27 January 2015: CEH EIC (PM Session) – Control Of Bond Proceeds: Who Held Discretion And Spent The Money?
On the second day in court of Chew Eng Han (CEH) taking the stand, he brought up many instances, backed by specific evidence, whereby Kong Hee and Tan Ye Peng held discretion and determined how much, when and where money was going to be spent.
Previously when the prosecutor cross-examined Kong Hee on 27 August 2014, they put that it was Kong Hee, Tan Ye Peng, Serena Wee and Chew Eng Han who controlled the funds under the first Xtron BSA as they were all copied in two emails: E-145 and E-154. However, the emails were sent out only after the Xtron bonds were spent.
Below is the reccount of CEH as he took the stand on 27 January 2015.
WHY WAS CEH COPIED IN SOME EMAILS? Email exhibit (E-154)
Kong Hee writes to Tan Ye Peng and myself, and the date is 28 July 2008. This is after the $13 million of Xtron bonds had already been drawn down and spent. It’s after the fact, after the spending, that the breakdown is now transmitted to me in this email.
Kong Hee wrote:
XPL at present owes AMAC $13 million for the crossover project. The breakdown is the following
English album – $7.394 million. Additional promotional expenses in Hong Kong
Airport panels in China, $361,450
Management fee for Ling’s Linkage, $530,660
Loan to Creative Productions, $471,504;USA expenses prior to Wyclef for the singles since the year 2003, amounting to US$2.7 million, orS$4.05 million.
I’m told of the breakdown after the spending is done. I am now in this email only because of additional Firna bonds needed and the Riverwalk deal. In the original allocation in E-145, there was no allocation of the funds to be used to pay for the singles which had already happened and been launched. It’s only now, in 2008, that we see that $4.05 million has been allocated to pay for the US singles. So I’m copied in this email because, on the second page of the email, you will see at the top that point number 2 is that:
AMAC is planning to buy another $18 million of bonds from XPL, and XPL is using it to pay for Riverwalk.
Then below, in the next section, under “Firna/SVS”, then it talks about how Firna buys US$13.3 million of bonds from Firna. So, again, whenever there’s more requirements for the album, it means more bonds need to be issued, and that’s where I’m called in again. Other than that, I get the broad figures only.
And, other than that, the detailed allocation of how 13 million or 18 million, or whatever amount that’s going to be issued, the allocation is really decided by Kong Hee and Tan Ye Peng, and Serina Wee has knowledge of it. Other than that, I believe the three other accused do not have knowledge of this — myself, John Lam and Sharon Tan.
EXAMPLE 1 OF THE DISCRETION OF KONG HEE & TAN YE PENG -THE ALLOCATION OF MONEY
The way the monies are allocated, a big number of 13 million, how it’s spent is going to determine the odds of whether the outlay can be recouped. If too much is spent on marketing, then the marketing produces no fruits, then the chances are that money is going to be lost. If excessive fees are paid to Wyclef or to Johnny Wright or to David Foster, then I realise this is a judgment call, but what I’m saying is that discretion lies in the hands of Kong Hee and Tan Ye Peng, the question is, “What was in their minds when they used these monies?” And other than that, any other accused would have had no knowledge of how the big number was being spent. I do not see how that person could have abetted to commit CBT, because, in the first place, he didn’t even have knowledge of how it was going to be spent or that there was intention to misspend it, or to spend it recklessly or to use monies to buy up albums or singles to get awards that are false. In the course of getting awards, I’m sure there’s money being paid as well. And all this could be camouflaged and categorised under “marketing fees”.
The other email is E-145, which was the other email that was referred to by the prosecution when they put it to Kong Hee that there were four persons who controlled the spending. I do not see how my name can be pulled in when my name is not in this email. And, yes, this breakdown was on 27 August 2007, right at the time when Xtron bonds were about to be issued, or already drawn down.
So Serina Wee writes to Tan Ye Peng, 27 August 2007:
Hi TYP,I just wanted to let you know and remind you that as per past discussions with Pst Kong & yourself, the 13M inflow from Bonds issue is used to cover the following.
Then they make a decision that no part of this $13 million will go to repay some people ….. Then they talk about the budgeted sales, 200,000 units. On the second paragraph, they talk about alternative sources of funding:
In view of this, I think this time round we should start to find additional people to give to Xtron.
On the second line, she says, of that second paragraph:
We already have people like Cheong Hui giving to Xtron.
