After some questionings, DPP Ong did not
get the desired response from Mr. Chew, he put to him that he is being
disingenuous and lying.
Below is the recount of cross-examination by DPP Ong on 4 February 2015.
4 Feb 2015 – Chew cross-examined by DPP – Part 1
DPP referred to an email exhibit (E-196) dated 15 June 07, written by Ye Peng to Serina and Chew.In this email Ye Peng was suggesting a plan to lend CHC’s Building Fund to Xtron and then, later, to allocate part of the next Arise & Build to the General fund, and then that allocation would then be used to replace the money in the Building Fund.
DPP recounted what was said yesterday. Not from this email, there was another plan to use the Building Fund indirectly by placing as a fixed deposit with Citic Ka Wah Bank to build the relationship with the bank in the pursuit of getting a loan from Citic Ka Wah Bank to fund the Crossover Project.
After Eng Han agreed with DPP Ong, he referred Chew to an email exhibit (E-189) dated 4 Dec 2006. The bottom of this email was Chew writing to Kong Hee and Ye Peng. (This is a 4 pages email)
Dear Pastor,
Here’s a follow up to the proposed plan in the sms.
CHC will prepay Xtron rental of expo for 2007 and 2008, in return for a discount on the rates. So instead of the $3.1m per year, perhaps it pays the amount which Xtron pays Unusual? Xtron can use the money for the Crossover first, but as the next 2 years progress, it will need the money back to pay Unusual.
This is where the new building comes in. Once we secure the land, Xtron takes a down payment from CHC in exchange for securing a 10-year usage of the concert hall….<<skipped some lines of the proposal>> UEPL will let out directly to SUTL (Arther and JJ’s company). I am thinking of $1m for the go-kart plus $1m for F1 each year. Once we secure the land, we take a $3-4m deposit from them. The money can then be used to help pay for the land.
For all these to look real and legitimate and arms-length commercial transactions, I feel we need to really physically separate UEPL and Xtron from CHC’s office. Otherwise, if one day we get audited, these companies are probably going to get scrutinized for independence, because of the many transactions CHC has with them.
I propose the following changes:
1. Move Xtron staff out from CHC office and have a separate real office of its own.
2. Have a separate accountant – any audit which shows the CHC and Xtron accountant are the same is going to cast doubts on whether transactions between CHC and Xtron are really commercial, or are we are just trying to move funds between these 2 entities.
3. Xtron must have a full-time CEO/COO who is not Pastor Tan or any of our board members. Can Wen Ling come out of the CHC staff and run Xtron? The board should also not overlap with CHC/CHCSA’s board or committees.
DPP wanted Chew to confirm the following point:
The proposed plan was that Building Fund money would be paid out to Xtron as advance rental for the Expo but that advance rental paid would instead be used by Xtron to fund Sun Ho’s music career first, then later on more advance rental will be paid when a building was secured, and that further advance rental would actually be used to cover the 2 years of rent which was originally supposed to have been covered by the first lot of advance rental.
Chew: That’s correct, your Honour. But depending on when the building comes in and when the albums launch and the album sales comes in, by the time the album is launched, if the album is launched quickly and the sales comes in, then the next batch of advance rental that comes in doesn’t need to cover the first deposit, rental deposit.
……
DPP: Really, this is very similar in
concept to the plan in E-196 (the email written by Ye Peng) to loan
money from the Building Fund and then put it back later, except that,
instead of a loan, here the money goes first under the label of “Advance
Rental”.
Chew: Yes
DPP read the email and said that Chew in this email was really expressing a concern that people might say these were not real commercial transactions, these were just shams to move funds between the two entities. Chew disagreed.
DPP: Then can you explain what you meant by whether these transactions between CHC and Xtron are really commercial or are we just trying to move funds between these two entities?
Chew: Yes, I will explain. Sham never came to my mind until we got investigated and got charged. What I’m trying to pre-empt is the possibility which exists in the commercial world itself, in my own experience, whereby auditors will always question whether the pricing is based on arm’s length. And, really, the best way to verify and assert that these transactions are at arm’s length is to have separate accountant, separate CEOs, separate office. But the very fact that it was separate accountants means the two accountants will be negotiating prices. But that does not mean that if these steps are not done that it’s not possible to have arm’s length. It is still possible, provided the person is handling both sides, is able to separate his mind and make a distinction between the two entities.
This happens in the commercial world as well, where the same two or three directors are sitting on both sides of two entities, and one is a associate of the other. I’m really trying to pre-empt… I’m not saying that the auditors will find out that these are sham transactions. Doubts are normal when there are no separate accountants and it’s the same people managing both sides. But it doesn’t mean it’s going to be a sham, your Honour.
