18 Mar 2015 – Chew cross-examined by DPP (Advance Rental – Part 1) (MrsLightnFriends: 18 March 2015)

Advance Rental – Part 1

Chew is charged in a conspiracy with Tan Ye Peng and Sharon Tan to commit criminal breach of trust by an agent in respect of the funds of CHC.

DPP’s case
Chew dishonestly misappropriating monies from CHC’s funds for the purpose of generating the false appearance that certain purported investments in Firna bonds had been redeemed, which was not an authorized purpose of the said funds.

The ARLA (Advance Rental Licence Agreement) is a sham device for Xtron t use the monies to purchase Firna bond, which the monies would in turn be channelled through Firna, Ultimate Asset and AMAC back to CHC to complete the round-tripping.

Today, 18 March 2015, DPP used the blackberry memo messages that was extracted from Sharon Tan’s blackberry phone to build the case.   There are 72 images extracted from the blackberry memo and some images are being redacted during Sharon’s cross-examination.   As mentioned in my blog last year the reason given by DPP for the redacted images was simply because it was not relevant to the case.

However on 30 September 2014, during Sharon re-examination, Mr Ramesh introduced the full version of the blackberry memo to re-examine Sharon and put the entire conversations in its proper context. (Sharon’s re-examination)

The purpose of the advance rental

Image 28
Sharon was talking about solving Firna by October and that being an audit point if not solved. Xtron was not mentioned.

Image 29
Eng Han said to Sharon: “I have a solution for the Xtron and Firna bonds regardless of whether we get the building by October 2009.”

Image 30
Eng Han: “It has to do with prepayment Xtron will contract with CHC to provide a minimum 5k seater every weekend for say the next 25years. Assuming a yearly rental of $4m, total is 100 million. We then discount it back at a 5 percent yield, and the discounted present value is the lump sum payment that CHC makes to Xtron.

Image 31
Xtron is free to use the money to invest in a building or whatever investment to earn a yield so that it can fulfill its commitment to CHC to secure a place.
From this lump sum, Xtron redeems the $21m bonds, it also buys over the rights from Ultimate Assets (UA) to the rights to the crossover for $17m.
Mr Chew Eng Han then goes on to say: “After spending the $38m, the leftover is invested in the building which should earn a yield of 10 percent at least and that will help Xtron’s cashflow to meets its future commitment as it pays rental for CHC.”

Image 32
Eng Han said: “We will pass a board resolution to state the reason why we do this. Because the board recognizes that it is hampered from owning a building and is trying to replicate the scenario by this contract with Xtron.”
Eng Han said: “To make it more attractive, we can insert another condition that Xtron will refund a percentage of any potential total gains it makes from this contract over the period of 25 years.”

Image 33
Eng Han: “So we try to replicate a deal that makes it as close to the scenario as if CHC owned the building.”
Eng Han: “The reason for doing this is real that CHC can’t get a building as we experienced it many times with the government bias.”

DPP: If you look at images 29 to 32, that’s where you outline your plan to use advance rental to clear the bonds.

Chew: Yes

<… questions and answers…>

DPP: Mr Chew, I put it to you that when you said to Sharon in image 29, “I have a solution for the Xtron and Firna bonds regardless of whether we get the building by then”, it is clear that the plan you then explained to her in image 30 onwards was just specifically to be able to get the Xtron and Firna bonds cleared, even though the building deal wasn’t completed yet.

Chew: Your Honour, I do not agree that it’s just specifically for redemption of the bonds, because, in subsequent images, I talk about the difficulty we had in getting a building and why the advance rental was necessary. But I don’t deny that this solution was proposed to solve two problems and one of them was the redemption of the bonds.

DPP: I put it to you that you are once again ignoring the obvious meaning of your own words in image 29.

Chew: In what way am I ignoring?

DPP: In that it’s exactly as I’ve just put to you, that it’s clear from image 29 that you were proposing a solution purely to clear the Xtron and Firna bonds at that point in time.

Chew: Your Honour, if the prosecutor wants to focus just on image 29, then of course I have to agree that in image 29 I’m just talking about the redemption of the bonds, but I think we need to look at the evidence in its whole context and look at the other images as well.

DPP: After image 29, image 30, you go on to explain the plan that you have at that point in time, which, as we’ve covered yesterday, was basically involving advance rental. Then in image 32, you say: “We will pass a board resolution to state the reason why we do this. Because the board recognizes that it is hampered from owning a building and is trying to replicate the scenario by this contract with Xtron.
 

To make it more attractive, we can insert another condition that Xtron will refund a percentage of any potential total gains it makes from this contract over the period of 25 years. So we try to replicate a deal that makes it as close to the scenario as if CHC owned the building.”

Chew: Yes, and this is what I’m referring to, your Honour. There are other slides that talks about the building itself, and what was my purpose in doing this ARLA? It was to replicate the situation as if the church owns the building.

DPP: This portion on page 32, 33, that I’ve just taken you through, continuing on to image 34, when you say you would pass a board resolution to state the reason “we do this” and “this” refers to the advance rental, the reason that was going to be explained to the board and embodied in the resolution was that because it was to allow the church to own a building through Xtron. Correct?

Chew: Yes

DPP: You don’t say, “We’re going to pass a resolution and we’ll tell the board that the advance rental is to allow Xtron to own a building on behalf of the church and also to allow us to redeem the Xtron and Firna bonds”. Correct?

Chew: In other words, you’re saying that I left out the second part, is it?

DPP: Yes

Chew: Yes, it’s not stated in there, your Honour, but, of course the intention and the natural consequence of that would be that there will be an offset and that offset was raised to the board eventually. I don’t have to say everything in these images.

DPP said that Chew intend to use the advance rental to clear the Xtron and Firna bonds regardless of whether the building comes through and intend not to tell the part about offset of the bonds to the board.

DPP: …. the commercial justification you were going to give to the board was that the advance rental was to enable Xtron to purchase the building, but that the real motive of your plan was simply to clear the Xtron and Firna bonds.

Chew: First of all, your Honour, I wasn’t planning to give a commercial justification or a cover story to the board. The board was already aware of our difficulties in securing the building if the church were to go in by itself, because of what happened in the year 2005, when we went for the plot of land at Bugis. It’s not a cover story to the board; the board knows this is a real problem. And, number two, my intention was not to hide the second motivation, to redeem the bonds, and, as the evidence has already shown in handwritten notes of Sharon Tan, it was spelt out and explained to the board simultaneously the advance rental, the reasons for it as well as the offset. There was never any intention to hide the second reason.

DPP: I put it to you that it was your intention to make use of the advance rental as an excuse to provide funds to redeem the Xtron and Firna bonds, but to then only portray to the board that the advance rental was for Xtron to purchase a building on behalf of the church.

Chew: There are actually two puts in there. The first put is my intention to make use of advance rental as excuse to provide funds to redeem the bonds. Your Honour, I don’t deny the advance rental, there was a plan to use it to offset, after checking with the board and the auditor.
 

I don’t call it excuse; to me, it was just an exercise that had to be passed through first the auditors, which I believe at that time was approved by the auditors, and then to be told to the board as well. It’s not an excuse. It’s dealing with an official audit issue.
 

Number two, the second put is that I wanted to portray to the board that advance rental was for Xtron to purchase a building, and that was the only thing that I was wanting to portray. But whoever explained it to the board, it looks from the evidence it was TYP did explain both parts. Why we need to put advance rental to Xtron, and then part of the advance rental will be offset, your Honour. I don’t see how was it hidden from the board.

<<< continue with images from 38 till 69 and Sharon’s hand written notes – Part 2 >>>>