The first three of the six defendants—John Lam, Kong Hee and Sharon Tan—have taken the stand to bear witness to what they believe is the truth in the ongoing case against them. City News Weekly takes stock.
(From left) Kong Hee, seen here with his lawyers, Aaron Lee and Edwin Tong from Allen and Gledhill. CN FILE PHOTO
The City Harvest trial has been a long journey for the six accused by the State of Singapore of conspiring to misuse church funds. The court has sat for 88 days so far, and it looks likely that it will stretch all the way through 2015, with three more defendants taking the stand starting next January, followed by the defense witnesses.
The prosecution’s case, which began in May last year and concluded this past February, saw the deputy public prosecutors making their case with 14 witnesses. The prosecution’s case is that the Xtron and Firna bonds, which City Harvest Church subscribed to, were “sham” investments used to channel the church’s building fund into the Crossover Project. The second set of charges surround transactions that were carried out to redeem the Xtron and Firna bonds. The prosecution holds that these “round-tripping” transactions—involving the advance rental licence agreement (ARLA) between CHC and Xtron, and funds invested by CHC into its fund manager AMAC’s Special Opportunity Fund—were devised to “defraud” the auditors.
The defense case began on Jul 14, with three defendants taking the stand: former board member John Lam, senior pastor Kong Hee and finance manager Sharon Tan.
“MY ONLY GAINS FROM CHURCH WERE SPIRITUAL”
John Lam joined the church before it became CHC and served as a volunteer. CN FILE PHOTO
Former board member and investment committee member John Lam was the first to take the stand. The court heard that the Crossover Project began as a natural progression from CHC’s 1995 Church Without Walls movement, and became a mission of the church to fulfill the Great Commission, that is, to preach the Gospel to the ends of the earth. This would be accomplished by sending the then-worship pastor and wife of Kong Hee, Sun Ho, out into the pop music world to reach the unchurched.
Lam, a founding member of the church, is a chartered financial analyst and also a fellow certified public accountant. He held various posts in the church as volunteer: he was the treasurer in the CHC board and was involved in the investment and audit committees. The court heard that he was roped in mostly to advise on accounting matters due to his background.
Lam told the court that he, among others, had been “traumatized” by the Roland Poon incident—in January 2003, Poon had gone to the media and made allegations that the church’s building fund had been used to market Ho’s music career. Lam told the court it had never occurred to him that the public and other Christians would object to such a project to reach the secular world through pop music. The court heard throughout the defense case so far that this led to the creation of an indirect relationship between the church and the vehicles that managed the Crossover Project, such as Xtron Productions, which was formed in 2003 to manage Ho.
Lam’s testimony was that the church leadership did its best to perform all transactions in a proper manner. The funding of the Crossover came from Xtron, which issued bonds to CHC amounting to $21.5m in 2007. This amount comprised “surplus funds” from the church’s building fund—one of the uses of the building fund, as decided on by the executive members of the church, was for investments. Lam told the court that he felt investing into Xtron bonds made sense as Ho had enjoyed a good track record as a pop artist, and that he was confident his pastor, Kong Hee, would not fail in such an important mission. Additionally, he was assured by businessman Wahju Hanafi’s personal guarantee to underwrite any losses incurred by Xtron in the Crossover Project.
The court also heard during Lam’s testimony the CHC leadership took advice from the auditors seriously. The Investment Committee was formed at the suggestion of auditor Foong Daw Ching, the managing partner of Baker Tilly, and it was decided by the IC in December 2007 that the church board should have full details of every investment made through fund management firm AMAC, which was founded by co-defendant Chew Eng Han.
Among the many accusations lobbied at him by deputy public prosecutor Mavis Chionh were the “comfort letter” to Hanafi that Lam signed and his anxiety about avoiding impairment in Xtron’s books—ostensibly at CHC’s cost. Lam explained that he had understood from Chew that Hanafi had no intention of enforcing the “comfort letter”. Lam also saw absolutely no reason for CHC to trigger the convertibility feature of the Firna bonds.
As for Xtron’s financial state, he explained it was common practice for any company to minimize impairment in its books as this indicated a decrease in value, but it did not mean anything “untoward” was going on. An impairment of $2.5m was eventually recorded to accurately reflect the state of Xtron’s finances at that point in time.
