judgment - State Courts

Transcription

IN THE STATE COURTS OF THE REPUBLIC OF SINGAPORE
District Arrest Case No 23148 of 2012 and others
Between
PUBLIC PROSECUTOR
And
(1) LAM LENG HUNG
(2) KONG HEE
(3) TAN SHAO YUEN
SHARON
(4) CHEW ENG HAN
(5) TAN YE PENG
(6) SERINA WEE GEK YIN
JUDGMENT
TABLE OF CONTENTS
OVERVIEW AND BACKGROUND ............................................................. 1
THE SIX ACCUSED PERSONS.................................................................... 5
THE 43 CHARGES ......................................................................................... 7
THE SHAM INVESTMENT CHARGES .................................................................. 8
THE ROUND-TRIPPING CHARGES ...................................................................... 9
THE ACCOUNTS FALSIFICATION CHARGES ..................................................... 11
GLOSSARY.................................................................................................... 12
FACTS ............................................................................................................ 13
THE CROSSOVER PROJECT ............................................................................ 13
THE ROLAND POON INCIDENT IN JANUARY 2003 AND ITS AFTERMATH......... 15
THE INCORPORATION OF XTRON ................................................................... 18
THE US PHASE OF THE CROSSOVER .............................................................. 21
THE CROSSOVER’S INCREASED FINANCIAL NEEDS ........................................ 22
THE XTRON BONDS ....................................................................................... 24
XTRON’S FINANCIAL NEEDS IN THE FIRST HALF OF 2008 ............................... 27
DISCUSSIONS WITH AUDITORS IN JUNE AND JULY 2008 ................................ 28
CONCEPTION OF THE FIRNA BONDS AND XTRON’S PURCHASE OF RIVERWALK
...................................................................................................................... 34
THE FIRNA BONDS ......................................................................................... 40
PLANS TO REDEEM THE XTRON AND FIRNA BONDS ....................................... 43
EVENTS IN 2010 ............................................................................................ 47
THE LAW ON CBT BY AN AGENT AND CONSPIRACY .................... 48
WHETHER THE SECOND CHARGE IS DEFECTIVE.......................... 52
WHETHER THE RELEVANT ACCUSED PERSONS WERE
ENTRUSTED WITH DOMINION OVER CHC’S FUNDS ...................... 53
WHETHER DOMINION WAS ENTRUSTED TO THE RELEVANT
ACCUSED PERSONS IN THE WAY OF THEIR BUSINESS AS
AGENTS ......................................................................................................... 62
WHETHER THINGS WERE DONE THAT CONSTITUTED A
“WRONG USE” OF CHC’S FUNDS .......................................................... 65
THE XTRON BONDS ....................................................................................... 66
Relationship between CHC and Xtron ..................................................... 67
Whether the Xtron bonds were investments ............................................. 81
THE FIRNA BONDS ......................................................................................... 89
THE ROUND-TRIPPING TRANSACTIONS .......................................................... 97
APPROACH TO TAKE IN DETERMINING WHETHER THE
ACCUSED PERSONS ACTED DISHONESTLY .................................... 100
THE XTRON BONDS ..................................................................................... 110
THE FIRNA BONDS ....................................................................................... 121
THE ROUND-TRIPPING TRANSACTIONS ........................................................ 127
THE INDIVIDUAL ACCUSED PERSONS’ INVOLVEMENT AND
STATE OF MIND ........................................................................................ 136
JOHN LAM ................................................................................................... 136
The Xtron bonds ..................................................................................... 137
The Firna bonds ..................................................................................... 153
Summary – John Lam ............................................................................ 157
KONG HEE .................................................................................................. 158
The Xtron bonds ..................................................................................... 160
The Firna bonds ..................................................................................... 171
Summary – Kong Hee ............................................................................ 174
YE PENG ..................................................................................................... 178
The Xtron bonds ..................................................................................... 179
The Firna bonds ..................................................................................... 183
The round-tripping transactions ............................................................ 185
Summary – Ye Peng ............................................................................... 191
ENG HAN .................................................................................................... 193
The Xtron bonds ..................................................................................... 194
The Firna bonds ..................................................................................... 203
Summary – Eng Han .............................................................................. 209
SERINA ........................................................................................................ 213
The Xtron bonds ..................................................................................... 213
The Firna bonds ..................................................................................... 218
Summary - Serina ................................................................................... 223
SHARON ...................................................................................................... 224
Summary - Sharon ................................................................................. 238
THE ACCOUNTS FALSIFICATION CHARGES .................................. 239
THE SEVENTH, EIGHTH AND TENTH CHARGES .............................................. 241
THE NINTH CHARGE .................................................................................... 242
THE INVOLVEMENT IN A CONSPIRACY – ANALYSIS OF THE
CONTEXT .................................................................................................... 246
OBSERVATIONS ON THE ACCUSED PERSONS’ BELIEFS,
MOTIVES AND MINDSET ....................................................................... 256
CONCLUSION ............................................................................................ 266
Public Prosecutor
v
Lam Leng Hung and others
State Courts — District Arrest Case No 23148 of 2012 and others
Presiding Judge See Kee Oon
15–16, 20–23 May; 26–30 August; 2–6, 9–13, 16–20 September 2013; 13–17,
20–24, 28–29 January; 5–7, 10 February; 8–9 April; 5, 21 May; 14–18 July;
4–8, 11–15, 18–22, 25–29 August; 8–12, 15–19, 22–26, 29–30 September;
2 October 2014; 26–30 January; 2–6 February; 16–20, 23–26, 30–31 March;
1–2, 6–10, 13–17, 27–29 April; 4–8, 11–15, 18–20 May; 10, 14–15 September
2015
21 October 2015
Judgment reserved.
