Let’s see how the prosecution has dealt
with Foong Daw Ching’s evidence. This post I shall focus on what was
said in court in relation to the meeting on 25 June 2007 and E-269.
E-362 dated 12 January 2006 (Email from Foong Daw Ching to Serina and copied to Tan Ye Peng)
Hi Serina,
In my opinion and looking at the critical problems uncovered from the NKF saga, it may be better that the audit of a group of companies with some common interest even though they may not be directly related be handled by one audit partner and one audit manager. This will help to ensure that certain transactions whether they are related at all can be critically reviewed and appropriate decisions made. Overall, I am still the Consultant Partner to the whole of CHC group of companies.
The term “managing partner”, “technical partner” and “engagement
partner” were heard in court. Foong’s evidence is he is not the
engagement partner at the relevant time.In my opinion and looking at the critical problems uncovered from the NKF saga, it may be better that the audit of a group of companies with some common interest even though they may not be directly related be handled by one audit partner and one audit manager. This will help to ensure that certain transactions whether they are related at all can be critically reviewed and appropriate decisions made. Overall, I am still the Consultant Partner to the whole of CHC group of companies.
In relation to E-362, let’s see how prosecution so far has dealt with Foong Daw Ching’s evidence?
The fact is E-362 has been ignored! Foong is not the engagement partner conducting the audit.
Recap of Foong cross-examined by Senior Counsel Ramesh
Senior Counsel Ramesh asked “Would it be fair to say that in so far as we have talked about the bonds that were invested into Xtron by the church that all of what I’ve just described was matters known to Baker Tilly at the relevant time?
Senior Counsel Ramesh asked “Would it be fair to say that in so far as we have talked about the bonds that were invested into Xtron by the church that all of what I’ve just described was matters known to Baker Tilly at the relevant time?
Foong initially said, “I would say yes, yeah” then the prosecutor stood up.
DPP: “… I think it has been adduced in evidence who the engagement partners conducting the audit were at the time……”
<……>
Foong said, “I did
not interfere, did not encroach into that. In 2007, I, because I don’t
know, so I may not be able to comment on this one.”
Recap of Tan Ye Peng’s cross-examined by DPP on 6 April 2015
DPP: You’ve given evidence before that you are aware that the engagement partner is the one who has the final say on audit issues. If the engagement partner in this case Mr Sim Guan Seng raises concerns about the valuation of the bonds, then wouldn’t you be thrashing out those concerns with the engagement partner himself, rather than asking to meet Mr Foong alone about them?
DPP: You’ve given evidence before that you are aware that the engagement partner is the one who has the final say on audit issues. If the engagement partner in this case Mr Sim Guan Seng raises concerns about the valuation of the bonds, then wouldn’t you be thrashing out those concerns with the engagement partner himself, rather than asking to meet Mr Foong alone about them?
TYP: Your Honour,
I’ve always viewed Mr. Foong as the overall auditor in charge of our
accounts. And yes, my view of Mr Foong, your Honour, has been consistent
throughout this period of time. So that’s why I will always go to Mr
Foong to ask him or seek his advice.
25 June 2007 – Meeting with Foong.
When comes to this important meeting date. Foong response, “I cannot remember.”
This is the first meeting that the
concept of Xtron bond was told to Foong Daw Ching. Foong couldn’t recall
until his appointment diary told the court. (Read Part 1 – How Mr Foong’s appointment diary that came into evidence.)
It’s fair to say Foong could not
remember the meeting date. But Foong’s evidence is the co-accused
consulted him general things. Foong’s evidence has serious implication
to the co-accused.
The prosecution’s case is that Mr Foong
was never told specifically that it was Xtron that was going to be the
bond issuer during the meeting on 25 June 07.
Recap of Tan Ye Peng’s cross-examined by DPP on 7 April 2015
Pastor Tan Ye Peng (TYP) insisted that Mr Foong was told specifically that it was Xtron that was going to be the bond issuer during the meeting on 25 June 2007. (See below Baker Tilly’s audit working paper)
Pastor Tan Ye Peng (TYP) insisted that Mr Foong was told specifically that it was Xtron that was going to be the bond issuer during the meeting on 25 June 2007. (See below Baker Tilly’s audit working paper)
TYP gave evidence
that Mr Foong said in this meeting that there would just be that one
line saying “Investment with the fund manager of this amount” and get
the investment policy to be drafted.
