1MDB scandal: Arul Kanda Kandasamy publicly defended Malaysian state fund but now faces 20 years in jail for tampering with government audit

Arul Kanda Kandasamy, the public face of Malaysia’s long-running 1MDB scandal, was on Wednesday charged with tampering with a government audit report into the state fund. The former 1MDB president and CEO entered a plea of not guilty. Later, at the same court complex, former prime minister Najib Razak was charged with the same offence.

Before this year’s elections that led to Najib being replaced as premier by Mahathir Mohamad, Arul appeared on the campaign trail to assure voters no wrongdoing had occurred at 1MDB – the abbreviation for 1Malaysia Development Berhad. Arul now faces a prison sentence of 20 years and a fine if found guilty. This was the first charge against Arul but Najib and many other officials face various charges involving money-laundering and corruption.

The US Department of Justice has said about US$4.5 billion was misappropriated from 1MDB between 2009 and 2014. Mahathir’s new government has vowed aggressive measures to recoup these funds.

Arul was appointed at 1MDB in 2015 to deliver a rationalisation plan to monetise its assets, having spent several years in the Middle East.

However, when 1MDB became mired in scandal, with the opposition accusing the government of corruption, Arul became the most prominent public defender of the state fund’s operations. This included addressing the seizure of assets allegedly bought with misappropriated funds, such as the super yacht Equanimity and paintings by Monet and Picasso.

Earlier this year, Arul noted that separate investigations by the auditor-general’s office, Malaysia’s central bank and the police failed to find any wrongdoing on Najib’s part. He insisted Najib should therefore not be held accountable as the management of 1MDB was not his responsibility.

“I took on a job that no one wanted,” Arul told the Asian Correspondent website in April. “I was then in a bit of a dilemma. But fortunately, the government made the right decision to come up with a rationalisation plan.”

He also chided the opposition for seizing upon the 1MDB scandal to criticise Najib’s government.

“It was a business issue that became a political one, and then it went on to become a geopolitical issue,” he said. “But all that happened after I took on the role at 1MDB.”

In June, two days before his 1MDB employment contract was to expire, Arul was sacked for dereliction of duty. In July, the finance ministry revealed he had been offered a six-month salary package of 5 million Malaysian ringgit (US$1.2 million), half of which was paid in advance.

Najib’s trial is scheduled to begin in February and authorities have continued to open new investigations into the misappropriation of funds at 1MDB, which Najib founded.

The tampering of the audit report was exposed when the new auditor-general, Madinah Mohamad, showed there were major discrepancies between an audit report submitted to Najib during his tenure and the subsequent amended version. They included the deletion of passages that mentioned the presence of fugitive financier Low Taek Jho – also known as Jho Low – at key 1MDB meetings. Low is wanted by both Malaysia and Singapore for his alleged role in the movement of 1MDB funds.

The auditor-general claimed in November that one of Najib’s aides had instructed her predecessor to remove sections of the report before it was presented to a parliamentary body tasked with reviewing the nation’s public accounts. It was alleged Najib sought these alterations to protect himself from criminal or civil actions relating to the operations of 1MDB.

Finance Minister Lim Guan Eng has criticised investment bank Goldman Sachs for its handling of 1MDB-related matters, demanding it return fees paid to it.

“I would be happy if we can get around 30 per cent net after all the expenses incurred [from the entire 1MDB scandal],” Lim said in November, although Mahathir has set the objective of recouping all US$4.5 billion of misappropriated funds.

Bankers from Goldman Sachs ‘cheated’ Malaysia in 1MDB dealings, says Prime Minister Mahathir Mohamad

“There is evidence that Goldman Sachs has done things that are wrong,” Mahathir said last month. “Obviously we have been cheated through the compliance by Goldman Sachs people.”

The South China Morning Post reported in November that 1MDB officer-bearers – regarded by Malaysian police as “low-hanging fruit” – will be targeted next. Although no other 1MDB staffers have been arrested, several have been charged in absentia, including business development director Casey Tan Keng Chee, general counsel Jasmine Loo Ai Swan, and executive director of finance Terence Geh Choh Heng. All have fled the country.