Was there any conspiracy to make a sham investment?
The main vital areas of dishonesty – Continue Part 2
We know in court that the money was used for the Crossover, which is a legitimate purpose of the church. That has not been in dispute, and that has, in fact, been admitted in the opening statement of all parties.
Sreeni: The prosecution’s answer is “Don’t believe them, because they are the accused”. You see, this has been the conundrum in criminal law since day one. If the accused says he is innocent they are all guilty, people say they are innocent. Innocent people also say they are innocent. And that’s why the law constantly reminds us that it is not the accused’s evidence that should be viewed with a high degree of skepticism; it is the prosecution’s evidence that has to be tested and weighed and examined and see whether it passes the test beyond reasonable doubt.
It is because the law knows that, for better or for worse, somehow when somebody is in the dock, if you’re not guilty, you wouldn’t be charged, somehow it works on all of us. I’m not accusing anybody because, having been a prosecutor myself, I also had that view. As I got older and wiser, I realized why you should not view evidence the way the prosecution has put it forward.”
So where is the dishonesty? Continue Part 2 – Chew Eng Han says, “I submit that the real sham, your Honour is not the bonds, it’s Sun’s albums and Sun’s career.“
The prosecution’s case theory against the 6 defendants.
The prosecution’s case theory is based on several planks. (I have borrowed the words from John Lam’s lawyer SC Tan. He mentioned about the six critical planks)
1. The first plank that the prosecution makes is that after the Roland Poon incident in January 2003, Pastor Kong had devised a strategy to conceal the church’s funding of the Crossover to a small circle of persons
The incorporation of Xtron on 18 June 2003 to manage the Crossover was part of that strategy.
The first backdrop – Strategy to distance the church from the Crossover Project.
2. The second plank is, with that backdrop, the prosecution says the Crossover Project was outsourced to Xtron, but Xtron was completely controlled by Pastor Kong and Pastor Tan and the Xtron directors were only figurehead and proxies for Pastor Kong and Pastor Tan.
3. The third essential plank was that the Xtron bond was entered into without any consideration whether it could be paid on maturity.
4. The fourth plank is about the responsibility for repayment under the Xtron Bond and Firna Bond. The prosecution says that the Bond Subscription Agreements were clearly not intended to create any real repayment obligations for Xtron or Firna.
5. The fifth plank is about Kong Hee, Tan Ye Peng and Serina Wee exercised control over the drawdowns of the bond with the assistance of Chew Eng Han.
6. The six plank is about several people, the Board, the Investment Committees, Executive Members and the auditors were kept ignorant that the bond was a sham.
John Lam – Charged for three charges (No round-tripping and falsification charges)
SC Tan: “John Lam not being part of the Crossover team and not being involved in planning and financing the Crossover.”
SC Tan: “John Lam is not part of the people who are able to unilaterally and artificially alter Xtron’s income.”
SC Tan: “John Lam is not part of the determination of the terms of the bond, but he’s supposed to know about the fact that it is these co-conspirators that determine the bond.”
SC Tan: “When John Lam is involved in any emails, it’s for a specific purpose, and he does not know the full picture and is not focused on the full picture.”
SC Tan: “John Lam is like a Foong Daw Ching, like a board member, he doesn’t know the facts which would constitute these bonds being shams. It’s now the close of a very long trial. Now I do say the prosecution needs to join those dots by inexorable and irresistible interferences. It can’t do that, because John Lam is not guilty of any of the three charges, sir.”
Kong Hee – Charged for three charges (No round-tripping and falsification charges)
Counsel Chan: “… there is no dishonesty here. …”
Counsel Chan: “The evidence shows that if we are going to talk about Pastor Kong’s knowledge, that state of mind, prior to the execution of the bond transactions, was that they were legally entitled to use the Building Funds to invest in the Bond Subscription Agreement.”
Counsel Chan: “… No red flags were circulated back to Pastor Kong to say, “Pastor, we can’t do this. We are not legally entitled to do so. The auditors have said ‘no’, the church’s lawyers have said ‘no’”.”
Counsel Chan: “Pastor Kong’s mind the church’s lawyers are to help with ensuring that they are good stewards of the church’s money, especially with ‘Sun’s crossing over to the US’. The scope of the responsibility was to handle contracts, money and media. These were the people, these were the advisers that Pastor Kong said, ‘If this is the transaction you want to do with the church’s money, go check with those people’, people whose interests were to protect the church.”
Counsel Chan: “… there is no evidence that when Pastor Kong said, ‘Check with the lawyers, the church’s lawyers’, that he knew and expected the lawyers to be misled.”
Counsel Chan: “There’s actually no evidence that Pastor Kong ever intended to deceive the church’s auditors.”
Counsel Chan: “What the prosecution has done for this is quite interesting, and now I go back to my earlier reference to the term ‘responsible’. Somewhat perversely, in my submission, the prosecution argues that because Pastor Kong was committed to ensuring that Xtron and Firna would meet their obligation to repay, that somehow means that he did not intend for there to be genuine legal obligations. That’s the prosecution’s argument, and it’s based on a word substitution, such that the prosecution makes arguments like, “We have highlighted evidence that it was within Mr Chew’s knowledge that the responsibility for payment did not fall on the bond issuers.”
