CHC’s Trial – Firna Bond (MrsLightnFriends: 16 April 2015)

There was a long series of questions in cross-examination by DPP about whose money; Is it Wahju’s money or City Harvest Church’s money?

This is in relation to the 3^rd charge. The 6 of them are charged to commit criminal breach of trust by dishonestly misappropriating $11million from the Building Fund for the purpose of funding Sun Ho’s music career and for the purpose of providing funds to Wahju Hanafi.

The Prosecution’s case is Firna bonds is meant to be no more than the conduit through which the Building Fund monies would pass in order to be channeled to the funding of Sun’s music career.

TYP insisted that Wahju was using his own money to fund the Crossover.

DPP asserted that Wahju’s role is to carry out instructions that Serina conveys to him on when to draw down and what to do with the monies drawn down.

The DPP’s put to TYP on the last day of cross-examination.
 

DPP: “I’m putting it to you that from the email evidence that we have seen, it is clear that the understanding among you, your sham bond co-accused and Wahju himself was that Firna and Wahju were, in the context of this CHC Firna bonds, meant to be no more than the conduit through which the Building Fund monies would pass in order to be channeled to the funding of Sun’s music career”

DPP: “I’m putting it to you that there was never any intention for this sham CHC Firna bond transaction to create genuine legal obligations, and this is seen, for example, from the fact that insofar as repayment under the CHC Firna bond BSA was concerned, it was you and your sham bond co-accused who were making plans and taking steps to ensure that the money would be put back in the church.”

DPP: “I’m putting it to you that you knew that the CHC Firna BSA was not a genuine independent commercial and arm’s length investment and yet you have consistently lied to the auditors, lawyers and the court that it is such a genuine investment.”

DPP: “I’m also putting it to you that it was you who gave instructions for the Firna bonds to be redeemed and cleared off the boos as well because of your concerns that the audit scrutiny by Mr Sim would also result in the true nature of those bonds being scrutinized and their sham nature exposed.”

Recap of TYP re-examination on 15 April 2015

Senior Council Sreeni read Wahju’s evidence of 4 September 2013. Wahju Hanafi answer is: “’your fund’ can means that it is your portion that I have promised you.”

Sreeni: Is that also your understanding?

TYP: Yes, your Honour, this is my understanding, that it is an amount of money that is committed for the Crossover Project.

Continue with Wahju’s evidence. Question: Who is Firna helping to pass through the money here? Wahju replied, “I’m helping to sponsor the Crossover.”

Then DPP asked again, “Answer the question, witness. Who was Firna helping to pass through the money? Who? Wahju replied, “The money come through the bond, and when it comes to bond, it becomes my responsibility that I owe the money to CHC, and then the money then go back to redeem my debt to Ultimate Assets, and then from the Ulitmate Assets, I was using the money to help finance the Crossover, because I have another source of S$7million that are coming in from Papua New Guinea. So if I don’t have two source of money, I will not be able to pay UBS $7million and then at the same time, use this money to fund all these projects. So very clearly there are two source of money that comes in to make up all this transaction to happen, which I already promised to sponsor this project, or to continue the project.”

…..
Wahju said, “I was helping Sun, I was helping the Crossover.”

Sreeni: Do you agree with Wahju’s position?

TYP: Yes, your Honour

<….>

Sreeni: You have Wahju’s explanation. You have your explanation. Then you have the emails that the prosecution suggest say something else. What is your final say on the Firna bonds, Ye Peng, about the two versions, two theories? One is entirely sham; Firna was just a conduit, that’s why Wahju refers to it as “your funds”, that’s why Eng Han says, “We’ll find the money to pay”, versuse what you say and what Wahju says on oath in court. Take your time to answer it because it’s very important for the third charge.

TYP: Your Honour, my understanding is consistent with Wahju’s explanation because of the 30 July 2008 meeting that I had with him together with Eng Han, and he already explained to us that he would take back his own shareholder’s loan that he has given to Firna and then now this becomes his money and he’a ble to use his own money to support the Crossover Project.

And so, your Honour, even though Serina gives him instructions, that’s because he has already agreed to support the Crossover, but, as I’ve already given my evidence, Wahju does not do exactly everything that Serina says. He makes up his own mindl he does his own cashflow management, and we have seen from his evidence that he has another sum of money coming in from Papua New Guinea. So that is not something that is transparent to me. It is just Wahju managing his own funds. So it is not a sham, your Honour, and Wahju, as he has said in his evidence, if he’s the borrower, he will make sure that he pays back the money with interest to the church.

What did Wahju Hanafi the prosecutor witness say?
DPP: Can you confirm that this money that has been drawn down under Firna bond subscription, is it or is it not for Firna’s working capital?