DPP: …… If you say “really commercial”, then alternative view, you are …. you are afraid that the auditors might have must be that not really commercial.
Chew: My concern is that the auditor, or anyone else, may think that these transactions are not arrived base on true commercial relationships, and, therefore, that the pricing could not be at arm’s length.
DPP: If that is the conclusion or the suspicion that the auditors arrive at, then the conclusion that they would arrive at is that these could then be false or shams — whatever word you want to use — but not real. Correct?
Chew: No, your Honour. If it’s not commercially arrived at, it does not mean that it’s not real. It’s just that the price at which these transactions are made may not reflect what would have happened if it was done between two commercially separate entities that have no relationships. That’s all I’m saying.
<… questions and answers…>
DPP: So why were you concerned, as you expressed in the email, that the auditor would view it as just “just trying to move funds between these 2 entities”?
Chew: Your Honour, because, first of all, there has to do with the Crossover. I’m already mindful, your Honour, because of Roland Poon crisis, the saga, that there was going to be baseless accusations, that this is done perhaps to benefit Sun and Kong Hee, which was the exact accusation of Roland Poon. And here we are trying to avoid doing things in a manner that just openly invites baseless accusations and put us in a position that makes it difficult for us to justify, your Honour. That’s the answer.
DPP: You see, now you are saying that it might put you in a position that makes it difficult to justify. A few moments ago, you were saying that it’s no problem, it’s just that somebody would have to spend a bit more time explaining. So which is it? Is it not a big deal or is it a concern that another Roland Poon incident will happen?
Chew: It is not a big deal, as in, your Honour, in my mind and conscience that there’s nothing wrong with doing this. It’s a big deal if someone does pounce on it and we end up spending weeks or months, like what we’re doing right now, trying to explain these transactions. If everything had been done as I had suggested, your Honour, perhaps we wouldn’t spend so many weeks explaining about Xtron and arm’s length.
DPP said that what Chew wrote in the email “For all these to look real and legitimate and arms-length commercial transactions” it’s the appearance, not the substance, that Chew were concerned about.
Chew: Your Honour, I’m a man of substance. I don’t believe in appearance. But I do believe as well that if you project the wrong appearance, it just invites false accusations. Simple as that.
<… questions and answers…>
DPP: So, really, what you would have been envisioning is somebody very much like what you’ve described the directors to be: people who trusted in the decisions of Tan Ye Peng and Kong Hee and so would basically be prepared to go along with their decisions without really having full information of what was going on. Correct?
Chew: No, your Honour. What I’m suggesting here is that they would ask for more information. And if giving the limited experience, of course, in the entertainment industry, they may need to brush up on it, and then ask intelligent questions, like how many songs do you have in the album, who owns the copyrights, these questions could have been put up by the CEO. Not that they’re going to run it on their own, but, of course, they know they can’t do it. But they need to fulfill their minimum duties. That was my perception of how Xtron should be run, your Honour.
DPP: Mr Chew, I put it to you that you are being disingenuous and lying because you are ignoring the obvious meaning of the words in your email.
Chew: Your Honour, which words?
DPP: The fact that you, yourself wrote in your email that these transactions need to look real and legitimate and arm’s length, as opposed to being real and legitimate and arm’s length.
Chew: Your Honour, I disagree.
DPP: You had also sought to ignore the obvious meaning of your words in paragraph 2 when your concern was clearly whether the auditors would view the transactions as shams or noncommercial deals to move funds between two entities.
Chew: I disagree.
DPP: I put it to you that contrary to your evidence that you are a man of substance, the proposal that you make in this email is all about ensuring that the form disguises the real substance of the plan.
Chew: I disagree.
DPP: I put it to you that the real substance of the plan that you’ve proposed here is that Building Fund money would be channeled to Sun Ho’s music career, disguised as advance rental.
Chew: You finished?
DPP: Yes.
Chew: I disagree, your Honour. At then end of all the puts, I would like to say something, your Honour.
DPP: And I put it to you that plan would then call for more money to be transferred to Xtron to cover for the earlier advance rental disguised as further advance rental for a subsequent period.
Chew: So you are saying that the advance rental are shams as well?
DPP: That if this had been carried out, yes, that was your plan.
Chew: The advance rental is nothing more than a disguise?
DPP said, “Yes” and Chew replied, “Disagree”.
DPP further said that this plan that Chew had proposed would essentially had meant that CHC would be paying twice for the same period of rental. Given the reason that the first rental payment would be expended on Sun Ho’s music and the second rental payment would have to be made to cover for the rental that was supposed to have already been paid for in the first rental payment.