So they have done the word “substitution” here, your Honour, the responsibility for payment. But taken to its logical conclusion, that responsibility for repayment arises because of a desire to uphold an obligation to repay. The prosecution tries to argue that when one party is the one that is trying to ensure that the other party meets those obligations, somehow that factual scenario must necessarily be excluded from the definition of the term ‘genuine legal obligation’, and there’s no basis for this. There is no rational for this. We have made the point in our submissions that, if anything, this even more demonstrates the intention and the commitment to ensuring that the Bond Subscription Agreement obligations are met.”
Counsel Chan: “Putting all of that together, looking at the actual evidence before this court, our submission is that it is unfair to say that Pastor Kong and the other accused were dishonest. It is equally unfair to say that they intended to enter into anything that could be called a sham transaction. Under the circumstances, your Honour, it would be unfair to convict Pastor Kong and the other co-accused of the charges concerning the subscription to the bonds.”
Sharon Tan – Charged for seven charges (round-tripping and falsification charges)
Counsel Seah: “Your Honour will have seen in our respective submissions quite a long exchange on the issues of dominion and agency, and your Honour would know that our case is that if legal dominion is not made out, the CBT charges against Ms Tan must fall. However, as I said, this has been canvassed at great length in both our submissions … I will not addressing your Honour on those issues in my orals, but I do put a marker down to say that we stand by our position, and these issues, dominion and agency, are a key part of our case.”
Motive has always been a key part of the courts consideration when it comes to criminal jurisprudence.
First Point – There is no motive for Sharon to enter into a criminal conspiracy, together with the co-accused, to hide the bonds.
Counsel Seah: “Ms Tan had no reason whatsoever to enter into illegal transactions that would cause loss to the church. On the one hand, it is not disputed that Ms Tan did not stand to gain from these transactions. She did not take a cut from the proceeds. She was not going to get pay rise or an extra bonus for what she did. This is not even a case like the Ren Ci case where the money would be funneled to one of Ms Tan’s associates.”
Second Point- Ms Tan’s mindset.
Counsel Seah: “Ms Tan no reason at all to believe that the transactions that she is now being charged for were illegitimate.”
Counsel Seah: “As I go through these key points of evidence, I will be asking your Honour to consider Ms Tan’s behavior, Ms Tan’s perspective, and to ask whether her reactions and her responses are one of a person who is involved in a criminal conspiracy or, instead, these were the perspective and responses for a person who was innocent and who had thought the church was engaging in proper, above-board transactions.”
Counsel Seah: “All of these pieces of evidence point to the conclusion that Ms Tan clearly thought Mr Sim wanted the Xtron bonds off the books and that he had concerns about the Firna bonds. To that, I would add that Mr Chew, who was not at the meeting, and did not receive the email from Ms Tan, also testified on the stand that, shortly after the meeting, Ms Tan called him and told him the same thing separately: Mr Sim wanted the bonds off the books. And this is why the church leaders then started talking about how to clear the bonds…. So that was Ms Tan’s mindset following the meeting of 9 April 2009.”
Counsel Seah: “The evidence up to this point certainly does not suggest that she entered into a conspiracy to cover up the sham bonds or to defraud the auditors.”
Counsel Seah: “Your Honour, Ms Tan, as you have seen from the stand, is just a humble woman trying to do her job to the best of her ability. It would be a grave injustice to find her guilty for the crime she has been accused of committing. On her behalf, I humbly ask for full acquittal. “
Court Evidence BB-89a
Counsel Seah: She said she was not worried because the transactions were sham. When one takes Ms Tan’s explanation and maps that against the evidence, I would say it becomes very clear that BB-89s cannot be read in the way that the prosecution is inviting your Honour. I will show your Honour why.
There are three key points in BB-89a…. there are three that I want to stress in today’s oral submissions. These are the points that the prosecution did not bring Ms Tan to in cross-examination, they are points that only emerged in re-examination, when the full picture was set out. The first point, your Honour, the exchange between Mr Chew and Ms Tan on his redemption plan first took place after the board meeting in July 2009. By this time, the board had already approved an embryonic plan involving advance rental being used to aid the church to purchase a property and as well to redeem the Xtron and Firna bonds……
Her question was really whether Mr Sim would look through the whole thing and then raise Related Party Transactions(RPT) questions again, and that would bring them back to square one, exactly with where they were in April.
My second point, and, your Honour, this is really the key point. Ms Tan then queried Mr Chew on whether he had spoken to Ms Christiana Ng of Rajah & Tann about the redemption plan. She specifically stated in BB-89 that Pastor Tan was going to bring up this plan to the board again and that it would be good to have Ms Ng’s advice by then. Several days after that, she sent a further message to Mr Chew to remind him that Ms Ng’s views were needed for the board meeting. When she was asked about this, Ms Tan testified that it was important for her that Ms Ng’s advice was sought and given to Mr Chew before the plan was presented to the board. She said this was because Pastor Tan wanted to make sure that the entire plan was legal. Again, your Honour, this is not the behavior of someone who is in criminal conspiracy; certainly not the behavior of someone who knew that what she was doing was illegal and wanted to defraud the church’s auditors. I will ask your Honour to bear in mind that BB-89 is a private BB chat, it was something private between Ms Tan and Mr Chew, and, at that time, neither of them, I dare say, would have imagined that it would one day be splashed across the projector screen and scrutinized in a criminal trial.
…..
Counsel Seah: “If I wanted to defraud the company’s auditors, a company’s auditors with a fraudulent scheme, the last thing I would want to do is go to the company’s lawyers and present the scheme to them and say, ‘Hey, is this okay? It is legal?’ The evidence here just does not fit with the prosecution’s case theory of a criminal conspiracy. It doesn’t fit with their reading of BB-89.”
