Who has control over Xtron? (TYP cross-examined by DPP) (MrsLightnFriends: 6 April 2015)

Who has control over Xtron?

Recap of Pastor Tan Ye Peng(TYP) cross-examined by DPP

The prosecutor brought up many emails on 1-2 April 2015. Let’s go through some of them.

E-455 dated 23 May 2006 (Timeline: Before the Xtron Bond)
This is an email exchange between TYP and Wahju.

TYP tells Wahju that Xtron will be treating his contribution as a loan. After Wahju tells TYP about how much he will contribute to Xtron, TYP forwarded the email to Serina Wee and instructed her to punch the new figures from Wahju into the Xtron cashflow.

Serina replies to alert TYP because of the instructions he had given her to increase the Chinese album budget.

Serina writes:
Pst you see that May onwards the [Xtron] cashflow has major problem. We only have $286,000 in the bank. We have not paid Unusual for the May Expo rental, which is around $275,000. If we send $100k to Taiwan, we can’t pay Unusual. How can we solve the cashflow problem?

TYP replies:
CHC will loan XPL, I have spoken to Pastor Kong about this.
CHC will need XPL to be a vehicle for the projects that we are doing in China in the month of Oct. But because of cashflow issues, CHC will prepay or loan XPL first the amount that CHC has already budgeted for China.
XPL will return the money to CHC at the end of the year.

E-450 dated 5 October 2006 (Timeline: Before the Xtron Bond)
This is an email from Serina to TYP and Kong Hee.

The content of this email is about the overview of the CHC group and Attributes cashflow. She tells TYP and Kong Hee that Xtron will have a deficit of $454k at the end of 2007 due to the three Crossover budget. (Read: No Problem or Big Problem? posted on 2 April 2015)

Serina writes:
Xtron has a deficit of $454k at end of 2007 is due to the
1. US$250,000 paid to Justin.
2. Increase in Chinese album expenditure $70,000
3. Sun’s handphone bills between January 2005 and December 2007 totaling $132,000
The deficit also arose because initially we had planned for CHC to repay 5 months of rental in Feb 07 to Xtron so that Xtron can pay Justin for the 2nd installment of the Wyclef budget. We did not less off the 5 months prepaid rental in the later part of 2007 but only in 2008. We cannot do this because CHC’s year end is on 30 June 2007. And we cannot reflect a prepaid rental by CHC to Xtron in the accounts then as CHC had already given a 3 months rental deposit to Xtron in the beginning.To solve this, we have transferred the $100k budgeted in 2007 for the China Primary School to be borne by CHC as we feel that it is legitimate for CHC to pay for this. CHC will also pay back Xtron for the building in Guizhou … we also increased the retainer for Expo from $150k to $200k per month from Jan 2007 onwards.

DPP: I think we established that if the church gives advance rental to Xtron and that advance rental prepayment is really for Xtron to use to pay off the Crossover album expense, then when the rental falls due, Xtron still needs to get money from somewhere to pay for the rental. Correct?

TYP: Yes, your Honour, and the somewhere, your Honour, can be from the album sales.

DPP asked whose idea was it to set out the various things that Serina wrote including increase the Expo retainer.

TYP: Your Honour, I cannot remember who initiated the idea. I just want to say that the increasing of the retainer did not happen. The transfer of monies for the school did happen, your Honour.
…. I think the retainer remained at $150,000 for 2006.

…..

DPP: I ask you this because she said we have increased, so it is presented as a fact. Do we understand from you that in fact the board did not approve such an increase in the end, or that it wasn’t put to the board?

TYP: Your Honour, that one, I’m not sure.

<…>

DPP: …motivation behind these solutions set out in Serina’s email is to solve Xtron’s cashflow deficit…. It doesn’t matter to the three of you because the aim is to solve Xtron’s cashflow anyway. Do you agree?

TYP disagreed. He said every dollar that is given to Xtron must commensurate with the services that Xtron would do for the church.

E-600 dated 5 November 2006 (Timeline: Before the Xtron Bond)
To borrow DPP’s word “tikam-tikam”. I would like to call this “tikam-tikam” email.

This email Serina is proposing to TYP to transfer of $157,700 from the church to Xtron in the church’s accounts as production costs for seven Bible study DVDs.

Serina writes:

Still short of $150k to come in by this month for Xtron to survive this year. Then every month in 2007 is in deficit with a maximum deficit of $1.2m in Nov 2007. Let me update the BF pledges after this weekend and then we can really see how much Xtron will still need to borrow.

…

TYP: … I wanted to clarify, so that there’s no misunderstanding. Your Honour, though the individuals may pledge, but they don’t actually give the money to the church. This is not like giving a donation to the Building Fund (BF) and then refunding out. No. It is just directly these individuals give to Xtron without going into the accounts of the church.