Presiding Judge See Kee Oon:
Overview and background
1
In 1997, a rapidly-expanding church in Singapore sets up a Building
Fund (“BF”) in preparation for receiving donations through its “Arise and
Build Campaign”. The object is to fund its efforts to accommodate its growing
congregation by building a new church building at Jurong West. Church
members are given pledge cards and asked to pledge their commitment
towards raising funds for the new building. Led by its founding pastor, Kong
Hee, who is the second accused, the church subscribes to a professed “cultural
mandate” as a key evangelistic tool. This involves reaching out to nonbelievers through the use of popular music and culture mainly to appeal to the
younger generation. This is the broad backdrop for the activities of City
Harvest Church (“CHC”) around the time leading up to May 2002.
PP v Lam Leng Hung and others
2
In time, CHC became popularly-known as one of Singapore’s “mega-
churches”. CHC decided to embark on the “Crossover Project” officially in
May 2002. Ms Ho Yeow Sun, also known by her performing name “Sun Ho”,
was the “ambassador” for the Crossover Project, which was Kong Hee’s
vehicle for realising CHC’s vision to engage popular culture for evangelical
outreach. Sun Ho, who is also Kong Hee’s wife, was to record secular music
compact disc (“CD”) albums, inter alia, in order to influence those who would
not otherwise enter a church to listen to a preacher and to encourage Christians
in the pop industry to share their own conversion stories and testimonies. The
CHC Management Board agreed that the Crossover Project was consistent
with the overall objectives of CHC of fulfilling the Great Commission of
spreading the Christian Gospel.
3
Sun Ho’s first music CD albums under the remit of the Crossover
Project were recorded and launched in Asia in 2002. In January 2003,
allegations of misuse of CHC’s funds to fund Sun Ho’s music career were
publicly made by one Roland Poon. These allegations were subsequently
withdrawn. A chain of events was set in motion therefrom, with statements
being made to CHC members to the effect that “no church funds were ever
used” to fund the Crossover Project and promote Sun Ho’s secular singing
career or manufacture her CDs. Xtron Productions Pte Ltd (“Xtron”) was then
set up in June 2003 primarily for the purpose of managing Sun Ho’s music
career. Up to that point, she had been managed by City Harvest Pte Ltd and
Attributes Pte Ltd, which were both subsidiaries of CHC.
4
A decision was made by CHC in 2004 to extend the Crossover Project
beyond Asia, to enter the American popular music market. With that decision
came associated needs for more funds to support the cost of promoting Sun
2
Ho’s nascent music career in the United States of America (“US”). By January
2007, CHC projected that nearly $20 million in loans would be needed for
Xtron to fund the cost of producing two planned US music albums for Sun Ho,
comprising $11.24 million for the first album and $8.3million for the second.
5
A second “Arise and Build” Campaign was launched in August 2005,
with the projected aim of raising $160 million at the end of seven years for the
BF. This amount was adjusted to $310 million in or around 2010. By then,
substantial sums of money from the BF had been channelled into Sun Ho’s US
music career. The launch of her US album(s) was however delayed for various
reasons.
6
On 31 May 2010, the Commercial Affairs Department (“CAD”) raided
the offices of CHC and other associated entities. Criminal charges were
eventually preferred against the six accused persons in June 2012. The issue of
how CHC funded Sun Ho’s US album production costs was central to these
charges. The accused persons claimed trial to all the charges and elected to be
jointly tried. All six accused persons were, to varying degrees and at different
times, part of the leadership or management of CHC. They were tried
primarily on charges of conspiring to commit criminal breach of trust (“CBT”)
as agents by dishonestly misappropriating church funds that had been
entrusted to one or more of them.
