17 Mar 2015 – Chew cross-examined by DPP (AM session) (MrsLightnFriends: 18 March 2015)

On 17 March 2015, DPP Christopher Ong continued to cross-examine Chew on the Firna Bonds. The cross-examination on Firna Bonds ended around 4pm today. (Total around 8man-hours expended from yesterday till today) DPP estimated his cross-examination would end this Thursday. Chew estimated he would take half a day for his re-examination on Friday. Therefore Tan Ye Peng will be on the stand next Monday( 23 Mar 2015).

A brief recap of what was cross-examined on 16 March 2015 – PM session

The purpose of the Firna Bond
 

The real use of the proceeds of the Firna Bond was to finance Sun Ho’s music career and not for Firna’s general working capital as stated in the Bond Subscription Agreement.

Chew explained that the reason why it went through Firna is because, in his mind, he is thinking Firna will be the party, the entity, the business that has an obligation to pay back the church. The intention was really for Firna to hold that obligation to the church, although the ultimate objective was to fund the Crossover. The obligation is not on Ultimate Asset, but Wahju had an obligation through the personal guarantee.

Chew said, “The borrower is not free to deal with the proceeds according to their own needs. It has to be pre-agreed, your Honour, as it was with Xtron and Firna. The lender would normally specify right at the beginning the purpose of the loan. So whether or not it’s built in the BSA is a different issue, your Honour. Whether it’s verbal or written, the borrower would be constrained in the way he would use the monies. No lender gives money out to a borrower without telling what he can use it for or what he cannot use it for.

DPP: So, for the Firna bonds, the purpose or the use of proceeds provided for was that it was for Firna’s general working capital, for the CHC Firna bonds. Correct?

Chew: Yes, I think that was what was stated in the BSA, BUT that was not it.

DPP: You are saying that there was an additional verbal limitation imposed upon.

Chew: Yes

Chew further explained that Wahju had to withdraw the money from Firna and then use part of it to fund the Crossover.

DPP: Was part of the verbal agreement also that, insofar as the proceeds were to be used to fund Sun Ho’s music career, the funds would continue to be controlled by the Crossover team?

Chew: Yes, it was given, actually, your Honour, that for him to invest in the Crossover, it would be managed by Kong Hee.

<… Questions and answers…>

DPP: The Bond Subscription Agreement is very clear. CHC is going to purchase Firna bonds, the proceeds are supposed to be Firna’s general working capital. All right? So you can’t be saying that the proceeds of the bonds were meant to finance Sun Ho’s music career. In fact, earlier, you were quite clear in saying that that is not the case. The Firna bonds proceeds were put into Firna and stayed there; Wahju withdrew his own money and used it to fund Sun Ho’s music career. That’s your position, right?

Chew: Yes.

DPP: Are you now telling us that this bond agreement between CHC and Firna not only involved a term that was written into the agreement about how the bond proceeds were to be used, the bond transaction also included a limitation on how Wahju was subsequently allowed to use his own money that he withdrew once the bond proceeds came in?

Chew: Yes. This was an unwritten agreement.

DPP: This verbal agreement that you are saying existed isn’t over the bond proceeds at all, according to you. This is over Wahju’s own money.

Chew said, “ ….. Firna doesn’t have money unless City Harvest funds it. But money is fungible…. it is not his evidence that he wants to be so strict about this that, this is not City Harvest’s money or it’s not Firna money, it’s Wahju’s own money that went to the Crossover…. His defence is based on this simple premise that we expected the album to make money. However this is structured, whether it’s structured through Firna bonds or direct into UA or even direct to JHM, is really not relevant, because, in the end, it’s what’s in the minds of each of the six, or the four, whether we expected JHM to deliver the results for the album sales to come back in and then to repay it. So I’m having a problem answering this question, because I don’t know from what angle the prosecution is coming from. I just want to make it clear that it is not my defence. I’m not going to stress or emphasize whether it is Wahju’s own money or Firna’s money. I hope this is clear.”

<… Questions and answers…>

DPP: Witness, I put it to you that the Firna BSA was not a genuine investment but merely set up as a conduit to channel Building Fund to finance Sun Ho’s music career under the guise of an investment.

Chew: Your Honour, can I clarify this put first, before I answer? So is the prosecution saying that if monies are being channeled through a certain entity, or rather, if building funds is being channeled through certain entities to finance Sun Ho’s music career, then it’s a foregone conclusion it’s a sham investment? Is that all it takes for this case? Because monies are channeled through a certain entity and it doesn’t go directly into Crossover and it goes into Sun Ho’s music career, is it the prosecution’s case that that is enough to justify that this is a sham?

