Court also told that reason for hurried redemption of bonds was for Suntec purchase, not because of anonymous threat
INDONESIAN businessman and City Harvest Church (CHC) member Wahju Hanafi says he never relied on the "secret letter" when he agreed to the $11 million bond issue his company, The First National Glassware (Firna), made to the church in 2008.
In fact, Mr Hanafi told the court yesterday, he had not even seen the said letter at the relevant time and would never "take advantage of the church" that way.
The prosecution had produced the letter last week, to try to prove its case that the Firna bonds were a sham.
Under the terms of the bond agreement, Firna was to issue up to $24.5 million in bonds to CHC; and the church would be entitled to convert the bonds to shares in Firna, amounting to 40 per cent of Firna's issued capital.
The "secret letter" (signed by CHC board member John Lam on behalf of the church's management board) was never made public until the prosecution produced it as evidence. It states that, if CHC were to convert the bonds to Firna shares, the church would sell all the shares back to Firna for just $1 - essentially nullifying the convertibility clause.
Senior Counsel Kenneth Tan, who represents Lam, revisited the document yesterday when the defence finally got to cross-examine Mr Hanafi.
He referred to a statement made by Mr Hanafi and his father-in-law Tjandra Kusuma (the other shareholder of Firna) to Firna's shareholders, stating that they waive their rights as shareholders to have the right of first refusal if the bond was converted to Firna shares. The prosecution had shown this document as being attached to the secret letter in its exhibit.
But, as Mr Tan pointed out yesterday: "When you and your father-in-law signed this document (the statement to shareholders), on or around Oct 7, 2008, this document was not attached to the first page (the secret letter), was it?"
"No," Mr Hanafi said.
"You only received this (secret letter) by e-mail on June 4, 2009?" Mr Tan asked.
"Correct."
"It didn't matter to you at all when you signed the second page (statement) of the Firna bond that this letter was not with you?"
"No."
"Because you were not going to rely on this letter if conversion was effected by the church?"
"Yes."
Mr Hanafi added: "I just want my father-in-law (to be) willing to sign the document, and I'm happy enough, and we know in our hearts that we're not going to take advantage of the church . . . at least, I would give them (CHC) the same value of money back."
He also testified that Lam was not involved in either the budgeting or fund-raising for the Crossover Project (CHC's way of evangelising through pop music) as far as he knew, nor was he involved in the bond issue.
Senior Counsel N Sreenivasan, who represents CHC deputy senior pastor Tan Ye Peng, touched on the issue of why the church was in such a desperate hurry to unravel another bond issue: $11.455 million in bonds issued by Firna to Xtron Productions, a music production house that used to manage Sun Ho's career, in December 2009.
The prosecution produced an e-mail on Thursday, which Mr Hanafi had sent to his wife on March 26, 2010, saying: "CHC has some serious issue from an anonymous px (person) who wrote in and threatened to open up all our connection with Xtron and Sun (Ho's music) project, etc, so now they want to find quick cash to pay us so I can (redeem Firna's bonds issued to Xtron)."
It is the prosecution's case that this threat from the anonymous person prompted the sudden need to find cash to pay Mr Hanafi.
Yesterday, Mr Sreenivasan said his client, Tan YP, had told him that there was instead another reason why the church was in such a hurry to get the bonds redeemed ahead of time. "The reason they were doing that was that, in January 2010, the church had decided to buy an interest in Suntec City . . . Then I'm told - my instructions (from my client) again - that, to fund that acquisition, one of the things they needed to do was to get back the advance rental from Xtron . . . And for Xtron to pay back (the rental), Xtron had to get back money that it had lent to other people - and one of the bodies that Xtron had lent the money to was Firna (via the bond issue).
"So, I'm told, the reason why they were chasing for Firna to pay back Xtron is so that Firna can pay back Xtron, Xtron can pay back the advance rental and the advance rental can be used to buy Suntec," Mr Sreenivasan said.
Mr Hanafi said he was not aware of all of this.
It is the prosecution's case that some $12 million CHC paid out to Xtron as "advance rental" was a sham, as the money was instead used by Xtron to purchase the Firna bonds - and eventually round- tripped back to CHC.
The hearing resumes on Monday.
CHC pastor Kong Hee, deputy senior pastor Tan Ye Peng, former board member Chew Eng Han, former board member and former finance manager Serina Wee, board member John Lam and finance manager Sharon Tan are on trial for allegedly channelling the church's building funds into Kong's wife Sun Ho's music career, and then coming up with an elaborate round-tripping scheme to cover that up.
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