This is what I was referring to then. I was called to ask some of my BBG members, around 2007/2008, to either to lend money or to give their Building Fund to Xtron in order to fund the album, and Cheong Hui was one of my BBG members. One of the witnesses that I’m calling is Sun Yuen Peng. Sun Yuen Peng is the wife of Cheong Hui. Really, these are people that are generous and they believe in the vision. They knew about Xtron and the Crossover, and they were willing to part with the money and risk it. And like I said, my question is: Why is the man with the vision not willing to part with his own money?
EXAMPLE 2 OF THE DISCRETION OF KONG HEE & TAN YE PENG –LARGE DIFFERENCES BTW ACTUAL SPENDING & ORIGINAL BUDGET
The original allocation was $10.864 million to be spent on the USA album, your Honour. That is where the money, the revenue-generating part of this whole Crossover is, the album production. But come July 2008, in E-154 (email evidence), you see that instead of $10.864 million spent on the album, only $7.394 million has been spent on the album. So where did the balance go to?
Now in 2008, we have additional items such as airport panels in China, $361,450, that was not in the original budget in E-145. Your Honour, this is where the discretion lies. If Kong Hee or Tan Ye Peng chooses to spend less on the album and more on certain other items, like airport panels in China, which I believe is for advertisements of Sun, that is where the discretion is, that is where the spending is, and that is where the potential is to create loss or profits.
Original Budget (2007)
Actual Spending (2008)
Link Linkage Mgmt Fees
$479,565
$530,660
Creative Productions
$400,000
$471,504
Singles launched since 2003
Not in Budget
$4.05 million
…….. the control of spending is in the hands of Kong Hee and Tan Ye Peng, and I do not see how the prosecutor can bring my name in here just through these two emails.
The next exhibit is E-101. E-101 was written on 20 July 2008, and this is the time just before we decided for Firna to issue bonds to the church. This is the second part of the Crossover that requires additional funds. There they lay down again where the 13 million bonds issued by Xtron has gone to. It look, again, like the figures keep changing again, as compared to E-145 and E-154, but I won’t go into details.
At the last paragraph, just above the table, it says:
Justin’s payment schedule is as follows from Apr 08 to Nov 08(all in US$) Up to Oct08 he is asking for US$4.55M of which we can only give US$800K if Wahju returns the loan. So the solution is that we will need to advance either the Expo rental or Riverwalk rental.
So here again, the budget, the financing itself, is being discussed between Serina Wee and Tan Ye Peng and the idea of using advance rental to finance the album.
EXAMPLE 3 OF THE DISCRETION OF KONG HEE & TAN YE PENG –SPENDING EXPONENTIAL AMOUNTS OF MONEY WITHOUT EXPLANATION
I’m showing that even from 2006, well before the bonds, the spending was already controlled by Tan Ye Peng, Kong Hee and with the help of Serina Wee. And that continued into 2007 to 2009, when the Crossover was financed through Xtron and Ultimate Assets. These three emails are E-185, E-310 and E-186. We will just take E-185 first. E-185 happened on 6 October 2006, about one year before the Xtron bonds.
Serina Wee wrote to Tan Ye Peng:
“Pst,We TTed the following amounts to Justin but I do not have any budget details as to what they are for. I was only told in an email by Pst Kong each time how much Justin needs, that’s all. Do you have the budget? If don’t have, how do I present in the board resolution for Wahju and kar weng to sign? Please advise.”
In other words, there were actually payments being made from Xtron to Justin in chunks, four chunks, where there was no details given to Serina as to how this amounts of money were going to be spent. And this happened over six months, from February 2006 till August 2006. And Serina Wee has waited till October 2006, eight months after the first chunk has been sent, and she’s asking Tan Ye Peng, “What was the money spent on?”
If we add up the four amounts in the table, the total is $1.839 million, sent from Xtron to the US, to Justin Herz on Kong Hee’s instructions, but without any details, any breakdown, as to how it was spent. And I believe that I cross-examined Kong Hee and asked him that, in the end, was there a breakdown given and he said “no”. Full discretion has been given to Kong Hee to send monies, to ask for monies from Xtron and to spend it according to what he thinks is fit.
[Mrs Light remarks:
On 30 Jan 2015 cross-examination; Chew cross-examined by Mr Tong. Mr Tong said that in the re-examination of Kong Hee, he did show the evidence to Kong Hee that these same transactions were verified by the audtiors in the work papers.
On 11 September 2014 Kong Hee re-examination by Mr Tong. The judge clarified with Kong Hee whether there were approvals or resolutions passed. Kong Hee replied that he remember there was a Xtron board meeting on 7 October and all these would be brought up. The judge replied that there’s no reference made to any approval for these payment.]