Counsel Seah: ”I would submit that, far from suggesting that she had a guilty mind, BB-89, when cited in the proper context of the evidence, actually shows that she thought the transactions were all perfectly above board.”
Sharon’s handwritten notes
Counsel Seah: “If your Honour will permit me, let me first deal with the elephant in the room, which is the question of whether Ms Tan’s handwritten notes were indeed accurate contemporaneous records of what took place in the meetings. The prosecution, of course, says that, no, they were not. They point out the fact that the notes do not fully accord with the official minutes. In their closing submissions, they quibble and I say for the first time, with the ordering of page numbers in the July set of minutes. Your Honour would remember that I made an objection to that in the course of cross-examination. We say that the evidence is abundantly clear that the notes were contemporaneous, handwritten notes of what went on in the meeting. Your Honur has seen my submissions.”
Counsel Seah: Firstly, it is not disputed that Ms Tan had a practice of taking down notes before transcribing them into the official minutes. At trial, we saw numerous examples of this, spanning the years where she was minute-taker.
The next is key, your Honour I think this is a most important thing is that there are portions in the handwritten notes for both the July and September meetings that precisely met what is recorded in the official minutes. Not everything, but there clearly are portions. I say this is clear evidence that these must be contemporaneous notes. The third key point in this: all this is further corroborated by the fact that the people who were present at the meeting, Ms Tan, Mr Chew, Pastor Tan and Mr John Lam, all remember key portions of the handwritten notes being presented to and discussed by the board.
The truth is there is no other compelling theory to explain the presence of these handwritten sheets other than the most obvious conclusion: that they are contemporaneous notes of these meetings. Your Honour, these are not documents that Ms Tan would have cooked up in a Machiavellian fashion to mislead the CAD. They were seized from her when the CAD conducted their surprise multi-pronged raid. What your Honour sees in court today are the documents set out in exactly the same form and order that they were in when they were seized.
……
SC Screeni: “We then come to the very interesting assertion by the prosecution, “You didn’t tell the board because it’s not in the minutes”. And when Sharon Tan’s counsel produced the handwritten notes of the meeting of the minutes, we thought, slam dunk. I mean, there it is, it’s in writing, it shows two things. The minutes are not complete, because there are things in the handwritten notes which are not in the minutes, and the minutes corroborate a lot of what the accused persons have said…. The key fact is those handwritten notes were in the possession of the CAD, they had been seized from the very beginning. So actually, when the prosecution ran its case up to the no case submission on the argument that, “See, it’s not in the minutes and therefore it doesn’t exist”, actually, that argument had an intrinsic flaw, but of course, we had to wait for your Honour to call the defence before Sharon Tan could go on the stand and explain it. And those documents were referred to.”
SOF T10 and T11
Counsel Seah: “The prosecution says that the contents of the official minutes of the July and September meetings that recorded the ARLA and T10 and 11 were backdated. They say, “Look, there must be a dishonest intention behind backdating this”, taking facts and figures that happened later and then plugging that back in July and September. In response, your Honour, my simple submission is this: backdating may be something the prosecution is uncomfortable with. In fact, it may even be something which disturbs your Honour, because this was an issue that made me very uncomfortable at first viewing. However, the question is this. Is the backdating a sign of something illegal happening in the background or does the discomfit that we have with Ms Tan’s practice arise from the fact that the backdating shows a failure or even a blatant disregard of good corporate governance? These are two entirely different issues and should not be confused.”
Counsel Seah: “The evidence further shows that T10 and T11 of the SOF were also presented to the board as part of the regular monthly investment updates at this same October meeting. Your Honour would remember that the $11.4 million that was made up of T10 and T11 were clearly set out in the investment schedules and these schedules were circulated to all the board members and discussed. Ms Tan’s evidence is that the board was informed about these transactions at the October meeting and gave their approval……
I will be the first to say that this does not mean that it was not a mistake to carry out the transactions first and then to go to the board for approval later. What I will say, however, is on the facts, this is not criminal behavior. It is certainly not misappropriation and it cannot be called CBT.
Chew Eng Han - Charged for ten charges
After two years in the trial, I think I have finally come to almost a full understand of the prosecution’s case. It has to do with evidence of securities or bonds which are deemed to be shams by virtue of certain criteria which the prosecution has set and deemed to be the right criteria.
Based on those criteria, they make a case that, due to the actions of the accused, that the bonds are shams, and, therefore, if the bonds are shams, it shows that the accused had a dishonest mindset when they were involved in those bonds.
The prosecution also relies on evidence of non-disclosure as evidence that we knew we were doing something wrong, the prosecution submits: “Many parts of CEH’s testimony in court constitutes a confession under this approach since the facts in his testimony taken together suggest an inference that he committed the offence charged against him.”
My confession is that I have not passed the compliance test of the prosecutor because the prosecutor has laid down many rules defining how investment should be conducted. They have deemed certain structures to be indicative of dishonesty. Based on those criteria, I fail.
They have relied on the fact that there was minimum or total non-disclosure in certain cases as evidence of dishonesty. But the question, your Honour, are there other possible reasons, and what does the evidence show?
The evidence shows that, right from the beginning in 2002, the leadership, which is Kong Hee, has a style of non-disclosure.
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The Roland Poon incident, and we had a weekend service after the incident, and we see how, in the video, the members are applauding him, encouraging the leadership, the Crossover team, and Kong Hee said, “I hope we never have to go through this again”.
