On the second day in court of Chew Eng Han (CEH) taking the stand, he brought up many instances, backed by specific evidence, whereby Kong Hee and Tan Ye Peng held discretion and determined how much, when and where money was going to be spent.
Previously when the prosecutor cross-examined Kong Hee on 27 August 2014, they put that it was Kong Hee, Tan Ye Peng, Serena Wee and Chew Eng Han who controlled the funds under the first Xtron BSA as they were all copied in two emails: E-145 and E-154. However, the emails were sent out only after the Xtron bonds were spent.
Below is the reccount of CEH as he took the stand on 27 January 2015.
XPL at present owes AMAC $13 million for the crossover project. The breakdown is the following
English album – $7.394 million. Additional promotional expenses in Hong Kong
Airport panels in China, $361,450
Management fee for Ling’s Linkage, $530,660
Loan to Creative Productions, $471,504;USA expenses prior to Wyclef for the singles since the year 2003, amounting to US$2.7 million, orS$4.05 million.
I’m told of the breakdown after the spending is done. I am now in this email only because of additional Firna bonds needed and the Riverwalk deal. In the original allocation in E-145, there was no allocation of the funds to be used to pay for the singles which had already happened and been launched. It’s only now, in 2008, that we see that $4.05 million has been allocated to pay for the US singles. So I’m copied in this email because, on the second page of the email, you will see at the top that point number 2 is that:
The other email is E-145, which was the other email that was referred to by the prosecution when they put it to Kong Hee that there were four persons who controlled the spending. I do not see how my name can be pulled in when my name is not in this email. And, yes, this breakdown was on 27 August 2007, right at the time when Xtron bonds were about to be issued, or already drawn down.
So Serina Wee writes to Tan Ye Peng, 27 August 2007:
Hi TYP,I just wanted to let you know and remind you that as per past discussions with Pst Kong & yourself, the 13M inflow from Bonds issue is used to cover the following.
Then they make a decision that no part of this $13 million will go to repay some people ….. Then they talk about the budgeted sales, 200,000 units. On the second paragraph, they talk about alternative sources of funding:
On the second line, she says, of that second paragraph:
This is what I was referring to then. I was called to ask some of my BBG members, around 2007/2008, to either to lend money or to give their Building Fund to Xtron in order to fund the album, and Cheong Hui was one of my BBG members. One of the witnesses that I’m calling is Sun Yuen Peng. Sun Yuen Peng is the wife of Cheong Hui. Really, these are people that are generous and they believe in the vision. They knew about Xtron and the Crossover, and they were willing to part with the money and risk it. And like I said, my question is: Why is the man with the vision not willing to part with his own money?
Now in 2008, we have additional items such as airport panels in China, $361,450, that was not in the original budget in E-145. Your Honour, this is where the discretion lies. If Kong Hee or Tan Ye Peng chooses to spend less on the album and more on certain other items, like airport panels in China, which I believe is for advertisements of Sun, that is where the discretion is, that is where the spending is, and that is where the potential is to create loss or profits.
| Original Budget (2007) | Actual Spending (2008) | |
| Link Linkage Mgmt Fees | $479,565 | $530,660 |
| Creative Productions | $400,000 | $471,504 |
| Singles launched since 2003 | Not in Budget | $4.05 million |
…….. the control of spending is in the hands of Kong Hee and Tan Ye Peng, and I do not see how the prosecutor can bring my name in here just through these two emails.
The next exhibit is E-101. E-101 was written on 20 July 2008, and this is the time just before we decided for Firna to issue bonds to the church. This is the second part of the Crossover that requires additional funds. There they lay down again where the 13 million bonds issued by Xtron has gone to. It look, again, like the figures keep changing again, as compared to E-145 and E-154, but I won’t go into details.
At the last paragraph, just above the table, it says:
So here again, the budget, the financing itself, is being discussed between Serina Wee and Tan Ye Peng and the idea of using advance rental to finance the album.
Serina Wee wrote to Tan Ye Peng:
“Pst,We TTed the following amounts to Justin but I do not have any budget details as to what they are for. I was only told in an email by Pst Kong each time how much Justin needs, that’s all. Do you have the budget? If don’t have, how do I present in the board resolution for Wahju and kar weng to sign? Please advise.”