DPP: … From your evidence, therefore,
it’s clear that one important reason why AMAC was chosen as the church’s
fund manager in 2007 was to avoid or minimize disclosure of the Xtron
bonds in the church’s accounts?
Recap of Tan Ye Peng’s cross-examined by DPP on 6 April 2015
DPP: I’m putting it to you, Mr Tan, that at the 25 June 2007 meeting, you and Eng Han did not tell Foong critical information about the proposed Xtron bonds. In particular, you did not tell that Xtron had been set up to manage the Crossover and that you and Kong Hee were the ones controlling Xtron, especially in relation to the management and financing of the Crossover.
DPP: I’m putting it to you, Mr Tan, that at the 25 June 2007 meeting, you and Eng Han did not tell Foong critical information about the proposed Xtron bonds. In particular, you did not tell that Xtron had been set up to manage the Crossover and that you and Kong Hee were the ones controlling Xtron, especially in relation to the management and financing of the Crossover.
TYP: Your Honour, I
disagree that I kept any critical information from Mr Foong. Because
when I went to see him, I wasn’t going there to hide anything from him,
your Honour. And I want to say that at that point in time, it wasn’t
because I was already charged in court that I need to mention to Mr
Foong all these things that are now the subject matter of these charges.
I went there to ask Mr Foong for his advice. Whatever issues that he
raise, we answered him, and if he didn’t raise any further issues, then
we thought that was sufficient and he had.. he felt that this was proper
as long as we have an investment policy. So that’s my answer your
Honour.
DPP: I’m putting it
to you that you and Eng Han also hid from him at this meeting the
critical information that the control which you and Kong Hee had over
Xtron was not intended to be disclosed in the church’s accounts. Do you
agree or disagree?
TYP: Your Honour, I
disagree because I know that Mr Foong already knows Pastor Kong and I
are involved in this Crossover Project.
Chew stood up
Chew: Your Honour,
can I seek a clarification? Earlier … the prosecutor has put to Tan Ye
Peng that we, meaning Tan Ye Peng and myself, have never told Foong Daw
Ching that the church was going to invest in Xtron bonds
specifically. But now the prosecutor is saying that we hid critical
information about the Xtron bonds. So what really is prosecution’s case?
That we told Foong about Xtron bonds but didn’t give him complete
information, or that we just told Foong that we’re going to invest in
bonds without mentioning Xtron?
DPP: Your Honour, in
fact, that was going to be my next put, but I broke them up because I
thought it would be confusing for Mr Tan if I put everything at once. My
next put was going to be that in fact, Mr Tan and Mr Chew did not tell
Mr Foong specifically that the church would be subscribing to Xtron
bonds. So the first two puts related to hiding information about the
true nature of the relationship between the church and Xtron, and this
present put is about hiding information on Xtron being the bond issuer.
Do you agree or disagree, Mr Tan?
TYP: Your Honour, I disagree. We told Mr Foong that we were investing into Xtron bonds.
DPP: You also at this meeting on 25 June 2007 did not discuss with Mr Foong or bring up to him Xtron’s financial track record.
TYP: Yes, your Honour, I didn’t specifically bring up Xtron’s financial track record.
DPP: I’m putting to
it you that you did not bring these things up to Mr Foong because if you
had put before him all these pieces of information, then he would have
asked questions about the true nature of the planned investment into
Xtron and the sham nature of the transaction might then have been
exposed.
TYP: No, your
Honour, I disagree. Because Mr Foong knows the true purpose of the
investment; it was for the Crossover project. It’s not a sham, you
Honour, this is a real investment.
DPP: I’m putting it
to you that since you were hiding critical information from Foong,
clearly you never intended to rely on him to advise you on the propriety
of the Xtron bond investment and instead what you wanted to do a this
meeting was to get general information from him about the possible
accounting treatment which would be applied if bonds were bought by the
church.
TYP: No, your Honour, I disagree. We went to see Mr Foong specially because of this investment into Xtron bonds.