EXAMPLE 4 OF THE DISCRETION OF KONG HEE & TAN YE PENG –MONETARY GIFT/BONUS GIVEN TO SUN HO BEFORE BOARD’S OFFICIAL APPROVAL
The next email in that series of three is E-310. There are several board minutes of Xtron being attached here. The date of this email is 24 January 2007. The first attachment that we look at is basically on the second-last page of the PDF: “Minutes of Board Meeting held on Monday, May 15, 2006.” So minuted on this date, 15 May 2006, on point number 2 is that:
“As Sun Ho’s birthday was around the corner on June 2, 2006, Mr Choong proposed to give her a cash gift of S$30,000 for her birthday. The directors approved the gift to Ms Ho in appreciation of the tremendous work she had done in the year.”
So here you have a discretionary item, spending by Xtron. If we go to the minutes of 14 January 2006, item number 3 says that:
“The directors approved a special performance bonus of S$80,000 to Ms Ho Yeow Sun for her breakthrough in the USA & UK for the following English Singles.”
So there is a discretion for paying payments to Sun Ho, either for birthday or for performance bonus for good performance for the singles. And this email is being sent, actually, one year after the spending 24 January 2007. Really, it shows that the decisions are being made by Tan Ye Peng or Kong Hee to allocate funds that Xtron has. The discretion is in their hands, and the minutes are being prepared even one year after the actual date of the minutes.
[Mrs Light comment: On 30 Jan 2015 cross-examination by Mr Tong. He produced a new court document, minutes of board meeting of Xtron production held on 7 October 2006 and he claimed that these payments would have been audited.]
EXAMPLE 5 OF THE DISCRETION OF KONG HEE & TYP –HUNDREDS OF THOUSAND OF DOLLARS TO JUSTIN HERZ EACH TIME
The next email in the series is E-186. E-186, this is still in the year of 2006. Justin Herz, at the bottom email, writes to Kong Hee and Tan Ye Peng:
“Dear Kong,The execution copy of the agreement has gone toWyclef for signature. We will need to fund the initial payment of $625k shortly.”
So I believe this is the first initial payment to Wyclef in the new relationship. Then Tan Ye Peng replies:
“We will wire the amount of $625k on Monday … to your account.”
And that’s discretion. How much is Wyclef worth? Is he asking for too much? If he asks for too high a fee, is it going to jeopardise the profitability of the whole project? The discretion lies in Kong Hee and Tan Ye Peng. In the end, whether the album makes it or not depends on how the big number is being allocated.
The next email exhibit is E-192.
Now we are into the year of 2007, 2 February 2007. Tan Ye Peng write to Justin Herz:
Dear Justin: We have just sent USD300,000 to you for the January Chinawine promotion and music video. We will send the guest producer portion in February 07. I will check with you first how much we should send since you are currently in negotiation with regards to Missy Elliot.
So, again, the detailed spending items are being handled by Tan Ye Peng or Kong Hee. In this case, it’s Tan Ye Peng.
The next email exhibit is E-193.
At E-193, if we look at page 2, on the last email, basically, Justin Herz is discussing with Kong Hee various budget options on 20 February 2007.
He wrote,
Dear Kong, I’ve been going back and forth with the production company for the last two days to explore the various budget options.
Then on the third paragraph:
A significant chunk of the budget is in travel and hotel for all the artists – Elephant Man, Tony Matterhorn, and Lady Saw, plus the DJ and in the stylist, hair, and makeup people that Sun wants to use (they are top of the line and expensive). These costs come between $150-$200k all by themselves.
Right at the bottom, he lists out several options and scenarios. There are three scenarios for Kong Hee to choose. Either you have:
1 prelight 3 shoot days 2 videos $933,000
1 pre-light 2 shoot days 2 videos $844,0001 pre-light 2 shoot days 1 video (ChinaWine) $671,000.
So you have a choice to go for top of the line, $933,000, or the cheapest, $671,000. At the top of page 2, Kong Hee chooses the expensive option:
I am ok with Option A of 3 Shoot Days and 2 Videos.
Again, your Honour, discretion is in the hands of Kong Hee. He decides how much is it worth to spend on all this. On the first page, the second email from the bottom,
Kong Hee wrote,
Dear Justin, How would this affect our payment schedule? Can you have a look at the previous one you’ve sent and quickly get back to me and Peng?
Because Kong Hee and Tan Ye Peng are controlling the purse strings of Xtron. Above this,
Justin wrote,
Dear Kong, We will need to fund 50% of the production budget –approximately $500k within the next few days.
The timing of the funding is also known to TYP and Kong Hee and they are the ones that decide when to drawdown from Xtron. In the third paragraph there, it says:
“I think the best plan would be to wire the $500k as soon as possible … In the mean time over the next two weeks I will get a better take on how much we need to spend when on marketing and promotion for ‘China Wine’ and we can discuss how much additional money I will need to fund the balance of the video budget.”