7
The case against the accused revolves around a number of financial
transactions involving CHC in the years 2007 to 2009. From August 2007 to
June 2009, CHC paid $24 million from its BF to Xtron and PT The First
National Glassware (“Firna”), an Indonesian company, in order to purchase
bonds issued by these two companies. The vast bulk of this sum of $24 million
was eventually spent on music production costs for Sun Ho’s planned US
3
album(s). Subsequently, in the last quarter of 2009, CHC placed $11.4 million
in two tranches of an investment fund known as the “Special Opportunities
Fund” (“SOF”) offered by AMAC Capital Partners (Pte) Ltd (“AMAC”) and
paid Xtron about $15.24 million. Most of this money returned to the church by
the end of the year after having been channelled through a number of
corporate entities, one of which was Firna; it would not be inapt to say that the
money had been “round-tripped”. All this is not disputed.
8
An Agreed Statement of Facts was tendered at the commencement of
the trial. This is set out at Annex A. What is disputed is the characterisation of
the various transactions in question. The accused persons say that, to their
minds and in fact, the bond purchases from 2007 to 2009 were genuine
investments and so were authorised uses of the BF, while the transactions in
the last quarter of 2009 were either genuine investments or payments made
pursuant to an attempt to secure a building for CHC such that they were
authorised uses of the church’s money. But the prosecution’s case is that the
bond purchases were “sham” investments in that they were mere pretences for
directing BF money towards the production of Sun Ho’s music, while the
transactions in the last quarter of 2009 were entered into for the purpose of
creating the false appearance that Firna was redeeming the bonds that CHC
had purchased, and the accused knew this, with the result that there had been a
conspiracy to commit CBT.
9
These transactions gave rise to two broad groups of charges for the
offence of conspiring to commit CBT by an agent under s 409 read with s 109
of the Penal Code (Cap 224, 2008 Rev Ed). The first group, consisting of three
charges, was brought against five of the six accused persons. These charges
concerned the bond purchases from 2007 to 2009, and for convenience they
4
might be called the “sham investment charges”. I should stress that my use of
this terminology in no way indicates any pre-judgment of the merits of the
case. The second group of charges, also consisting of three charges, was
brought against four of the six accused. These charges concerned the
transactions in the last quarter of 2009, and for convenience they might be
called the “round-tripping charges”.
10
In addition, a third and final group of charges, consisting of four
charges, was brought against four of the six accused. These charges concerned
four accounting entries in CHC’s books made in respect of the transactions in
the last quarter of 2009. The accused persons say that, to their minds and in
fact, these entries are true and accurately reflect the substance of the relevant
transactions. But the prosecution’s case is that the entries are false and were
made with intent to defraud in that they were designed to conceal the fact that
CHC’s money was being round-tripped for the purpose of creating the false
appearance that bonds purchased by the church were being redeemed. The
prosecution thus formulated these four charges for the offence of conspiring to
falsify accounts under s 477A read with s 109 of the Penal Code, and for
convenience this group of charges might be called the “accounts falsification
charges”.
The six accused persons
11
The six accused persons are: Lam Leng Hung, Kong Hee, Tan Shao
Yuen Sharon, Chew Eng Han, Tan Ye Peng and Serina Wee Gek Yin. They
are, respectively, the first to sixth accused. This reflects the chronological
order in which they were charged in court in relation to the offences.
5
12
It is not disputed that the foremost individual at CHC is the second
accused Kong Hee. I shall refer to him by his full name, although he is also
referred to as “KH”, “Pastor Kong”, “Reverend Kong” or “Dr Kong” in
various forms of correspondence and documents used during the trial. He is
the founder and senior pastor of CHC. He was president of the CHC board of
directors, also known as the CHC management board – I shall refer to it as
“the board” except where the context requires that I identify it as “the CHC
board” – during the period in which the material events in this case occurred,
which broadly speaking was from 2003 to 2010.
13
The next person in the CHC organisational hierarchy is the fifth
accused Tan Ye Peng, whom I shall refer to as “Ye Peng”, and who is referred
to in various documents in a number of different ways including “TYP” and
“Pastor Tan”. He is a deputy senior pastor of CHC. He was first appointed to
the CHC board in 1995 and remained there from 2003 to 2010, and from 2006
to 2010 he held appointments within the board, in that he was treasurer in
2006 and 2007 and subsequently vice-president until 2010.
14
Another board member among the accused is Lam Leng Hung, also
known as “John Lam”, which is how I will refer to him – he is sometimes
referred to as “JL”. From 2003 to 2010 he was either secretary or treasurer on
the board. He was also a member of CHC management committees. He was a
member of the finance committee from 20 January 2006 to 28 June 2007, at
which point it was re-named the investment committee. He continued to be a
member of the investment committee and was chairman of the committee
from 17 August 2007 to 1 February 2008. He was also a member of the audit
committee.
