This morning in court you could see Senior Counsel Edwin Tong, the defense lawyer acting for Pastor Kong Hee.
Recount of SC Edwin Tong’s oral submission
SC Tong agreed with prosecution that the state of mind is key and critical.
SC Tong says,
I agree because it is their burden to show, beyond any reasonable doubt, that the state of mind or the mens rea, as we lawyers like to call it.
To give your Honour an example, it would obviously be crucial to look at state of mind before the bonds transactions were issued.
Again, it is something that I agree with Ms Chionh on. Not only for Xtron but also for Firna in the context of why the issue arose for Firna, how that happened.
What else was happening with the auditors when issues were brought to the attention? And crucially, what information did the auditors already have in the repository of information that they have as being the auditors of both Xtron and CHC, and indeed, Firna as well.
When your Honour looks at state of mind, it’s not just about what you might think, or what one might think about why certain emails were written. But your Honour, with respect, has to look at it in the context of the circumstances in which they occurred.
Xtron Bonds
The background of the Xtron bonds can be found in the Agreed Statement Of Facts (ASOF).
It is not disputed that all of the bond drawdowns, every single cent, went into the Crossover Project.
SC Tong: “There has been no personal gain by Pastor Kong Hee. Indeed, I think the position is on any of the accused as well.”
The idea of the bonds was conceived by Eng Han and was brought to Kong Hee who then instructed both Eng Han and Ye Peng to check with CHC’s advisers.
SC Tong: “Pastor Kong also told Mr Chew and Mr Tan to then present the idea to the board if the advisers had no issue. Indeed, Mr Chew and Mr Tan gave evidence that they met with Mr Foong Daw Ching, before the bonds were even drafted and the meeting took place on 25 June….
Mr Foong himself as being the one overseeing the team of Baker Tilly auditors, which audits both CHC and Xtron, said he had no objections. So he knew about it, 25 June 2007. This is corroborated by several pieces of documentary evidence, such as E-197, E-322 and E-426….
In addition, Mr Chew also met with Ms Christina Ng[lawyer] who told Mr Chew that, like Mr Foong, had no problems with the way in which the bonds were to be used for the Crossover Project, and proceeded to draft the terms of the BSA.”
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What is wrong with a large organization relying on professional advisers, relying on the word of professional advisers? And what is wrong with the leader of an organization saying to his team, ‘In principal, I’m okay with this, we can use the Building Fund for this investment, but check it with Mr Foong, who has been our auditor for many, many years, on both sides of the equation, Xtron and CHC. Check it with the laywers.’…. What is wrong with that? Nothing. The only answer they[DPP] have now come up with is well, it’s wrong because Pastor Kong now must have know.
Your Honour must draw an inference that his team intended, and he knew that they would mislead these advisers.
Your Honour, I will come to that, but, not only is there no evidence of this, but it is also a significant departure from the prosecution’s own case.”
Firna Bonds
SC Tong says,
The sequence of events make it very clear that there could have been no intention whatsoever for Pastor Kong to have a dishonest intention, dishonest motive in relation to this. Again, let me ask your Honour to bear in mind the relevant context when your Honour assesses the state of mind.
First, how did the issue first arise?
Your Honour would have heard sometime in July 2008 there were concerns about the repayment. These concerns were not raised out of the blue; it was raised in the context of an audit that was impending. But it was an issue which Pastor Kong and his team, Mr Tan, Mr Lam, Ms Wee looked at and considered carefully.
What did Pastor Kong do when this issue arose?
He said, ‘First thing to do, consult with Mr Foong’. And that, I think, is clear from the evidence given not only by Pastor Kong himself but also from a variety of other team members.
What was said to Mr Foong at that point in time?
I know my learned friends rely on the fact that look at E-260, it is meant to be misinformation, meant to be deceitful, meant to mislead the auditors.
That is why the context is important. As of this point in time, July 2008, Mr Foong and his team had been involved with CHC and Xtron, and eventually Firna, for many years. They’ve audited those companies for many years. So information about the relationship and the interdependence and the interreliance of CHC and Xtron were not only known; they were intricately aware of this information.
But what else does the team do?
On 9 July, at E-364, Serina writes to Mr Foong and says specifically: “Is there an issue with CHC investing heavily in Xtron when it is an insolvent company for the past few years?” again, a fact which surely Mr Foong and his team must have been aware. In fact, that I were aware at the subscription of the bonds, back in the time of June 2007, when Mr Chew met with Mr Foong, that Xtron was already insolvent, had been insolvent for many years, relies a lot on CHC’s business for its continued survival. They knew all that, when Mr Chew consulted with Mr Foong in June 2007. He said “okay” to the bonds.”
You have heard Mr Foong give evidence. He didn’t reply to this. If, indeed, there was a grand plan by the accused to use Mr Foong very cleverly, somewhat presciently as well, because they didn’t know many years later they would be charged, if they used Mr Foong as cover and said, “Well, we’ve consulted with him”, then the thing to do with Mr Foong’s silence on these emails would have been to say, “Very good. We have raised it with him. He didn’t reply. He didn’t say no, let’s leave it”. This would provide the perfect cover: we have gone to him, we3 have said there’s an issue, Xtron is insolvent for many years, he’s not responded, he’s not said no, so why don’t we just leave it, because, if and when we are asked, we can say, “We raised it with the auditors”.
That might have been the mens rea of dishonest people. That might have been the mens rea of someone who intends to use Mr Foong to cover up. But not this group. This group proceeded to then actively look for Mr Foong.
When Ren Ci happened, MCYS was involved, Ernst & Yong was involved.
