On 17 March 2015, DPP Christopher Ong
continued to cross-examine Chew on the Firna Bonds. The
cross-examination on Firna Bonds ended around 4pm today. (Total around
8man-hours expended from yesterday till today) DPP estimated his
cross-examination would end this Thursday. Chew estimated he would take
half a day for his re-examination on Friday. Therefore Tan Ye Peng will
be on the stand next Monday( 23 Mar 2015).
A brief recap of what was cross-examined on 16 March 2015 – PM session
The purpose of the Firna Bond
The real use of the proceeds of the Firna Bond was to finance Sun Ho’s
music career and not for Firna’s general working capital as stated in
the Bond Subscription Agreement.
Chew explained that the reason why it
went through Firna is because, in his mind, he is thinking Firna will be
the party, the entity, the business that has an obligation to pay back
the church. The intention was really for Firna to hold that obligation
to the church, although the ultimate objective was to fund the
Crossover. The obligation is not on Ultimate Asset, but Wahju had an
obligation through the personal guarantee.
Chew said, “The borrower is not free to
deal with the proceeds according to their own needs. It has to be
pre-agreed, your Honour, as it was with Xtron and Firna. The lender
would normally specify right at the beginning the purpose of the loan.
So whether or not it’s built in the BSA is a different issue, your
Honour. Whether it’s verbal or written, the borrower would be
constrained in the way he would use the monies. No lender gives money
out to a borrower without telling what he can use it for or what he
cannot use it for.
DPP: So, for the Firna bonds, the
purpose or the use of proceeds provided for was that it was for Firna’s
general working capital, for the CHC Firna bonds. Correct?
Chew: Yes, I think that was what was stated in the BSA, BUT that was not it.
DPP: You are saying that there was an additional verbal limitation imposed upon.
Chew: Yes
Chew further explained that Wahju had to withdraw the money from Firna and then use part of it to fund the Crossover.
DPP: Was part of the verbal agreement also that, insofar as the
proceeds were to be used to fund Sun Ho’s music career, the funds would
continue to be controlled by the Crossover team?
Chew: Yes, it was given, actually, your Honour, that for him to invest in the Crossover, it would be managed by Kong Hee.
<… Questions and answers…>
DPP: The Bond Subscription Agreement is
very clear. CHC is going to purchase Firna bonds, the proceeds are
supposed to be Firna’s general working capital. All right? So you can’t
be saying that the proceeds of the bonds were meant to finance Sun Ho’s
music career. In fact, earlier, you were quite clear in saying that that
is not the case. The Firna bonds proceeds were put into Firna and
stayed there; Wahju withdrew his own money and used it to fund Sun Ho’s
music career. That’s your position, right?
Chew: Yes.
DPP: Are you now telling us that this
bond agreement between CHC and Firna not only involved a term that was
written into the agreement about how the bond proceeds were to be used,
the bond transaction also included a limitation on how Wahju was
subsequently allowed to use his own money that he withdrew once the bond
proceeds came in?
Chew: Yes. This was an unwritten agreement.
DPP: This verbal agreement that you are saying existed isn’t over the
bond proceeds at all, according to you. This is over Wahju’s own money.
Chew said, “ ….. Firna doesn’t have
money unless City Harvest funds it. But money is fungible…. it is not
his evidence that he wants to be so strict about this that, this is not
City Harvest’s money or it’s not Firna money, it’s Wahju’s own money
that went to the Crossover…. His defence is based on this simple premise
that we expected the album to make money. However this is structured,
whether it’s structured through Firna bonds or direct into UA or even
direct to JHM, is really not relevant, because, in the end, it’s what’s
in the minds of each of the six, or the four, whether we expected JHM to
deliver the results for the album sales to come back in and then to
repay it. So I’m having a problem answering this question, because I
don’t know from what angle the prosecution is coming from. I just want
to make it clear that it is not my defence. I’m not going to stress or
emphasize whether it is Wahju’s own money or Firna’s money. I hope this
is clear.”
<… Questions and answers…>
DPP: Witness, I put it to you that the
Firna BSA was not a genuine investment but merely set up as a conduit to
channel Building Fund to finance Sun Ho’s music career under the guise
of an investment.
Chew: Your Honour, can I clarify this
put first, before I answer? So is the prosecution saying that if monies
are being channeled through a certain entity, or rather, if building
funds is being channeled through certain entities to finance Sun Ho’s
music career, then it’s a foregone conclusion it’s a sham investment? Is
that all it takes for this case? Because monies are channeled through a
certain entity and it doesn’t go directly into Crossover and it goes
into Sun Ho’s music career, is it the prosecution’s case that that is
enough to justify that this is a sham?