Tan Ye Peng replies to Justin:
“No problem. We will send the US500K to you immediately.”
Tan Ye Peng has authority to use the funds from Xtron, and discretion as well.
The next exhibit is E-226.
Here, we have a breakdown of how the English album budget is going to be spent, and it is between Tan Ye Peng and Serina Wee. Just to highlight a few of the items, if we look at the table of the breakdown of items, and all these are in US dollars,
the first line says
“Producer Fees for John Wyclef”, US$625,000.
If you go down a few more lines, again there is
producer fees for Jean Wyclef, another $675,000
, and if we go down, further down,
in April 2007, there is producer fees for John Wyclef, $200,000.
If we add up these three items, the total producer fees that was supposed to be paid to Jean Wyclef would be US$1.5 million, and that is a big discretionary item that will affect the profitability of the project. And discretion was in Tan Ye Peng and I’m sure in Kong Hee’s hands as well. If you look at the marketing fees,
April 2007, $100,000
May 2007, $100,000
July 2007, $400,000
August 2007, $400,000
September 2007, $550,000
October 2007, $250,000
and November 2007, $200,000.
If we add up the total marketing, it would be US$1.9 million. Again, a big discretionary item that is going to affect the potential of the album to make profits.
The next exhibit is E-232. We are moving on, actually, in chronological order. Now is 14 April 2007. On the first page, Justin Herz at the bottom writes to Kong Hee:
Dear Kong, I look forward to hearing everyone’s thoughts on the video – I think we’re getting close. We are getting close to really beginning our China Wine promotion in full. We’re going to need to pay the last portion of the video and additional promotion and marketing expenses – it would be helpful if you could wire $500,000.00 to cover.
Kong Hee replies:
“No problem. If it is already budgeted, we will send you the money on Monday.”
Then serina Wee at the top says:
Please find attached the receipt of the transfer.
So money is spent and the control is in the hands of Kong Hee in this case.
The next email exhibit is E-141. It is written on 25 April 2007, Serina Wee to Tan Ye Peng again.
It says:
“Hi TYP, I have updated the Xtron budget based on $300K for China promo. Even if we sell 1.5M copies of the US album and get all the money back by Dec 08, we will be in a benefit it is of $360K.”
So in this particular scenario, it seems like the album may not be profitable and there may be a slight loss. But I’m not in this email. It goes on, the next paragraph:
As for the Hong Kong loan Eng Han says the max we can borrow is $9M. Currently we need $13M in order to cover all the expenses as well as return the loans to Suhardiman & Siow Ngea by Dec 08 and still end up with a deficit of $335K.
So here, actually, they are planning for the usage of funds that is available to Xtron, whether it is from Citic Ka Wah or what, whatever are the source. And the part of the loans, or the funds, that is available to Xtron is going to be used to return Suhardiman and Siow Ngea. And I do not know what those loans were previously spent on, whether it went into the album or into the US singles. But, basically, what I’m saying is this, that the way the funds are being allocated and spent, again, will determine the chances of making money or losing money.
And the proposed solution, below, in item 2 it says:
“As for the additional $360K to ensure there is breakeven as at Dec 08 in order to return all loans, I need you to check with Dr Kong about the USD 100K X 2 for 2007 and 2008 that he has budgeted to receive from Xtron. Is this to be replaced by what Si Chuang will give him? If it is, then Xtron can save $600,000. Please revert on this.”
So Tan Ye Peng and Serina Wee are here discussing and exercising discretion on the use of Xtron funds as to whether to use $600,000 to pay to Dr Kong, and I don’t know if this actually happened, but, if it did, then, of course, this will affect the profitability of Xtron. Because the understanding is that Xtron’s monies are being raised to invest into the album, to invest into a project that is supposed to generate revenue. If money is being diverted elsewhere, for non-revenue-generating projects, then, of course, it’s going to affect the chances of making money.
The next exhibit is E-233.
E-233, we are now moving forward, 9 August 2009. This is the time of the Xtron bonds. Justin Herz says to Kong Hee:
“Dear Kong, China Wine promo is picking up speed.
If we go down several paragraphs, he says:
“From a budget perspective I will need the next set of funds to continue our China Wine promotion. At this point I think the 50% of what we had for promo in August will cover us for a while”
And that is US$200,000 to do a promotion for the “China wine” music video. Up there, Serina Wee says:
“Hi Dr Kong, We have processed the transfer today …”
Again, discretion in the hands of Kong Hee to decide whether to spend an additional US$200,000 on the promotion for the “China Wine” video.
