Photographer: Goh Seng Chong/Bloomberg

1MDB Advises Caution on Financial Statements, Auditor Resigns

  • U.S. reveals scheme of $3.5 billion misappropriation from 1MDB
  • 1MDB at center of global probes into alleged money laundering

1Malaysia Development Bhd. said its audited financial statements for 2013 and 2014 shouldn’t be relied on after U.S. prosecutors said more than $3.5 billion was misappropriated from the fund during a period that included those years.

1MDB also said its auditor Deloitte LLP is resigning and the company is seeking a replacement, according to an e-mailed statement on Tuesday. It didn’t give a reason for the departure but said that Deloitte, which notified 1MDB in February of its decision, will continue to audit its key subsidiaries.

The Malaysian fund is at the center of several international investigations into alleged corruption and money laundering by public officials. Prosecutors in at least four countries -- Singapore, Switzerland, Luxembourg and the U.S. -- are looking into money flows from the investment vehicle, which was established for national development.

U.S. prosecutors last week detailed an alleged scheme of international money laundering and misappropriation stretching from 2009 to 2015 and announced it is seeking to seize more than $1 billion worth of assets it says went through U.S. banks.

‘No Wrongdoing’

"The board remains confident that no wrongdoing has been committed by 1MDB and that the past audited financial statements continue to show a true and fair view of the company’s affairs at the relevant points in time," the company said. 

However, directors decided "as a precautionary measure, the 2013 and 2014 audited financial statements of 1MDB should no longer be relied on by any party, pending final and conclusive determination by a court of law of certain alleged facts, as described" in the U.S. civil suit, it said.

U.S. prosecutors alleged suspected fraud occurred at 1MDB in three phases in which money was laundered through bank accounts in Singapore, Switzerland, Luxembourg and the U.S. 

In 2012, 1MDB officials and others diverted proceeds raised through two separate bond offerings, according to the Justice Department. More than 40 percent of the proceeds, or $1.4 billion, were transferred to a Swiss bank account belonging to a British Virgin Islands entity. More than $1 billion was diverted from another bond offering in 2013, it said.

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