Chew: Your Honour, when …
DPP: Can you answer my question first?
Chew: I need to clarify on the question first. What do you mean by “pay twice”? You mean expend and never going to come back, or is it expenses?
DPP: Mr. Chew, under your plan, the advance rental was supposed to be paid for 2007 and 2008. That money was going to be spent on Sun Ho’s music career, and so you would have to put in some money to actually pay for the 2007/2008 rental. Correct?
Chew: That’s provided by then album sales hasn’t come in.
DPP: Mr Chew, you would have to get money to pay the rental unless you could inject fresh sums in the album sales. Before I go on can you answer my question? The plan you proposed was to pay the rental again. Correct.
Chew: Yes
The same email Kong Hee and Tan Ye Peng was okay with Eng Han proposed plan.
DPP further said, “Quite apart from having been disingenuous and dishonest in your answers this morning, you are also misleading and very selective when you referred to this email during your evidence on 29 January 2015. Because then, you said that the concept of a long-term lease between Xtron and CHC already existed in the year 2006, and you sought to rely on this email (E-189) to suggest that the ARLA, which is the subject matter of the charges, was just another advance rental agreement like the one in this email. Correct?”
Chew: No I disagree.
DPP Ong based on this email (E-189) to pin down on Eng Han. He concluded that Eng Han gave his evidence on 29 Jan 2015 that this was an example of an earlier genuine advance rental agreement or proposal but has omitted to go through the other parts of this email that shows the advance rental proposed was just part of a plan to channel money to Sun Ho’s music career.
DPP: … you didn’t refer the court to those sections because you didn’t want the court to realize that this advance rental plan in E-189 was just another scheme to finance Sun Ho’s music career.
Chew: Your Honour, I’m under no illusion that just because I don’t bring up the part of the email then the prosecution wouldn’t bring it up. The answer is no.
DPP: Yet this morning, when I have drawn your attention to those sections, you have tried to continue to dissemble and give explanations contrary to your clear words in the email itself. Correct?
Chew clarified the meaning of the word “dissemble” and he said, “No.”
……
Chew: Your Honour, this email was based
on an actual property project I was working on. It was called Project
Shamgar. It was the site, the land on which the F1 site, the pit
building site, the pit building stand now. This was a project I was
working together with Arthur Tay from SUTL. I’ve shown emails your
Honour, where Arthur was going to meet the minister as well as Iswaran.
Arther was flying to meet Iswaran about F1. Xtron was going to be the
master lessee, not just to rent to City Harvest but to rent out to
concert operators. UEPL, the owner of the project, was going to rent it
out to the F1 people, which was Ong Beng Seng. I did actual projections.
I was wondering whether I should put in those projections as evidence
but since now I’m being accused that these whole thing is a sham, in my
re-examination, I can produce those projections, your Honour, to show
that this was a real project. What I was proposing was not a
commercially justifiable thing for Xtron to do, it was commercially
motivated.
DPP: …..but even if Project Shamgar was a genuine plan to secure a building, you have taken that plan and you’ve folded into it your proposal in E-189 to use the building to put back the advance rental that you were planning to use for Sun Ho’s music career.
…….
DPP: Mr Chew, you’re not answering my question. My point is that your proposal in E-189 basically uses this building project even if it’s legitimate as an excuse to put funds into Xtron so that the advance rental that has been used to fund Sun Ho’s music career can be put back. Correct?
Chew: Can be put back??
DPP: Yes
Chew: What do you mean by “advance rental that has been used to fund Sun Ho’s music career can be put back”? Into where?
DPP: Mr Chew in E-189, as we’ve gone through, you propose paying advance rental to Xtron using that first tranche of advance rental to finance Sun Ho’s music career, and then paying a second tranche of advance rental to replace the first tranche of advance rental. Correct?
Chew: Yes
DPP: And the second tranche of advance rental was going to be portrayed as advance rental for the new building project it could be Shamgar but was actually going to be used to cover the rental that was supposed to have been paid for by the first tranche. Correct?
Chew: Your Honour, as I said, it depends on when album sales comes in, and when this second advance rental is done. Because it wouldn’t be done until the property project takes off. So I can’t answer.
DPP referred Eng Han to another email E-455.
Eng Han explained that the concept of using advance rental to fund the Crossover was not hidden from the auditors. There is nothing sinister about this. He said it is just an interim funds not being used to fund the album trailer. At that point in time, as what he said, he always thought the album was within one and a half to two years. It’s just a bridging finance.