The next exhibit is E-145, which I have brought up previously. Here, again, is another example, basically, that Kong Hee and Tan Ye Peng will decide on the usage of the bond proceeds.
The next exhibit is E-227. This is the year 2007
E-227, on the first page, Tan Ye Peng writes to Justin Herz, on the second paragraph.
He says:
There is a total of $2,876.092.46 in advances sent to you as at 31 August for which we will require you to provide us a copy of the receipts and invoices.
Then the budget is being laid down below. This is quite similar to the previous ones that we have seen, but, basically, now if we add up the producer fees in October 2006 and February 2007, we have, again, producer fees for Wyclef for US$1.5 million, but now we have an additional budget for in December 2006, for guest producers and singers, for $800,000. Plus, in February and March 2007, again, guest producers and singers, another $400,000 and $300,000, and that makes a total of US$1.5 million to be allocated to pay guest producers and singers other than Wyclef. A discretionary item, again. And the total marketing budget, if we add up all those marketing items, works out to US$2 million. Your Honour, I’d just like to highlight that in all these emails that have been brought up, I’ve not been put into the loop. By now, the bonds have already started.
The next exhibit is E-228. We are now at 8 October 2007. Xtron bonds has already been issued the first tranche, at least. Justin Herz is talking to Tan Ye Peng and telling him in the first paragraph:
“… we will need an additional $200k-300k end of October … including additional recording with Clef and David Foster.
$200k in early January and then approximately $400k in April for promotion.”
In the second paragraph, he says he needs $200k in early January of the next year and $400k in April for promotion. Then in April he says we will need to decide whether to shoot an additional music video for the record release. This is discretionary again.
“If we decide to go ahead we will need approximately $500k.”
He goes on to say there are some unknowns which are “any costs associated with touring with Wyclef”. Here we see Tan Ye Peng and Serina Wee discussing how the budget, which basically now comes from Xtron bonds, is going to be spent and allocated in detail.
The next exhibit is E-234. Now we are on 6 November 2007 and an advance is given to Justin Herz of $300,000, as instructed by Serina Wee to her staff, Angie Koh. The next exhibit is E-235. Here, we have Tan Ye Peng telling Justin Herz that:
“We have wired USD400k over to you yesterday. On a separate matter, Xtron’s accountant informed me that there are still outstanding documents from you that’s needed for our auditors.”
In other words, there’s missing backup invoices. So discretion has been given to Tan Ye Peng to send monies to Justin Herz ahead, without documentation, without backup invoices. There’s discretion in his hands and in Kong Hee’s hands as well.
E-236 is the next exhibit, and by now we are into the year of January 2008, 4 January 2008. By now, several tranches of Xtron bonds have been drawn down and the same people are controlling the spending of the bond proceeds. Serina Wee writes to Justin Herz, copied to Kong Hee and Tan Ye Peng:
“Dear Justin, The following is the transfer receipt for USD 350,000.”
The next exhibit is E-237. We are moving forward now to March 2008. By now I believe the most of the Xtron bonds have already been drawn down.
Justin Herz, at the bottom, writes to Kong Hee:
“Dear Kong,
…
As discussed it would be very helpful if you could have the team wire $75k to cover any near term expenses as we finalise the budget and cash flow projections.
I will take the incremental money for the Olympics work out of that amount and cover some additional invoices.”
And Kong Hee exercises discretion and tells Ye Peng at the top:
Dear Peng and Serina,
Can we wire the money to Justin ASAP?”
The next exhibit is E-238, and now we are moving to month of May 2008.
Here, we have Serina Wee telling Justin Herz:
Hi Justin,
Below is the transfer receipt for the USD 150,000 we have just wired to you.
Again, payments are made out to Justin Herz, and the three persons that invariably know about this will be Serina Wee, Tan Ye Peng and Kong Hee.
CHEW’S ROLE IN THE BONDS
The next exhibit is E-202. Serina Wee wrote to Eng Han and Tan Ye Peng on 14 April 2008.
“Hi Eng Han,
Xtron has completed the drawdown of the $13M initial bonds in March 2008.”
I get a loop-in because the moneys have been drawn.There are no more bonds to draw. So now I’m being called in to put in my thinking cap and to help structure a new set of bonds. She goes on to say:
“For the new additional bonds, we have removed $2M needed for the US movie as Dr Kong says to add in only if really going for it. So as of now, we only need $7M additional bonds in the following schedule.”
And this is typical of the information and instructions given to me. How much more bonds do they need? 7 million.
Now she asks me:
“Do we go ahead to prepare the new bond subscription agreement based on 7M?”