DPP: No, Mr Chew. I’m saying that the
Firna bond investment was never an actual investment into Firna, in the
sense that you never intended to create a genuine legal obligation with
the objective of getting investment returns from Firna, that it was just
an excuse to channel the Building Fund to finance Sun Ho’s music
career.
Chew: Your Honour, I disagree because
I’ve said many times that the structure of investment doesn’t invalidate
the investment, and just because monies are channeled through Firna via
UA into JHM, that is not enough evidence, your Honour, that we didn’t
expect returns. In the end, we did expect returns, and if not for
disclosure issue, City Harvest could have well invested directly in JHM
and bypass all these entities. And the crux of the whole analysis is
still this: Did we expect the album to make money? Just because we
channel it through Firna and UA does not invalidate or make it a sham
investment and does not mean that we didn’t expect monies to come back.
This whole channeling was done because of the disclosure issue.
A brief recap of what was cross-examined on 17 March 2015 – AM Session.
DPP referred to an email written by Serina Wee instructing Wahju to repay the loan from the proceeds of the Firna bonds.
DPP: You were copied in this email, so
you would have seen this instruction, but you didn’t raise any concerns
about this. Correct?
Chew: No, I didn’t, your Honour, because
I assumed this was related to the Crossover, and, in any case, this is
Wahju’s personal monies and, as part of the agreement, if he can use it
to return the loan, I don’t see anything wrong with it, your Honour.
DPP: The agreement that you mentioned
previously, that he would use the bond proceeds to finance Sun Ho’s
music career, also included other uses of funds. Correct?
Chew: Your Honour, this, to me, was a
indirect use of the Crossover, because I believe there were other loans.
They were all bridging loans to help to finance the Crossover, pending
this bond proceeds coming in. For instance, actually, on the next page,
point number 4, $1.135m to Ultimate Assets; under sub-point (B) number
1. There is a $700,000 return loan to Chan Kok Yew and this was Chan Kok
Yew lending money for the album expenses, pending the bond proceeds
coming in. So when I saw all this, I thought this was just bridging,
using the bond proceeds now to pay off loans that were taken in the
short term to pay for the album expenses and I didn’t see anything wrong
with it.
<… Questions and answers…>
DPP: Look at item 2, the $674,000 that
he is being instructed to transfer to the multipurpose account. Do you
know what this is about?
Chew: It says there, actually, it’s for
the miscellaneous expenses relating to the album, your Honour. So it is
related to the album as well.
DPP: That is where Serina is explaining
to him what the MPA is used for and then she says: “As such, we do need
the S$674,700 directed to this account rather than to Xtron. I believe
TYP has spoken to you before about this”. But look at the part in
parenthesis: “S$674,700 (this was your sponsorship giving to Xtron in
2003 and last year in Dec, Xtron “refund” the same amount to you)” Do
you know what that part is about?
Chew: No, your Honour, I wasn’t involved in this part as well.
<… Questions and answers…>
DPP referred to an email exhibit. The context of this email is about
Wahju would face a margin call and the Crossover funds was stuck in the
bank.
Wahju Hanafi wrotes:
Dear Eng Han,cc Ps Tan,
Sorry that I have to forward you this email to show what actually
happened, I’m trying to get I/C issued asap next week so UBS can release
all your fund.
DPP further cross-examined Chew on the usage of the word “your” money.
DPP: So it would appear that, from
Wahju’s point of view, these monies didn’t belong to him; he considered
them “your” money, and that was referring to the Crossover team.
Correct?
Chew: It was his money that he agreed to
invest into the Crossover and that’s why he says it’s our money not
his, because the agreement was that his money was to be put into the
album.
DPP: But you agree that he doesn’t say,
“I’m sorry, my money is stuck so I can’t give it to you to use for the
Crossover”? He simply considers it your money, if it doesn’t belong to
him. Correct?
Chew: I can’t read into his mind, your Honour.
DPP: You can read his words. Correct?
Chew: I can read his words, but I think this is really a play of words right now, your Honour.
Counsel Seah who is representing Sharon Tan stood up.
Seah: Your Honour, I would like to point out… Mr Wahju Hanafi had taken a
position contrary to what my learned friend is putting to the witness.
I’m not sure whether we should ask the witness to leave, but I’m happy
to take your Honour to that portion of the cross-examination of Mr
Hanafi.
DPP: Your Honour, I think it was quite
clear from the entirety of the evidence of Mr Hanafi that the
prosecution did not accept many aspects of his testimony and he was
confronted with the opposing evidence, which basically supported the
position that we are obviously now taking in respect of what was really
going on with the Firna proceeds. I think all that would have been made
clear in our submissions at the close of the prosecution’s case.