DPP: You’re saying that when Serina talks to you here about her updating the Building Fund pledges before you all can really see how much Xtron will need to borrow, she is referring to, and you understand her to be referring to, getting church members to divert their Building Fund pledge amounts to Xtron instead, to help Xtron’s cashflow. Is that it?

TYP: No, your Honour. I wouldn’t use the word “divert”, your Honour, because these are individuals who wants to set aside a certain amount of money they want to give for the work of God and so during that season where the church is doing a pledge, sometime towards the end of the year, and so these individuals, they also want to pledge, and to them the Crossover Project is a missions project of the church. So they decide to give it to Xtron, your Honour.

….

DPP: … the important objective that you and Serina have is to transfer the money to Xtron quickly, no matter what, and how the transfer is booked in the accounts it is a matter of multiple choice. If there is time for the DVDs to be produced, you book it as DVD production costs. If time is tight, you book it as something else, like prepayment for future projects.

TYP said that these projects in 2007 are real projects.

TYP: ….. So if the DVDs take too much time to do and Xtron has a immediate need, that’s why she throws out another option and that is if we can prepay next year’s budget first. But then, as Xtron continues to do the DVD, then Xtron will invoice the church later on for the services that they have done for the church, for the DVDs and we will still be paying that $150,00. …. at the end would still have to go the CHC board for their final approval.

…..

DPP: Which apparently in this email, as far as you and Serina are concerned, is a matter of multiple choice or “tikam-tikam”, depending on whether there’s enough time for the DVDs to be done. Agreed?

TYP: No, your Honour. I disagree.

DPP: I put it to you that what this email in E-600 shows is what we saw in other emails like E-450, which is that you, Serina and Kong Hee were actually aware of Xtron’s cashflow problems. You were very much concerned with getting funds transferred to Xtron to help it tide over the cashflow and pay for the Crossover, but you knew that you can’t transfer money with no reason given and so, in form, each time you would find a pretext that you think is acceptable. In this case, for example, you have a choice between presenting it as DVD production costs or prepayment for future projects. But that is the pretext and form, and, in substance, the objective is to capitalize Xtron to help it pay for the Crossover. Agree?

TYP: Your Honour, I disagree. Your Honour, we have a lot of churches in Taiwan and they really need to have all these Bible study DVDs translated with subtitles, and that is something that is helpful for the building and these churches… so these are not just random projects; these are real, needful projects that the church wants to do, your Honour.

E-310 dated 24 January 2007 (Xtron Board Minutes)
In this email Serina sends six sets of Xtron board minutes of meeting span in the period January 2006 to December 2006 to TYP.

The directors of Xtron Wahju Hanafi and Choong Kar Weng were recorded as having attended these directors meeting. These minutes are supposed to be the minutes of the Xtron board of directors.

DPP: Why are you being asked whether you have anything to add and also to give your input on the highlighted area?

TYP: Your Honour, I didn’t prepare these minutes, so first of all, your Honour, I didn’t instruct Serina to do any of these minutes. I just trust that the minutes are accurate, your Honour.

DPP: I’m saying that when you look at the minutes of meeting, they purport to record decisions made by the two Xtron directors at these meetings. Correct?

TYP: Yes, your Honour.

….

TYP: Your Honour, because I’m overseeing the Crossover Project, and I’m the one that goes to Taiwan and meet with the Taiwan managers, so that’s why Serina asked me to check if I have anything else to add.

….

DPP: But the six sets of minutes of meeting are not just about Taiwan. Correct?

TYP: Yes, your Honour, but when I read this email, I think she’s just referring to my involvement in the Crossover Project, your Honour.

DPP: Why would she send you all six sets of minutes of meeting, even though they do not all concern Taiwan, and ask you if you have anything to add?

TYP: Your Honour, I cannot answer this question. I do not know.

……

DPP: …. why are the minutes recorded in such a way as to present this decision as something that has been decided by the Xtron directors at a board meeting?

TYP: Your Honour, I’ve already said in my evidence that when it comes to the Asia portion of the Crossover Project, I am involved in the day-to-day oversight of this project. But then when it came to the minutes, your Honour, I already said I didn’t prepare the minutes. Maybe this question should be asked to Serina, your Honour.

…..

Judge: I think he said he wasn’t really able to answer.

Sreeni: Exactly. He didn’t prepare the minutes.

Judge: Let’s move on, Ms Chionh.

<….. still on Xtron minutes of meeting …>

The prosecutor inferred in the minutes that the Xtron directors decided that Xtron will appoint Taiwan-registered company Creative.

DPP position is the Xtron board minutes, which purport to record decisions made by the directors at their board meetings.

Defence position is the directors didn’t make the decisions to appoint the Taiwan-registered company Creative. The director approved the decision make by TYP.

