As early as 2006, executive members of City Harvest Church were aware of and agreed to the church building fund being invested; defense shows Xtron bonds fully redeemed and accounted for.
Lai Baoting (with sunglasses) arrives at the subordinate courts on Day 2. CN PHOTOS: Daniel Poh & Michael Chan.
What did City Harvest Church’s auditor Sim Guan Seng really object to?
That seemed to be the sticking point in yesterday’s court proceedings for the CHC trial, which saw the first prosecution witness Lai Baoting being cross-examined by defense lawyers and then re-examined by Deputy Public Prosecutor Tan Kiat Pheng.
DPP Tan took a line of questioning that aimed to prove that Lai had taken instructions from her then-supervisor finance manager Sharon Tan on accounting methods that appeared questionable.
At the center of most of yesterday’s questioning were the minutes of a meeting of CHC’s audit committee on April 9, 2009. Lai had taken the minutes of the meeting but some quotes had not been attributed. From it, both prosecution and defense drew entirely different inferences about the knowledge and approval of the auditor at the meeting, Sim Guan Seng, the managing partner of Baker Tilly.
At this meeting, investments into bonds issued by two companies, Xtron and Firna, were discussed between Tan Ye Peng and John Lam, and Sim.
The prosecution sought to establish that the auditor was against the investments, presenting in court an email from Sharon Tan to the committee that was sent after that meeting, which suggested that Sim was not convinced about the “unrelated party” status of Xtron and the valuation of the bonds by the end of that meeting.
Sharon Tan (center) exiting the subcourts at the end of the day.
DEFENSE TEAM STARTS BUILDING ITS CASE
A number of issues that the defense team would be bringing up during its case later this year surfaced yesterday at the cross-examination.
Senior counsel Kannan Ramesh, who represents finance manager Sharon Tan, asked Lai when she knew about the building fund being utilized for investments.
“From what I can recall, in my memory, I attended an AGM at Jurong West where, I think it was Pastor Kong who conducted the AGM, and we did go through that building fund can be used for investment.” She added that it was in either 2005 or 2006, and that she had attended the meeting as an executive member, not yet a staff member of the church.
In a statement taken, Lai had said sometime in January 2009, she was instructed by Sharon Tan to prepare monthly schedules on the status of these investments. It was then established that these schedules would go to the board of the church, and that Xtron and Firna were listed as investments in these schedules. Lai confirmed that no one wrote to her to ask any questions about the investments.
Chew Eng Han (center) after Day 2 had concluded.
Senior counsel Michael Khoo, representing fund manager Chew Eng Han, established through Lai’s confirmation that an independent auditor’s report was circulated to executive members during the AGM in 2009. The report covered the various investments that the church had made, including bond, unquoted bonds and equity investments. Lai revealed that the auditor Sim did not object to the investment in unquoted bonds (bonds in non-listed companies) but preferred quoted bonds because it was easier to value those bond at any particular time. Through Khoo’s questioning, Lai also confirmed that Sim did not have issues with the fact that bonds and the financial assets were, on record, invested with funds from the building fund.
It was also established that Chew formally disclosed his interest in AMAC to the executive members at the 2009 AGM. He had resigned from his position as vice president of the board on July 7, 2007.
Senior counsel Andre Maniam, the lawyer representing CHC’s former finance manager Serina Wee, confirmed with Lai that she was not surprised by documents that revealed there were bonds included under CHC’s investments, because she already knew that the church could invest and did invest.
Serina Wee with her lawyer, senior counsel Andre Maniam.
Lai confirmed that at the time she was an executive member of the church, there were three annual general meetings held from 2004 to 2006, and she attended all of them. She also confirmed that updates on the investments made by CHC were provided at each AGM, and that executive members of the church were fully aware and in agreement of the church’s investments, including the educational institute Research University for Leadership which was a related party.
N. Sreenivasan, the lawyer acting for Tan Ye Peng, took the court through a systematic rundown of how an auditor would conduct an audit of City Harvest Church’s accounts, with Lai’s confirmation on all his points. He established, through Lai, that the auditor would have checked every major item in the accounts, that a “$20 million item is a major item” and that a $4 million impairment (potential loss in value of an investment) would also be a major item.
Using journal entries that DPP Tan had referred to earlier in the day, Sreenivasan showed the court that the church’s investments in Xtron bonds, amounting to $21.5 million, was fully repaid; impairment, previously provided, was duly reversed when the investment in Xtron bonds was redeemed; and prepayment of rental was offset from CHC’s investments in Xtron bonds. Every line of accounting appeared in the document.
Tan Ye Peng (in grey) with his lawyer, senior counsel N. Sreenivasan (left).
“I’m a lawyer and I’m not very good at accounts. I just figured this out,” quipped Sreenivasan.
“Very good already,” Lai replied.
“Thank you. Would I be correct to say, any auditor, or maybe even an accounts clerk who looks at this will know for sure what has happened as part of the advance rental has been offset against the Xtron bonds?”
“Yes,” said Lai.
PROSECUTION INTRODUCES NEW EMAIL
To contest Sreenivasan’s statement that the auditor Sim had clarified everything he was in doubt about before signing off on accounts for 2008, prosecutor Tan Kiat Pheng presented an email correspondence showing that Sim expressed concerns that were unresolved even though he signed off on the accounts.
However, upon further cross-examination by defense lawyer for Kong Hee, Edwin Tong, Lai confirmed that Sim’s concerns stemmed not from his doubts about the genuineness of the Xtron bond investments, but from possible conflict of interests, given the relationship between Xtron and CHC; it appeared that Baker Tilly did not have an issue with whether the bonds were bona fide. The use of the building fund for investments, including into Xtron and Firna bonds, was disclosed to the auditor, the board and to executive members, and no concern in relation to this had been raised.
The trial resumes on Monday, May 20 at 9.30am.
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