DPP: No, Mr Chew. I’m saying that the Firna bond investment was never an actual investment into Firna, in the sense that you never intended to create a genuine legal obligation with the objective of getting investment returns from Firna, that it was just an excuse to channel the Building Fund to finance Sun Ho’s music career.

Chew: Your Honour, I disagree because I’ve said many times that the structure of investment doesn’t invalidate the investment, and just because monies are channeled through Firna via UA into JHM, that is not enough evidence, your Honour, that we didn’t expect returns. In the end, we did expect returns, and if not for disclosure issue, City Harvest could have well invested directly in JHM and bypass all these entities. And the crux of the whole analysis is still this: Did we expect the album to make money? Just because we channel it through Firna and UA does not invalidate or make it a sham investment and does not mean that we didn’t expect monies to come back. This whole channeling was done because of the disclosure issue.

A brief recap of what was cross-examined on 17 March 2015 – AM Session.

DPP referred to an email written by Serina Wee instructing Wahju to repay the loan from the proceeds of the Firna bonds.

DPP: You were copied in this email, so you would have seen this instruction, but you didn’t raise any concerns about this. Correct?

Chew: No, I didn’t, your Honour, because I assumed this was related to the Crossover, and, in any case, this is Wahju’s personal monies and, as part of the agreement, if he can use it to return the loan, I don’t see anything wrong with it, your Honour.

DPP: The agreement that you mentioned previously, that he would use the bond proceeds to finance Sun Ho’s music career, also included other uses of funds. Correct?

Chew: Your Honour, this, to me, was a indirect use of the Crossover, because I believe there were other loans. They were all bridging loans to help to finance the Crossover, pending this bond proceeds coming in. For instance, actually, on the next page, point number 4, $1.135m to Ultimate Assets; under sub-point (B) number 1. There is a $700,000 return loan to Chan Kok Yew and this was Chan Kok Yew lending money for the album expenses, pending the bond proceeds coming in. So when I saw all this, I thought this was just bridging, using the bond proceeds now to pay off loans that were taken in the short term to pay for the album expenses and I didn’t see anything wrong with it.

<… Questions and answers…>

DPP: Look at item 2, the $674,000 that he is being instructed to transfer to the multipurpose account. Do you know what this is about?

Chew: It says there, actually, it’s for the miscellaneous expenses relating to the album, your Honour. So it is related to the album as well.

DPP: That is where Serina is explaining to him what the MPA is used for and then she says: “As such, we do need the S$674,700 directed to this account rather than to Xtron. I believe TYP has spoken to you before about this”. But look at the part in parenthesis: “S$674,700 (this was your sponsorship giving to Xtron in 2003 and last year in Dec, Xtron “refund” the same amount to you)”  Do you know what that part is about?
 

Chew: No, your Honour, I wasn’t involved in this part as well.

<… Questions and answers…>

DPP referred to an email exhibit. The context of this email is about Wahju would face a margin call and the Crossover funds was stuck in the bank.

Wahju Hanafi wrotes:

Dear Eng Han,cc Ps Tan,
Sorry that I have to forward you this email to show what actually happened, I’m trying to get I/C issued asap next week so UBS can release all your fund.

DPP further cross-examined Chew on the usage of the word “your” money.

DPP: So it would appear that, from Wahju’s point of view, these monies didn’t belong to him; he considered them “your” money, and that was referring to the Crossover team. Correct?

Chew: It was his money that he agreed to invest into the Crossover and that’s why he says it’s our money not his, because the agreement was that his money was to be put into the album.

DPP: But you agree that he doesn’t say, “I’m sorry, my money is stuck so I can’t give it to you to use for the Crossover”? He simply considers it your money, if it doesn’t belong to him. Correct?

Chew: I can’t read into his mind, your Honour.

DPP: You can read his words. Correct?

Chew: I can read his words, but I think this is really a play of words right now, your Honour.

Counsel Seah who is representing Sharon Tan stood up.
 

Seah: Your Honour, I would like to point out… Mr Wahju Hanafi had taken a position contrary to what my learned friend is putting to the witness. I’m not sure whether we should ask the witness to leave, but I’m happy to take your Honour to that portion of the cross-examination of Mr Hanafi.

