13 May 2015 – Serina cross-examined by DPP (CHC Firna Bonds) (MrsLightnFriends: 18 May 2015)

CHC Firna Bonds

The first three sets of charges are CBT that relate to CHC’s purchase of Xtron and Firna bonds. Read my previous post on Firna Bonds.

If Wahju had previously made a shareholder’s loan to Firna and he needs the money for other purposes, he decides to withdraw the money that he had loaned to Firna, now the Bank lends money to Firna so that he can withdraw the money that he had previous loaned to Firna. Please tell me what is the term defines in this scenario in relation to the money from the Bank that is put in Firna?

Now change the word Bank to CHC. Because CHC is the lender and Firna is the borrower. Firna issue bonds and CHC buy the bonds. The legal obligation entity is Firna.

“This idea the Firna proceeds were just put into Firna working capital so that Wahju could withdraw his shareholder loan and use his own money to fund the Crossover is a fiction that you and your bond transaction co-accused are relying upon. In reality, it was just a case of the Church Building Fund money being used to finance Sun Ho’s music career.”, said the DPP.

Who is the root of the problem?

According to Serina’s evidence Wahju pledged his money into Crossover Project. That’s how the “our money”, “my money” or “Wahju’s money” problem started.

The root of the problem is the Crossover Project. Kong Hee sells the business plan to Chew Eng Han. Chew trusted Kong Hee and therefore believed what was written in the business plan. He went to assess the company [Firna Glass Factory] financial statement and visited the factory.  The owner of Firna who is Wahju agreed to fund the crossover project.  The arrangement between Wahju and the church is Firna is counting on the Crossover team to make the profit from the personal investment that Wahju has made. For Serina’s evidence is profit from Wahju’s money that he has pledged in the Crossover Project. The business plan can be found in an email from Serina to Wahju copied to Eng Han and Tan Ye Peng. [E-107 dd 28 Jul 08]

When comes to scenario planning for repayment of the bonds, email evidence shows that the accused were planning to help Firna to fulfill its legal obligation.

If you join the dots carefully, there are actually two tracks of email. Track one is Tan Ye Peng, Serina Wee and Sharon instructed by Kong Hee. They were planning for zero sales scenarios. [court evidence]

Track two involves Eng Han, which he was called in sometimes by Kong Hee to plan for the worst-case scenario, what if only one-third of the sales comes in. [court evidence]

The bonds were redeemed prematurely after the bonds were drawdown and before the CHC Firna bonds expired. Eng Han was told by Sharon and Tan Ye Peng to redeem the bonds, that the auditors were not happy with the bonds. [court evidence] Serina’s evidence is she did not attend the auditor’s meeting and she was told by Sharon that the bonds needed to be redeem.

Do you think Eng Han’s proposed solution came out because of unanticipated problem that arose or the other way around because the accused know it’s a sham?

The prosecution’s case is the early redemption arose because the accused know the bond is a sham.

Recount of Serina’s cross-examination on May 13.

Serina: Your Honour, my role was to assist in the budgeting, the giving instructions for payment relating to the English album, and also assisting in the execution of the BSA.
DPP: What roles did the other bond transaction co-accused persons play in the Firna bond plan, according to your knowledge?
Serina: Your Honour, for Pastor Kong, he’s the main one liaising with the Americans. Pastor Tan will assist him and pass the budgets to me, and Pastor Tan will also be copied in budget updates that I give. Pastor Tan and Eng Han, they are the main ones that communicate with Wahju at the beginning of the plan. And for Eng Han, he is the one that came out with the idea. He’s the one that explain to me, and he’s the one that speaks to the lawyers about it.
DPP: And John plays a role in the Firna bond plan going through his involvement in the secret letter [Wahju’s father-in-law comfort letter]. Correct?
Serina: Yes, your Honour, and as a church board member in approving the bonds.
DPP: Just to clarify, when you talk about the role that Pastor Kong and Pastor Tan played in relation to the budgets, these are part of the Firna bond plan, because, of course, the entire purpose of the plan is tied to fulfilling the needs of the budget that is being provided by Kong Hee and Ye Peng to you. Correct?
Serina: Yes, from the Americans.
…

Kong sent some queries to Serina, Tan Ye Peng and Chew Eng Han. [E-18]. The first email in the chain is an email of 28 July from Serina to Kong Hee, Ye Peng and Eng Han. There has been some back and forth between Serina in response to Kong Hee’s original queries and then his further queries.