And that is my role: to get the new BSA done up. Then she gives me a broad breakdown of the quantum of the bond drawdown by months, where $2 million will be drawn down April 2008; $2 million on June 2008; $1 million July 2008; $1 million October 2008; and $1 million December 2008, somehow, the figures don’t fit in with the dates. But, basically,a total of $7 million to be drawn down.
And this really captures well when am I looped in? When they need me to do a new bond agreement, or to structure a new way to finance the Crossover. In this case, we were still thinking about financing through the through Xtron, and we did a new BSA based on the requirements that was told to me by Serina Wee or Tan Ye Peng.
And these are only broad figures, $7 million, break down into five months. I have no details of what it’s going to be spent on. On the first page, the bottom email, Serina Wee tells me and clarifies:
“I just double checked and realised that the $7M additional funds needed actually included USD 3M for the movie. Sorry about that. So actually I only need S$3M.”
So she gives me a revised instruction now. Then right at the top, she gives me a new breakdown, a drawdown schedule, whereby in October 2008, we need $2 million; March 2009, $1 million; December 2009, $1 million. Below that breakdown, she asks me:
“Pst Tan wants to know hypothetically what is the maximum that your side can set aside …”
Again, this is in relation to how much can City Harvest spare for the Crossover, because I am working on the property project as well and I have certain budgets that’s required for the property. And this is another angle where I’m being looped in, because they need to know how much funds from City Harvest can be available for the Crossover.
The next exhibit is E-86. Here, again, we have a different allocation of the monies that have been spent on Xtron, but now Tan Ye Peng is telling Kong Hee that, on top of the $13 million, they’re going to have more drawdowns, to make a total of 22 million bonds. The discussion is just between Tan Ye Peng and Kong Hee as to how this total of 22 million, of which 13 million has already been spent, is going to be allocated. This is at 6 July 2008. Really, the way Kong Hee and Tan Ye Peng work, I believe, was this, that anything that had to do with the US was in Kong Hee’s discretion and anything that had to do with Asia will be in Tan Ye Peng’s discretion, and that’s why you have items such as “Additional promotion expenses in Hong Kong, $306,000 Airport channels in China, management fees for Links Linkage, loan to Creative Productions.”
I believe all of this relates to the Asian side of the Crossover. But, basically, discretion, again, lies in the hands of the two men.
The next exhibit is E-210. Serina Wee wrote to tell me just before the Firna bonds were going to be drawn down for the first time on 23 August 2008:
“Hi, Eng Han,
Once the BSA is completed for Firna, we will need to draw down $10.8 million …”
So I get instructions from Serina; again, she gets it from Kong Hee and Tan Ye Peng. Then she tells me,the first drawdown, please tell Deutsche Bank to sendout $10.8 million to Firna, and my job is to get out that letter of authorisation, with the three CHC signatories, and to send out that amount. Then she gives a broad breakdown of 5.8 million short term loan to Xtron shareholders, that is basically for the Riverwalk deal, and it never happened as well as US$3.44 million for the English album budget, and we have no details butjust a broad number as to how much was going to be sentto Justin Herz, basically.
Below that, she says:
“If cant liquidate so much, point 3 & 4 are more urgent.”
Here, again, is an example of where they are coming to me because they know I maintain the portfolio of stocks and bonds, and that if there’s a need to, then I need to liquidate the stocks or the bonds, and that’s why she’s saying,
“If you can’t liquidate so much,points 3 & 4 are more urgent”;
in other words, she would not need that much money.
EXAMPLE 6 OF THE DISCRETION OF KONG HEE & Tan Ye Peng –KONG HEE’S ‘RETURN’ OF ROYALTIES (NO MONEY LOST TO HIM)
The next exhibit is E-262. We are moving forward in time and it is now 5 September 2008, when Firna bonds have already beendrawn down. Now Serina Wee is explaining to Kar Weng why Pastor Kong wants to return his royalties, which he’s earned. He wants to give it back to the church because there’s going to be related party issues, and if there’s related party issues, the amount of royalties he receives will be disclosed in City Harvest accounts. So Serina Wee now tells Kar Weng, on the second paragraph, the second-last line:
“But he wants to return the royalties and we have arranged for another way to compensate him. In essence he doesn’t lose the money.”
What happened really was that, in the end, Kong Hee returned the royalties that was paid to him from APL. Eventually, the money went back to the church, but he was compensated because some money from the Firna bond proceeds were paid to MPA and then MPA paid him back. And that’s why Serina Wee says, “In essence he doesn’t lose the money”. And that is described in E-217.