DPP: Clearly, this
was something that you and Eng Han had taken care to clarify with Mr
Foong on 25 June. You had taken care to clarify with him how an
investment through AMAC would be reported in the church’s accounts. Yes?
TYP: Yes, your
Honour, and, of course, to tell Mr Foong what exactly Xtron would be
using the funds for. That one is known to Mr Foong.
DPP: Well, we’ve
already been through that, and I’ve put to you the prosecution’s case on
what you did or didn’t tell Mr Foong. Can I suggest to you, Mr Tan,
that you agree that AMAC was chosen one of the important reasons was
because AMAC could help avoid or minimize disclosure of the Xtron bonds
in the church accounts? I suggest to you that at the EOGM on 7 July
2007, the EMs were told an untruth by Kong Hee about AMAC having been
chosen competitively from among other fund managers, because Kong Hee,
you and your sham bond co-accused would not have wanted to risk the EMs
asking awkward questions if they found out that AMAC was chosen as fund
manager to avoid or minimize disclosure of the Xtron bonds. Do you
agree?
Recap of DPP’s put statement to Chew on 5.2.2015
DPP: I put it to you that, in fact, at this meeting [25.6.2007], you merely asked Mr Foong generally about the consequences of CHC investing its Building Fund into the bonds of a private limited company.
DPP: I put it to you that, in fact, at this meeting [25.6.2007], you merely asked Mr Foong generally about the consequences of CHC investing its Building Fund into the bonds of a private limited company.
DPP: I put it to you
that at the meeting you and the other participants from City Harvest
deliberately hid critical information from Foong about the proposed
Xtron bonds plan.
DPP: I put it to you
that you hid the critical information that Kong Hee and Tan Ye Peng had
control over Xtron in relation to Sun Ho’s music career.
DPP: I put it to you
that you deliberately concealed this information about control to avoid
the auditors requiring disclosure in City Harvest’s financial
statement.
DPP: I put it to you that you also concealed the fact that the Xtron bonds would not be repayable upon maturity.
DPP: I put it to you
that you hid all this critical information because, ultimately, you
wanted to conceal the fact that the Xtron bonds were actually a sham.
DPP: I put it to you
that Mr Foong was in no position to give you good advice about these
bonds because you had hid this critical information from him?
DPP: I put it to you
that Foong was not asked whether the bonds were acceptable either
legally or from a governance perspective because this was only asked in
E-269, one year later?
DPP: I put it to you
that, in any case, when you met Mr Foong in 2007, you knew that he was
not the right person to seek advice on the legality of the bonds.
Chew: I knew I had
to seek advice on legality from the lawyers, your Honour. But for Mr
Foong’s input was in relation to acceptable practice for charities. It
was important from that angle.
Let’s see Chew Eng Han’s evidence.
Chew’s recollection he did mention to Foong about Xtron Bond to finance the Crossover.
In fact, Chew’s counsel put to Foong on 20 September 2013.
Chew’s recollection he did mention to Foong about Xtron Bond to finance the Crossover.
In fact, Chew’s counsel put to Foong on 20 September 2013.
Michael Khoo: Mr
Foong, I have to put this to you, all right? My instructions are that it
happened. If you can’t recollect, then, of course, you know, so be it.
Then it was mentioned by you that you understood the Xtron bonds were
issued to finance the Crossover and you advised that it was an
investment that did not require specific disclosure just like any other
investment.
Foong: I really cannot comment because you [paused and didn’t say anything]
E-269 dated on 21 July 2008 – Relationship between XPL, CHC, AMAC
In relation to this document E-269.
Foong’s evidence is he could not recall reading this document. But
prosecution’s argument is Tan Ye Peng gave false impression to Foong.
Foong’s evidence and prosecution’s argument are inconsistent. At least
one of them must be false, is illogical for me to accept both statement.
Recap of Tan Ye Peng’s cross-examined by DPP on 7 April 2015
Evidence E-267 dated 24 July 2008 wrote by Serina Wee to the 3 defendants (John Lam, Chew Eng Han and Tan Ye Peng, Foong not a recipient of this email.)
Evidence E-267 dated 24 July 2008 wrote by Serina Wee to the 3 defendants (John Lam, Chew Eng Han and Tan Ye Peng, Foong not a recipient of this email.)
