City Harvest leaders carefully planned cover-up: Prosecution (ST: 16 May 2013)

THEY had been entrusted with money donated by their members to build a new church, but City Harvest Church founder Kong Hee and his aides "dishonestly misappropriated" $24 million of this instead.

Not only that, they went on to cover this up by devising a series of transactions to the tune of $26.6 million, after the mega church's external auditors raised questions about the funds.

This was the picture painted by prosecutors on the first day of one of the most high-profile trials involving a registered charity since the National Kidney Foundation (NKF) saga in 2005.

NKF had sued its former chief executive and three others for $12 million which had been improperly paid out or used by him and the charity's former board.

More than 100 church members turned up to support their leadership yesterday; some had spent the night waiting outside the Subordinate Courts.

While most could not get into the packed courtroom, those who did heard Deputy Public Prosecutor Mavis Chionh charge that their leaders' deeds were "part of a deliberately planned, meticulously coordinated and carefully executed scheme" which stretched over years and involved moving millions of dollars.

As the six accused - Kong, Tan Ye Peng, Sharon Tan, Chew Eng Han, Serina Wee and John Lam Leng Hung - sat calmly in the dock, she spelled out their alleged transgressions:

First, they funnelled money - earmarked for the 33,000-strong church's new building - into buying sham investment bonds in church-linked companies Xtron Productions and PT The First National Glassware, so they could fund their co-founder Ho Yeow Sun's secular pop music career.

Then, they did what prosecutors called "round-tripping": by falsifying the church's accounts to make it seem like these bonds were "redeemed".

"These transactions were thus designed to throw the auditors off the scent of the bogus bonds," said DPP Chionh in the prosecution's opening statement.

But yesterday, defence counsel objected to parts of the opening statement.

Lawyer N. Sreenivasan, representing deputy senior pastor Tan Ye Peng, argued that there was "no wrongful gain and no wrongful loss" since the church received all its money back at the end, and fulfilled its wider purpose of using Ms Ho's music as a means of evangelism.

The lawyer argued that "theological legitimacy" was an issue in the trial, although this was rejected by Ms Chionh.

None of the transactions made was authorised, she argued, as the building fund was explicitly to be used "for the purchase of land, construction costs, rentals, furniture and fittings".

Yesterday, the prosecution presented its first witness, the church's former assistant accountant Lai Baoting. She told the court that although she was strictly a church employee, Wee gave her another e-mail account where she would sign off as an Xtron accounts officer whenever she was asked to handle Xtron's accounts.

She continues on the stand today and may be cross-examined by defence lawyers.

This first leg of the trial will last until May 23, with three witnesses to be called by the prosecution.

What happened
May 2002: The Crossover Project is launched, following a series of concerts with a gospel theme in Taiwan and Hong Kong.

It involves Ms Ho Yeow Sun recording music albums to influence people to attend church, and encouraging Christians in the pop industry to share testimonies.

January 2003: City Harvest churchgoer Roland Poon alleges misuse of church funds for Ms Ho's career. He later retracts the allegations and makes public apologies in major newspapers.

A senior partner of the church's auditors makes a public statement that no church funds were used in promoting Ms Ho's career.

August 2005: The church begins its second cycle of fund raising for its building fund, called the Arise and Build Campaign, with the aim of raising $160 million at first.

This target is later revised upward to $310 million around 2010.

August 2007 to March 2008: About $13 million is transferred in several tranches from the church's building fund to Xtron Productions in a bond purchase.

Xtron is a music production company which also managed Ms Ho. Its original directors include Chew Eng Han and John Lam Leng Hung, who are among the six on trial now, and churchgoer Wahju Hanafi. All three are no longer directors.

Xtron needed the funds to repay loans taken to fund the Crossover Project, and to cover the costs of Ms Ho's first English album.

August 2008: Ms Ho ends her contract with Xtron. Ultimate Assets, a firm fully owned by Mr Wahju, becomes her new manager.

October 2008 to July 2009: About $11 million is transferred in several tranches from the building fund to PT The First National Glassware (Firna), an Indonesian company whose director is Mr Wahju, as a bond purchase.

Most of that money is then transferred to Ultimate Assets, and is later used by the Crossover Project and to fund Mr Wahju's personal expenses.

October 2009: City Harvest transfers about $11 million to investment firm AMAC Capital Partners in two tranches, as investments in a "special opportunities fund". AMAC's sole director is Chew.

The money is in turn transferred to Ultimate Assets, then to Firna, and back to City Harvest.

During this period, the church also records in its books a set-off of $21.5 million in favour of Xtron, as a redemption of Xtron bonds.

It also signs an advance rental licence agreement with Xtron for the use of Singapore Expo Hall 8 for its services.

November to December 2009: City Harvest transfers $15 million to Xtron, of which $12 million is part of a payment for advance rental of the hall and the other $3 million is goods and services tax.

Xtron transfers about $11.4 million to Firna. That amount is in turn transferred to Ultimate Assets, then to AMAC, and finally back to City Harvest.

May 2010: Acting on a tip-off, the Commercial Affairs Department commences investigations and raids the offices of City Harvest and Xtron, among others.

June 2012: Five church leaders are arrested and charged with conspiracy to commit criminal breach of trust as an agent. Three are charged with conspiracy to falsify accounts.

July 2012: Serina Wee is the sixth person to be charged with alleged misuse of funds.