In other words, no more of this being made a public spectacle. That’s the basis of my frame of mind, your Honour. Why did I go along with Kong Hee not to disclose to the EM’s about the Riverwalk loan? Because that would reveal the Crossover. Other plausible reasons there are, and the evidence is compelling.
I told Christina Ng [lawyer] that this discreet strategy was deliberate, and she penned it down in the board resolution. How do I go and tell the lawyer, “Hey, we are going to keep all this secret because we are doing something illegal”? Obviously, I had a pure frame of mind, your Honour, when I went along with Kong Hee’s strategy.
In E-322, the Charlie Lay case, I said keep it in a small circle because we want to avoid baseless accusations. The word “baseless” already implies that we are not doing anything dishonest.
In my submissions, I made a distinction between interim solutions and solutions that extinguish the debt, which the prosecutor claims is irrelevant but I claim is totally relevant.
The interim solutions are things like the ABSA and the ARLA. The solutions that extinguish debt would include the adjustment of retainer as well a any third-party income that Xtron would earn.
The difference is this: the interim solution merely transforms one debt into another debt, the liability remains. The second solution to extinguish debt removes the debt, it removes any scrutiny by the auditor.
One shows expectation for album sales profits to repay the bonds, as in interim solutions the other shows perhaps less dependence on the album sales. There is a big difference, your Honour.
I’m speaking from my own frame of mind. The question about were there obligations on the bonds, this is important because the bonds need to be repaid, otherwise it’s a misappropriation and there’s dishonesty to cause wrongful loss. The key to determine whether the bond is an investment, there are just two factors. Is there existence of a legal obligation, and, secondly, what is the probability of satisfying those obligations? I submit, your Honour, the second part, the probability of satisfying obligations, is the mens rea of each of the accused. It goes right into the heart, right into the core of the mind.
The entities have the obligation, Xtron and Firna. The separate question is: who takes all the responsibility to satisfy the obligation? The prosecution confuses the two, whether deliberately or not. If other people besides the entities directors take on the responsibility, that doesn’t mean there’s no obligation.
Your Honour, I’m on bail. I have a legal obligation to put bail money, but the responsibility has gone to my bailor. I have a legal obligation to pay Merrill fees, but someone else has taken on the responsibility. I think this is just common sense, your Honour.
The next section: expectation for profits.
I don’t know about the other accused, but, for me, my mens rea revolves around album profits, from start to end. More than just believing in the album profits, the other question which is important is what is the basis for believing that there will be profits? This goes right, again, into the core of the mind.
This is how mind was formed, your Honour, from 2002, CH-95, page 51, Kong Hee says that 231,000 deferred expenditure is being spent, but don’t worry, it will be recouped from album sales.
In E-92, 2 May2003, I talk about how Wahju, myself and Kong Hee would lend money to Xtron and the album will churn revenue to repay back.
We go on in time, 16 May 2003, E-306, Wahju’s Building Fund was reversed and he was told that in the next year, 2004, Xtron would return the investment.
In CH-20, which was the 27 April 2003 EGM, page 79, Kong Hee told the church, the EMs, 150,000 CDs were sold within three months and that is double of the top performing groups, 5566.
In E-189, we go to December 2006, Kong Hee talks to me about a two-year cycle to recoup album sales. He asked me about the probability of losing money, what if we put in $8m and get back $1m. I countered him with my worst case scenario is losing $4m out of $8m, and I said that that is a remote possibility.
E-197, 4 July 2007, and that’s a few hours after the contentious E-1, which Serina Wee said 200,000 CDs. Hours later, I said, after two to three years, I will get other funds to buy over the bonds. How do I get people to buy over bonds where there is no hope of recovery?
In A-62, 15 March 2007, there was forecast for 1.5 million copies.
As we go around May or June 2007, I approached Citic Ka Wah for financing, and, in the process of doing that, we have to talk about the album sales. If I believe that it is okay for a bank to lend money to Xtron, why would it be wrong for the church to lend money? The bank has even more stringent due diligence.
So on 3 July 2007, when E-1 was written, the prosecution claims that this is the only valid expectation, because, before that, the projections were 1.5 million copies was too long, too far away, 15 March 2007. Your Honour, after the bonds were issued, E-395, 6 November 2007, Tan Ye Peng said $3million copies. With a surplus after repaying the bonds, a surplus of 12.7 million.
So is the prosecution saying that it went from 1.5million in March 2007 to 200,000 copies in July 2007, and then went back up in November 2007 to 3million copies. So that is the Xtron bonds.
The Firna bonds, 25 July 2008, in E-152, an email was sent to me about $13million being expended, $18 million more bonds to be issued, and the table that Serina Wee displayed showed that the bonds can be repaid. All $13 and $18 million.
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In 4D-34, that is a file of the projections for the album sales saved in my thumb drive on 31 July 2008, it shows a surplus of $5.9million after repaying both bonds.
In E-770, 22 October 2008, I wrote the email, I said that as long as we hold the bonds to maturity, the impairment losses will be recovered.
In the same year, 2008, I was dealing with Standard Chartered Bank to get a loan for Riverwalk. They will look at the books, they see this deferred expenditure, they see the bonds.
