LIM SIAN SEE: Sue those misleading M’sians over 1MDB’s dealings

Contrary to popular belief, backdating contracts is a common practice and does not always suggest wrongdoing as critics of 1MDB would like everyone to believe.

Lim Sian See

Folks have already accused international accounting giant Deloitte, the Kingdom of Saudi Arabia, the government of Abu Dhabi, Tony Blair, the ex-chairman of MasterCard International, the US ex-deputy Secretary of State for Energy, various banks, Goldman Sachs, the top-notch law-firm of White and Case, etc., of conspiring with PetroSaudi to cheat 1MDB of USD1billion.

And yesterday, the Sarawak Report and The Malaysian Insider (and very soon, Tony Pua) accused the international accounting giant, KPMG of “unacceptable and unethical practices”, which included actively conspiring to backdate documents referred to in the audit report, as well as intervening to retrospectively alter agreements which had been previously signed by 1MDB.

These people are trying to take advantage of the people’s lack of knowledge in legal and auditing matters and essentially their accusation boils down to: “backdating agreements is illegal and hence proof of fraud and cheating” – which is wrong.

Well, in auditing and legal matters, what is important is this very crucial concept called “substance over form”.

Substance over form is an accounting principle used “to ensure that financial statements give a complete, relevant, and accurate picture of transactions and events”.

If an entity practices the “substance over form” concept, then the financial statements will show the overall financial reality of the entity (economic substance), rather than the legal form of transactions.

This basically means that past actions and past discussions that signify a transaction (with or without a signed contract ) is more important than the contract itself and the contract can come later to formalise the entire transaction.

These people need to understand that complex contracts can take a long, long time to prepare, edit, negotiate and sign.

In the meantime, people get on with business while the contracts are signed and backdated. Many projects start work while the contracts are being prepared simultaneously and signed later. – THIS IS NORMAL IN BUSINESS.

What do lawyers say about backdating agreements?

“It’s not unusual for parties to a contract to want the written agreement to cover a period before it’s actually signed. There are any number of contexts where this comes up.”

“Backdating (agreements) is a much misunderstood and largely unexplored subject. It involves a wide range of conducts, some of which are integral to everyday law practice. To the layperson, backdating connotes wrongdoing. The propriety of backdating, however, depends upon its purpose and effect. Every lawyer should be capable of distinguishing legitimate backdating from improper backdating.”

Basically, Tony Pua, the Sarawak Report and The Malaysian Insider are simply exploiting the layman’s lack of understanding and shouting “CHEAT, CORRUPTION, FRAUD etc” – when it is clear that all lawyers and auditors already cleared this.

Why can’t Malaysians acknowledge that the PetroSaudi and 1MDB joint venture was built on the relationship between the Kingdom of Saudi Arabia and Malaysia at the highest possible levels? (this phrase was in one of the emails in the Sarawak Report expose).

Why can’t Malaysians acknowledge that 1MDB got back all its money and even made a RM2b (USD488million) profit? Money which has been confirmed received by KPMG and Deloitte multiple times?

I urge KPMG and Deloitte to sue all these irresponsible parties for tarnishing their international reputations.