6
15
The fourth accused Chew Eng Han also spent some time as a CHC
board member. I shall refer to him as “Eng Han”; it might also be mentioned
that he is referred to in various documents as “CEH” or “EH”. He was a
member of the board from 25 April 1999 to 7 July 2007 and was vicepresident from 6 June 2006 to 7 July 2007, and had two stints as treasurer
prior to this. On 7 July 2007, he resigned from the board after the board
decided to appoint AMAC, a company of which Eng Han is the sole director,
as CHC’s fund manager.
16
The sixth accused Serina Wee Gek Yin, whom I shall refer to as
“Serina” and who is also referred to in various documents as “SW” or
“Nawee”, was a member of the board from 17 April 2005 to 7 July 2007, but
her involvement in this case is primarily as the administrator of the “Crossover
Project”. She started work in CHC’s accounts department in August 1999 and
was eventually promoted to finance manager in 2005. She resigned on 31
August 2007 and started Advante Consulting Pte Ltd (“Advante”) a month
later on 1 October 2007. Advante provided accounting services to Xtron and
various other clients including a few companies linked to CHC.
17
The third accused is Tan Shao Yuen Sharon. I shall refer to her as
“Sharon”; she is also referred to in various documents as “ST”. She joined the
CHC accounts department in January 2000 and took over from Serina as
CHC’s finance manager in January 2008. She is the only one among the
accused persons who has never been a member of the CHC board.
The 43 charges
18
For convenience, I reproduce in this section all the charges that were
brought against the accused persons.
7
The sham investment charges
19
This group of three charges was brought against five of the accused
persons, namely, John Lam, Kong Hee, Eng Han, Ye Peng and Serina. The
first to third charges were as follows:
1st CHARGE
You, [name of accused person], are charged that you, between
18 January 2007 to 23 August 2007, in Singapore, did abet by
engaging in a conspiracy with [names of the other four
accused persons] to commit criminal breach of trust by an
agent in respect of the Building Fund of CHC, the dominion of
which was entrusted to Kong Hee, Tan Ye Peng (Chen Yiping)
and [John] Lam Leng Hung as members of the CHC
Management Board; to wit, by dishonestly misappropriating
monies from the said Fund for the purpose of funding one
[Sun Ho’s] music career, which was not an authorised purpose
of the said Fund; and in pursuance of the conspiracy and in
order to the doing of that thing, between 23 August 2007 and
2 January 2008, a total of $10 million was dishonestly
misappropriated by being transferred from the Building Fund
of CHC to Xtron Productions Pte Ltd upon the written
instructions of Chew Eng Han; and you have thereby
committed an offence punishable under Section 409 read with
Section 109 of the Penal Code, Chapter 224, 1985 Revised
Edition.
2nd CHARGE
18 January 2007 to 23 August 2007, in Singapore, did abet by
[Sun Ho’s] music career, which was not an authorised purpose
of the said Fund; and in pursuance of the conspiracy and in
order to the doing of that thing, on or about 5 March 2008,
$3 million was dishonestly misappropriated by being
transferred from the Building Fund of CHC to Xtron
Productions Pte Ltd upon the written instructions of Chew
Eng Han; and you have thereby committed an offence
8
punishable under Section 409 read with Section 109 of the
Penal Code, Chapter 224, 2008 Revised Edition.
3rd CHARGE
24 July 2008 to 6 October 2008, in Singapore, did abet by
[Sun Ho’s] music career and for the purpose of providing
funds to one Wahju Hanafi, which was not an authorised
purpose of the said Fund; and in pursuance of the conspiracy
and in order to the doing of that thing, between 6 October
2008 and 19 June 2009, a total of $11 million was dishonestly
misappropriated by being transferred from the Building Fund
of CHC to PT The First National Glassware upon the written
instructions of Chew Eng Han; and you have thereby
committed an offence punishable under Section 409 read with
Section 109 of the Penal Code, Chapter 224, 2008 Revised
Edition.