In other words, there were actually payments being made from Xtron to Justin in chunks, four chunks, where there was no details given to Serina as to how this amounts of money were going to be spent. And this happened over six months, from February 2006 till August 2006. And Serina Wee has waited till October 2006, eight months after the first chunk has been sent, and she’s asking Tan Ye Peng, “What was the money spent on?”
If we add up the four amounts in the table, the total is $1.839 million, sent from Xtron to the US, to Justin Herz on Kong Hee’s instructions, but without any details, any breakdown, as to how it was spent. And I believe that I cross-examined Kong Hee and asked him that, in the end, was there a breakdown given and he said “no”. Full discretion has been given to Kong Hee to send monies, to ask for monies from Xtron and to spend it according to what he thinks is fit.
[Mrs Light remarks:
On 30 Jan 2015 cross-examination; Chew cross-examined by Mr Tong. Mr Tong said that in the re-examination of Kong Hee, he did show the evidence to Kong Hee that these same transactions were verified by the audtiors in the work papers.
On 11 September 2014 Kong Hee re-examination by Mr Tong. The judge clarified with Kong Hee whether there were approvals or resolutions passed. Kong Hee replied that he remember there was a Xtron board meeting on 7 October and all these would be brought up. The judge replied that there’s no reference made to any approval for these payment.]
So here you have a discretionary item, spending by Xtron. If we go to the minutes of 14 January 2006, item number 3 says that:
So there is a discretion for paying payments to Sun Ho, either for birthday or for performance bonus for good performance for the singles. And this email is being sent, actually, one year after the spending 24 January 2007. Really, it shows that the decisions are being made by Tan Ye Peng or Kong Hee to allocate funds that Xtron has. The discretion is in their hands, and the minutes are being prepared even one year after the actual date of the minutes.
[Mrs Light comment: On 30 Jan 2015 cross-examination by Mr Tong. He produced a new court document, minutes of board meeting of Xtron production held on 7 October 2006 and he claimed that these payments would have been audited.]
“Dear Kong,The execution copy of the agreement has gone toWyclef for signature. We will need to fund the initial payment of $625k shortly.”
So I believe this is the first initial payment to Wyclef in the new relationship. Then Tan Ye Peng replies:
And that’s discretion. How much is Wyclef worth? Is he asking for too much? If he asks for too high a fee, is it going to jeopardise the profitability of the whole project? The discretion lies in Kong Hee and Tan Ye Peng. In the end, whether the album makes it or not depends on how the big number is being allocated.
The next email exhibit is E-192.
Now we are into the year of 2007, 2 February 2007. Tan Ye Peng write to Justin Herz:
So, again, the detailed spending items are being handled by Tan Ye Peng or Kong Hee. In this case, it’s Tan Ye Peng.
The next email exhibit is E-193.
At E-193, if we look at page 2, on the last email, basically, Justin Herz is discussing with Kong Hee various budget options on 20 February 2007.
Dear Kong, I’ve been going back and forth with the production company for the last two days to explore the various budget options.
Then on the third paragraph:
Right at the bottom, he lists out several options and scenarios. There are three scenarios for Kong Hee to choose. Either you have:
1 pre-light 2 shoot days 2 videos $844,0001 pre-light 2 shoot days 1 video (ChinaWine) $671,000.
So you have a choice to go for top of the line, $933,000, or the cheapest, $671,000. At the top of page 2, Kong Hee chooses the expensive option:
Again, your Honour, discretion is in the hands of Kong Hee. He decides how much is it worth to spend on all this. On the first page, the second email from the bottom,
Kong Hee wrote,
Because Kong Hee and Tan Ye Peng are controlling the purse strings of Xtron. Above this,
Dear Kong, We will need to fund 50% of the production budget –approximately $500k within the next few days.
The timing of the funding is also known to TYP and Kong Hee and they are the ones that decide when to drawdown from Xtron. In the third paragraph there, it says:
Tan Ye Peng replies to Justin:
Tan Ye Peng has authority to use the funds from Xtron, and discretion as well.