Judge said Chew is capable of responding in the appropriate way.
Chew: Your Honour… my position is that,
as far as me and Wahju are concerned, that Wahju knew that when money
went to Firna, that it was Firna’s money that when he withdrew the money
from Firna, that it was his money, and he knew that he had an
obligation then put his money into the album, and that’s why now he
says, “It’s your money”. The other thing is that he’s an Indonesian, as
Kong Hee has said before. Sometimes they are not very good at English,
your Honour.
And the other thing I want to ask your Honour is this: I’m not a lawyer,
but I’ve got a question. Wahju Hanafi is the prosecutor’s witness and
they’re rejecting part of his evidence. How does this work your Honour?
Can they just take part of his evidence and accept it and use it against
us and reject the other evidence?
Judge: If you want to launch into a submission on that, you can do that at a later stage, but not now. All right?
A brief recap of what Wahju Hanafi has said last year.
DPP questioned Wahju why he said “your
fund”. Wahju explained that “your fund” refers to “their portion” that
he had promised to sponsor them.
Wahju: Again, I had just like to remind you that I have another $7m
from Papua New Guinea that will come in and I can either use the one
from the Firna or I can use the one from PNG. There is actually a $15m
money going around at that time. So whether I’m using the Firna one or
I’m using my own money from PNG you know, it’s one way or the other, it
all goes to the same account.
DPP asked be it $15m from PGA or the proceeds under the Firna bond,
these monies were considered your money or someone else’s money.
Wahju replied is his money.
DPP: Right. So if the PNG $15m and the Firna bond money proceed
sitting in that UBS account were your money, why is it that you’re
stating here “your fund”, meaning that it’s not your fund?
Wahju: “Your fund” can means that it is your portion that I have promised you.
<… Questions and answers…>
DPP: That is why, when I show you an
email like this, where he refers to the funds as “your fund”, you are
saying that he’s being imprecise in his language, not using English
properly and that just calling it “your fund” doesn’t really reflect the
reality that it was actually Wahju’s funds that he was providing
willingly. Correct?
Chew: Sorry, I don’t get your exact question.
DPP: To put it more simply, you are
saying that when Wahju says “your fund” here, he’s being inaccurate and
imprecise in his description of what these funds really are. Correct?
Chew: He’s just being very casual, your
Honour, with his words, and, actually, I don’t see anything wrong with
him saying, “It’s your fund”, because, as part of our agreement, it
becomes our fund, it becomes the Crossover fund…… because, rightfully,
it is his money, your Honour.
DPP: I put it to you that, when in your
explanation for Wahju’s use of the term “your fund” in this email, you
are not for the first time during your cross-examination trying to put a
different meaning on words in an email that actually have a very
obvious and clear meaning.
Chew: Your Honour, I disagree and I
would say that, in fact, it’s the prosecutor who is putting a different
meaning on the words which are obvious to me.
DPP referred to another email exhibit.
E-661 dated 13 Nov 2008. In this email, Serina informs Kong Hee and Tan
Ye Peng that Wahju is instructing UBS to make a transfer to Justin Herz
the next day. Serina Wee forwarded the email to Chew.
Chew replied to her:
How come we are not channeling our money through his DBS account.
DPP: What did you mean when you said “Channelling our money through his DBS account”?
Chew: Wiring the money.
DPP: So you were just using the word “channeling” to refer to the act of transmitting the money?
Chew: Yes
DPP: I put it to you that, once again,
you are trying to give a different meaning to your own words now that
are very clear, because when you say “channelling” here. It’s clear that
what you mean is that the money was just being passed through Firna
under the guise of the bonds.
Chew: Your Honour, I don’t know what
the prosecutor is coming at, but I guess the prosecutor is saying that
the word “channelling” is a dirty word, that the moment someone uses the
word “channelling”, it means there’s a sham, or the word “conduit”.
I’ve said in my EIC that these words are even used in the financial
markets, on financial market printouts, publications, conduits,
channelling they’re being used. Those terms are being used in the
markets. When I use these words “channelling”, it has no connotation of
shams or scams or dishonestly, your Honour. It is a common term. I’ve no
qualms about using the word “channelling” or “conduits” and to me, yes,
even if money passes through Firna, to UA, to JHM, and even if I use
the word “channel”, it doesn’t anything, your Honour, because, as I’ve
said, this is just a structure to achieve an ends which is an investment
to the album, and that channelling, or conduit was done to achieve
certain objectives, which is to solve certain constraints that are in
the way of achieving the investment.