DPP: Your Honour, I think it was quite clear from the entirety of the evidence of Mr Hanafi that the prosecution did not accept many aspects of his testimony and he was confronted with the opposing evidence, which basically supported the position that we are obviously now taking in respect of what was really going on with the Firna proceeds. I think all that would have been made clear in our submissions at the close of the prosecution’s case.

Judge said Chew is capable of responding in the appropriate way.

Chew: Your Honour… my position is that, as far as me and Wahju are concerned, that Wahju knew that when money went to Firna, that it was Firna’s money that when he withdrew the money from Firna, that it was his money, and he knew that he had an obligation then put his money into the album, and that’s why now he says, “It’s your money”. The other thing is that he’s an Indonesian, as Kong Hee has said before. Sometimes they are not very good at English, your Honour.
 

And the other thing I want to ask your Honour is this: I’m not a lawyer, but I’ve got a question. Wahju Hanafi is the prosecutor’s witness and they’re rejecting part of his evidence. How does this work your Honour? Can they just take part of his evidence and accept it and use it against us and reject the other evidence?

Judge: If you want to launch into a submission on that, you can do that at a later stage, but not now. All right?

A brief recap of what Wahju Hanafi has said last year.

DPP questioned Wahju why he said “your fund”. Wahju explained that “your fund” refers to “their portion” that he had promised to sponsor them.

Wahju: Again, I had just like to remind you that I have another $7m from Papua New Guinea that will come in and I can either use the one from the Firna or I can use the one from PNG. There is actually a $15m money going around at that time. So whether I’m using the Firna one or I’m using my own money from PNG you know, it’s one way or the other, it all goes to the same account.
DPP asked be it $15m from PGA or the proceeds under the Firna bond, these monies were considered your money or someone else’s money.
Wahju replied is his money.
DPP:  Right. So if the PNG $15m and the Firna bond money proceed sitting in that UBS account were your money, why is it that you’re stating here “your fund”, meaning that it’s not your fund?
Wahju: “Your fund” can means that it is your portion that I have promised you.

<… Questions and answers…>

DPP: That is why, when I show you an email like this, where he refers to the funds as “your fund”, you are saying that he’s being imprecise in his language, not using English properly and that just calling it “your fund” doesn’t really reflect the reality that it was actually Wahju’s funds that he was providing willingly. Correct?

Chew: Sorry, I don’t get your exact question.

DPP: To put it more simply, you are saying that when Wahju says “your fund” here, he’s being inaccurate and imprecise in his description of what these funds really are. Correct?

Chew: He’s just being very casual, your Honour, with his words, and, actually, I don’t see anything wrong with him saying, “It’s your fund”, because, as part of our agreement, it becomes our fund, it becomes the Crossover fund…… because, rightfully, it is his money, your Honour.

DPP: I put it to you that, when in your explanation for Wahju’s use of the term “your fund” in this email, you are not for the first time during your cross-examination trying to put a different meaning on words in an email that actually have a very obvious and clear meaning.

Chew: Your Honour, I disagree and I would say that, in fact, it’s the prosecutor who is putting a different meaning on the words which are obvious to me.

DPP referred to another email exhibit. E-661 dated 13 Nov 2008. In this email, Serina informs Kong Hee and Tan Ye Peng that Wahju is instructing UBS to make a transfer to Justin Herz the next day. Serina Wee forwarded the email to Chew.

Chew replied to her:
How come we are not channeling our money through his DBS account.

DPP: What did you mean when you said “Channelling our money through his DBS account”?

Chew: Wiring the money.

DPP: So you were just using the word “channeling” to refer to the act of transmitting the money?

Chew: Yes

DPP: I put it to you that, once again, you are trying to give a different meaning to your own words now that are very clear, because when you say “channelling” here. It’s clear that what you mean is that the money was just being passed through Firna under the guise of the bonds.

Chew: Your Honour, I don’t know what the prosecutor is coming at, but I guess the prosecutor is saying that the word “channelling” is a dirty word, that the moment someone uses the word “channelling”, it means there’s a sham, or the word “conduit”. I’ve said in my EIC that these words are even used in the financial markets, on financial market printouts, publications, conduits, channelling they’re being used. Those terms are being used in the markets. When I use these words “channelling”, it has no connotation of shams or scams or dishonestly, your Honour. It is a common term. I’ve no qualms about using the word “channelling” or “conduits” and to me, yes, even if money passes through Firna, to UA, to JHM, and even if I use the word “channel”, it doesn’t anything, your Honour, because, as I’ve said, this is just a structure to achieve an ends which is an investment to the album, and that channelling, or conduit was done to achieve certain objectives, which is to solve certain constraints that are in the way of achieving the investment.