E-455 dated 7 Dec 2006. Chew wrote to Kong Hee and Tan Ye Peng about the Shamgar Project with financial projections.
Chew wrote:
… project proposal …
… project proposal …
The bottom of this email
Because of all the major commercial transactions between UEPL, Xtron and CHC, this is why we need total independence of all 3 entities, so that any scrutiny will reveal that everything is done at arms-length, and not favoring any particular party or used as a means of channeling money out of CHC.
Because of all the major commercial transactions between UEPL, Xtron and CHC, this is why we need total independence of all 3 entities, so that any scrutiny will reveal that everything is done at arms-length, and not favoring any particular party or used as a means of channeling money out of CHC.
DPP: And further advance rental to be
paid to Xtron was going to be portrayed as advance rental in relation to
this building(Shamgar Project).
Chew: Not portrayed, your Honour. It’s actual advance rental.
DPP read the bottom of the email and said, “again there is your concern that the transactions must be arm’s length”. Chew agreed.
……
Eng Han confirmed with DPP that if the transaction favours one particular party then it would not be arm’s length.
……
DPP another put statement
DPP: I put it to you that, from your description of the relationship between CHC and the Xtron directors, it would have been the same for Kar Weng, for Siow Ngea for Wahju, that the interest that they would put foremost was not Xtron but City Harvest. Correct?
Chew: Yes, City Harvest interest was more important.
<… more questions and answers…>
Eng Han said … the whole objective is to
ensure that the church doesn’t get short changed. But before we can
ensure that, we need to know what’s the arm’s length rate, your Honour,
and then we add something better for the church. That’s what’s happening
in all these conversations.
Chew pointed out that the projections were sent as attachment to Kong Hee and Tan Ye Peng in this email (E-455). This is not a sham as he told them the whole business model about this Shamgar Project.
Chew pointed out that the projections were sent as attachment to Kong Hee and Tan Ye Peng in this email (E-455). This is not a sham as he told them the whole business model about this Shamgar Project.
DPP referred to another email dated 22 Feb 07 sent out by Suraj. (E-459)
In this email he said that the board was told that the advance rental was to pay for July 2007 to February 2009. There is no mention of the actual usage of the advance rental was to be used to finance Sun Ho’s music career.
The author of the email was Suraj. DPP questioned Chew why Suraj didn’t write on this email and tell the board what was really going to happen with the advance rental that was being paid.
Chew: I can’t answer the question, your Honour. I’m not the writer of this email.
DPP said Chew at that time was a board member was copied in this email. DPP asked, did you reply to this email to say, “Hey, by the way, board member, actually, this is all part of the plan to channel Building Fund as advance rental, but, actually, to finance Sun Ho’s music career”?
Chew replied No.
DPP: Why not?
Chew: I didn’t think of it, your Honour. However, at this point in time, the board already knows Xtron is managing Sun. If the monies go to Xtron in these sort of amounts, the board would know.
<… more questions and answers…>
DPP referred to another email dated 7
Aug 07 (E-157). Serina wrote to Chew, Ye Peng and John Lam about the use
of proceeds in the bond subscription agreement.
Serina wrote:
Reason why I need to add in traveling and salary costs is because we had used the advance from Expo rental to pay off a part of the English Album expenses already and some part of this $13m is to go to pay off Unusual for the rental.
Reason why I need to add in traveling and salary costs is because we had used the advance from Expo rental to pay off a part of the English Album expenses already and some part of this $13m is to go to pay off Unusual for the rental.
DPP interpreted Serina’s email as she is
actually proposing a way to justify the sum of money that is actually
required to pay off the rental expenses that should have been covered by
the advance rental.
Chew explained: She’s asking about the treatment basically, your Honour, about how to treat these transactions, whereby advance rental for Expo has been used to pay for album expenses. And now the bond proceeds are coming in, and these bond proceeds were originally to be used to pay for those expenses, the album expenses. So she’s not asking how they’re justified but how to treat this series of transactions.
DPP: But the bottom line, Mr Chew, is that the use of proceeds that the lawyer are going to be asked to draft doesn’t reflect that the money is actually going to be used to pay off past rental expenses. Correct?