Wahju: Remember in the very beginning when we raised this bond, I told the court, your Honour, that this money is to pay back all the $7million that the BVI company loan to Firna. So no matter what the purpose is to send back the full $7million out of the $8million equivalent to $11million that I received from Firna, first of all to cover this BVI. So the majority of the $8million plus $7million of them will have to be sent back to Ultimate Assets to cover this BVI company.

……..

DPP: But, you know, once the bond like you say is drawn down, the money comes to you, is it your money or the church money or AMAC’s money?

Wahju: It’s my money.

There were some email exhibits being referred in the court. Wahju followed Serina’s instruction to transfer the money raised a few eyebrows in the court.

…….

DPP: Go back to the email, …. So why is Serina able to tell you, “Do this and do that” for the $5million drawdown?

Wahju: She can tell me anything, but it’s up to me to choose what I do with my money.

DPP: Tell us, of this instruction that she gave you, what did you do? Did you, for the 900,000 do according to what is stated here?

Wahju: Yes, some of them I did it..

DPP: No, tell us item by item first. $990,000 did you follow the instruction?

Wahju: Yes, I think I do this

DPP: Then how about the $674,000 did you follow the instruction?

Wahju: Yeah, I think I did this as well

DPP: The $2.2 million?

Wahju: No

DPP: The $1.135 million?

Wahju: Maybe, I can’t exactly remember.

……

DPP: Why were you following her [Serina] instruction on where to direct the money …

Wahju: Well, that was the fact of life, I’m still owing those people

DPP: So if you were following her instruction and made payment back, for example the $990,00, the $674,000 that would take away from the S$11million total amount that you draw down from Firna bond, isn’t it?

Wahju: Your Honour, this is my money, whether it is ….

DPP: No, answer the question first!

Wahju: whether it is $11million or whether it is $5million, $7million from PNG, does it make any difference? I could have used the money from Papua New Guinea, the US$7million, to utilize for this. It’s just that, as I said to you in my account, in my books, I have to clear Ultimate Assets being a lender ……

……..

DPP: Let’s look at Serina’s email … Let’s go item by item. $990,000 was it held back by UBS?

Wahju: No

DPP: Next one, the $700,00 was it held back by UBS?

Wahju: No

DPP: The $674,000, was it held back by UBS?

Wahju: No

DPP: Next $2.2 million, was it held back by UBS?

Wahju: No, I didn’t do this one.

DPP: What do you mean you didn’t do this one?

Wahju: I didn’t intend to do this, so no money is held back on this one.

DPP: Did you make the transfer according to what Serina instructed here?

Wahju: No

DPP: Not at all?

Wahju: Not at all?

DPP: Why not?

Wahju: It is my will, it is my choice, whether I want to buy somebody a house or I don’t buy somebody a house.

…. Senior Counsel Sreenivasan stood up…..

SC Sreeni: May it please, your Honour. I get a feeling of déjà vu. ….

Judge …… The question was, why did you not make the transfer?

Wahju: Yes, I told him that it’s my will that if I don’t want to send or if I don’t want to buy somebody a house, it’s my will. Why do I have to follow Serina?

DPP: Is there any reason why you did not want to make that transfer?

Wahju: I just don’t want to buy somebody a house.

DPP: Even though that somebody presumably would be Sun Ho?

Wahju: I didn’t get you.

DPP: Even when that somebody is Sun Ho, the person that you are managing her music career.

Wahju: Yeah, I can rent her a house, a unit, a flat, an apartment. But I need the money more than her at that time.

<……>

Wahju tried to explain there was actually $15million going around from Papua New Guine or from Firna about the same time all goes to the same account.

DPP: But be it the $15million from Papua New Guinea or the proceeds under the Firna bond, these monies were considered your money or someone else’s money, the Papua New Guinea money

Wahju:That’s my money.

What did Chew Eng Han say?
Chew said is Wahju’s money

Chew Eng Han’s EIC of 26 Jan 15
Your Honour, the idea for Firna as a company to issue bonds was my idea. I knew Wahju had a glass factory, because he tells me about it, how he purchased a glass factory about one year before, or something. He was optimistic. He says this is the second largest glass factory in Indonesia and the potential is great. He told me he had big clients, and the biggest client was IKEA, that was going to buy glasses from him. I made a trip to Jakarta to see his factory. He showed me around the whole factory. He showed me he had something like, I think four big machines that were doing glassware. He told me his plans to buy more new machines because the orders were flowing in and IKEA wanted more, to order more. He told me that the land and the factory that he was taking me on his tour of was worth US$50million. And that was the due diligence that I did to the best of my ability as a fund manager. And….. just as for Xtron and for Firna, these are run by people who are City Harvest Church members, who are known to be trusted and to hold the visions of the church. And because of that, it is not unreasonable to cut down the degree of due diligence, because of the very fact that we trust them. So what Wahju Hanafi tells me when he says it’s US$50million for the factory, I believe him and till today, I still believe him. When he says that orders are flowing in, he needs to increase capacity, I believe him as well.