DPP: Mr Chew, from what you’ve just said I think it is very clear, the Firna bonds were never an investment in Firna itself. Correct?

Chew: No, your Honour.

<… Questions and answers…>

DPP: Basically, you didn’t want to mix up the Crossover money with Wahju’s own money which was burdened with his financial situation. Correct?

Chew: Yes, because that was part of the deal. There’s a certain portion of his money that is supposed to go over Crossover and become the Crossover money.

<… Questions and answers…>

DPP: Basically, the intention was that the money drawn down under the Firna bonds was supposed to go directly from the church to the Crossover fund to be used, but, unfortunately, it got stuck with Wahju. Correct?

Chew: No, the money drawn under Firna bonds wasn’t supposed to go directly from the church to Crossover. I think you made a mistake there. It doesn’t go directly from the church.

DPP: No, I said directly from the church to the Crossover fund it is there, actually.

Chew: It goes from the church to Firna, then Firna to UA to the Crossover fund.

 <… Questions and answers…>

DPP: But anyone else reading the Firna Bond Subscription Agreement, but without the additional knowledge that the four of you, and John Lam also knew, the five of you had, would have thought that any CHC funds used to invest in the Firna bonds were actually going to be applied as Firna’s working capital, because that’s what it says in the BSA. Correct?

Chew: Beside the five of us, Foong Daw Ching would have known as well, and Christina Ng knew as well.

<… Questions and answers…>

The repayment of the Firna Bond

Chew said that the first line of repayment comes from Firna, because it’s Firna that owes the legal obligation.

DPP: Sorry, Mr Chew. Is it the first line or is it the last line of repayment?

Chew: Legally, it’s the first line, your Honour. When I say it’s first line, I’ll talking about the legal aspect, that, even if the album fails, Firna has to repay the church, because you can’t erase the debt.

DPP: You see, you have mentioned on a few occasions already that there were many ways in which the Firna bonds could be repaid. Can you tell us in what order were you relying on these possible options for the Firna bonds to be repaid?

<… Questions and answers…>

DPP: To be clear, from your point of view, the substance of it was the first line of repayment is album profits; the second line of repayment is the Crossover team finding funds to repay, if the album flops through no fault of Wahju’s and then the last line would be turning to Firna and Wahju. Correct?

Chew: Yes, and I would say the second line of repayment has the word “concurrently” with the third line, which is Wahju himself, because the second line, we are not sure how strong we are anyway, whether we’ll be able to get the funds, so we have to work simultaneously with Wahju to get the funds if the album flops.

<… Questions and answers…>

DPP: So, really, there were two layers of borrowing going on. There is Firna borrowing from the church in the form of the CHC Firna bond, or Firna borrowing from Xtron in the form of Xtron Firna bonds. Then, below that, there is this further borrowing of Wahju borrowing from the Crossover fund.

Chew: Yes.

DPP: This second layer of borrowing, the internal accounting, as you refer to it, is only known to yourself, Serina, Ye Peng, Kong Hee and Wahju himself. Correct?

Chew: Yes

DPP: Did John Lam know all about it?

Chew: I didn’t think so

DPP: Did Foong Daw Ching and Christina Ng know about it?

Chew: No

DPP: Even if we take your evidence at its highest, what they knew was that the Firna bonds were meant to for Wahju to use the money to finance Sun Ho’s music career. They didn’t know about all these things that happened along the way. Correct?

Chew: Yes

<questions and answers>

DPP: It had to be done that way, because you couldn’t simply transfer out money from the Building Fund and put it into, say, a bank account set up by the Crossover item. Correct? That wouldn’t be a proper use of the Building Fund.

Chew: I disagree, your Honour. I think I’ve said several times in my EIC, even if the Building Fund had gone directly to JHM to invest into the album, that would be a proper use of the Building Fund because it is an investment. How we structured it was affected by, firstly, Roland Poon, and then that statement by Kong Hee that no church funds had been used, and then that decision by him not for the church to fund it directly. Not because he thought it was wrong, or, rather, I thought that he didn’t think it was wrong, but because he wanted to avoid public scrutiny, backlash, internet criticism, derailing the project. So, in the end, your Honour, we ended up doing these bonds, Xtron bonds, Firna bonds, advance rental because a choice was made, a decision was made to avoid scrutiny and unnecessary, baseless accusations. And that’s why I came in to help put in the structure, your Honour. But now the prosecution’s case is the other way around, as in, we knew it’s a sham bond and therefore we came up with the structure. But that’s not how it happened. If we trace back through history, your Honour, from 2002 to 2003, where Roland Poon Hit the press, that set a course for me to come in and structure it in such a way that we don’t get another backlash, another baseless accusation thrown at us through the press.  We didn’t come up with the bonds because we think it’s a sham investment. We came up with the bonds because we needed to avoid this project getting derailed. This is a total opposite scenario, your Honour, from what the prosecutor is saying.