Serina Wee wrote:
Below is summary of what was discuss with Mr Foong on Monday 21 July 2008.
Bonds
1. Is the coupon rate of 7% offered by XPL fair and market-value?
2. If something happens to XPL, can XPL redeem? “As long as there is a sign of uncertainty of repayment, there will be impairment of the bonds.
There is a discussion of whether there is a need to engage external audit firm to do a preliminary assessment of impairment required for the bonds.
3. Disclosure of the bonds will be something like this: “CHC subscribed to bonds issued by a company in which a key employee is related to one of the Management Board members.” (No specific details will be mentioned in the audit report but the members have a right to ask during the AGM).….
Other matters
3. Sun is considered a key player in XPL so auditors will require disclosure on all transactions between XPL & CHC from this year onwards.
Bonds
1. Is the coupon rate of 7% offered by XPL fair and market-value?
2. If something happens to XPL, can XPL redeem? “As long as there is a sign of uncertainty of repayment, there will be impairment of the bonds.
There is a discussion of whether there is a need to engage external audit firm to do a preliminary assessment of impairment required for the bonds.
3. Disclosure of the bonds will be something like this: “CHC subscribed to bonds issued by a company in which a key employee is related to one of the Management Board members.” (No specific details will be mentioned in the audit report but the members have a right to ask during the AGM).….
Other matters
3. Sun is considered a key player in XPL so auditors will require disclosure on all transactions between XPL & CHC from this year onwards.
DPP referred TYP to E-267
DPP: … The fact that Sun is in Xtron, the fact that she is who she ie Kong Hee’s wife, these facts, you have just agreed, would have been known to Mr Foong much earlier, even before 2007, in fact. Yes?
DPP: … The fact that Sun is in Xtron, the fact that she is who she ie Kong Hee’s wife, these facts, you have just agreed, would have been known to Mr Foong much earlier, even before 2007, in fact. Yes?
TYP: Yes, your
Honour. Your Honour, I wanted to add that Mr Foong, when he explained to
us that there’s wider scope, it was because of a change, I believe with
the commissioner of charity. This was after the Ren Ci incident. And
the COC did an audit on seven large charities, and after that I think
they came up with something more maybe rigorous for charity to disclose
related party, your Honour.
DPP brought up the
management letter for financial year 2007 and 2008. The definition of
“related parties” remained the same as between 2007 and 2008.
TFW-9 – One paragraph in the Management letter signed by Kong Hee and Tan Ye Peng to the auditor Teo Foong and Wong. It writes:
Confirm the completeness of the information provided to you regarding the identification of related parties and regarding transactions with such parties that are material to the financial statements. The identity of, and balances and transactions with, related parties have been properly recorded and when appropriate, adequately disclosed in the financial statements. You also state that you understand that as defined in FRS 24, Related Party Disclosure, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decision.
Confirm the completeness of the information provided to you regarding the identification of related parties and regarding transactions with such parties that are material to the financial statements. The identity of, and balances and transactions with, related parties have been properly recorded and when appropriate, adequately disclosed in the financial statements. You also state that you understand that as defined in FRS 24, Related Party Disclosure, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decision.
DPP: ….According to
your evidence, Mr Foong, despite having known all along that Sun is in
Xtron and is Kong Hee’s spouse, in 2007 says nothing at all about
related party issues when you supposedly asked for his advice on the
Xtron bonds. But one year later, in July 2008, suddenly he tells you
that there will be related party issues because of Sun’s position in
Xtron which he has know all along. Can I put it to you, Mr Tan, that
this makes no sense unless t is the case that Mr Foong was never told
specifically in June 2007 that the church intended to subscribe to Xtron
bonds?
<< Note: There is a change in the charities code of governance>>
Judge: I understand the put question to be based purely on what’s in the management representation letter.
Judge: I understand the put question to be based purely on what’s in the management representation letter.
……
TYP: Your Honour, I
disagree. On the 25 June 2007 Eng Han and I really bought up this
investment in Xtron to Mr Foong when we met him. It was the main reason
why we went to meet him on that day.