As we go to 2009, when I start to deal with DBS and Standard Chartered to get financing from the bank for Xtron to purchase the property, when we open our books, they will see the same thing: Xtron’s deferred expenditure on the Crossover. More than that, they will be seeing, because by then we have the round-tripping, that Xtron has used the money, the ARLA, to buy the bonds. They will see that Xtron owes a liability of $31million for the ARLA.
Are these shams? Do I go around opening up the shams to banks?
BB-88, page 155, 20 May 2010, 11 days before the CAD raid, I planned for a fund that is going to be administered by APEX, and I said that this fund can also invest into the Crossover. I was still expecting the album to succeed.
BB-80, 28 May 2010, three days before the CAD raid, I was encouraging Sun, I said, “Sun, you have thousands of fans in and outside of church”. I thought she was a successful pop star.
Lastly, when we were securing funds to repay the ARLA, the Firna bonds acted as collateral to Pak Roy, the President of Lippo Group. How to use sham bonds as collateral.
The next issue is redemption within the bond expiry date crucial for an investment?
The prosecution is redefining investment rules. If their rule stands, the consequence on the financial industry will be disastrous. No one would ever issue any bonds, because nobody can be sure they can repay the bond on time. State Street Bank, which I’ve showed, couldn’t repay the bond; they had to issue new bonds to repay the old ones. Charles Schwab swapped old bonds with new bonds. The Perpetual bonds has an option after five years for the issuer to roll it again, because they are not sure, after five years, will the money come back.
The prosecutor takes issue with me that I was waiting for album profits to come in and didn’t care about legal obligations and that if there’s any delay in album profits then I’ll plan to come up with interim solutions until the profits came in. That’s right, it really describes my frame of mind. And what’s wrong with that, your Honour? If the album is delayed, does it make it less of an investment? Do we have to abide by the two rules, otherwise we are found dishonest?
I have been ten years in the market, in financial markets, and I have never heard a rule like this.
Were the bonds authorized or not? I submit that it started authorized and it never changed. It started authorized because in 2002, Sum was mandated to Crossover, Kong Hee went out to negotiate and sign contracts and bind the church. The board didn’t hesitate to ratify it and gave him further power to bind the church. It is authorized.
What changed it was the Roland Poon incident, where Kong Hee decided that he doesn’t want the church to fund it directly. It’s not that he can’t; he doesn’t want. And he gave his reasons for it.
The prosecution constantly uses post-bond issuance events as evidence of the state of mind at the point of its inception, and it’s wrong to do this. Unless I had a crystal ball and I knew at the beginning that we need to do the ABSA[Amended Bond Subscriptions Agreement], that we need to switch to UA, that we need to do ARLA, so as to hide the bonds in 2009, then, after we did the ARLA, that somehow the church decided to purchase it directly, and there’s no more justification for ARLA and then we have to scramble for funds to repay it.
That’s what the prosecution has been doing, taking events which happened one, two, three years later, and saying, “There you are, in 2007, you knew the bonds couldn’t be repaid. You knew it was a sham.”
The sham bond theory cannot work. It’s an incredible story, incredible theory. Note of the shames which I devised could last for even six months, your Honour. If the Xtron bond is meant to be a sham, what was I doing putting the Crossover into Xtron that was audited by the auditors? They would see there’s a different expenditure and it will be constantly under scrutiny.
There’s no escaping. Not that I’m an expert in shams, but I think the basic rule in shams is that you use a BVI. You keep the BVI as far away from the auditors as possible. So in 2007, I came up with the Xtron bond sham. In 2008, I realized there is big trouble, we can’t repay it. So I camouflage it into the ABSA. I thought that solves the problem. In 2009, the auditors start to scrutinize and pressure John Lam, Tan Ye Peng and Sharon Tan and we have to hide again and now I’ve got to do the ARLA. It seems like every year, the sham breaks down.
With my 25, 30 years of experience, I think it is really shameful for me to put a time bomb in the hands of all my co-accused. It’s a matter of time, your Honour, before the scrutiny of the impairment of the bonds, the valuation of the bonds, starts to show whether it is a real investment of it is a sham.
Tan Ye Peng – Charged for ten charges
SC Screeni: “This leads me to a general point: it has never been the 5th defendant’s case [Tan Ye Peng] that Xtron is absolutely distant and independent. Your Honour will recall the issue of ‘full control’ and ‘some control’..”
SC Screeni: “We have clear evidence that she[lawyer] knew the money came from the Building Fund. So, if we analyse it, it means Christina Ng knew that the money came from the Building Fund as an investment into bonds, which proceeds were to be used for Sun Ho’s music career, so she knew the use of the money from the Building Funds. If it’s an unauthorized use, then she could have sad, ‘It’s unauthorized’. Let’s assume it is unauthorized, but she didn’t say. It doesn’t matter, your Honour. But the accused persons are entitled to believe and rely on the fact that if my lawyer knows I’m taking Building Fund money, subscribing Xtron bonds and I’m using the prosecution words ‘and the lawyer is under the impression it used for Crossover’, which the prosecution says is synonymous with Sun Ho’s music career, then the lawyers knew everything they needed to for the first three charges…..”
SC Screeni: “..Your Honour is faced with is whether your Honour is satisfied beyond reasonable doubt that the accused persons, especially the 5th accused, went about doing what they did with a dishonest intent to cause loss to their church. If you look at what they did prior to the bonds, the manner in which they did the bonds, their conduct after that in trying to get the money back in, if we look at the emails they exchanged with each other contemporaneously, actively discussing cashflow of Xtron, whether the revenue of Xtron can be increased to pay the money back, how the bonds can be retired and restructured, they were not talking about something that was sham.”