If you go down a few more lines, again there is
, and if we go down, further down,
If we add up these three items, the total producer fees that was supposed to be paid to Jean Wyclef would be US$1.5 million, and that is a big discretionary item that will affect the profitability of the project. And discretion was in Tan Ye Peng and I’m sure in Kong Hee’s hands as well. If you look at the marketing fees,
May 2007, $100,000
July 2007, $400,000
August 2007, $400,000
September 2007, $550,000
October 2007, $250,000
and November 2007, $200,000.
If we add up the total marketing, it would be US$1.9 million. Again, a big discretionary item that is going to affect the potential of the album to make profits.
The next exhibit is E-232. We are moving on, actually, in chronological order. Now is 14 April 2007. On the first page, Justin Herz at the bottom writes to Kong Hee:
Kong Hee replies:
“No problem. If it is already budgeted, we will send you the money on Monday.”
Then serina Wee at the top says:
So money is spent and the control is in the hands of Kong Hee in this case.
So in this particular scenario, it seems like the album may not be profitable and there may be a slight loss. But I’m not in this email. It goes on, the next paragraph:
As for the Hong Kong loan Eng Han says the max we can borrow is $9M. Currently we need $13M in order to cover all the expenses as well as return the loans to Suhardiman & Siow Ngea by Dec 08 and still end up with a deficit of $335K.
So here, actually, they are planning for the usage of funds that is available to Xtron, whether it is from Citic Ka Wah or what, whatever are the source. And the part of the loans, or the funds, that is available to Xtron is going to be used to return Suhardiman and Siow Ngea. And I do not know what those loans were previously spent on, whether it went into the album or into the US singles. But, basically, what I’m saying is this, that the way the funds are being allocated and spent, again, will determine the chances of making money or losing money.
And the proposed solution, below, in item 2 it says:
So Tan Ye Peng and Serina Wee are here discussing and exercising discretion on the use of Xtron funds as to whether to use $600,000 to pay to Dr Kong, and I don’t know if this actually happened, but, if it did, then, of course, this will affect the profitability of Xtron. Because the understanding is that Xtron’s monies are being raised to invest into the album, to invest into a project that is supposed to generate revenue. If money is being diverted elsewhere, for non-revenue-generating projects, then, of course, it’s going to affect the chances of making money.
If we go down several paragraphs, he says:
And that is US$200,000 to do a promotion for the “China wine” music video. Up there, Serina Wee says:
Again, discretion in the hands of Kong Hee to decide whether to spend an additional US$200,000 on the promotion for the “China Wine” video.
The next exhibit is E-145, which I have brought up previously. Here, again, is another example, basically, that Kong Hee and Tan Ye Peng will decide on the usage of the bond proceeds.
The next exhibit is E-227. This is the year 2007
E-227, on the first page, Tan Ye Peng writes to Justin Herz, on the second paragraph.
He says:
Then the budget is being laid down below. This is quite similar to the previous ones that we have seen, but, basically, now if we add up the producer fees in October 2006 and February 2007, we have, again, producer fees for Wyclef for US$1.5 million, but now we have an additional budget for in December 2006, for guest producers and singers, for $800,000. Plus, in February and March 2007, again, guest producers and singers, another $400,000 and $300,000, and that makes a total of US$1.5 million to be allocated to pay guest producers and singers other than Wyclef. A discretionary item, again. And the total marketing budget, if we add up all those marketing items, works out to US$2 million. Your Honour, I’d just like to highlight that in all these emails that have been brought up, I’ve not been put into the loop. By now, the bonds have already started.
The next exhibit is E-228. We are now at 8 October 2007. Xtron bonds has already been issued the first tranche, at least. Justin Herz is talking to Tan Ye Peng and telling him in the first paragraph:
$200k in early January and then approximately $400k in April for promotion.”
In the second paragraph, he says he needs $200k in early January of the next year and $400k in April for promotion. Then in April he says we will need to decide whether to shoot an additional music video for the record release. This is discretionary again.
He goes on to say there are some unknowns which are “any costs associated with touring with Wyclef”. Here we see Tan Ye Peng and Serina Wee discussing how the budget, which basically now comes from Xtron bonds, is going to be spent and allocated in detail.
