Arul Kanda: Najib concerned 1MDB audit report could become political ammo against him

Arul Kanda: Najib concerned 1MDB audit report could become political ammo against him

KUALA LUMPUR, June 24 — Then prime minister Datuk Seri Najib Razak was concerned the auditor-general’s completed audit report on 1Malaysia Development Berhad (1MDB) would be spun politically to his detriment, former 1MDB CEO Arul Kanda Kandasamy told the High Court today.

Arul Kanda said this was why Najib had asked him to attend a meeting on February 24, 2016, when amendments to the report were discussed between the auditor-general, Arul Kanda, and government officials, despite the document being ready for presentation to Parliament’s Public Accounts Committee (PAC).

“So, I received a phone call from Datuk Seri Najib on 23rd, the day before, and he asked me to attend the meeting in my capacity as president of 1MDB,” he said.

When lead prosecutor Datuk Seri Gopal Sri Ram asked if Najib had explained why Arul Kanda needed to attend the meeting, the latter said yes.

“So, there were a number of reasons given by Datuk Seri, one of the key reasons was to defend the interests of the company, he also mentioned to ensure that the Jabatan Audit stuck within the scope of audit, which was to verify the accounts of 1MDB.

“And he also mentioned that he had some concerns that the contents of the report could be spun from a political perspective,” Arul Kanda added.

Asked if he was influenced by what Najib had told him when he attended the February 24 meeting, Arul Kanda said: “I had what he said in mind, ensuring the interest of the company was protected, ensuring the scope of the audit was relevant to the terms of reference of the Jabatan Audit Negara and yes, I also had in mind concerns that findings in the report could be spun politically.”

Sri Ram: Spun to whose detriment?

Arul Kanda: My understanding is it would be to Datuk Seri’s detriment.

Sri Ram: Which Datuk Seri?

Arul Kanda: Datuk Seri Najib.

The auditor-general’s audit report on 1MDB was initially scheduled to be presented to the PAC on February 24, 2016 but this was postponed to March 2016, with the prosecution’s case being that this was due to Najib’s instructions and the resulting discussions in February 2016 for amendments to be made to the report first and which ultimately resulted in four key amendments.

The four amendments included the removal from the 1MDB audit report about mention of Najib’s role in relation to 1MDB’s predecessor Terengganu Investment Authority (TIA), and removal of mention that 1MDB had two different versions of its 2014 financial statements, and also removal of mention of Low Taek Jho’s presence in a 1MDB board meeting on September 26, 2009.

Shown the report bearing the watermark “9” which is the sole surviving copy of the auditor-general’s completed 1MDB audit report that was already finalised and ready to be presented to the PAC before amendments were made, Arul Kanda said the first time he saw the printed and bound version of this document was at the end of the February 24, 2016 meeting.

Asked by Sri Ram if he agreed with a National Audit Department (NAD) official’s testimony that this completed version of the 1MDB audit report — which is the version before amendments were made — would have gone to the PAC if the February 24, 2016 meeting was not held, Arul Kanda agreed.

Arul Kanda was testifying as the 15th prosecution witness in Najib’s corruption trial over amendments to the auditor-general’s 1MDB audit report.

In this trial, Najib is accused of having as then prime minister and then finance minister abused his position between February 22, 2016 and February 26, 2016 to receive self-gratification in the form of protection from civil or criminal action over his role in the handling of 1MDB operations, by instructing for amendments to the auditor-general’s report on 1MDB — which was already finalised and ready to be presented to the parliamentary watchdog Public Accounts Committee (PAC) — before it was finally presented to the PAC.

Arul Kanda was charged with abetting Najib, but the High Court today granted the prosecution’s application to have Arul Kanda be called in as a prosecution witness.

In deciding to allow Arul Kanda to testify, High Court judge Mohamed Zaini Mazlan agreed with the prosecution’s argument that Arul Kanda would be a relevant witness for the prosecution as he was privy to the communications with Najib about the charge against the latter.