DPP: Mr Chew, from what you’ve just
said I think it is very clear, the Firna bonds were never an investment
in Firna itself. Correct?
Chew: No, your Honour.
<… Questions and answers…>
DPP: Basically, you didn’t want to mix
up the Crossover money with Wahju’s own money which was burdened with
his financial situation. Correct?
Chew: Yes, because that was part of the
deal. There’s a certain portion of his money that is supposed to go
over Crossover and become the Crossover money.
<… Questions and answers…>
DPP: Basically, the intention was that
the money drawn down under the Firna bonds was supposed to go directly
from the church to the Crossover fund to be used, but, unfortunately, it
got stuck with Wahju. Correct?
Chew: No, the money drawn under Firna
bonds wasn’t supposed to go directly from the church to Crossover. I
think you made a mistake there. It doesn’t go directly from the church.
DPP: No, I said directly from the church to the Crossover fund it is there, actually.
Chew: It goes from the church to Firna, then Firna to UA to the Crossover fund.
<… Questions and answers…>
DPP: But anyone else reading the Firna
Bond Subscription Agreement, but without the additional knowledge that
the four of you, and John Lam also knew, the five of you had, would have
thought that any CHC funds used to invest in the Firna bonds were
actually going to be applied as Firna’s working capital, because that’s
what it says in the BSA. Correct?
Chew: Beside the five of us, Foong Daw Ching would have known as well, and Christina Ng knew as well.
<… Questions and answers…>
The repayment of the Firna Bond
Chew said that the first line of repayment comes from Firna, because it’s Firna that owes the legal obligation.
DPP: Sorry, Mr Chew. Is it the first line or is it the last line of repayment?
Chew: Legally, it’s the first line,
your Honour. When I say it’s first line, I’ll talking about the legal
aspect, that, even if the album fails, Firna has to repay the church,
because you can’t erase the debt.
DPP: You see, you have mentioned on a
few occasions already that there were many ways in which the Firna bonds
could be repaid. Can you tell us in what order were you relying on
these possible options for the Firna bonds to be repaid?
<… Questions and answers…>
DPP: To be clear, from your point of
view, the substance of it was the first line of repayment is album
profits; the second line of repayment is the Crossover team finding
funds to repay, if the album flops through no fault of Wahju’s and then
the last line would be turning to Firna and Wahju. Correct?
Chew: Yes, and I would say the second
line of repayment has the word “concurrently” with the third line, which
is Wahju himself, because the second line, we are not sure how strong
we are anyway, whether we’ll be able to get the funds, so we have to
work simultaneously with Wahju to get the funds if the album flops.
<… Questions and answers…>
DPP: So, really, there were two layers
of borrowing going on. There is Firna borrowing from the church in the
form of the CHC Firna bond, or Firna borrowing from Xtron in the form of
Xtron Firna bonds. Then, below that, there is this further borrowing of
Wahju borrowing from the Crossover fund.
Chew: Yes.
DPP: This second layer of borrowing,
the internal accounting, as you refer to it, is only known to yourself,
Serina, Ye Peng, Kong Hee and Wahju himself. Correct?
Chew: Yes
DPP: Did John Lam know all about it?
Chew: I didn’t think so
DPP: Did Foong Daw Ching and Christina Ng know about it?
Chew: No
DPP: Even if we take your evidence at
its highest, what they knew was that the Firna bonds were meant to for
Wahju to use the money to finance Sun Ho’s music career. They didn’t
know about all these things that happened along the way. Correct?
Chew: Yes
<questions and answers>
DPP: It had to be done that way,
because you couldn’t simply transfer out money from the Building Fund
and put it into, say, a bank account set up by the Crossover item.
Correct? That wouldn’t be a proper use of the Building Fund.
Chew: I disagree, your Honour. I think
I’ve said several times in my EIC, even if the Building Fund had gone
directly to JHM to invest into the album, that would be a proper use of
the Building Fund because it is an investment. How we structured it was
affected by, firstly, Roland Poon, and then that statement by Kong Hee
that no church funds had been used, and then that decision by him not
for the church to fund it directly. Not because he thought it was wrong,
or, rather, I thought that he didn’t think it was wrong, but because he
wanted to avoid public scrutiny, backlash, internet criticism,
derailing the project. So, in the end, your Honour, we ended up doing
these bonds, Xtron bonds, Firna bonds, advance rental because a choice
was made, a decision was made to avoid scrutiny and unnecessary,
baseless accusations. And that’s why I came in to help put in the
structure, your Honour. But now the prosecution’s case is the other way
around, as in, we knew it’s a sham bond and therefore we came up with
the structure. But that’s not how it happened. If we trace back through
history, your Honour, from 2002 to 2003, where Roland Poon Hit the
press, that set a course for me to come in and structure it in such a
way that we don’t get another backlash, another baseless accusation
thrown at us through the press. We didn’t come up with the bonds
because we think it’s a sham investment. We came up with the bonds
because we needed to avoid this project getting derailed. This is a
total opposite scenario, your Honour, from what the prosecutor is
saying.
