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Deloitte Just Gave the Malaysian Government Several Wheelbarrows Full of Ringgit (UPDATE: KPMG Pays Up Too)

Posted on by Jason Bramwell

[Updated article originally posted on June 3, 2021 with additional information about KPMG settlement.]

From the Ministry of Finance in Malaysia on June 3:

The Government has received a settlement payment of RM336 million (US $80 million) related to 1Malaysia Development Bhd (1MDB) from Deloitte PLT.

In a statement today, the Ministry of Finance (MoF) said the money had been deposited into the Assets Recovery Trust Account.

“To date, the Trust Account – under the supervision of the Accountant General’s Department – has received a total of RM16.386 billion of funds seized and returned in connection with 1MDB.

“The amount in the Trust Account will be used to settle the remaining debts of 1MDB and SRC International Sdn Bhd (SRC),” he said.

However, the ministry added that this balance did not include the total settlement of RM2.83 billion that would be received from the Ambank Group in the near future.

“In addition, negotiations are also underway with KPMG,” he said.

The Finance Ministry said to date, the government had paid off RM12.54 billion of 1MDB’s debt and RM3.1 billion of SRC’s debt.

As at May 31, 2021, the outstanding debt comprising principal and coupons/ profit/ interest for bonds, Sukuk and term loans, amounted to RM39.66 billion (1MDB) and RM2.57 billion (SRC).

Meanwhile, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the current balance of the Trust Account was only enough to pay off the principal and interest of 1MDB’s debt for 2021 and 2022 only.

“Once all the Trust Account funds are used up, the government will still have to bear the obligation to pay the balance of 1MDB’s debts as the debts are supported by the government through government guarantees and letters of support when these debts are issued,” he said.

Deloitte agreed to the $80 million settlement with Malaysia in early March.

Authorities in at least six countries are investigating alleged graft and money laundering at 1MDB, set up by former Malaysian Prime Minister Najib Razak in 2009. Najib, who was ousted in an election in 2018, was found guilty last year and sentenced to 12 years in jail in the first of several corruption trials linked to the 1MDB scandal. He is appealing the sentence.

KPMG may have to pony up some money to the Malaysian government too because it used to audit 1MDB. According to the website The Edge Markets:

Ernst & Young (EY) — was terminated before it completed the audit of 1MDB’s accounts for the financial year ended March 2010 (FY10).

According to the Auditor-General’s Report declassified in 2018, EY was sacked on Sept 15, 2010 as it declined to sign off on the FY10 accounts of 1MDB, unless it was provided with certain documents on the US$1 billion joint venture with PetroSaudi International.

KPMG, which took over in September 2010, signed off the FY10 accounts one month after it was appointed as well as those for FY11 and FY12. However, the audit firm refused to sign off the accounts for FY13 because it was unable to verify the authenticity of 1MDB’s US$2.318 billion investment in a Cayman Islands’ investment fund.

Deloitte was then appointed to replace KPMG. The third auditor quit in 2016 after the US Department of Justice filed lawsuits to recover assets acquired with misappropriated 1MDB funds.

[UPDATE] KPMG did in fact have to shell out a shit-ton of money to the Malaysian government for its shoddy auditing of 1MDB, according to Reuters on Jan. 13, 2022.

Malaysia said on Thursday audit firm KPMG has agreed to pay a 333 million ringgit ($80.11 million) settlement to resolve all claims related to their fiduciary duties on auditing of 1Malaysia Development Berhad (1MDB) accounts from 2010 to 2012.

The finance ministry said in a statement that the settlement will conclude a lawsuit filed against the auditor in July, and that KPMG will expedite the payment.

The Malaysian government, 1MDB, and its subsidiaries filed a $5.6 billion lawsuit against 44 current and former partners at KPMG on July 6, 2021, alleging breaches and negligence linked to the corruption scandal at 1MDB. KPMG pledged to “vigorously” contest the lawsuit but ultimately decided it wasn’t a battle worth fighting.

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Jim Quigley Takes Exception with the Notion That Deloitte Isn’t the Biggest Firm in India

You don’t need to tell Jim Quigley that it’s only a matter of time before Deloitte is the largest accounting firm ON EARTH.

In a Q&A with India’s Business Standard, Quigs was asked about the shrinking gap and you better believe the man is all over it like a hard-hitting interview at Davos:


After five years, we have eliminated the gap. They were once $2 billion larger than us.