The round-tripping charges
20
This group of three charges was brought against four of the accused
persons, namely, Sharon, Eng Han, Ye Peng and Serina. The fourth to sixth
charges were as follows:
4th CHARGE
9 April 2009 and 2 October 2009, in Singapore, did abet by
engaging in a conspiracy with [names of the other three
agent in respect of the funds of CHC, the dominion of which
was entrusted to Tan Ye Peng (Chen Yiping) as a member of
the CHC Management Board; to wit, by dishonestly
misappropriating monies from CHC’s funds for the purpose of
generating the false appearance that certain purported
investments in PT The First National Glassware bonds had
been redeemed, which was not an authorised purpose of the
said funds; and in pursuance of the conspiracy and in order to
the doing of that thing, on or about 2 October 2009,
9
$5.8 million from the CHC Building Fund was dishonestly
misappropriated by being disbursed into AMAC Capital
Partners (Pte) Ltd’s Special Opportunities Fund pursuant to
arrangements made by Tan Shao Yuen Sharon (Chen
Shaoyun Sharon); and you have thereby committed an offence
5th CHARGE
agent in respect of the funds of CHC, the dominion of which
was entrusted to Tan Ye Peng (Chen Yiping) as a member of
the CHC Management Board; to wit, by dishonestly
misappropriating monies from CHC’s funds for the purpose of
generating the false appearance that certain purported
investments in PT The First National Glassware bonds had
been redeemed, which was not an authorised purpose of the
said funds; and in pursuance of the conspiracy and in order to
the doing of that thing, on or about 14 October 2009,
$5.6 million from the CHC General Fund was dishonestly
misappropriated by being disbursed into AMAC Capital
Partners (Pte) Ltd’s Special Opportunities Fund pursuant to
arrangements made by Tan Shao Yuen Sharon (Chen
Shaoyun Sharon); and you have thereby committed an offence
6th CHARGE
which was entrusted to Tan Ye Peng (Chen Yiping) as a
member of the CHC Management Board; to wit, by dishonestly
misappropriating monies from the Building Fund of CHC for
the purpose of generating the false appearance that certain
purported investments in PT The First National Glassware
bonds had been redeemed, which was not an authorised
purpose of the said Fund; and in pursuance of the conspiracy
and in order to the doing of that thing, on or about
6 November
2009,
$15,238,936.61
was
dishonestly
misappropriated by being disbursed from the CHC Building
Fund to Xtron Productions Pte Ltd pursuant to arrangements
made by Tan Shao Yuen Sharon (Chen Shaoyun Sharon); and
10
you have thereby committed an offence punishable under
Section 409 read with Section 109 of the Penal Code, Chapter
224, 2008 Revised Edition.
The accounts falsification charges
21
This group of four charges was brought against the four accused
persons facing the round-tripping charges, namely, Sharon, Eng Han, Ye Peng
and Serina. The seventh to tenth charges were as follows:
7th CHARGE
9 April 2009 and 2 October 2009, wilfully and with intent to
defraud, did abet by engaging in a conspiracy with [names of
the other three accused persons] to falsify the accounts of
CHC; and in pursuance of the conspiracy and in order to the
doing of that thing, on or about 2 October 2009, Tan Shao
Yuen Sharon (Chen Shaoyun Sharon) instigated one Dua Poh
Teng (Lai Baoting) (an assistant accountant of CHC) to record
a false entry in CHC’s accounts; to wit, she instructed Dua
Poh Teng (Lai Baoting) to make an entry describing a payment
of $5.8 million made to AMAC Capital Partners (Pte) Ltd as
“Investment–Special Opportunity Fund” under the accounts
name “Investment” in CHC’s accounts, when the said payment
of $5.8 million was not an investment, and you have thereby
committed an offence punishable under Section 477A read
with Section 109 of the Penal Code, Chapter 224, 2008
Revised Edition.
8th CHARGE
of $5.6 million made to AMAC Capital Partners (Pte) Ltd as
“Special Opportunity Fund” under the accounts name
“Investment” in CHC’s accounts, when the said payment of
$5.6 million was not an investment, and you have thereby
11
Revised Edition.
9th CHARGE
Poh Teng (Lai Baoting) to make an entry describing a set-off
amounting to $21.5 million in favour of Xtron Productions Pte
Ltd as “Redemption of Xtron Bonds” in CHC’s accounts, when
the said set-off of $21.5 million was not a redemption of
bonds, and you have thereby committed an offence punishable
under Section 477A read with Section 109 of the Penal Code,
Chapter 224, 2008 Revised Edition.
10th CHARGE
doing of that thing, on or about 6 November 2009, Tan Shao
of $15,238,936.61 made to Xtron Productions Pte Ltd as
“Advance Rental with Xtron” under the accounts name
“Prepayments” in CHC’s accounts, when the said payment of
$15,238,936.61 was not advance rental, and you have thereby
Revised Edition.
Glossary
22
Due to the large number of persons and companies and other entities
involved in this trial, a glossary of terms is set out at Annex B for convenient
reference.
12
Facts
23
I shall now set out in the ensuing paragraphs the relevant facts which
are either undisputed or uncontroversial based on the evidence adduced at trial
with a view to providing context to the charges and the allegations against the
accused persons. There are of course other aspects of evidence which are
contentious. There are also numerous other facets which are inconsequential.
These are therefore not included in the account that follows unless reference to
the evidence is necessary to provide a more complete context to the activity or
event in question.