Judge: All right. Let’s not take too much time with this.. Ms Chionh, I know where you’re coming from and I understand the defence position on this as well. All right?

…
DPP: Yes, your Honour, I will leave the rest to submission.

E-167 dated 4 May 2007 (Xtron Board Minutes)
This email contains two minutes of meeting for February 2007 and May 2007. The minutes were purport to show that certain decisions were made by the two directors at the board meetings.

Serina writes:
Please call me when you have time to go through.
……
Please let me know if you can think of anything else we need to add.

…We want to show them the Xtron cashflow but there is a deficit currently in 2008 of $288,192. We should try to get rid of this deficit before showing them? Or leave it? This deficit means that Xtron will not have this amount of money to return loans to those who lent us money. I projected China $300k again. and $200k to support Si Chuang for next year’s album.

DPP: Why is Serina asking you to look through the minutes and to let he know “if you can think of anything else we need to add”?

TYP: Your Honour, again, it’s because of my involvement in the Crossover Project.

….

DPP: Serina tells you that in the Xtron cashflow there is a deficit amount shown and she asks you whether or not this deficit amount should be left in the cashflow to be shown to the two Xtron directors, or whether you should try to get rid of the deficit before showing them the cashflow. This shows us, Mr Tan, that you and Serina were basically controlling what information the Xtron directors would get about Xtron’s finances. Correct?

TYP: No, your Honour. I don’t recall that I reply her and when I see the Xtron minutes for 5 May 2007, the deficit is still reflected in the budget that’s shown to the Xtron directors.

….

DPP: Why is Serina asking you, in the first place, whether or not the deficit amount should be shown to the Xtron directors?

TYP: Your Honour, I honestly don’t really know what was her concern at that point in time.

DPP: Her concern, she tells you, is that the deficit means Xtron will not have the money “to return loan to those who lent us money”. But my question is why does she even ask you, in the first place, whether the deficit should be shown to the directors?

….

TYP: Your Honour, I’ve said I do not know why is Serina concerned.

E-349 and E-350 dated 23 November 2007
This email shows Serina tells TYP about certain things that she thought of minuting down for Xtron. She asks TYP the same question as in other email, “Do you have anything else to add”.

After some cross-examination questions, DPP referred to another email E-350. This email is six hours after the E-349. Serina Wee sends TYP a set of completed draft minutes.

Serina writes:
I just finished doing all the minutes. I know you may not have time to read through as you are preaching this weekend. If you can will be good.

DPP: Why does Serina say it will be good if you can read these draft minutes of meeting?

TYP: Your Honour, again, it is in preparation for the meeting with Wahju. Serina writes to me to see if there’s anything else I have to add, or maybe to see if there’s anything that I’m involved in the Crossvover.

DPP: Again, how can you add anything to minutes of meetings where you were not present?

TYP: I’ve already said my answer… I didn’t think so much about I wasn’t in the meeting. When she asked me, it is to give my input if there’s anything else to add, your Honour.

…

DPP: But you can’t explain why your role in the Crossover Project would require you to give input on the minutes of Xtron Board minutes where you were not present. Correct?

TYP: Yes, your Honour.
<…. other emails in relation to Xtron board minutes of meeting…>

DPP: I’m putting it to you, Mr Tan, that your answers in relation to the emails showing your input being sought on the Xtron board minutes of meeting have been evasive and disingenuous.

TYP: I disagree, your Honour.

DPP: And I’m putting it to you that your answers have been evasive and disingenuous because you are trying very hard to avoid having to admit that you and Serina, between the two of you, were deciding what content should go into the minutes of Xtron board meetings.

TYP: I disagree, your Honour, because I don’t decide what is the content that went into the board meetings. I don’t instruct Serina what to write and I didn’t prepare the minutes.

E-454 
Kong Hee writes to TYP

How are we going to pay APL, CHCSA and XPL staff 1.2 months bonus above their 13^th month bonus?  These organizations won’t have their financial strength to do that.

DPP: Why is Kong Hee asking you this questions?
…
DPP: How would you be in a position to tell Kong Hee whether Xtron, for example, has the financial strength to pay their staff a certain amount of bonus?

TYP: Your Honour, I can only bring this up to Serina, who is managing Xtron’s cashflow at that time, to see if there is money in Xtron for them to do that.
…..
DPP: In effect, what we see happening here is you, Serina and Kong Hee making decision about the payment of staff bonuses in Xtron when that should be a decision made by the directors of Xtron?

TYP: Your Honour, eventually, after the proposal, the Xtron directors still have to give their approval.

DPP: Do you mean that after you and Serina have come up with the proposal and Kong Hee has approved it, then the directors will be asked to sign off on that decision?

TYP: Yes, your Honour…..subject to ….