Serina Wee – Charged for ten charges
SC Maniam: Point one. I made the point that the prosecution needs a finding of sham for each of the 10 charge that appears from their reply. Their explanation is that sham is the basis of them saying that the Xtron bonds, the Firna bonds and the two tranches of SOF were not investments, and that’s why the prosecution says they were unauthorized uses of the Building Fund, and they say that the ALRA was not an advance rental agreement, and, likewise, that was not an authorized use of the Building Fund.
For the falsification charges, your Honour has heard much, but as I understand the prosecution, they are saying if the transactions were a sham, then any entity which said “bonds” or “repayment of bonds” or “offset against advance rental”, it’s a false entry because the transactions were a sham. You can’t call a dog a dog if it’s a cat. So anything that says “dog” is false. And, from there, they say that brings with it intention to deceive Mr Sim.
Your Honour, what I see as crucial to the whole of the prosecution’s case is, first, the legal concept of “sham” and second, whether the facts justify a finding beyond reasonable doubt that each of the relevant transactions was a sham. Your Honour, the prosecution has said this really is dependent on the accuseds’ mens rea. I think, with respect, your Honour, that is too simplistic. It’s not just a mens rea point; it’s an actus rea point. The prosecution needs it to say that the transactions were unauthorized.
SC Maniam: I pause there just to say that this is a very odd conspiracy. Normally, people conspire to escape liability. Here, the prosecution is saying find a common intention to take on liability. Take on liability so that Xtron is not liable, Firna is not liable, Wahju, he’s just a multimillionaire, he’s not liable. Actually, he is borrowing money from Serina, who is the finance manager of the church. To compound that factual matrix, they say after Mr Sim whatever he said on 9 April 2009, Sharon decided that she would come in and she, together with Pastor Tan, Eng Han and Serina, would then sort out the earlier liability by taking on for themselves a greater sum.
Unfortunately, Serina is in both groups, so her life is, first, “I take on personal liability for $11m then I add another $13m, and then I swap that out by taking on $40, $40 million under the ALRA.”
What is odd about this is not just the sheer unbelievability of it. I ask your Honour to ask, where is Pastor Kong when it comes to the redemption?
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Your Honour has heard no evidence that anybody went to Pastor Kong and said, ‘Pastor Kong, remember, these so-called bonds which we actually bear personal liability for, all $24m worth or so, Mr Sim is about to uncover that they are bogus, but don’t worry, Sharon will take your place and take on the liability for herself.’ But that is the prosecution’s case, your Honour.
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But Pastor Kong’s absence is peculiar, because, your Honour, if there were a common intention between Pastor Kong, Pastor Tan, Eng Han and Serina that we would share in the liability under the so-called Xtron bonds and Firna bonds, why does nobody tell him that soon he’s not going to be liable any more and Sharon is going to take his place? Why does nobody tell him that ‘Mr Sim is on the war path, or at least he is a bloodhound, he is sniffing around, he is going to find you out, but, don’t worry, we’ll take care of you’?
When your Honour reviews the evidence, I would ask your Honur to look at the inherent probabilities of what is going on. How are people acting? What are they saying to each other? Everything which is said to EMs, the prosecution wil say, “Well, it’s largely a lie”, or to the board, or to the auditors or to the lawyers.
But what about things the accused are saying to each other? Do they lie to each other all the time? Do they lie to themselves all the time? Every time they say “invest”, that they don’t mean invest, they say ‘bonds’, they don’t mean bonds, they say “Xtron”, they don’t mean Xtron…..
SC Maniam: Your Honour, we say “if” means if. It shows that 200,000 units was not something which the accused knew was all that the album would sell. That’s the prosecution’s case: you knew it would only sell 200,0000 units, you went ahead anyway. This says, “That’s what we have budgeted, if we get that, if we sell that”.
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The prosecution’s case is the accused didn’t want Xtron to be liable at all, they wanted to take on for themselves the liability of repaying the money to the church with interest. Together with that, they say the accused knew they would only sell 200,000 units. From there it follows the accused knew they would lose more than $10 million out of the $13 million which they were taking, and that they would need 10 years in order to put the money back. It’s not human nature to say, “I know we are going to lose more than $10 million out of $13 million, and that’s why I want to be personally liable and not this company”.
SC Maniam: We repeat, your Honour, that intention to cause wrongful loss is not the same as knowledge that the use is wrongful. There are really two questions. It is necessary but not sufficient to know that the use is wrongful, because if you think that you are entitled, you are legally entitled to do what you did, that’s not going to lead to a finding of dishonesty.
But I do repeat my submissions that the illustration (d) to section 405 of the Penal Code and the case of Navaratnam show that it is not enough just to ask: did the accused know they were doing something wrong?
The court needs also to ask: did they intend wrongful loss to the church?
The prosecution may say, “But the explanation to section 403 says “Misappropriation for time is enough’”. Your Honour, I just looked at that before I stood up, and the explanation to section 403 says “Dishonest misappropriation“. It doesn’t say “Misappropriation“, it says “Dishonest misappropriation for time is misappropriation enough”. I will ask your Honour, when your Honour considers the explanation to section 403, read that together with illustration (d) to section 405. What illustration (d) to section 405 says is that, (a) “Not dishonestly but in good faith believing it will be more for Z’s advantage to hold shares in the bank X, disobeys Z’s direction.
