They trusted the church leaders, but were not told of Building Fund plans
TRUSTEES of City Harvest Church were kept in the dark about plans related to its Building Fund coffers but placed their trust in their church leaders, a district court heard yesterday.
The executive members of the church with voting powers, numbering about 1,000, were also in the dark about where money was coming and going.
City Harvest pastor Kong Hee and five others face varying counts of criminal breach of trust and falsifying accounts for allegedly misappropriating $24 million through sham investments in two church-linked companies, and using $26.6 million to cover it up.
Prosecution witness Tan Yew Meng, the church's longest-serving trustee since 1996, said he was assured that a bond investment in the music production firm Xtron was a sound move.
In an extraordinary general meeting in August 2008, the executive members were given "the understanding that the investment would give us good returns of 4 per cent of $720,000 a year over a period of 10 years".
"We are laypersons, but it makes sense to help them (Xtron) to get this loan," said Mr Tan, who is the director of Singapore Polytechnic's School of Communication, Arts and Social Sciences.
Though he signed documents for the bond agreement, Mr Tan said he was not privy to negotiations in drafting them but his queries were adequately answered.
He said the church's accounts were handled by fund manager AMAC Capital Partners, founded by former church treasurer Chew Eng Han, one of the accused.
Through its Building Fund, the church entered a bond subscription agreement with Xtron worth $13 million in July 2007. This was revised upwards to $18.2 million in August 2008 to enable Xtron to purchase Riverwalk, a property the church intended to use for worship, court documents show. It was valued at $17.55 million.
By this time, however, $13 million of the $18.2 million had already been drawn down.
The prosecution's case is that this was an elaborate ruse to funnel money from the Building Fund into furthering the music career of Kong's wife, Ms Ho Yeow Sun.
Deputy Public Prosecutor Tan Kiat Pheng questioned why, even with the $18.2 million in bonds, Xtron still took out a "huge loan" of $10.7 million to buy Riverwalk.
The trustee said it had never occurred to him to ask. But he kept "wholehearted" faith in the church's Crossover Project mission, a vehicle for Ms Ho.
When asked by defence counsel Paul Seah why the church was so secretive, even to members, he said: "If it is so obvious that we are doing this as a church, we might turn away a lot of potential seekers who do not want to be associated with the church until they become believers."
waltsim@sph.com.sg
*****************Background Story *****************
Transactions 'a bit unusual'
THE auditor who repeatedly sounded alarm bells about church monies going to music production firm Xtron yesterday testified for the first time.
Mr Sim Guan Seng, managing partner of Baker Tilly, took the stand for about an hour towards the end of yesterday's hearing.
"Some of the transactions were a bit unusual, so I did ask some questions about the business rationale behind the bonds and the agreement," Mr Sim said, referring to an agreement with Xtron in 2007 to purchase $13 million worth of bonds.
In a 2009 e-mail that has been cited in court, deputy senior pastor Tan Ye Peng told former finance manager Serina Wee to arrange for an "off-the-record meeting" with Baker Tilly's then managing partner Foong Daw Ching, who was known familiarly as "Bro Foong" to pastor Kong Hee, Tan, Wee and three others - on trial for varying counts of criminal breach of trust and falsifying accounts.
In the e-mail, Tan wrote: "Explain to Foong that it's precisely because we cannot show a link to City Harvest Church, ask him to advise you how to speak to Sim."
Mr Sim was engagement partner - the lead auditor responsible for signing off on audits - for the church from July 1, 2007 to Oct 31, 2009, and for Xtron from Jan 1, 2008 to Oct 31, 2008. He continued in both roles for the next financial year, but the audits were aborted due to the seizure of records in a Commercial Affairs Department probe.
Mr Sim said of the role of an auditor: "Besides looking at documents, we actually got to exercise judgment where a transaction appears to not make sense commercially."
He added: "Of course we will ask questions as to why this transaction was entered into... (The explanation given) may have some implication in terms of whether the transaction has got merit or there could be something more to it than what it seems on the surface."
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