“The fact that Mr Arul Kanda was the CEO of 1MDB at the material time and had attended the meetings on February 24 and February 25, 2016 is relevant to the charge against Datuk Seri Najib,” the judge had said.

Having joined 1MDB as president on January 5, 2015, Arul Kanda — now a director in a private company which he owns — testified today that he met Najib at least once a month on 1MDB matters.

“Not necessarily going to the office, sometimes we would meet at a function or event, we have a quick discussion, and also as and when needed,” he said.

After attending the February 24 and February 25 meetings with government and NAD officials where proposed amendments to the 1MDB audit report were discussed, Arul Kanda confirmed that he had met with Najib in the course of that week as well as before another meeting on March 1.

“So I explained to Datuk Seri Najib what was discussed on February 24 and February 25 meetings, we also had a summary prepared by the NAD, there were over 65 items that were discussed in the course of the meetings. So I gave him a briefing on all those various items that were discussed and what were the decisions and outcomes as a result of the various discussions,” he said.

In explaining the purpose of such a briefing, Arul Kanda said he was the only one who had attended all the meetings — one on February 24 and two on February 25 — and had the most detailed knowledge and information about what was discussed, and that it was to provide Najib with an “update”.

As for the March 1, 2016 meeting in the morning which he had attended with the NAD’s 1MDB audit team, Arul Kanda said that they had discussed the changes that had been made and which had not been made to the 1MDB audit report, saying: “So as you recall there were around 65 items, so some of those items, the amendments were accepted and some amendments were not accepted, so the meeting on March 1 was to go through an updated version of this watermark ‘9’ document.”

This original copy bearing the watermark “9” is a copy that NAD official Datuk Nor Salwani Muhammad had preserved instead of destroying as ordered. This trial had previously heard that by 6pm on March 1, the amended version of the 1MDB audit report was sent for printing to be eventually handed over to the PAC.

The amended version of the 1MDB audit report was finally presented by the NAD to the PAC on March 4 and March 7, 2016.

Former 1MDB CEO Arul Kanda Kandasamy arrives at the Kuala Lumpur High Court June 24, 2022. — Picture by Yusof Mat Isa

How the 1MDB audit came about

Arul Kanda said that he was interviewed individually by three 1MDB board directors before joining the company in January 2015 as president and that Najib did not interview him before he took up the job.

Arul Kanda said he had met Najib a week later for the first time to introduce himself as the 1MDB president, and that Najib had in subsequent meetings expressed concerns about 1MDB’s financial difficulties such as why the company could not repay its loans and why its projects were delayed.

It was in the end of January 2015 or early February 2015 that Arul Kanda said he was able to give full briefings on 1MDB to Najib, such as when what loans were due to be repaid as well as his suggestions on how to meet these financial obligations, with Arul Kanda also giving his ideas for restructuring 1MDB which later became known as the rationalisation plan.

Arul Kanda said by the second week of February 2015, he could not point out specific issues such as fraud in 1MDB, but already had concerns which was triggered by news articles about 1MDB, noting that he suggested to then prime minister Najib to have the NAD carry out an audit on 1MDB as he felt the department had a good reputation and could be relied on.

“So I felt that further investigation was required and in fact I suggested to Datuk Seri that we bring in an independent third party, NAD, to conduct a review,” he said, also noting that he did not have the resources to carry out an investigation on 1MDB.

Asked by Najib’s lead defence lawyer Tan Sri Muhammad Shafee Abdullah on what was Najib’s reaction to the suggestion to have an independent audit on 1MDB, Arul Kanda said: “He said he would take it into consideration first, he didn’t say yes or no, of course we spoke about other matters. Within a week or two, there was an announcement post-Cabinet meeting, I think it was in early March, that NAD had been asked to verify the accounts of 1MDB.”

Arul Kanda said he had only made the suggestion and was not sure if this was the reason why Cabinet had agreed to have NAD to do the audit on 1MDB, as he was not part of the decision-making process at the Cabinet.