DPP: The reason you had to respond to Kong Hee’s queries is that what you were ultimately seeking was Kong Hee’s go-ahead to proceed with the plan. Correct?
Serina: Your Honour, I don’t know if I was thinking of that when replying, because Pastor Kong is the one that started the email, and I just respond to his queries.
DPP: Well, this email was part of an ongoing series of planning you all had been doing, and along the way, Pastor Kong must have briefed by one of you on the latest version of the plan, the latest version of the plan that included Firna, because otherwise he wouldn’t have been able to send this email with his queries. Correct? It is not an email where he suddenly proposes this entire plan on his own.
Serina: Yes, your Honour, and I would just state that I was not the one that spoke of the plan to him, but I provided figures to him.
….
DPP: … the amount of the Firna bonds, as with the Xtron bonds, the first Xtron BSA that we’ve dealt with previously, that is dictated by the needs of the Crossover Project, so it would come from the budget that Kong Hee and Ye Peng worked on for the project correct?
Serina: Yes, based on the needs from the American side.

Mentioned in court about planning to increase the bonds amount to $22million for Wahju to take a loan from Firna to buy out his father-in-law and repay a loan to XPL. This did not happen.

….

DPP: To tie this back to the earlier emails we looked at, E-19, where Kong Hee had the understanding it was the Crossover profits that were going to cover the interest and the principal eventually for Firna, similarly here, I think what you are saying is contractually it is Firna that is liable for the bond interest. But again, it falls on those doing the budgeting and the financing of the Crossover Project to ensure the funds are there to pay this additional interest. Correct?

Serina: Yes, your Honour. This is based on my understanding from what Eng Han told me.
…

Serina updated the cashflow and sent to Eng Han and Tan Ye Peng. [E-169] In this email she wrote two scenarios. One scenario is assuming 100 per cent revenue, profits will be distributed between Firna (60%) and Xtron (40%), the other is assuming one-third revenue. There is no profit to distribute as Firna cannot even recoup the US$13.3m.

DPP: … if you look at the cashflow, there are lines for things like investment in English album, profit from DVD, TV series, film and licensing. While the Firna bond proceeds are factored into this spreadsheet, this spreadsheet shows the projected cashflow for Sun Ho’s music expenses. Correct? The inflows are primarily the Firna bonds; the outflows are the expenses that will be incurred. Correct?
Serina: Yes, and the inflows will also include the album sale proceeds.
DPP: It’s your position that Mr Foong was told about the Firna bond plan before the CHC Firna bond agreement was signed. Correct?
Serina: Yes.
DPP: Can you tell us again what was he told during this meeting on 1 August? We have E-325, but it doesn’t capture anything about Firna.
Serina: Your Honour, in relation to Firna, we’ve updated him from what he mentioned on 21 July meeting about the possible related party disclosure. So we updated him or Pastor Tan updated him that Sun would no longer be under Xtron but will be managed by Wahju. And the church is going to buy bonds in Firna, which is Wahju’s glass factory, so that the Crossover can continue and so that the funding for the Crossover can continue.
…
DPP: Was Mr Foong told anything else about the Firna bonds?
Serina: No, your Honour.
DPP: For example, he was not told that what those of you who were planning all this were counting on was that the Firna bond principal and interest would be repaid using the profits from Sun’s albums eventually. Correct?
Serina: Yes, your Honour, he wasn’t told.
…

DPP: Based on your position, he would not have been aware that the repayment of the principal and interest was really dependent on the album sales coming in, and that you and your bond transaction co-accused persons were actively planning for what you would do if only one-third of the album sales come in. Correct?