Recap of Tan Ye Peng’s cross-examined by DPP on 6 April 2015
On 23 March 2015, Tan Ye Peng’s EIC showed a Blackberry message from him to Foong on 18/7/2008 to meet on 21 July 2008. Tan Ye Peng’s evidence was before he went to meet Foong, he gave a phone call to him and told him that he was going to send him an attachment (E-269) that he has prepared.
On 23 March 2015, Tan Ye Peng’s EIC showed a Blackberry message from him to Foong on 18/7/2008 to meet on 21 July 2008. Tan Ye Peng’s evidence was before he went to meet Foong, he gave a phone call to him and told him that he was going to send him an attachment (E-269) that he has prepared.
DPP: Both you and Mr
Kong have said that the paper in E-269 is evidence that you gave full
information to Mr Foong about the relationship between the church and
Xtron. Correct?
TYP: Yes, your Honour, to the best of our ability at that point in time. It was only done within one day, your Honour.
DPP: It was done nearly a year after the church had already entered into the bond agreement with Xtron, yes?
<….>
DPP: I’m putting to
you that based on what you tell us you told Mr Foong on 25 June 2007,
that even if you did tell Foong about the Xtron bonds at this meeting,
you gave him a totally false understanding of the relationship between
the church and Xtron because you did not tell him critical information
about the control that you and Kong exerted over Xtron, the fact that
Xtron had been set up to fulfill the special purpose of managing the
Crossover and the fact that you were investing in it despite it having
been in the red for some years. Do you agree?
TYP: Your Honour, I
disagree. I didn’t go to tell Mr Foong a false relationship between City
Harvest and Xtron. This relationship is known to him since 2004, and
also Baker Tilly has been the auditor that audits both CHC and Xtron. So
Mr Foong knows hat Xtron was set up for the Crossover Project. He knows
that myself and Pastor Kong, as pastors of City Harvest Church, are
very involved in the Crossover Project because it’s a mission objective
of the church. And Mr Foong, as the overall auditor in charge of CHC and
all our affiliated companies, he would know that Xtron’s financial
position is in a loss position over a few years. But even though it’s in
loss position, every year the auditors were able to closs off on the
accounts or sign off because they know that Wahju is the director in the
company and Wahju has always given his statement to ensure that Xtron
as a company is still going to be viable.
<…..>
DPP: …. so if Mr
Foong already knew all along that Xtron was set up for the Crossover why
were you telling him something entirely different in the E-269 writeup?
TYP: Your Honour,
I’ve given evidence that I don’t feel that I’m giving him a wrong
information. Even in the paragraph that talks about “in preparation to
manage CHC’s future building”, we also wrote there that the vision of
Xtron is to provide audio, video, lighting, multimedia productions. The
multimedia productions is already referring to albums. And then when I
wrote about Sun, that the directors of Xtron saw the potential and it’s
true, because the directors at the time were John and Eng Han.
<…..>
DPP: Since you are
asking him these questions in E-269, and we can see what these questions
are about, they are essentially about the Xtron bonds and whether they
are above board, any breach in corporate governance, what CHC will have
to do if the bonds cannot be redeemed at maturity, and so on…. since you
are asking him these questions in E-269 and there is no mention of any
previous advice given by him on these issues, then we must understand
that the issues raised in these questions have not previously been
discussed with Mr Foong. Correct?
TYP: No, your Honour, I disagree.
DPP: Because if you
have previously discussed the same issues with Mr Foong and received
advice from him, then it makes no sense to ask him the same questions or
similar questions again and yet make no mention of the advice he has
previously given. Do you agree?
TYP: No, your
Honour, I disagree. Because the context of this E-269 was because of Ren
Ci event, your Honour. And so in our minds, we were concerned about
letting Mr Foong know again of what has happened with the investment in
Xtron bonds since 2007 all the way right up to this present point in
time. We told him about the retainer, we told him about the advance
rentals that went to Xtron which were all used for Crossover. Then we
asked him these questions: that everything that we have done so far, is
everything proper?
<…..>
DPP: ..last week we
went through quite a number of exhibits where I put it to you the
prosecution’s case that those email exhibits showed that you and Kong
Hee controlled Xtron with the assistance of Serina, Eng Han and John,
especially in relation to the management and funding of the Crossover.
