Kong Hee knew reality of bonds: prosecution (BT: 27th Aug 2014)

But he says he was not aware of Xtron cashflow projection

EVEN before City Harvest Church (CHC) entered into the S$13 million bond subscription agreement with events management firm Xtron Productions, the church founder and four of his deputies knew that there was no reasonable prospect of return, charged the prosecution.

On Tuesday, the court was shown an e-mail dated July 3, 2007 (sent about a month before the first drawdown of the S$13 million Xtron bonds), which was correspondence between three of the six accused: Chew Eng Han, Tan Ye Peng and Serina Wee.

The trio had discussed in a Xtron cashflow projection how the sale of 200,000 copies of singer Sun Ho's United States albums would bring in revenue of S$2.17 million. In the e-mail, Wee told Chew and Tan that this was "hardly enough to pay off the S$13 million" by 2009 and that it would take Xtron 10 years to redeem all the bonds from the church.

Church founder Kong Hee, 50, told the court that Wee, who came up with the projection, was being "ultra-conservative". He testified that he was not aware of the July projection and that he was not involved in that discussion.

Referring to a scenario planning dated May 9, 2007, Kong said it was the last scenario planning that his team shared with him before the Xtron bond subscription agreement was entered into in late July 2007.

The May projection, based on a 1.5 million album sale, showed that by about 2008 or 2009, Xtron would have a surplus of S$1.2 million after paying off a loan of about S$10 million.

Prosecutor Christopher Ong then grilled Kong on why Wee would suddenly do a projection that was 1.3 million copies less than the May 2007 estimates.

Kong said: "I don't know. She was probably being conservative, as advised by (American music producer) Justin Herz in November 2006, perhaps."

Referring to the statements of Chew, Tan and Wee to the authorities, Mr Ong noted that the trio stated that Kong was kept in the loop about their July 2007 projections.

But Kong said he could not recall being told of this by the three before the church entered into the first bond subscription agreement.

Citing two other e-mails sent by Wee in August and September 2007, Mr Ong pointed out that it was "odd" for Wee to have "such wildly fluctuating cashflows". He added that Wee said in her September e-mail that she was to present to Kong the July 2007 projections.

To this, Kong said: "Your Honour, this is a question that only Serina could answer."

The court also heard that the auditor of both Xtron and the church, Sim Guan Seng, was "never informed" of the July 2007 projection.

The founder agreed, but stressed that he was not involved in that.

Earlier in the day, Mr Ong also accused Kong of lying to the church's executive members in the latter's description of how AMAC Capital, owned by Chew, was chosen to be the church's fund manager.

Kong and five deputies are accused of misusing millions of the church's building fund monies to boost Ms Ho's career through "sham bond investments" in Xtron and glassware manufacturer Firna. Four of the six are also fighting allegations of round-tripping that the prosecution said was used to cover up the misuse.