Serina Wee wrote:
I had budgeted for Wahju to return MPA S$674,700 but so far he has only given S$59,530 to MPA and the rest of the S$615,170 is stuck in UBS. MPA will be returning you S$222K royalities in Dec.If by then Wahju still can’t release the funds stuck in UBS, we will get his to return S$200,000 to MPA first from the balance in Firna bank account so we can still return you the S$222K.
Here she’s talking to Kong Hee, he will get his royalties in Dec. Discretion is in the hands of Kong Hee and Serina Wee as to how to use the Firna bond proceeds, and, furthermore, in this case to pay Kong Hee personally. And, of course, now money is going into an area that does not generate revenue.
EXAMPLE 7 OF THE DISCRETION OF KONG HEE & Tan Ye Peng –KONG’S DECISION TO PAY $200K TO LAWER WHO INTRODUCED JOHNNY WRIGHT
The next exhibit is E-492. E-492, we’re moving forward in time again, 6 October 2008. In the middle email,
Serina Wee wrote:
Hi Dr Kong,
FYI. We will proceed to execute and draw downthe bonds as it is likely BNI will approve …”
This was right at the start of the Firna bonds, and before these Firna bonds were finally completed, interms of legal documentation, Kong Hee was chasing us,
“Give me a date. When can it be ready? When can the bonds be drawn down?”
And the moment it was drawn down, the second paragraph says:
“It will take a few days for the money to go to Firna account, then for Firna to transfer to Ultimate Assets and then for them to transfer to Justin. I will get ultimate assets to transfer US200k to Justin first. Will need the updated budget from Justin to determine amount to send for the album funds.”
So right from the start of Firna bonds, full discretion is in the hands of Kong Hee, and the first batch is going out, US$200K, and I believe Kong Hee testified that this amount was to pay this lawyer Gary Stiffelman for helping to introduce the new producer, Johnny Wright, instead of Jean Wyclef, and he testified that because Johnny Wright was now helping them to save money in terms of fees for the producers, because Wyclef was asking for huge fees, and now Johnny Wright is better value for money, and Kong Hee exercised discretion and said that, because of this lawyer’s introduction,
“I’m going to pay him US$200k”.
But this will be an expense, your Honour, and it’s not going to generate revenue at all. And discretion is in his hands; he decides what to spend on and how much to spend. And then on top, he asks:
“When can the US$200k be sent?”
He asks Serina Wee. So it’s obvious. Once the bonds are ready, Kong Hee and Tan Ye Peng takes over: how much to draw down, when to draw down, where is the money going to be sent to, and what is it going to be spent on?
The next exhibit is E-802. E-802, page 11. On item (D), this is how the $5 million for PT Firna is going to be used, basically, and one of the breakdown items is item (D) S$674,700. He’s telling Wahju:
“Could you transfer this amount to the Multi-Purpose Account (MPA) that we are using to cover the US team’s expenses. MPA is used to cover travelling and other miscellaneous album related expenses for the team in USA.”
So I’m copied in this email, and, as far as I understand, if Xtron bond proceeds are being sent to MPA, it is for the purpose of covering album-related expenses, miscellaneous album-related expenses. Never did I think or suspect that monies would go to Kong Hee personally.
EXAMPLE 8 OF THE DISCRETION OF KONG HEE & Tan Ye Peng –THE BREAKDOWN OF MILLIONS OF DOLLARS WORTH OF BOND PROCEEDS
The next exhibit is E-214. E-214 on page 2, here, we have Serina Wee instructing Wahju Hanafi how the bond proceeds are going to be used. She copies me in. What is shown to me basically are items that are necessary usage for the album, but no detailed breakdowns.
Item 2: S$700,000 return of loan to a member in the church. This is the guy that I mentioned, the Dr Chan, from BBG, that I asked to borrow money from, and the understanding for me was that it was bridging finances as well for the album expenses.
Item 5: “S$2,200,000 to City Harvest’s Deutsche Bank account for the purchase of the New York apartment …” this is something that didn’t happen.
The next exhibit is E-216. E-216, we are now on 5 November 2008, and here we have Serina Wee again instructing Wahju Hanafi how the bond drawdown is going to be used. In this case, it’s $1 million bonds for Firna.
She breaks it down, under the section “Transfers from Firna”, into two items:
S$700,000 to Wahju’s DBS account;
S$45,000 to lawyers Rajah & Tann for the Firna bond-related matters
These two items are basically album-related expenses. We are coming to the end of this, your Honour.
Email exhibit E-222.
Here again is a schedule of drawdown, but only in broad numbers, where I’m copied in, and Sharon Tan as well. Again, the purpose is for me to know and as well to seek my input as to whether these amounts are possible or not, given the availability of funds in CHC.