The next exhibit is E-234. Now we are on 6 November 2007 and an advance is given to Justin Herz of $300,000, as instructed by Serina Wee to her staff, Angie Koh. The next exhibit is E-235. Here, we have Tan Ye Peng telling Justin Herz that:
In other words, there’s missing backup invoices. So discretion has been given to Tan Ye Peng to send monies to Justin Herz ahead, without documentation, without backup invoices. There’s discretion in his hands and in Kong Hee’s hands as well.
E-236 is the next exhibit, and by now we are into the year of January 2008, 4 January 2008. By now, several tranches of Xtron bonds have been drawn down and the same people are controlling the spending of the bond proceeds. Serina Wee writes to Justin Herz, copied to Kong Hee and Tan Ye Peng:
…
As discussed it would be very helpful if you could have the team wire $75k to cover any near term expenses as we finalise the budget and cash flow projections.
I will take the incremental money for the Olympics work out of that amount and cover some additional invoices.”
And Kong Hee exercises discretion and tells Ye Peng at the top:
Can we wire the money to Justin ASAP?”
The next exhibit is E-238, and now we are moving to month of May 2008.
Here, we have Serina Wee telling Justin Herz:
Below is the transfer receipt for the USD 150,000 we have just wired to you.
Again, payments are made out to Justin Herz, and the three persons that invariably know about this will be Serina Wee, Tan Ye Peng and Kong Hee.
CHEW’S ROLE IN THE BONDS
The next exhibit is E-202. Serina Wee wrote to Eng Han and Tan Ye Peng on 14 April 2008.
Xtron has completed the drawdown of the $13M initial bonds in March 2008.”
I get a loop-in because the moneys have been drawn.There are no more bonds to draw. So now I’m being called in to put in my thinking cap and to help structure a new set of bonds. She goes on to say:
And this is typical of the information and instructions given to me. How much more bonds do they need? 7 million.
Now she asks me:
And that is my role: to get the new BSA done up. Then she gives me a broad breakdown of the quantum of the bond drawdown by months, where $2 million will be drawn down April 2008; $2 million on June 2008; $1 million July 2008; $1 million October 2008; and $1 million December 2008, somehow, the figures don’t fit in with the dates. But, basically,a total of $7 million to be drawn down.
And this really captures well when am I looped in? When they need me to do a new bond agreement, or to structure a new way to finance the Crossover. In this case, we were still thinking about financing through the through Xtron, and we did a new BSA based on the requirements that was told to me by Serina Wee or Tan Ye Peng.
And these are only broad figures, $7 million, break down into five months. I have no details of what it’s going to be spent on. On the first page, the bottom email, Serina Wee tells me and clarifies:
So she gives me a revised instruction now. Then right at the top, she gives me a new breakdown, a drawdown schedule, whereby in October 2008, we need $2 million; March 2009, $1 million; December 2009, $1 million. Below that breakdown, she asks me:
Again, this is in relation to how much can City Harvest spare for the Crossover, because I am working on the property project as well and I have certain budgets that’s required for the property. And this is another angle where I’m being looped in, because they need to know how much funds from City Harvest can be available for the Crossover.
The next exhibit is E-210. Serina Wee wrote to tell me just before the Firna bonds were going to be drawn down for the first time on 23 August 2008:
Once the BSA is completed for Firna, we will need to draw down $10.8 million …”
Here, again, is an example of where they are coming to me because they know I maintain the portfolio of stocks and bonds, and that if there’s a need to, then I need to liquidate the stocks or the bonds, and that’s why she’s saying,
in other words, she would not need that much money.
What happened really was that, in the end, Kong Hee returned the royalties that was paid to him from APL. Eventually, the money went back to the church, but he was compensated because some money from the Firna bond proceeds were paid to MPA and then MPA paid him back. And that’s why Serina Wee says, “In essence he doesn’t lose the money”. And that is described in E-217.
Here she’s talking to Kong Hee, he will get his royalties in Dec. Discretion is in the hands of Kong Hee and Serina Wee as to how to use the Firna bond proceeds, and, furthermore, in this case to pay Kong Hee personally. And, of course, now money is going into an area that does not generate revenue.
