Malaysian Government, 1MDB seeking more than $5.6 billion in damages from audit firm KPMG

According to court documents,, Malaysia’s 1Malaysia Development Berhad (1MDB) and the state government are seeking more than $5.6 billion in damages from KPMG partners for alleged negligence and breaches linked to a corruption scandal at the fund.

The audit firm has denied the allegations and pledged to “vigorously” contest the suit filed against 44 current and former partners and linked to its audit of 1MDB’s financial statements between 2010 to 2012.

The lawsuit, filed earlier this week on Tuesday, has been confirmed by the finance ministry. The lawsuit is the latest in a series of suits filed by Malaysian authorities to recover billions of dollars missing from 1MDB in a scandal that has implicated banks, financial institutions, and high-level government officials.

“All allegations as reported in the news are refuted and the claim will be vigorously contested,” said KPMG in a statement while noting it was “disappointed” with the suit.

Malaysia’s finance ministry declined comment saying the matter is sub judice. Earlier this year in June it had said, it was negotiating a settlement with KPMG.
Lawyers for 1MDB did not immediately respond to requests for comments.

In the lawsuit, plaintiffs have alleged that around $3.2 billion were misappropriated from 1MDB and its subsidiaries during the period KPMG served as the company’s auditor. This amount was part of a much larger sum of $5.64 billion which was allegedly siphoned off from 1MDB between 2009 and 2014; plaintiffs have alleged that these losses could have been avoided if KPMG had obtained sufficient evidence to support its audit findings.

“A proper audit by KPMG would have identified fraud risk warning signs which the firm would have had a duty to report and which would have led to the discovery of the fraud at 1MDB sooner,” said the plaintiffs.

The plaintiffs are seeking the full amount that was misappropriated, including interest accrued as well as additional costs.

The Malaysian government and MoF Inc, a statutory body under the finance ministry, is also seeking $627.83 million (2.63 billion ringgit) from the KPMG partners to cover losses incurred in bailing out 1MDB.

KPMG was fired as 1MDB’s auditor after it refused to sign off on the fund’s 2013 accounts.

In June 2018, it said it had informed 1MDB to “immediately take all necessary steps to prevent any further or future reliance on the audit reports prepared by KPMG Malaysia for the financial years ended 31 March 2010 to 31 March 2012”.
Deloitte PLT which took over as 1MDB’s auditor after KPMG, paid $80 million to Malaysia’s government last month to settle claims related to its dealings with 1MDB.
At least six countries have opened investigations into 1MDB, co-founded by former prime minister Najib Razak.

In 2020 Najib was found guilty of corruption and money laundering in a 1MDB-linked case. He has denied any wrongdoing and is appealing the verdict.
($1 = 4.1890 ringgit)

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