Serina: Yes, your Honour. He wasn’t told this, but this was not necessary to be told to him. The obligations are Wahju’s and Firna’s, and all these are just our internal workings.
….
DPP: Please go to E-107, which is the email when Wahju was forwarded the business plan.   Can you explain to us why this business plan was sent to Wahju?
Serina: Your Honour, Eng Han asked me to forward to Wahju, because Wahju’s going to take over the management of Sun. So he need to see the business plan.
DPP: Why did you particular highlight the bottom line profit for the whole of the project to Wahju?
Serina: Your Honour, this is because this is quite a detailed plan, so I just want to point him to the place where he can clearly see that the project is profitable,
DPP: Why was it relevant for Wahju to know whether the project was profitable?
Serina: Your Honour, this because Wahju is a businessman, and for him to take on this heavy investment, he also need to know that it’s going to bring returns and he’s able to bear the cost that he’s pledging for the Crossover.
DPP: And this was what it was about, correct? Wahju knowing that this money he was going to, according to you, commit to financing the Crossover Project, although it actually came from the Firna bond proceeds which was from the church, he needed to know it would not end up with a loss of the investment. Correct?
Serina: Yes, your Honour.
DPP: Based on what you have said, the main purpose here was to reassure Wahju that he was not being asked to put himself on the line for something that would end up causing him a loss. Correct?
Serina: Your Honour, I don’t know if that is what Eng Han is thinking when asking me to forward to Wahju. But in my own understanding, this is an investment that Wahju’s undertaking, and he need to assess the particular investment into the project, in the music project.
DPP: The prosecution’s case in relation to the Firna bonds is that the bonds were a sham and Wahju was just acting as a conduit for the bond transaction co-accused, including yourself, to channel funds from the Church Building to finance Sun Ho’s music career. You are clear about that. Right.
Serina: Yes
DPP: Based on your projection, money was going to be loaned to Firna through the bonds, and then from those proceeds, money was going to be loaned to Wahju. Correct?
Serina: Yes, Firna will loan those monies to Wahju.
DPP: Coming back to E-107 [the business plan], I was confirming that you understand that the prosecution’s case is the Firna bonds were a sham. What was really happening is that Wahju was just a conduit for the bond transaction co-accused persons to channel money from the Building Fund, the bulk of which was then used to finance Sun Ho’s music career, some of it was to provide funds to Wahju. So you understand that’s our case? Correct?
Serina: Yes

DPP: I put it to you that when you sent this business plan to Wahju, the real purpose was just to reassure him that the projections showed the Crossover Project would be profitable so that the bond transaction co-accused persons would have sufficient funds to provide for the repayment of the Firna bonds, so Wahju himself would not be in any danger if he agreed to be your conduit.

Serina: Your Honour, I disagree. I was sending this business plan pursuant to Eng Han’s instruction. And in my own understanding, Wahju’s taking over the project, which is a big investment, and he needs to assess the investment by itself, whether its going to bring him return.

…..
DPP: The Firna bonds were originally arrived at because of the need to finance Sun Ho’s music career. CorrecT?
Serina: Yes, that’s my understanding
DPP: You’ve already said the intention all along was that the interest and the principal were to be paid using the profits from the album projects. Correct?
Serina: Yes

DPP: Clearly, any assessment of the recoverability or the viability of the investment into the Firna bonds was on the basis of whether the album profits would be sufficient to provide the returns under the bonds. Correct?

Serina: Your Honour, I cannot speak for what Eng Han took into his assessment of recoverability, because there was a due diligence done. I don’t know if that goes into that. But I can only speak for my own perspective, that in my planning, it is based on the income, the proceeds from the album sales.

DPP: In fact, insofar as the business plan in E-107 is concerned, your position is that it’s precisely for this purpose, to allow Wahju to assess that the album project would be able to account for the interest and the principal, that you sent him the business plan. Correct?

Serina: Your Honour, I’ve mentioned earlier that I sent him the business plan is based on Eng Han’s instruction and it’s for Wahju to assess the album project at that point.

DPP: Well, if in your mind, the proceeds of the bonds were to be accounted for from the album sales, the only way Wahju could have assessed whether the album sales would be sufficient to account for the bond returns would be from the business plan you sent him. Correct?
Serina: Yes.
DPP: You’ve mentioned that a due diligence was done. In the contect of your answer, it would seem to be by Eng Han. Do you know that for a fact, or did you simply assume Eng Han would have done due diligence on the investment?
Serina: Your Honour, I know for a fact that the Indonesian law firm, ABNR, was doing a due diligence report. And also, I knew that Eng Han went to visit Wahju’s factory.
DPP: What was the relevance of Eng Han’s visit to Wahju’s factory if the understanding was that the bond returns were to be accounted for from the profits of the Crossover?
Serina: Your Honour, this because the investment is into Firna, the business. So that’s why I thought Eng Han needed to go and visit the factory.
DPP: To be more precise, these discussions were not how you could help Wahju and Firna in the sense of providing them with some funds, but they would have to come up with the rest. When you planned, for example, for the one-third scenario, it’s on the basis that those of you doing the planning and it’s the same people who do the planning, budgeting and financing of the Crossover Project all along yourself, Ye Peng, Kong Hee and Eng Han would find a way to provide all the necessary funds to make good on the bonds. Correct?
Serina: Your Honour, yes, that is the basis of the planning and proposals. But all these are planning, and we can try the best we can. But at the end of the day, if there’s no solution or no way for us to help Firna raise the funds, Firna is still liable to pay for it.
….
DPP Put’s statement
DPP: I put it to you that the clear understanding you and your bond transaction co-accused persons had reached with Wahju from the very beginning was that the Firna bonds had nothing to do with Firna’s business whatsoever.
Serina: Your Honour, I disagree. I partially agree that it is not because of the needs of the glass factory, but it is also something to do with the business, because it’s a return of shareholder loan, which has to do with the general working capital.
DPP: I put it to you that from the very beginning the Firna bonds were just a sham to provide a conduit for you to channel funds from the Church Building Fund to meet the expenses of Sun Ho’s music career, and that is why they were completely separate from Firna’s real business, so the CFO has no clue what they are about.
Serina: Your Honour, I disagree that they are sham. They are real obligations by Firna to fulfill. And yes, there was the understanding that this is a return of shareholder loan which Wahju’s going to use his own monies to fund the Crossover, and that’s why, in that sense, it has nothing to do with the needs of the glass factory business. But still, it is part of the general working capital needs.
DPP: I put it to you that this idea the Firna proceeds were just put into Firna working capital so that Wahju could withdraw his shareholder loan and use his own money to fund the Crossover is a fiction that you and your bond transaction co-accused are relying upon. In reality, it was just a case of the Church Building Fund money being used to finance Sun Ho’s music career.
Serina: Your Honour, I disagree. Firstly, I state that I did not come up with this idea, but also that it is not a fiction that we are relying upon. It is a real bonds, and the return of shareholder loan, it falls under working capital needs. All these are known to the lawyers that helped with all these transactions.