Hi Dr Kong,
FYI. We will proceed to execute and draw downthe bonds as it is likely BNI will approve …”
This was right at the start of the Firna bonds, and before these Firna bonds were finally completed, interms of legal documentation, Kong Hee was chasing us,
And the moment it was drawn down, the second paragraph says:
So right from the start of Firna bonds, full discretion is in the hands of Kong Hee, and the first batch is going out, US$200K, and I believe Kong Hee testified that this amount was to pay this lawyer Gary Stiffelman for helping to introduce the new producer, Johnny Wright, instead of Jean Wyclef, and he testified that because Johnny Wright was now helping them to save money in terms of fees for the producers, because Wyclef was asking for huge fees, and now Johnny Wright is better value for money, and Kong Hee exercised discretion and said that, because of this lawyer’s introduction,
But this will be an expense, your Honour, and it’s not going to generate revenue at all. And discretion is in his hands; he decides what to spend on and how much to spend. And then on top, he asks:
He asks Serina Wee. So it’s obvious. Once the bonds are ready, Kong Hee and Tan Ye Peng takes over: how much to draw down, when to draw down, where is the money going to be sent to, and what is it going to be spent on?
The next exhibit is E-802. E-802, page 11. On item (D), this is how the $5 million for PT Firna is going to be used, basically, and one of the breakdown items is item (D) S$674,700. He’s telling Wahju:
So I’m copied in this email, and, as far as I understand, if Xtron bond proceeds are being sent to MPA, it is for the purpose of covering album-related expenses, miscellaneous album-related expenses. Never did I think or suspect that monies would go to Kong Hee personally.
Item 5: “S$2,200,000 to City Harvest’s Deutsche Bank account for the purchase of the New York apartment …” this is something that didn’t happen.
The next exhibit is E-216. E-216, we are now on 5 November 2008, and here we have Serina Wee again instructing Wahju Hanafi how the bond drawdown is going to be used. In this case, it’s $1 million bonds for Firna.
These two items are basically album-related expenses. We are coming to the end of this, your Honour.
The next email is E-223. We are on to 2 June 2009, and the same mode of operations still continues. Serina Wee again loops in Sharon and myself for only one reason: what is the fund available, is it enough for the bond draw down for the Crossover:
Again, is this possible based on my input, which depends on how much is needed for the property and whether there are liquid bonds and stocks to liquidate.
The second-last email is E-295. There’s an attachment for Xtron minutes, 25 October 2008. So the minutes are dated 25 October 2008, but the email is dated 27 November 2009. It’s more than one year after of the dating of the minutes. That minute dated 25 October 2008, there are three items in there. It says the first item:
The directors have discussed the recoverability of the loan and have decided to convert the loan into shareholding in Creative Productions Ltd.”
I believe this money was never recovered. It had to be written off. Point number 2:
In other words, there was a loss of $200,000 given to Link’s Linkage. So we have one loss to Creative, one loss to Link’s Linkage, and the third loss, in the third item:
Here, your Honour, we have discretion being exercised by Kong Hee and Tan Ye Peng for monies that are spent years ago in 2006, 2007, 2008, totaling up about $6million over, minuted later on, in 25 October 2008, and then sent in an email, one year later, on 27 November 2009.
The initial budget was supposed to be only $13 million for the Crossover. That was what was told to me in 2007. In 2008, I’m told that the project has gotten bigger, we’ve got greater plans and more grand plans, we may do more than one album. But, actually, that was not the case. It was money has been spent, it didn’t work out, and they decided to write it off in 2009. And in the end, a judgment call has to be made, as I said: to continue with David Foster or not to continue? Is Jean Wyclef better than David Foster? When you drop Jean Wyclef, is Johnny Wright really worth it? Was Gary Stiffelman worth $200,000 of referral fees? That is where the decision is made, your Honour, to spend the money, and that’s where the potential to create loss is, and not in the structuring of the bonds. Because, as far as I’m concerned, my role was to provide a structure for the financing of the Crossover via City Harvest Church buying bonds in Xtron or in Firna.
SUMMARY
No comments:
Post a Comment