The Crossover Project
24
The Crossover Project (“the Crossover”) is, in essence, an evangelistic
endeavour driven by CHC through commercialising the secular music of Sun
Ho. It is also a secular endeavour in the sense that, on its face, it does not
appear to have any obvious religious associations, let alone an evangelistic
agenda. The central idea behind the Crossover is that, through the commercial
propagation of music albums recorded by Sun Ho and her concert
performances, people who would otherwise have neither opportunity nor
inclination to enter a church to listen to a Christian preacher would be
influenced in a way that would impel them to do precisely that, and Christians
in the popular music industry would be encouraged to share their own
conversion stories and testimonies. Moreover, Sun Ho’s success in her secular
music activities would give her a platform to share her Christian faith and
personal testimony and so spread the message of Christianity.
25
Adopting a literary analogy, the Crossover was a conceit in that it may
not be immediately obvious that there was a relationship between Sun Ho’s
13
secular music and an evangelistic agenda on behalf of CHC. The prosecution
has accepted that, for the purposes of this trial, the Crossover is synonymous
with Sun Ho’s secular music activities and the two terms may be used
interchangeably. The prosecution has also accepted that the theological
legitimacy of using Sun Ho’s music career as a means of evangelism through
the vehicle of the Crossover is not an issue in this trial. This was made clear in
para 18 of their opening statement.
26
The idea that subsequently came to be given the name of “Crossover”
was conceived by Kong Hee in 1999. This initially involved Kong Hee and
Sun Ho modifying the lyrics of secular songs to include Christian messages.
Encouraged by what was seen as positive responses to Sun Ho’s performances
in 2000, Kong Hee considered that it would be viable for Sun Ho to record an
album of contemporary Christian music and he took steps to bring this to
fruition. But in July 2001 a Taiwanese music producer told Kong Hee that Sun
Ho had the potential to be an artiste in the realm of secular music, and so on
the weekend of 1 and 2 September 2001 – in what was known as the “Vision
Weekend” – Kong Hee shared with CHC’s members the idea of using popular
secular music for evangelism. CHC’s members expressed support for this idea.
27
That idea was officially called the Crossover in May 2002. The
minutes of the CHC board’s meeting on 5 May 2002 state that the board had
unanimously confirmed that the Crossover would be consistent with the
overall objective of CHC to fulfil the Great Commission “by sharing the
message of faith, hope and love throughout the Chinese Community
worldwide particularly in Far East Asia”. In its early years, which I will term
the Asian Crossover phase, the limit of the Crossover’s geographical reach
was Asia. Sun Ho would eventually release five Mandarin pop albums in all
14
between 2002 and 2005, titled “Sun with Love”, “SunDay” (2002), “Lonely
Travel” (2003), “Gain” (2004) and “Embrace” (2005).
28
In 2002, Sun Ho released her first two Mandarin albums. At this time,
CHC was directly funding the production of these albums. When CHC’s
master budget for the following year, 2003, was planned in September or
October 2002, provision was made for continued direct funding of Sun Ho’s
albums. This direct funding arrangement, however, was soon to cease because
of events in early 2003 involving a church member named Roland Poon.
The Roland Poon incident in January 2003 and its aftermath
29
In the middle of January 2003, Roland Poon made certain allegations
about CHC that were broadcast in the local media. The broad upshot of these
allegations was that CHC was giving excessive attention to Sun Ho and was
misusing its funds in connection with her. The negative publicity generated by
these allegations caused concern within the CHC leadership, and on
24 January 2003 the CHC board, which at the time included Eng Han and
John Lam, put forward a written response that was published in the
newspaper. In this response, the board confirmed, among other things, that
church funds “had[d] not been used to purchase [Sun] Ho’s albums or to
promote her career”1.
30
About three months later, on 27 April 2003, CHC held an annual
general meeting. At this meeting, Kong Hee told the executive members
(“EMs”) in attendance that “no church funds went into the promoting of [Sun
1
2D-9.
15
Ho’s] secular singing career or boost her albums and ticket sales”. He
explained that the $1.27 million set aside for the promotion of Sun Ho’s album
was a donation or “seed money” from Wahju Hanafi’s family in Indonesia2,
and the EMs were shown a letter dated 23 December 2002 from John Lam to
Wahju Hanafi (“Wahju”) and his wife (Wei Wei Hanafi) thanking them for
their contributions. Wahju was a CHC member who would eventually be held
out to be the main “sponsor” or “supporter” of the Crossover.
31
At this meeting on 27 April 2003, the EMs also heard from Foong Daw
Ching (“Foong”), who made a statement to the meeting by way of a video clip.