So, yes, the idea for Firna to issue bonds was my idea. The idea for Wahju to subsequently withdraw monies from Firna, because he had previously made a shareholder’s loan to Firna, through UA, was my idea as well. I said, “If you [Wahju] had previously loaned money to Firna, now if City Harvest buys bonds in Firna, what is effectively happening is that City Harvest is now funding the working capital of Firna. You take back your money, which you have previously supplied to Firna, and this is your personal money, but the agreement must be this: that if we do this for Firna, you, as a person as an individual, Wahju Hanafi, using your own personal money, you have to promise to use it, at least part of it, or the major part of it, for the Crossover”.

And that was the deal, your Honour. And that’s why later on, we look at some of the emails, the terms we used, like “us”, “we should bail out Wahju”, I think we need to define “Wahju” from “Firna”. Who is “us”? There are a lot of terms that are being used, that could cause confusion, but which I want to bring clarity to.

But if we understand the basis on which these bonds was done, then the emails will make a lot of sense. In the financial markets, again, where I come from, it is not unusual for, say, a man that owns a private business to go and issue shares or, rather, to sell his business to, let’s say, a listed company in Singapore, and that owner X that owns a valuable business agrees with the listed company that if I sell you for all my shares in this business for $20million, the listed company is going to pay X cash of $20million, it is not unusual for the listed company to say, “Out of the $20million, I want you to use $12million to do certain transactions that still relates to the listed company.”

In other words, here, we’re talking about the owner of a business making an exchange, exchanging shares or bonds in his business, and when he gets the cash, he agrees to abide by the deal that was made, relating to his personal monies. And …. what I’ve just said is consistent with my CAD statement.

CAD Statement: What is the purpose of Firna bonds?

Chew: Firna bonds were issued so that Wahju Hanafi could withdraw the loans he had made to PT Firna from UAL which is Ultimate Assets Ltd with these monies that are rightfully his, these are his personal monies he could use them, whether all or partially to fund the Crossover. So really there is nothing sinister about this. These kind of transactions in the markets are not uncommon.

CAD Statement: Do you agree that the funds for the Crossover Project were not from Wahju but from CHC?

Chew: I do not agree. Where the money went from CHC to PT Firna it enabled Wahju Hanafi to withdraw the loans which he had made to PT Firna previously. These were monies that belonged to him personally and, therefore, whatever monies used by UAL for the Crossover was his personal monies. In effect, CHC ended up funding the working capital of PT Firna and by so doing enabled Wahju Hanafi to withdraw the loans which he had provided to PT Firna.

CAD Statement: Why was it necessary for the funds to go through Firna?

Chew: Because it was actually prudent. It made commercial sense for CHC to invest into PT Firna was a sound commercial business which had reasonably strong cashflow. I chose Firna because I trusted Wahju. He’s a man of means and also because Firna was a good business.

In the end, the protection for City Harvest which buys Firna bonds comes from many sources. There are actually three layers of protection for CHC when it buys Firna bonds. Number one from Firna’s own business cashflow. In other words, if Firna earns money from selling glass and he has $20million profit a year, he has no problem paying back the $11million of bonds that was eventually issued.

The second layer is this: If Firna’s business doesn’t take off for some reason, there is still Wahju’s personal guarantee that was attached to the bond, and Wahju has many sources of repayment. Wahju has other assets in Papua New Guinea, a supermarket chain. He had properties in Singapore and in Australia as well, and that was the second layer of protection for City Harvest. And the third one, of course, is the album sales itself. That, as Wahju used his personal monies to invest into the album and I’ll show later on that at that point in time, before the Firna bonds were issued, there was expectations for huge income to come in. And therefore, if Wahju get UA, which is the new manager for Sun, gets the profits from the album, then he will be able to inject back into Firna and then Firna can pay back the bonds.

….

During the investigations, and even now, we’re constantly being thrown this scenario: hey, everything you do is just a sham; you’re just trying to make things look good on the outside[cover story]. My answer was this:

“PT Firna was chosen because it was run by a member of the church whom we had faith in. That’s not a sham. The church is not going to buy S$11million of bonds in a company run by someone that the church doesn’t trust.

It was also a large business that had ability to service the bond repayments.

And that’s from the glass business, At the worst case, your Honour, even if Firna doesn’t make it in terms of business, we could always seize the assets the factory itself, sell it, and that’s worth US$50 million. So the choice to invest in PT Firna, I believe, was a good investment choice, and that’s what I said in 2010 and I still stand by it.”