With the put in mind, I’m putting to it you now that the impression
which you sought to give Mr Foong is this E-269 paper of Xtron as an
independent commercial entity, set up to manage the church’s commercial
entity, set up to manage the church’s commercial property, was an
intentionally false impression.
TYP: Your Honour, I
disagree, for reasons I’ve stated earlier that after discussing with Mr
Foong, he felt that there was a potential related party issue.
DPP: I’m putting to
it you that based on the false impression that you were giving Mr Foong
of Xtron and its relationship with the church in this paper, any advice
that he gave based on this information in E-269 could not have been
relied on as valid by any honest person. Do you agree?
TYP: Your Honour, I disagree
<……>
DPP: You see, it’s
very strange, Mr Tan, because you say that really E-269 comes about
because the Renc Ci incident happens to make you all think that Mr Foong
should be apprised of certain, presumably new, information to see
whether he will still give the same advice about the Xtron bonds being
legally above board.
So why don’t you just tell him, “Mr Foong, you know, in 2007 you advised us this. But actually how the Ren Ci incident happened, so I need to tell you of these new facts which you didn’t know in 2007. Can you tell us please, is your advice still the same?
So why don’t you just tell him, “Mr Foong, you know, in 2007 you advised us this. But actually how the Ren Ci incident happened, so I need to tell you of these new facts which you didn’t know in 2007. Can you tell us please, is your advice still the same?
TYP: Your Honour, I
don’t know how to answer this question, because it just didn’t cross my
mind to be referring him to the June 2007 meeting.
DPP: Well, I’m
putting it to you that the reason why your evidence makes no sense now
is because Mr Foong was actually never asked to advise on the propriety
of the first Xtron BSA before the BSA was signed, and that this whole
exercise of preparing the writeup in E-269 was just to get his
after-the-fact opinion on the bonds.
TYP: No, you Honour, I disagree.
DPP: I’m putting it
to you that even in seeking his after-the-fact opinion on the Xtron
bonds in E-269, as I put to you a few minutes ago, what you did was to
give him an intentionally false understanding of xtron and its
relationship with the church so that you could steer him towards giving
you the answers that you wanted to hear.
TYP: No, your
Honour, I disagree. Because later on, when Mr Foong says that Sun would
be a related party issue that wasn’t like the answers that we wanted to
hear. It was very open conversation and discussion with him, and when he
brought it up, then we thought “Oh, so we have to resolve this matter
now”.
DPP: I’m putting it
to you as well that E-269 really is part of a pattern of conduct that we
see in your dealings with Mr Foong and the auditors, which is to give
them only selective pieces of information, conceal others critical
pieces of information, and not tell them the full truth about the
transactions you were discussing with them.
TYP: No, your
Honour, I disagree. Because we have given all the relevant information
and critical information to Mr Foong in this paper E-269.
Baker Tilly’s audit working paper
During Foong cross-examined by Senior Counsel Ramesh, SC brought up 2 sets of audit working paper evidence signed by Ms Foong Aifang, who is the sister of Mr Foong Daw Ching.
The audit working paper shows that the auditors would have certainly by 8 April 2008, a clear picture that City Harvest Church had invested in Xtron by way of bonds.
Audit Date 8/4/2008
Summary of Bond issues
24 August 2007 and 30 November 2007 total $7million
Computation of fair value on bonds
The “Issuer” – Xtron Production Pte Ltd (XPL) and “Subscriber” – Trustee’s of City Harvest Church (CHC)…
During the year ended 31/12/2007, XPL issued $7million unquoted and unsecured 7% bonds, each with a principal value of $1milion due to be redeemed 16/8/2009, at their principal amounts to CHC…”
Summary of Bond issues
24 August 2007 and 30 November 2007 total $7million
Computation of fair value on bonds
The “Issuer” – Xtron Production Pte Ltd (XPL) and “Subscriber” – Trustee’s of City Harvest Church (CHC)…
During the year ended 31/12/2007, XPL issued $7million unquoted and unsecured 7% bonds, each with a principal value of $1milion due to be redeemed 16/8/2009, at their principal amounts to CHC…”
Ramesh: Mr Foong, my question, by 8
April 2008, auditors of Xtron, auditors of City Harvest Church, would
have known that the church had invested in Xtron, correct?
Foong: Based on this, this evidence, yes, I would say.
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