He introduced himself as “a senior partner with the firm of Teo Foong Wong
LC Loong, the auditors of City Harvest Church” and the “lead partner in
charge of City Harvest Church’s accounts”. He went on to say that, having led
the audit of CHC’s accounts, it was his “professional opinion” that “no Church
funds were ever used in the promotion of [Sun Ho’s] secular singing career”.
32
It is thus apparent that, notwithstanding the fact that CHC had directly
funded Sun Ho’s albums in 2002, the position taken by the CHC leadership in
2003 was that no church funds had been used in the promotion of Sun Ho’s
secular singing career, and that the money that was used for that purpose had
come from Wahju. According to Kong Hee, the explanation for this was as
follows. On 19 January 2003, very soon after Roland Poon’s allegations were
made public, a number of board members met informally. At this meeting,
someone recalled that, several months earlier, Wahju had pledged his support
to the Crossover, and the idea was suggested that Wahju should be contacted
2
CH-20b, p 26.
16
and asked whether he would fulfil this pledge by paying for the production of
the two albums previously released by Sun Ho in 2002. Wahju was duly
contacted, and he confirmed that he was willing to fulfil the commitment that
he had made.
33
Both John Lam and Eng Han were on the CHC board at this time. Eng
Han testified that he could not recall such a meeting on 19 January 2003,
while John Lam said that, although he did not attend the meeting, one of the
board members who did later told him what had happened there, and her
description of the meeting accorded with Kong Hee’s account. John Lam
added that he understood from this board member that Wahju had erroneously
donated $1.27 million to the BF in 2002 – erroneously in the sense that he had
intended this sum to be applied towards Sun Ho’s albums but had given it to
the BF instead as he did not know the proper avenue for making the donation
that he truly intended.
34
The chief consequence of the Roland Poon incident was that CHC no
longer gave direct funding to Sun Ho’s secular music activities. According to
Kong Hee, CHC would have continued funding her music activities but for the
incident. A common theme of the accused persons’ testimonies was that the
incident demonstrated to them that, unless CHC became more discreet in how
they carried out the Crossover, there would always be a substantial risk of
unwanted negative publicity generated by people who did not fully
comprehend or agree with what CHC was doing. It was thought that CHC
needed to put greater distance between it and Sun Ho’s secular music, and of
particular concern was the source of funds for her music production,
encompassing publicity and promotional expenses.
17
The incorporation of Xtron
35
On 18 June 2003, Xtron was incorporated. It had three shareholders,
namely John Lam, Eng Han and Eng Han’s wife, and all of them were also
directors. On the same day, it entered into an artiste management agreement
with Sun Ho, under which it was to provide management services in respect of
her music albums and performances. In an e-mail sent to Wahju about three
weeks before Xtron’s incorporation3, the CHC board explained that, since it
did not want CHC or its bookstore (ie. Attributes) to be “involved directly or
indirectly in [Sun Ho’s] third and final album”, Xtron had been incorporated
as “an independent company to handle all the income and expenses related to
this album”. In this e-mail the board also requested that Wahju allow it to
convert a contribution of $674,700 he had made to the BF on 28 February
2003 to an “investment in Xtron” – this would be done by treating that sum
not as a contribution to the BF but as an interest-free loan to CHC, which
would be returned to Wahju some months later so that he could then invest it
in Xtron.
36
A key issue of fact in this trial is the relationship between the accused
persons and Xtron. I will express my views on this issue more fully later in the
judgment; for now, it suffices to summarise the competing positions taken by
the prosecution and the defence. It is the prosecution’s case that, although
Kong Hee and Ye Peng were never directors of Xtron, they controlled Xtron
entirely in the sense that they made all decisions on Xtron’s behalf, and the
Xtron directors were mere figureheads and rubber-stampers of decisions that
had already been made. In this regard, the prosecution’s case finds support in
3
E-279.
18
Eng Han’s testimony, which was unequivocally that Kong Hee and Ye Peng
controlled Xtron.
37
Kong Hee himself accepts that CHC had some control and influence
but maintains that CHC did not totally control Xtron. The rest of the accused
persons acknowledge that the CHC leadership exercised substantial influence
over Xtron, that the two entities were very much aligned in terms of their
broad vision and interests, and that Kong Hee and Ye Peng were heavily
involved in Xtron’s operational decisions such as how Xtron spent its funds in
relation to Sun Ho’s secular music. They deny that Kong Hee and Ye Peng
controlled Xtron; they say that it was ultimately the Xtron directors who made
all decisions on Xtron’s behalf, and that Kong Hee and Ye Peng could do no
more than put forward proposals for the directors’ consideration. They also
say that the Xtron directors would delegate their executive functions to Kong
Hee and Ye Peng in specific areas, so that, for instance, Kong Hee was
authorised to negotiate on Xtron’s behalf with American music producers
when the Crossover expanded to the US.