The court heard that for the past 30 years, Lam’s life had revolved around his family, his job and his church, and that he had never made any personal gains from the church, except for spiritual gain and the gains of friendship, “which has been since I met Pastor Kong from 1987 until now.” When asked by senior counsel N Sreenivasan if he understood what conspiracy he was being charged for being part of, Lam replied that he did not know.
THE VISIONARY OF THE CROSSOVER PROJECT
When CHC’s senior pastor took the stand on Aug 11, the court room was packed with both media and curious members of the public.
In his examination-in-chief, Kong gave the court the spiritual background to the Crossover Project, its success in Asia, and Sun Ho’s subsequent entry into the US music industry. Kong told the court that the Crossover began as a church mission and the first album had been funded by the church as a mission work—a fact that executive members were aware of. However, the 2003 Roland Poon incident was a wake up call to the church, said Kong. “[It] woke us up to the reality that what we perceive as something good…in the church may not be how those outside the church would perceive it.”
The allegations that church building fund was used to promote Ho’s music career and that Kong made the church worship Ho shook the members and the leadership. The court heard that from that point, Kong felt that in order to protect the Crossover mission, the church’s involvement could not be obvious. It was seen throughout his testimony that if there was no legal obligation to disclose a matter, Kong preferred not to provide full disclosure, in order not to jeopardize the mission.
Kong also consistently emphasized that it was of paramount importance to him that the church was protected at all times. To ensure that everything was “properly done”, he had consistently turned to auditors—the court heard that Baker Tilly charged CHC a higher fee than other audit companies—and lawyers—the court heard that Kong had relied on “top” lawyers” from “top law firms” like Drew and Napier and Rajah and Tann. Kong also repeatedly pointed out that for every major decision made by his team, he constantly reminded them to “check with the lawyers and auditors”. The court heard that Foong, a trusted advisor who Kong called “Brother Foong”, had been given full disclosure of everything with regards to CHC’s financial transactions, “the good, the bad and the ugly.”
The prosecution alleged during its cross-examination of Kong that he was the “ultimate decision-maker” who conspired with the other defendants to “channel funds” to the Crossover Project through sham bonds, that they sought to conceal the “misuse of church funds”, that Kong “manipulated” the Xtron directors and that Hanafi’s personal guarantee was an “afterthought”.
Kong answered that he was the visionary of the church and the one who received the mandate to start the Crossover Project. However, he pointed out that each of the defendants had a role to play to ensure the success of the Crossover. His role, he told the court, was to budget for the US album production to ensure its success. Over the course of Kong’s time in court, many different scenarios and budgets that he had worked on were seen. The court also heard that when producers Wyclef Jean and Lisa Ellis wanted to increase the budget by at least US$10m. Kong decided despite their track record, he could not put the church at risk. The decision was then made for Ho to work with another producer, Johnny Wright.
Kong told the court that, as he was a pastor and had no financial training, he only handled the budget and left it to fund manager Chew, working with pastor Tan Ye Peng, to figure out how the financing would be done. The accounting was handled by Serina Wee and Sharon Tan. Kong told the court that “everyone had a role to play” in the Crossover Project.
The personal guarantee given by Hanafi came under fire during Kong’s cross-examination. Despite the fact that Hanafi was the prosecution’s witness and that his testimony matched Kong’s with regard to how he had come to underwrite the Crossover Project, the prosecution still tried to cast doubt on his personal guarantee, noting that an “official” guarantee was only drawn up in 2010 and backdated to 2007. Both Hanafi’s and Kong’s testimonies showed that Hanafi had made good on his promise and paid for the Crossover Project, even though, not being liquid, he had to take loans to keep his word and is still servicing those loans today.
It also surfaced in court that in 2010, after the investigations began, Kong’s former lawyer told him to write a letter and “come clean” about his wrongdoings. Kong penned a 12-page letter explaining the genesis of the Crossover and the events that transpired, from his point of view. When asked what he had done wrong, he answered, “I was ignorant. I could have been more involved in some of the financial transactions, understood it more. I felt I was negligent not being around enough.” The court saw that this letter, his answers to the Commercial Affairs Department and his testimony in court were all consistent.