E-337 dated 14 March 2007
Serina writes to TYP.

The title of the email is “Important Xtron matters to be cleared” she listed for TYP the two important Xtron matters.

(A) Cover special bonuses and advances to Sun in 2006
After Wahju sponsored $479,750 to cover the bonuses and advances given to Sun, we are still short of $118,028 to cover the total amount given to her.

I have looked at the sponsors who have given in 2006 and have come up with the proposed list of persons to talk to them to get them to write a letter to Xtron to say their giving is meant for Sun personally.

(B) Cover purchase of CDs in 2006
Proposed 3 persons to indicate to Xtron that their sponsorship is for the purchase of CDs.

DPP: Wahju has already sponsored over $479,000 for payment of bonuses and advances to Sun Ho, but at this point in time, March 2007, Xtron is still short of more than $100,000 to pay Sun the total bonuses and advances it has committed to giving her. Correct?

TYP: Yes.

DPP: Both item (A), how to find money in Xtron to cover the bonuses and advances to be paid to Sun, and item (B), using Xtron’s sponsorship income to buy up Sun’s CDs, are matters concerning financial commitments that Xtron has and concerning how it’s going to use its income. Do you agree?

TYP: Yes, your Honour.

DPP: But Serina comes to you first, before the Xtron directors are asked to sign off on the relevant letters because you are the one who is the effective decision-maker in this case. Agree?

TYP: Your Honour, I wouldn’t be the effective decision maker if, at the end of the day, the Xtron directors are the ones that give the final approval. I don’t deny that I do the discussion, the planning or deliberation, but ultimately Xtron directors approve.

 <<<….many other emails …. >>>

E-620
DPP asked TYP to turn to another email (E-620). The content of this email is about Kong Hee asking Jacqueline, who is Tan’s wife to check with Tan whether he can be given the position of managing director in Xtron.

DPP: Why are you the one who is being asked whether he can be given that title of managing director?

TYP: Your Honour, Pastor Kong asks me questions. I don’t really know how to answer this question.

DPP: But the fact is that you did answer the question, so how is it that you were in a position to tell him whether or not he could be given the title of managing director in Xtron?

Tan replied. Firstly, Pastor Kong was checking with him whether there would be “related party issue” if the managing director title was given to him. Secondly, he answered to him that Kong is not managing Xtron in a day-to-day operation and he is more like a consultant to Xtron for the Crossover Project.

According to Pastor Tan Ye Peng’s evidence; Kong Hee makes the day-to-day operational decisions for the Crossover under Xtron and is able to commit Xtron to legal liabilities and financial liabilities relating to the Crossover expenses.

BUT

At the end of the day, when comes to signing the contract, the Xtron directors are the ones who have to sign the contract that involves committing Xtron to legal liabilities and financial liabilities (ie Xtron directors approve, Kong Hee made the decision.)

DPP: I put it to you that it’s not that Mr Kong didn’t have the power to make decisions for Xtron. That’s not the reason you told him he can’t be managing director. The reason you told him he can’t be managing director is that you didn’t want it known openly that he had this power to make decisions for Xtron. Do you agree?

TYP: I disagree, your Honour.

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.

Tan Ye Peng thought that CHC and Xtron were not related parties because there were no common directors. His understanding was based on what Mr Foong’s advice to him back in 2004.

TYP: First of all, your Honur I acknowledge that I signed this, but, your Honour, if I can just give a context and clarification, and that is the document was not prepared by me. Usually the finance staff will come to me and say, “This is a standard declaration before we close the accounts”, and usually I will sign on that. That means, in other words, my reliance is on the finance team, after talking to the auditor, that this is accurate, this representation is accurate, then I say. Thirdly, your Honour, I also want to say that in my mind, when I signed this, it’s because I am aware that there’s no common directors, then we are not related.

<….>

DPP: Are you saying that you did not read paragraph 10 and did not know what paragraph 10 said when you signed off?

TYP: Yes, your Honour.

DPP: So you signed off on TFW-9 without reading its contents, or at least without reading some of its contents?

TYP: Your Honour, I honestly, I didn’t read the details of the whole content.
<…>

DPP: So how is it that you knew that you were signing off on a management representation letter to be given to the auditors for the church’s accounts and you are signing off as the church’s treasurer, but somehow you were not aware of some of the contents of the letter?

<…..>

DPP: I put it to you that when you signed the management representation letter, TFW-9, which was given to the church’s statutory auditors, you were lying when you represented that CHC and Xtron were not related parties.

TYP: Your Honour, I disagree. When the document was given to me, I asked the staff if everything is correct and they say this is a standard letter, and based on my reliance on the staff I signed. And in my mind, when there’s no common directors, then it is not related, and that is seen by Mr Foong’s own evidence that he did mention that to me before.