Decision to drawndown the bonds

The above questionings are related to the planning and structuring of the Firna Bond. After the put statements, DPP went on to cross-examine Serina Wee on who made the decision to drawdown the bonds.

DPP: I think you’ve made this correction a number of times. When I say that you decide the drawdowns, you say you only proposed them. I think more to put a marker so that the prosecution’s position is clear. I’m sure you will keep clarifying that you were only proposing but the prosecution’s position is that you, Kong Hee and Ye Peng were the ones deciding. All right?

Serina: Yes
…..

DPP: Whose idea was it that this loan be eventually be channeled to the MPA instead?

Serina: Your Honour, I think I’m the one that gave a suggestion, because it’s a need for the MPA. Then Wahju was agreeable to that.

DPP: So your evidence is that the agreement to re-donate the money back to Xtron had been reached between Eng Han, Pastor Tan and Wahju, but subsequently you were the one who came up with the suggestion that the money go to the MPA instead.

In fact if you go to E-20, the instructions regarding the use of the first $5million drawdown are reproduced. We’ve looked at these earlier in another email. Under the $674,000 in point (A) 2, there’s an explanation from you on why the funds should be directed to MPA instead of Xtron. Correct?

Serina: Yes, your Honour.
DPP: You were direting the funds to go directly from the Firna bond proceeds deposited into Firna to the MPA, and this was also to cover Crossover expenses. Correct?
Serina: Yes, your Honour.
DPP: …. The MPA account was actually in your name. Correct?
Serina: Yes, your Honour.
…..
Wahju was using his money to do some trading and he met some margin calls. The money from Firna to his account was stuck in the bank.
DPP: This $1m was money that had just been released after having previously been stuck in the UBS account. Correct?
Serina: Yes.
DPP: You were asking Kong Hee whether you should just send the money to Justin first. Correct?
Serina: Yes.
DPP: When you explain why you think Wahju is anxious to get the money out of the account, Kong Hee says: “Then just send.”
And by this, he meant just send to Justin. Correct?
Serina: Yes, your Honour.
DPP: Here we have a situation where there is no schedule payment to be made to Justin under the budget, but in order to get the money out of Wahju’s account so it doesn’t get trapped, Kong Hee gives an instruction to you to just go ahead and send $1m first to Justin. Correct?
Serina: Yes.

DPP: Again, I put it to you that this shows you were the ones in control of the money, and all that Wahju was doing was trying to ensure that your money didn’t get stuck, so you would be able to use it freely for your purposes.

Serina: Your Honour, I disagree that we are in control of the money. I’m aware of the movements of the money, but ultimately it is Wahju’s money. And the initiation for me to get this $1m out is actually started from Wahju.
…..
Judge: Just to be clear, that is actually the church’s MPA Right? That’s the multipurpose account, but it’s under your name.
Serina: Yes, your Honour, that’s the MPA. But it’s not the church’s MPA, it is with a group of individuals the sponsors that raised the money.
Judge: I see.
The hearing continues.

[Mrs Light: In relation to the round-tripping charges, the prosecution has covered this topic on 14 and 15 May.  He estimated that he will need another 1 hour on May 18 to finish the cross-examination.  Sun Ho will be on the witness stand on May 19.]