SC Tong says
Your Honour ask this question: When fraud, financial fraud or irregularity of a charity was first raised, and an issue became prevalent and they were facing issues of repayability, and bear in mind, if the prosecution is correct, at that point in time they would have just pulled off a $13m fraud on the Xtron bond. Yet….they called in the accountants. They actively sought out Foong Daw Ching.
Again, in the context, not only of the repayability of the first bond but again in the context of Ren Chi…. there were emails exchanged. Mr Foong says to them, “Do not change your auditors. Use Foong Daw Ching on both sides, Xtron, CHC and all your associate companies because we can detect better any financial irregularity”.
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I want to draw your Honour’s attention to one point. The structure that was conceived of was, in fact, conceived of after discussion that Mr Chew had with Christina. Your Honour will see that at E-403. Mr Chew had shared with Christina why this structure for the Crossover Project was necessary. And it was because they did not want Xtron to be related to CHC. Mr Chew was very open with Christina about the purposes and eventually that purpose was also communicated to Mr Foong. 1 August 2008, in a meeting with Mr Foong, where Pastor Kong was not present, Mr Chew explained to Mr Foong that they will have a problem if Xtron is related party of CHC.
Mr Chew also explained that they wanted to move Sun Ho away from Xtron to UA, and for CHC to provide funding into Firna through Firna bonds. So the purpose was laid clear, laid bare to Mr Foong.
See the big difference.
We don’t want Xtron to be regarded as a related party to the church and therefore not have the accounts consolidate, we don’t want that. Mr Foong, you’re the auditor, tell us whether that’s possible, and if so, how do we do that? [CHC’s action]
vs
Hiding the facts which might give rise to a consolidation, hiding the facts which might lead one to believe that one is related to the other. [DPP’s case]
CHC chose the former, not the latter. It went to the auditors with a problem and said, ‘Is it possible for us to finance Sun Ho in the Crossover some other way? Is it possible for us to do this so that we don’t have to declare it as a related party and therefore not have the accounts consolidated?”
I dare to say that accountants, auditors all over the world, when they deal with these corporate matters, look at this as one of the issues, look at this as one of the questions that need to be considered during audit season. They look at it all the time. Why do people use SPVS, use different vehicles to make acquisitions? It is because they want to ensure that what the report, as related, is within their control. This is an example of that.
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That’s why the suggestion that there was any deception in relation to the related party transactions or the consolidation, is absolutely misconceived.
No evidence only inference
SC Tong says,
So when your Honour considers the prosecution’s submissions, your Honour needs to, with respect, ask: on what basis is the prosecution saying today that Pastor Kong Hee would not only have known but expected his team to go out there and mislead the advisers? On what basis do they say that? From where I look at the evidence, and where from where we stand, there is none whatsoever. There is no suggestion, anywhere in the emails, in the chats, the BB messages, the private messages, where Pastor King says to his team, “Please suppress this from the auditors”. There is not any of that.
Control over Xtron
I think this question of control is a complete red herring. It’s not about control. It’s not about whether there’s control, how much control, less control, more control, but it’s what the auditors were aware of. That reflects the state of mind of Pastor Kong. If you are aware of all these happenings, you are aware of all these circumstances which make the relationship between Xtron and CHC proximate, very close, and, in fact, as I said, even reliant, and Xtron was insolvent, then, I think, whether you have control or otherwise, is not the question. It’s not the right question to ask.
The right question to ask is: when we go back to ask Mr Foong to look at these transactions, look at Xtron bonds, look at the refinancing through Firna, look at moving Sun into UA. In the context of all those requests, what is the information that is already reposited inside Baker Tilly? Your Honour will have seen from the audit working papers it is a minefield of information. All the information, which they now say we suppressed, can be traced back to the audit papers.
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Critically, that is what the prosecution’s case against Kong Hee boils down to ; a series of inference, a series of request, I would say pleads by the prosecution to your Honour, to draw that inference, to say that there must be an expectation on the part of Kong Hee that his team would go about and mislead the auditors and the lawyers. That’s what their case now is all about.
200,000 CDs
Again, your Honour, they have come back to this 200,000 as being the benchmark for saying that you must have had no expectation that it could be repaid. But, again, let me pose this in the context of the point I made earlier, at the outset, that your Honour must look at it in the context. These are projections. There will be high, medium and low projections. It doesn’t mean that if on one of the parameters your projection shows an inability to recover, that you are therefore guilty. Likewise, it doesn’t show that if you have projected carefully and you fail in the projection, that you are therefore dishonest.
So it works both ways, your Honour. These are projections. What is imporatnat is that there is a slew of projections, many of them, pressed, your Honour has seen Pastor Kong pick the tyres on many of these projection, pressed the US consultants for lower, more reasonable, more conservative, more realistic numbers. That’s why I say to your Honour that the context is important.
If my learned friends are correct in saying that these bonds are all shams, and, on their case, we can do what we like, we can spend as we wish, we can control Xtron like a puppet, we don’t bother with repayment, we can just extend it with church funds immediately, why budget or why plan?
These numbers started not in 2007; they started before, in 2005 and in 2006. Why do that, your Honour, unless it was so smart or so prescient as I said, that they would have concocted these emails because they knew that day, like today, would come, when the state of mind would be relevant?
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To sum up, the prosecution’s case against Pastor Kong today boils down to this: a series of inferences that they want your Honour to draw, from the facts, facts such as emails which don’t show a presence by Pastor Kong, for which they cannot get him to admit that he was aware, for which they were unable to elicit concessions or admissions. They now say, “Your Honour, draw these inferences because Pastor Kong expected his team to go out there and lie to the auditors, lie to the lawyers.”
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Look at it in the context of the happenings….. and decide whether or not ultimately the critical question, state of mind, is something that the prosecution can establish beyond reasonable doubt.