I have emphasised that word “disobeys” means disobeys. It doesn’t mean made a mistake. It means, in that example, the trustee knew he was breaching his trust. Why did he do it? Because he believed it was better for the settlor or beneficiary if he did so, rather than sticking to the terms of the trust. The prosecution has staunchly refused to engage on this. They say all they have to show is that people knew that what they were doing is wrong, and from there, it follows either inevitably or strongly that there’s an intention to cause wrongful loss. But your Honour will see, in this illustration, money moves. Money moves into unauthorised investments.
The prosecution cannot just point to section 403 and say “Aha, there is sufficient misappropriation.” Does A know that the money is moving? Yes. Does he intend that the money moves? Yes. Is this movement loss? They say it is. Did they know he was doing something wrong? Yes, he did. But in that example the statute says he has not committed CBT because he did not act dishonestly.
Foong Daw Ching
The prosecution’s point is that, Foong Daw Ching did not know the full picture; nobody told him that Tan Ye Peng and Kong Hee controlled Xtron; nobody told him that the bond could not be paid from the outset.
Counsel Chan: “..through Mr Foong Daw Ching, all transactions will be critically reviewed.”
Counsel Chan: “At no point has it been demonstrated how that is something which was intended to be kept from Baker Tilly, where Pastor Kong directed that the transactions be cleared with them, and, as I have said, we have also set out the sheer scope of what Baker Tilly was, in fact, aware of at all material time, including before these management representation letters, from the years 2007 to 2009 were sent.”
Eng Han: “Foong Daw Ching, himself, in E-267, was asked the question, when the members get to see the accounts, the financial statements of the church, do they have a right to ask for more details? We were open with Foong Daw Ching, that we don’t ever want or, rather, Kong Hee doesn’t want the EMs to get too many details because, like what we have testified in court, anything that goes to the EMs goes quickly out to the public.”
Eng Han: “What does Foong Daw Ching really know? Your Honour, this issue of what did we tell Foong Daw Ching is important for me, not because I was relying on him for his legal opinion. It is important because it reflects my state of mind about my intention for the bonds. Did I think they were shams and unauthorized or did I know they were authorized? They are good investments. Foong Daw Ching knew we withdrew Building Fund and channeled Building Fund to the Crossover was moved to CHPL from the church.
In E-189, when we talk about Shamgar project, E-197 tell us that, actually, when I talked to Foong, I told him the whole plan: the church is going to use advance rental to fund the Crossover through two vehicles, UEPL and XPL. How would he not know that there’s a closer relationship and there’s some form of control?
Even before the bonds started, he knew. In E-267, we discussed the impairment for giving advance rental to Xtron. In E-269, we told him that 20 months of advance rental was given for the Crossover.
In E-325, we told him that we wanted to avoid disclosure, and that’s how the whole topic about the church appointing Siow Ngea to be on the board of Xtron arose. We told him the issue of control and disclosure, and what the members want; the members want control.
We told Foong Daw Ching, the members want control, Siow Ngea will promise not to take any profits, and Foong Daw Chng tells us, “Okay, make it verbal; don’t write it dow”. Why? Because of disclosure…
Foong Daw Ching talked to the Commissioner of Charities about how churches do things differently and how, if they were required to disclose everything, they cannot achieve their objectives. This shows we were totally open with him.
Did Foong Daw Ching know about the switch from Xtron to UA[Ultimate Asset[? He knew because Kong Hee told me in BB-21 to let Foong Daw Ching vet the profit-sharing agreement between Xtron and UA. How do we let him se the agreement when he doesn’t know that Xtron is funding it, and it is going to be moved over to UA?”
SC Screeni: “Most importantly and this will be a critical finding of fact in this case your Honour will have to make detail findings on Foong Daw Ching’s evidence. Having seen and heard him, having seen and heard his answers, considering the documents and propositions that were put in him and how these are consistent with , contemporaneous records, and then your Honour has to decide two questions; Did Foong Daw Ching know what was going on? and did the people, the accused who saw him, have adequate reasons for relying upon him?
Sim Guan Seng
Counsel Seah: “At the 9 April meeting, Mr Sim had issues with the bonds. Ms Tan’s impression was that he wanted the Xtron bond to be removed, he had difficulties valuing the Firna bonds.”
Eng Han: “I have no way of finding out what exactly happened between Sim Guan Seng and my co-accused. I have no direct contact. The prosecutor needs to prove that I alone, that Tan Ye Peng and Sharon Tan and Serina Wee cooked up excuse that Sim Guan Seng wanted the bonds off the books. They need to prove that, if in fact that was the case. But when I look at the evidence, it doesn’t look like that case.”
SC Screeni: “..But Mr Sim actually said it is quite far to say that the people who attended the meeting could have got that impression. [Mr Sim wanted the Xtron bonds off the books because of valuation issues.]
Board Members
SC Screeni: “Your Honour, this is a question the prosecution must answer. Why have they not called any board members? They will not answer that question. I’m hoping that by putting it as a dare, some attempt will be made to answer it, because when that question is answered, when my learned friend takes her two hours, we will then be able, in the last part of submission, to deal with the burden of proof on the relevant facts and whether that burden has been adequately discharged.”
Xtron Directors
The prosecution’s point is Xtron and the directors were just puppets or nominees.