HOW “PALM OIL” AND AUDITOR SPARKED OFF EVENTS
Sharon Tan kept discretionary information off the minutes to
maintain distance between CHC and Xtron. CN FILE PHOTO
Finance manager Sharon Tan experienced a number of emotional moments in court throughout her time on the stand. The mother of three had taken over Wee’s position as finance manager of the church in 2008. Sharon Tan is accused of devising a series of “round-tripping” transactions to create the false appearance that the Xtron and Firna investments by the church had been redeemed.
It was during Sharon Tan’s testimony that the details of CHC’s Suntec acquisition came to light. The court heard that the church had begun looking for a new worship premise in the city in 2005. By 2009, this search had intensified—after considering 20 properties, the church had narrowed it down to two locations: Suntec Singapore (code named “Palm Oil”) and the plot of land that Capitol Building sits on (code named “Crude Oil”).
For the purposes of this property search, the court heard that in 2009, the church entered into the ARLA with Xtron. The court heard that the board approved the plan for the advance rental to be primarily used to enable Xtron to bid for a new building, and secondarily to be used to redeem Firna and Xtron bonds. Eventually, CHC succeeded in its bid for a stake in Suntec and the ARLA was rescinded. This put Xtron in a position of having to return the remaining monies to CHC.
Sharon Tan was also queried about the real reason why the Xtron and Firna bonds were redeemed in 2009. The prosecution held that it was because the team was trying to avoid being found out that the church had been investing in “sham” bonds. Sharon Tan explained that it was the church’s audit engagement partner at that period, Sim Guan Seng, who had expressed that he did not like having such bonds in the CHC books, as they were not market bonds and had to be valued. It was then decided that it was best to clear the bonds off the books once and for all. The ARLA was drawn up and part of it went to effect the redemption of bonds. When the ARLA was rescinded, Hanafi’s guarantee was then activated to make up for Xtron’s deficit. Hanafi had told the court during his time on the stand he had given his word and kept it, and he had done so with the belief that the US album would launch and its projected sales would cover all Xtron’s accumulated costs.
The prosecution zoomed in on a number of practices that Sharon Tan had, such as backdating minutes and leaving Xtron-related information off the board minutes. The court heard that Sharon Tan had kept discretionary information off the minutes as it was necessary to maintain the distance between Xtron and CHC, and that during some board meetings, the investment committee members would discuss the IC agenda, but these would be minuted later as a separate meeting. As for Sharon Tan’s testimony that Sim had told her to take the bonds off the books, the prosecution pointed out that this was not recorded anywhere, and Sim’s testimony on the stand was that he did not tell Sharon Tan that.
Sharon Tan’s defense is that she did everything according to what she believed was right and that she understood each transaction to be legitimate. She told the court that it was her privilege to work for church for the last 10 years, and that “all these years of working in church, I never had any intention to cause any loss to church.”
When cross-examined by SC Sreenivasan, Sharon Tan said that, given all that has transpired, she still does not know why she has been charged.
Sharon Tan’s time on the stand, which ended on Oct 2, marked the sixth tranche in the trial. The trial resumes on Jan 26, 2015 with former fund manager Chew Eng Han taking the stand.
JOHN LAM
(Three charges)
Accused of conspiracy to commit criminal breach of trust (CBT) for putting monies from CHC’s building fund into “sham” investments in Xtron and Firna.
Key arguments:
• He was a church volunteer not involved in the planning and financing of the Crossover Project.
• Always acted in the church’s best interests
• The investment in the Xtron and Firna bond were arm’s length transactions between independent parties.
•The first Xtron bond was a genuine investment.
KONG HEE
(Three charges)
Accused of conspiracy to commit criminal breach of trust (CBT) for putting monies from CHC’s building fund into “sham” investments in Xtron and Firna.
Key arguments:
• He handled budgets but not the financing of the Crossover Project.
• Always checked with lawyers and auditors, always reminded team to do likewise.
• Insistent that church must be protected and not subject to high risk.
• Trusted his team to perform their individual roles.
SHARON TAN
(Seven charges)
Accused of devising a series of “round-tripping” transactions to create the false appearance that the investments had been redeemed.
Key arguments:
• Trusted each person in the team.
• Believed that every transaction was legitimate.
• Took minutes excluding discretionary details in order to protect the Crossover Project.
• Had taken auditor Sim Guan Seng’s advice to “take bonds off books”.