The next email is E-223. We are on to 2 June 2009, and the same mode of operations still continues. Serina Wee again loops in Sharon and myself for only one reason: what is the fund available, is it enough for the bond draw down for the Crossover:
“Hi Sharon & EH, Below is the draw down schedule for Firna bonds I emailed you last week. We need up to $4M (May + June amount) drawn down by 15 June. Please advise if this is possible.”
Again, is this possible based on my input, which depends on how much is needed for the property and whether there are liquid bonds and stocks to liquidate.
The second-last email is E-295. There’s an attachment for Xtron minutes, 25 October 2008. So the minutes are dated 25 October 2008, but the email is dated 27 November 2009. It’s more than one year after of the dating of the minutes. That minute dated 25 October 2008, there are three items in there. It says the first item:
From 2006 to 2008 XPL has extended total loan of S$971,123.54 to Creative Productions Ltd….
The directors have discussed the recoverability of the loan and have decided to convert the loan into shareholding in Creative Productions Ltd.”
I believe this money was never recovered. It had to be written off. Point number 2:
“The directors noted that an amount of $200,399.12 was given to Ling’s Linkage in 2008 for Olympics promotion. Due to some dispute, there is no way to obtain any supporting documentation for the advance given as the parties involved have since been un-contactable. The directors discussed and approved to write off the amount owing by them.”
In other words, there was a loss of $200,000 given to Link’s Linkage. So we have one loss to Creative, one loss to Link’s Linkage, and the third loss, in the third item:
From 2006 to 2007, a total amount of S$5,198,310.60 has been incurred for the production cost of a music album. However, due to a change in plans, the directors noted that the costs incurred would not translate into an album but are to be treated as promotion costs. Thus the entire amount of deferred album expenditure is to be written off as advertising and publicity expenditure in the year 2008.
Here, your Honour, we have discretion being exercised by Kong Hee and Tan Ye Peng for monies that are spent years ago in 2006, 2007, 2008, totaling up about $6million over, minuted later on, in 25 October 2008, and then sent in an email, one year later, on 27 November 2009.
EXAMPLE 9 OF THE DISCRETION OF KONG HEE & TAN YE PENG –KONG’S DECISION TO SWITCH PRODUCER; MILLIONS SPENT WRITTEN OFF
There’s been full discretion given into the hands of Kong Hee and Tan Ye Peng, to the extent that a huge sum of money of $5 million has been spent on producing a music album in 2006 to 2007, and Kong Hee made a decision to write it off and to embark on a new producer, which was Jean Wyclef. I believe another $5 million was spent on Jean Wyclef, and that didn’t work out as well, and finally, Johnny Wright came into the picture. And these are things that I gather in the course of these proceedings. But the point is this, that how do you spend $5 million on a production of a music album and then don’t know where the songs are? How do you make a decision to write all it off totally and not even think about salvaging the songs or repackaging it? As far as I understand, when I questioned Kong Hee, not in court but off the court, as to what was wrong with David Foster? — because he said we started with David Foster — he said the music was found to be too white for Sun. Then they they discovered Jean Wyclef, who was a black, and finally they got Johnny Wright. But the man that has discretion to exercise control over the funds and the spending is really the one with the potential either to make money or to lose money. And that’s where the focus should bein this case of CBT. To me, it’s shocking to spend $5 million and then to say “Write it off”.
The initial budget was supposed to be only $13 million for the Crossover. That was what was told to me in 2007. In 2008, I’m told that the project has gotten bigger, we’ve got greater plans and more grand plans, we may do more than one album. But, actually, that was not the case. It was money has been spent, it didn’t work out, and they decided to write it off in 2009. And in the end, a judgment call has to be made, as I said: to continue with David Foster or not to continue? Is Jean Wyclef better than David Foster? When you drop Jean Wyclef, is Johnny Wright really worth it? Was Gary Stiffelman worth $200,000 of referral fees? That is where the decision is made, your Honour, to spend the money, and that’s where the potential to create loss is, and not in the structuring of the bonds. Because, as far as I’m concerned, my role was to provide a structure for the financing of the Crossover via City Harvest Church buying bonds in Xtron or in Firna.
In E-305, on the first page, “Summary of Funds Movement”, at the bottom “Expenses incurred”.
This is 24 November 2009, advance to JH Music US$4.5 million. This is basically the total paid to JH at 22 November 2009 and it comes from Firna bonds proceeds. It’s just one lump sum figure, and, basically, all this discretion lies in the hands of Kong Hee and Tan Ye Peng.
SUMMARY
In summary, your Honour, through the series of emails that I’ve produced, there are 21 emails that have been shown where the spending had been decided and controlled by Kong Hee, Tan Ye Peng and Serina Wee without myself being in the loop.