 1MDB had around 2014 faced pressure in relation to the purported investment, with the public raising questions over whether the investment in Bridge Global Absolute Return Fund SPC had value and Deloitte also questioning whether it had value.

Azmi said 1MDB board of directors had initially disagreed with Deloitte’s recommendation to redeem the fund units as it viewed this to be a matter of 1MDB’s business and not Deloitte’s, but said the 1MDB board finally decided to redeem the investment after being pressured by the public and Deloitte.

Azmi said a total of US$1,392,292,800.02 or over US$1.39 billion of the purported US$2.318 billion investment was redeemed in 2014, and that the remaining US$939 million had yet to be redeemed and that he did not know what the status of the remaining amount was.

Shown a 1MDB board meeting minutes dated April 23, 2015 by deputy public prosecutor Deepa Nair Thevaharan, Azmi confirmed he had attended the meeting by invitation.

Azmi read out an excerpt of the meeting minutes which had recorded him as stating that the remaining US$939 million of Brazen Sky’s investment portfolio had been redeemed by selling it to Aabar but that there was no confirmation by Aabar on when payment would be made.

Azmi then explained today: “There was a proposal to sell the portfolio instead of redeeming it through the normal process. The proposal was to sell outright to Aabar so it was in fact a redemption, because we would get cash proceeds, however it did not materialise. That’s why I said it did not materialise. It did not materialise in the end.”

The trial before High Court judge Datuk Collin Lawrence Sequerah resumes tomorrow.