So my answer is: if Kong Hee wasn’t
afraid of public backlash, I would have said, “Investment straight into
JHM”. Building Fund goes to JHM, and just make sure that we track the
funds properly and Justin doesn’t mismanage it. We launch the album, the
money comes back, it goes straight back from JHM, back to the Building
Fund, to the church, and that would have been a valid investment.
<questions and answers>
How Firna interest payments were paid for?
DPP: So, if Firna couldn’t pay the bond
interest, because there were no album profit, you are not going to make
Wahju pay, you’re not going to make Firna pay. Neither is the Crossover
Project going to find money from elsewhere to give to Wahju so that the
church gets its interest returns. Instead, the church pays itself
interest. Correct?
Chew: Yes.
DPP: Mr Chew, you agree that the plan
was to use church funds to enable Firna to make its interest payments to
the church. Correct?
Chew: Yes
DPP: I put it to you that the fact that
you, Serina and Ye Peng were planning to use church funds to make
interest payments that Firna was supposed to be making is evidence that
the bonds were actually a sham, because Firna was not under a genuine
legal obligation to pay the interest.
Chew: I disagree, your Honour, and I
already said that, if we get Firna to draw more bonds to pay interest,
it has even more legal obligations in terms of dollar amount to repay
back. And also this interest payment thing, in the email that the
prosecutor showed me, was always a plan for the future, and, number two,
it was needed because of the delay in the album launch. Again, I would
emphasize again, your Honour, many of this solutions or structure came
out because of unanticipated problem that arose. It’s not the other way
around. It’s not that we structured it because we know it’s a sham.
It’s problems arose and we had to deal with those problems. That’s
all, your Honour.
DPP: These problems arose because when
you entered into these sham transactions, you really didn’t care about
fulfilling the legal obligations embodied in the transactions themselves
because you were, instead, looking at the Crossover profits, whenever
they came in, to put back all the money you had taken. Correct?
Chew: I’m sorry, you’re saying that I’m
looking at the Crossover profits to repay the bonds, right? Isn’t that
what it’s all about? This is what an investment is all about. Yes, I
was looking for the Crossover profits to come in eventually to repay the
bonds, and that’s why I consider it an investment, your Honour.
DPP: But, as you said in the previous
tranche, if there are delays in the album profits, then what you were
planning to do was to keep coming up with interim solutions until the
album profits really came through. Correct?
Chew: Yes, your Honour. I think that’s
the right thing to do right? If challenges come up, we have to come up
with solutions to overcome these challenges until the end objective
comes to pass. I don’t see what is so sham or why does it make it a
sham, your Honour.
<…..>
Chew: …I’d just like to add on about
the previous put. If delaying the repayment and using more bonds to pay
the interest makes it a sham, then I’ll say that all the US Treasury
bonds are sham as well. That’s what the US Treasury has been doing for
decades, your Honour. The debt is ballooning up every single year.
It’s $18 trillion right now. Is the US Treasury bond a sham as well?
DPP: If you were to buy a US Treasury bond, you are basically banking on the security of the US economy itself. Correct?
Chew: No.
DPP: When you buy a US Treasury bond,
you do so, as you’ve said, knowing that the US continues to issue debt
regularly, basically, as you put it and the debt keeps ballooning, and
it’s a risk you go into with your eyes open, because, presumably, you
understand the US Treasury market. Correct?
Chew: I understand the risk on US
Treasury bonds. I also understand the risk on the Crossover. They’re
not much different, your Honour. Both have risk. Both will come across
challenges.
DPP: When you buy a US Treasury bond,
you don’t intend that if the US cannot repay you, you will give the US
the money to repay yourself. Correct?
Chew: Oh, your Honour, that’s what’s
happening right now. The China Central Bank is the largest holder of US
Treasury bonds and when the bonds that it’s holding comes to mature,
the US Treasury is going to issue new bonds and it’s the same China
Central Bank that’s going to buy the new bonds and the proceeds on the
new bonds will be used to pay off the old bonds, It’s happening.
DPP: Witness, let’s move on to E-154.
<questions and answers related to this email>
lunch break