At $26.1 billion for FY ’09, Deloitte is all over PwC ($26.2 billion in FY ’09) for the Biggest of the Big 4 in terms of revenue. However, JQ was a little more defensive when asked about the firm’s presence in India.

But if one looks at India, the perception is that you are the smallest amongst the Big Four.
I think we are the largest in India when you look at the number of people. We have 12,000 Deloitte people in India and we are on our way to 20,000 people.

In other words, “Thanks for bringing that up but since India revenue isn’t known, head count is how we’ll measure this. And in that particular case, we’re the largest. Next question.”

But a lot of them are your [Business Process Outsourcing] employees at Hyderabad.
Yes, we have about 8,000 people there. And we are growing that towards 15,000. They are focused on serving the global market place.

We have the number one audit share in India. Our audit share of the listed companies is larger than any of the competitors. My goal is to go for balanced growth in India. I want to be one-third audit, one-third tax and one-third consulting. Growing the tax and consulting businesses is easier than it is to move the audit share because companies don’t change auditors often. The fact that we start with the largest audit share is a terrific foundation for us. My aspiration is that I want to be the absolute leader in professional services, especially in important emerging markets like India.

Translation: “Are BPO people not employees? Why wouldn’t we count them? And since we are counting them we’re going to double that number, FYI. Oh, and we have the biggest audit share in India and it we’ll eventually be biggest in everything so then they’re won’t be room for ‘debate’ (making the air quotes).”

In how many years?
In three to five years, I want to be the absolute leader here. I have more people here than anyone else today.

That is, “Deloitte numero uno by 2015! Did I mention that we have the most people here?”

Then the best part, comes a little later when Quigs gets the Satyam question:

How has Deloitte strengthened its internal controls after the Satyam scandal?
I don’t think you can say that if one firm has had an issue with Satyam, therefore all professional services firms have a problem.n the aftermath of that fraud, and it was a management fraud first, to make sure that we did not have comparable circumstances, we went back and reviewed our 50 largest audits. We challenged our partners and thinking. We were satisfied that we have completed procedures that will reduce to a relatively low level the risk that an undetected error could occur. Our commitment to quality is tireless. And that is what you want the market leader to be.

So it sounds as though Satyam will be NBD for Deloitte, unlike some firms. We know India is a fraud paradise so it wasn’t was their fault; they were duped. Deloitte is undupable.

‘Deloitte wants to be the absolute leader here’ [Business Standard]

Porn-Extortion Plot Didn’t Turn Out Too Well for Ex-Deloitte Partner

This story goes back before GC’s time so we’ll give you some background: Steven Klig was a hotshot tax partner at Deloitte until he was arrested for extorting an ex-lover back in January 2009.

Since most tax partners we know have to beat off the ladies with a stick in each hand, this seems unbelievable but apparently, Klig didn’t have the typical IRC wonky charm and was a little miffed that a lover wasn’t interested in him any more.


His frustration reached critical levels which resulted in emails to the lover, who he tracked down on the web and claimed that he had a DVD of them getting down. Lucky for us, the Post just so happened to get its hands on a copy of the email back in January ’09:

“Just to give you a head’s up. I’ve been doing a little editing on our video. Mostly some blurring of myself so that I won’t be recognized,” he wrote in one e-mail, according to the criminal complaint. You, on the other hand, can be seen very clearly having the time of your life being f—ed by me.”

Despite the good times, the woman went to the FBI after Klig emailed her husband trying to get a hold of her email address. An agent posing as the woman responded to Klig:

[A]sking what he wanted and pleading, “I want to keep my family out of this.”

He allegedly responded, “I don’t need money. What I really want is something new to look at.”

Klig then allegedly detailed his preferences for the “first installment” as: “(1) fully clothed; (2) without your shirt; (3) without your shirt and pants (in just a bra and panties); (4) without the bra and (5) fully nude.”

And the best part? He sent some of these emails while he was on vacation. At Disney World. With his wife and kids. Can’t you see it? You’re walking around Epcot, surrounded by shrieking children, grown adults dressed as princesses, talking animals, and overgrown dwarves; what a perfect opportunity to extort some porn out of an uncooperative ex-lover!

According to the Post, Klig pleaded guilty to lesser charge in order to avoid serious time although the judge indicated he could face up to a year in prison where he may or may not have the time of his life.

Tax lawyer pleads guilty in porno-extort scheme [NYP]