Prosecution: Interest rates on investment manipulated (BT: 17 May 2013)

It also says email shows external auditor concerned over bond purchases

[SINGAPORE] Casting doubt on the various "investments" made by City Harvest Church (CHC), the prosecution sought yesterday to show that certain members of the church manipulated interest rates purportedly earned off these investments.

The defence also had its turn, and attempted to prove that CHC's external auditor saw nothing disingenuous about the various bond purchases made by the church. The prosecution, however, subsequently produced a CHC internal e-mail message, which showed that the auditor was clearly concerned about the transactions.

CHC pastor Kong Hee, deputy senior pastor Tan Ye Peng, former board member Chew Eng Han, board member John Lam Leng Hung, finance manager Sharon Tan and former finance manager and board member Serina Wee are accused of conspiring to commit criminal breach of trust, while Chew, Wee and the two Tans are also charged with conspiring to falsify accounts.

Deputy public prosecutor Tan Kiat Pheng, questioning Lai Baoting on her second day on the stand, asked the former CHC assistant accountant how the interest was calculated on two tranches of investment made in a Special Operations Fund (SOF) run by Chew.

CHC had invested $11.4 million - in two tranches of $5.8 million and $5.6 million - in the SOF, managed by Chew's company, AMAC Capital Partners (Pte) Ltd, in 2009. Ms Lai was employed by CHC between 2006 and 2010.

Ms Lai, who recorded all these transactions in the church's general ledger, said that the interest of $76,625 supposedly earned on this investment was provided to her by Sharon Tan. Ms Lai added that she did not know how Tan had obtained the figure.

DPP Tan produced documents from AMAC, which were invitations to CHC to invest in the SOF. Among other details on these documents (referred to as Tranche Paper 10 and 11) was a sentence saying that the interest payable on these two tranches of investment would be 2 per cent, per tranche, for the relevant period - except that the "2 per cent per annum" had been crossed out and replaced with "5.05 per cent per annum".

Ms Lai said that the interest rate had to be changed to 5.05 per cent "because if I calculated for the period of the two tranches and at the interest rate of 2 per cent, I will not get $76,625, so I tried to work backwards to get the exact interest rate".

DPP Tan asked: "You are saying that the 2 per cent interest rate was incorrect because of the $76,625; but why not the other way round, meaning, the interest rate was correct, but the figure is wrong (and) you just work out what is the total interest amount? Why did you have to use $76,625 as the correct figure and work out what's the interest rate?"

Ms Lai replied: "Because I was told (by Tan) that the interest was to be $76,625."

DPP Tan produced e-mail between Ms Lai and Chew, which corroborated her testimony. "For the 11.4mil special opportunity fund, I've checked with Sharon that the interest would be received on 25 Nov 09 at $76,625. Out of the 11.4mil, 5.8mil was remitted out on 2 Oct 09 and 5.6mil on the 15 Oct 09. I tried to work out the interest rate and (it) seems to be around 5.05% pa. As such, can you help me to redo the Tranch(e) Paper 10 and 11?" Ms Lai's e-mail message to Chew said.

DPP Tan showed the court a subsequent e-mail message sent by Tan to Chew, in respect of Tranche 10 and 11, which said: "This is the cycle of days we need to work through Firna. We are working backwards to also ensure that nothing is left in Firna accounts."

Ms Lai said that she did not understand what Tan meant by her e-mail.

Firna refers to an Indonesian company called The First National Glassware, majority owned by Indonesian businessman Wahju Hanafi who has multiple links to CHC, that the church had purportedly invested some $11 million, via a bond purchase.

Ms Lai was then cross-examined by defence counsel. Focusing on a meeting held in April 2009, between various CHC board members and CHC's external auditor, Sim Guan Seng of Baker Tilly, they sought to overturn suggestions made by the prosecution on Wednesday that Mr Sim had concerns about the various bond investments made by CHC.

On top of the $11 million invested in Firna, CHC also supposedly bought $13 million worth of bonds in Xtron Productions Pte Ltd, owned by Chew and his wife, and Lam.

Questioned by Senior Counsel Kenneth Tan who represents Lam, Ms Lai testified that she believed that Mr Sim, at this meeting, "was not concerned as to the genuineness of the investment in the Xtron bond" but only in how the investment should be valued and disclosed in CHC's accounts as he considered Xtron a related party.

She also said that she believed Mr Sim was "not concerned about the genuineness of the church's investment in the Firna bonds" but only in how he should value the investment to protect the church.

Edwin Tong, representing CHC pastor Kong Hee, had Ms Lai testify that Mr Sim did not raise any concerns over "whether or not it would be proper to use the funds for the Building Fund to acquire the bonds". She also said that she believed Mr Sim would not have signed off on the accounts if he had concerns over the use of the funds or the authenticity of the bond investments.

DPP Tan, however, then produced an e-mail message sent by Sharon Tan to deputy senior pastor Tan Ye Peng and Lam, and copied to Ms Lai. The e-mail, sent the night of the audit meeting with Mr Sim, said: "Just want to let you know that Mr Sim 'mellowed down' after you left . . . But (he) made some more remarks which I think we should think about."

It went on to say:

"1) He is not convinced about the reasons we gave him about XPL (Xtron). 2) He still feels that it is obviously related. 3) He passed a remark saying that no matter how we put the story, it does not eliminate the obvious. So he chose to stop asking just now cos he knows that we will give some more stories which will trigger off more questions from him. 4) He still does not agree with the valuation done ... But for this time, he will just pass it first. 5) He hopes to see this XPL issue being solved in this FY (financial year). As of (n)ow, we need to think through."

The hearing continues on Monday.