Chew: Your Honour, this is exactly what I’m saying, that advance rental was a bridging finance to pay for the album expense, pending a more permanent source of funds, which could be either the revenue from the album sales, or, in this case, it’s the bonds. When the bond proceeds now comes in and the bond BSA specifies that it’s to be used for album-related expenses, but some expenses have already been paid by advance-rental, which was the bridge. Theoretically, accounting-wise, in substance, what’s happening is that the bond proceeds now are going to pay the “bridger” which is the advance rental that has paid for the album expenses. Your Honour, the same thing happened for Pacific Radiance commercial paper. John Lam told us Pacific Radiance is going to seek a bank loan, that’s a long-term plan. In the interim, before he gets a bank loan, can the church lend Pacific Radiance, which is what the church did. It was a bridging. And those bridging finance went into the building of the ships which his company was building. And when the bank loan subsequently comes in a few months later, I’m sure he would have got permission from the bank to take some of that bank loan proceeds to pay the commercial paper which was the bridging, your Honour. And this is exactly the same situation. The advance rental was a bridge. The permanent source is now the bonds, where the bond comes in it has to pay off the bridge, which is the Expo rental, which was used to pay for the album expenses. There’s really nothing sinister about this, your Honour.
DPP said the board was not told about the advance rental was actually a bridge.
Chew: I do not remember, your Honour, whether verbally they were told or not, so I can’t comment on that…
…I could or Pastor Tan could have verbally told the board.
DPP said that when Suraj sent out the email (E-459) to the boards, Chew has the opportunity to tell the board via the email but he didn’t. Chew replied, “That’s right, I didn’t tell them.”
The DPP further said that the email(E-157) wasn’t explaining that there was the advance rental was a bridge and then because of that, the money has been put back.
Chew explained that he assumed that what Serina was saying the Expo rental went to pay probably salary, which is part of album expense.
…..
DPP: So, again, you are trying to
dissemble and evade not only the words of the email but what you’ve just
agreed to a few moments ago.
Chew: I don’t know if the prosecution understands what I was explaining earlier on, your Honour. I’m assuming that the Expo rental to pay some album-related expenses, so when Serina says she has put in the salary costs as an item, in my mind, I’m thinking that she’s saying that Expo rental was used to pay salaries for album-related, is the team itself that’s doing the album, which are part of the indirect expense. I don’t understand what the prosecution is trying to say. So, in other words, in substance, the classification of this transaction, where the bond proceeds now goes to pay back for Expo rental, is that we’re tracing it back to the original destination of those funds, the Expo rental went to pay off salary or album-related expenses. That’s what I’m saying.
…….
DPP: Mr Chew, the evidence is on the
screen in front of you, because when you need to put the money back you
give a different reason to beef up, to justify the amount of money
needed to put it back.
Chew: When I needed to put the money back into where, sorry? and then I give a different reason?
DPP: When you needed to put back the advance rental that had been expended on music album expenses, you do it by disguising it in this use of proceeds clause. You don’t say, “We’re going to use part of this $13m to pay back advance rental that has been used first”.
Chew: Your Honour, if I explain this to Christina Ng, she would say you don’t need to include advance rental as part of the use of proceeds. She would have understood in substance the money went to pay for album-related expenses, which was bridged by the advance rental. Nobody does this in a commercial market, your Honour.
DPP: I’m sorry, Mr Chew. What do you mean by ”Nobody does this in the commercial market”?
Chew: Your Honour, what the prosecutor is suggesting is really out of market practice. I’m being held to move along the lines, very narrow line, of what the prosecution believes are proper and not proper investments. I think perhaps the prosecution needs to … …
SC Maniam stood up to clarify with the prosecution on his position related to the agreed statement of facts.
DPP explained that the substance of the questions that they have been asking is how the application of those funds to the Crossover Project was accounted for and how what was being told to.
Chew said what actually happened does accord with the agreed statement of facts…. and he gave the reasons.
DPP: I put it to you that in these
emails, like E-189, E-455, E-456 and previously E-196, really, what you
are always concerned about is marinating the form of commercial
transactions when the substance is, as you have agreed in relation to
E-189, prepackaged plans.
Chew replied:
Your Honour, I’m concerned with both
substance and form. Not because form is important to me but because form
is important to many people, and we are to avoid all appearance of
evil, your Honour. And that comes through the form.
DPP: I put it to you that, in fact, since before the first Xtron bonds, you had already been involved, together with Kong Hee, Ye Peng, Serina and John Lam, in hiding your plans to make use of the Building Fund to finance Sun Ho’s music career.
Chew: I disagreed
DPP: In fact, when you went on to the Xtron and Firna bonds, it was a continuation of this practice of cloaking the financing of Sun Ho’s music career in the guise of other kinds of transactions.
Chew: And the cloaking and the hiding is from whom?
DPP: From the auditors, from lawyers, from the executive members, from the board and, basically, from everybody outside the five of you who knew about these plans.
Chew: I disagree.