Shafee: Did Datuk Seri Najib, as the prime minister, did he ever obstruct, as far as you are concerned, having from my perspective having taken your advice, perhaps not only the advice about independent third party? Did he ever obstruct the assessment of NAD, having said, yes, go ahead with it, as far as you are concerned?

Arul Kanda: No.

Tan Sri Mohamed Shafee bin Mohamed Abdullah speaks to the media at the Kuala Lumpur High Court June 7, 2022 ― Picture by Devan Manuel

Meeting the PAC chairman before testifying at PAC’s 1MDB probe

Arul Kanda had previously testified on December 1, 2015 and December 18, 2015 in the PAC’s inquiry on 1MDB, with the PAC proceedings chaired by then PAC chairman Datuk Seri Hasan Arifin.

Arul Kanda confirmed however that he was asked to attend meetings at Najib’s then special officer Datuk Seri Ahmad Farid Ridzuan’s house about one or two weeks before the December 1 proceedings, explaining that he was asked to make a presentation there on 1MDB’s information, history, background, why it had gotten into financial difficulties and also its rationalisation plan.

“Essentially, what I was doing was presenting to Datuk Hasan what I was going to share with the PAC,” he said.

The first meeting involved Farid, Hasan and former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi, while subsequent meetings also included others such as two or three other PAC members.

Arul Kanda said the purpose of the meeting was for him to share what information he would present to PAC about 1MDB and its affairs.

Sri Ram: Did you receive any instructions from anyone in that meeting as to the evidence you would give before the PAC?

Arul Kanda: No, it was more me sharing information rather than telling me what to do.

Sri Ram: If you are going to give evidence to the PAC about affairs of 1MDB, what was the purpose, what would it serve to have the meeting with Hasan Arifin?

Arul Kanda: Again, I too found it to be a bit unusual to have that session but I was asked to do so and I did it.

Later when asked by Shafee if anyone had given him instructions to modify his answer and not to say certain things in the PAC inquiry, Arul Kanda said no.

Arul Kanda confirmed to Shafee that he would not have compromised his integrity in the PAC inquiry on 1MDB by compromising on what he should tell the PAC.

Datuk Seri Gopal Sri Ram is seen at the Kuala Lumpur High Court August 28, 2019. — Picture by Shafwan Zaidon

1MDB roadshows

As for the series of roadshows on 1MDB that Arul Kanda had spoken at in the run-up to the 14th general elections in 2018, Arul Kanda said Najib had asked him to do so.

“Datuk Seri wanted for me to provide an explanation on 1MDB, the issues that the company faced, the rationalisation plan and also share information about the various investigations and also the US Department of Justice (DoJ) lawsuits, so the ceramah covered all these various topics. The other part of the ceramah was questions and answers, so depending on the venue, there would be a question-and-answer session, I would answer questions posed by the attendees,” he said.

Asked if he had defended Najib at the roadshows, Arul Kanda said he would merely answer questions that were hostile or not supportive to Najib by referring to the facts available at that time.

“The then attorney-general of Malaysia had issued a statement exonerating Datuk Seri on certain matters, the anti-corruption commission had also issued a statement, so referred to those statements and findings in answering questions relating to Datuk Seri Najib,” he said.

“I had no personal knowledge of the items being asked of, hence I deferred to the findings and announcements made by the authorities,” he added, also saying that he had made reference to the US DoJ’s lawsuit’s allegations which were unfavourable to Najib.

Arul Kanda said he would typically not give any conclusion regarding Najib, but would ask the audience to make their own conclusion by saying “terpulanglah to tuan-tuan dan puan-puan untuk membuat keputusan yang sewajarnya” (it’s up to you to decide) after he had listed out what different parties have said about the matter.

Sri Ram then asked: “In your own mind, were you convinced Najib had not received any monies from 1MDB?”

Arul Kanda replied: “I can confirm Datuk Seri Najib, based on 1MDB records of where monies were paid out to, Datuk Seri Najib was not a recipient of those funds, from the perspective of 1MDB accounts.”

The trial will resume on July 4, where Shafee is expected to further cross-examine Arul Kanda.

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