So my answer is: if Kong Hee wasn’t afraid of public backlash, I would have said, “Investment straight into JHM”. Building Fund goes to JHM, and just make sure that we track the funds properly and Justin doesn’t mismanage it. We launch the album, the money comes back, it goes straight back from JHM, back to the Building Fund, to the church, and that would have been a valid investment.

 <questions and answers>

How Firna interest payments were paid for?

DPP: So, if Firna couldn’t pay the bond interest, because there were no album profit, you are not going to make Wahju pay, you’re not going to make Firna pay. Neither is the Crossover Project going to find money from elsewhere to give to Wahju so that the church gets its interest returns. Instead, the church pays itself interest. Correct?

Chew: Yes.

DPP: Mr Chew, you agree that the plan was to use church funds to enable Firna to make its interest payments to the church. Correct?

Chew: Yes

DPP: I put it to you that the fact that you, Serina and Ye Peng were planning to use church funds to make interest payments that Firna was supposed to be making is evidence that the bonds were actually a sham, because Firna was not under a genuine legal obligation to pay the interest.

Chew: I disagree, your Honour, and I already said that, if we get Firna to draw more bonds to pay interest, it has even more legal obligations in terms of dollar amount to repay back. And also this interest payment thing, in the email that the prosecutor showed me, was always a plan for the future, and, number two, it was needed because of the delay in the album launch.  Again, I would emphasize again, your Honour, many of this solutions or structure came out because of unanticipated problem that arose.  It’s not the other way around.  It’s not that we structured it because we know it’s a sham.  It’s problems arose and we had to deal with those problems.  That’s all, your Honour.

DPP: These problems arose because when you entered into these sham transactions, you really didn’t care about fulfilling the legal obligations embodied in the transactions themselves because you were, instead, looking at the Crossover profits, whenever they came in, to put back all the money you had taken. Correct?

Chew: I’m sorry, you’re saying that I’m looking at the Crossover profits to repay the bonds, right? Isn’t that what it’s all about?  This is what an investment is all about.  Yes, I was looking for the Crossover profits to come in eventually to repay the bonds, and that’s why I consider it an investment, your Honour.

DPP: But, as you said in the previous tranche, if there are delays in the album profits, then what you were planning to do was to keep coming up with interim solutions until the album profits really came through. Correct?

Chew: Yes, your Honour.  I think that’s the right thing to do right? If challenges come up, we have to come up with solutions to overcome these challenges until the end objective comes to pass.  I don’t see what is so sham or why does it make it a sham, your Honour.

<…..>

Chew: …I’d just like to add on about the previous put.  If delaying the repayment and using more bonds to pay the interest makes it a sham, then I’ll say that all the US Treasury bonds are sham as well.  That’s what the US Treasury has been doing for decades, your Honour.  The debt is ballooning up every single year.  It’s $18 trillion right now.  Is the US Treasury bond a sham as well?

DPP: If you were to buy a US Treasury bond, you are basically banking on the security of the US economy itself. Correct?

Chew: No.

DPP: When you buy a US Treasury bond, you do so, as you’ve said, knowing that the US continues to issue debt regularly, basically, as you put it and the debt keeps ballooning, and it’s a risk you go into with your eyes open, because, presumably, you understand the US Treasury market. Correct?

Chew: I understand the risk on US Treasury bonds.  I also understand the risk on the Crossover. They’re not much different, your Honour.  Both have risk.  Both will come across challenges.

DPP: When you buy a US Treasury bond, you don’t intend that if the US cannot repay you, you will give the US the money to repay yourself. Correct?

Chew: Oh, your Honour, that’s what’s happening right now.  The China Central Bank is the largest holder of US Treasury bonds and when the bonds that it’s holding comes to mature, the US Treasury is going to issue new bonds and it’s the same China Central Bank that’s going to buy the new bonds and the proceeds on the new bonds will be used to pay off the old bonds, It’s happening.

DPP: Witness, let’s move on to E-154.

 <questions and answers related to this email>

lunch break