SC Screeni: “The more fundamental point is this: What is your Honour to do with the evidence of Choong Kar Weng, Koh Siow Ngea and Wahju? ……..my point is, your Honour can’t do the third, because either the evidence is accepted or its’ not accepted. If it’s not accepted, then tehre’s a vacuum. The questions, the suggestions, the construction put forward by the prosecution isn’t evidence. So your Honour has only got two choices: either except what they say or don’t accept what they say. They were not impeached, and I have cited the case law in my submissions. They were prosecution witnesses. They were put forth on the stand by the prosecution, and, if your Honour looks at the transcript, there were cross-examined effectively by the prosecution…. There was no doubt that they took the view that the accused shouldn’t be charged. We come back to bread and butter of a criminal trial. That is the evidence. Now, if a prosecution witness has given that as evidence, and that witness has not been undermined, your Honour has to take it as part of the prosecution’s case. And the moment that happens, there’s a huge gap in the prosecution’s case.”
Regarding section 79 to be addressed on Monday morning, September 14.
Counsel Chan representing Kong Hee: “..my submission is that there is no dishonesty here. Applying the language of the law to the details of the facts, there is simply no dishonesty. If we talk about this knowledge, his knowledge does not include any knowledge prior to the investments that those investments cannot be done; that they are illegal or illegitimate.
Judge: “Could I pause here, just to clarify one point with you. In your submission, I don’t believe there’s been any express reference made to section 79 of the Penal Code. I take it you are not relying on that exception in the Penal Code.”
Counsel Chan representing Kong Hee: “No your Honour.”
Judge: “which deals with the suggestion that there is no offence if someone believes he acts in a manner where he is justified by law to do so.”
Counsel Chan representing Kong Hee: “I am grateful, your Honour. We have not made that submission; I confirm that. I would be hesitate to say that I do not wish to rely on it, especially if it is, in fact, an applicable principle here. I suppose, in fairness to the prosecution, I should say that part of their case involves a submission that the ignorance of whether something is unlawful is not a defence, which may, perhaps, your Honour, be relevant to your query here. But our foucs is actually purely on the question of mens rea and on the question of whether or not the conduct and the facts there demonstrate that Pastor Kong had what the prosecution say is the required state of mind. So I hope that clarifies, your Honour. I’m not saying that I don’t think it is applicable, but I have to say that our case has been framed to mean the case that has been presented to us that is it, your Honour. On the question of dishonestly, those are our submissions.”
DPP Ms Chionh: “I’m sorry, your Honour, I hate to interrupt. I’m still not clear what my learned friend’s position is. He says on the one hand that he’s not saying that section 79 is not applicable. So what is he saying, essentially? Is he relying on section 79? If that is so, then that is a new point that has not been dealt with in his submissions up until now.”
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Judge: “All I was seeking to clarify is whether, up to this point, such instructions have been given, or whether you have advised your client on this point. If it hasn’t been done, I will not exclude you, since we’re still in the midst of submissions, from seeking to rely on it, if you wish, but it would be good if you can let me know by the end of the day.”
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Before end of the day SC Maniam was talking about some legal proposition. Sreeni also participated.
SC Maniam representing Serina Wee: “What is relevant is if your Honour finds that my client honestly believed that she was legally entitled to do what she did, she would not be dishonest. Conversely, if your Honour finds the prosecution has not proven she knew that what she was doing was something she was not legally entitled to do, and the burden is on them, not on me, she would not be dishonest.”
Judge: “The question might be framed in this way. I know this may invite even more confusion. When you mentioned ‘legally entitled’, was it your intention to say that she was justified by law?”
SC Maniam representing Serina Wee : “Your Honour, my learned friend is claiming a right to reply before our permit expires on the day.”
SC Sreeni representing Tan Ye Peng:, “ Your Honour, given that the authorities cited are my submissions, the tests are not necessarily the converse of each other. The prosecution have to show an intention to cause wrongful loss. That is their primary burden. The defence can displace any inference by showing that you acted legally, on the belief that you are legally entitled. Section 79, on justification that you were justified by law, a belief that you were justified by law, would be a belief that you are legally entitled to act. But that’s not the end all and be all of it, because the mistake of law would not be a defence in the context of section 79. So I respectfully agree with your Honour that it means the same as “justified by law”, but not that carried forward that section 79 prescribes what the case law was doing in defining, “intention to cause wrongful loss”. I don’t know whether that has made it more confused. But section 24, the intention section, is a lot wider. So my proposition is a mistake of law, while it may not be a defence, can displace the factual inference of dishonest intent. I will now hand it back to Mr Maniam.
SC Maniam representing Serina Wee : “Your Honour, my learned friend has asked first about “authorised”, and your Honour has asked about “justified”. Again, I’m hesitant to move away from language in judgments, and Tan Tze Chye not only has the proposition about “legally entitled”, it also has the definition of “misappropriate”. Misappropriate means: “… to set apart for or assign to the wrong person or a wrong use, and this act must be done dishonestly.” Your Honour, we are quite happy to fight a case based on that. Was it wrong use? My learned friend, not only in submissions but also in the charges, has rephrased that as “unauthorised purpose”. We can debate whether they mean the same thing, but we are saying that there was no wrong use. My client did not know that what she was doing was wrong use. She honestly believed she was entitled to act as she did.
DPP Ms Chionh: “Your Honour, I think, rather than to prolong this, we will respond on what my learned friends have said so far. If I could also ask, then, that when we resume on Monday, that before the prosecution is called upon to respond, Mr Chan could make his position clear on the issue of section 79 and whether his client relies on it.
The hearing adjourned until 9am on Monday, September 14.