38
With Xtron managing Sun Ho, it fell to Xtron to finance her secular
music activities. Xtron acquired its wherewithal from a number of sources. It
received donations from individuals; these donations were often made in lieu
of contributions to the BF, ie, the money donated to Xtron would otherwise
have been given to the BF4. In some instances, these individuals would receive
refunds of donations they had made to the BF, and would then give the
refunded donations to Xtron. In January 2004, for instance, the CHC board
4
E-111, E-806.
19
approved a refund to Wahju of all the donations to the BF he had previously
made, which amounted to $1.45 million5. Where there was insufficient money
in the BF for refunds to be made, money would be transferred from the
General Fund to the BF6. On a few occasions, plans were made to use CHC’s
funds to purchase Sun Ho’s albums on the basis that these albums would be
used for CHC’s evangelistic and outreach work7.
39
Xtron also received revenue directly from CHC. From May 2005, it
sub-leased a hall at the Singapore Expo to CHC for CHC’s weekend services,
and from January 2006 Xtron provided events management and audio-visual
and lighting services to CHC in return for a monthly retainer. The position
adopted by the defence is that Xtron received this revenue from CHC pursuant
to legitimate commercial arrangements under which Xtron provided genuine
services in return for monetary payment. But the prosecution’s case is that
these services were mere excuses for transferring CHC’s money to Xtron in
order to fund the Crossover. For instance, Xtron’s audio-visual and lighting
staff were originally from CHC but moved over to Xtron in January 2006,
whereupon they continued to provide services to CHC in much the same way
they had done while employed by CHC; the prosecution contends that this
movement of staff was entirely unnecessary and that the intention behind it
was simply to give Xtron a reason to receive more money from CHC. The
prosecution further argues that the amount of revenue received by Xtron was
not based on a bona fide assessment of the value of the services it rendered to
CHC, but was wholly determined by the financial needs of the Crossover.
5
CH-83.
6
E-827 (27 February 2004).
7
E-115 (4 November 2003), E-127 and E-128 (August 2004).
20
The US phase of the Crossover
40
Around March 2003, Kong Hee went to the US to preach in a church
as a guest speaker, and when he was there he told the pastor of that church
about the Crossover. This pastor, who formerly worked in the entertainment
business, was intrigued by the concept behind the Crossover. She mooted the
idea of implementing a similar project in the US and to that end circulated
samples of Sun Ho’s music and videos among her friends in the entertainment
industry. Before long Kong Hee had forged connections with a number of
figures in the American music industry, one of whom was a producer named
Justin Herz (“Justin”). Following further discussions, Sun Ho went to the US
around June 2003 and recorded two English songs which were released as
singles. These singles met with a measure of success on the US music charts.
41
Following these first forays into the US music market, a decision was
taken to extend the geographical reach of the Crossover to the US. Kong Hee
continued corresponding with Justin and together they set goals and targets for
Sun Ho’s music activities in the US. Eventually, in February 2005, they began
discussing seriously the prospect of Sun Ho recording and releasing an
English-language music album in the US. Justin indicated that, if that was the
plan, he would start a “serious planning phase” in which he would “lay out a
detailed budget and projections on unit sales revenues etc”. In this context
Kong Hee told Justin that he would need a rough estimate of how much the
entire project would cost Xtron, and how much Xtron would “recoup on their
investment and when”8. In short, Kong Hee and Justin began discussing the
expected expenditure that would have to be incurred as well as the revenue
8
E-389.
21
that would subsequently be generated should Sun Ho record and release a
music album in the US. By June 2005, the aim was that Sun Ho would release
an album by March 20069, but when that time came around Justin took the
view that the album was not ready for release, and Kong Hee deferred to his
advice to hold back.
The Crossover’s increased financial needs
42
In May 2006, Justin brought a new executive producer, Wyclef Jean
(“Wyclef”), into the project. Being a producer of some standing in the US
music industry, Wyclef commanded substantial fees, and his involvement
would mean a significant increase in the amount of money needed to fund the
Crossover. But it was thought that Wyclef Jean’s ability and expertise could
bring much benefit to Sun Ho’s music activities and increase the likelihood
that more substantial revenue would be generated from album sales, concerts,
merchandising and other sources, such that his involvement might ultimately
lead to greater profit.
43
In this context, Kong Hee and Ye Peng began to think of ways in
which Xtron could obtain the funds that it needed for the Crossover. An early
idea suggested by Kong Hee was that CHC could give Xtron an advance of
several months’ worth of rent for the Expo premises that Xtron was subleasing to CHC, and Xtron could use this advance rental to fund the
Crossover10. By December 2006 that idea was being explored seriously11 and it
9
E-391.
10
E-447.
11
E-189.
22
eventually went through: CHC paid Xtron a sum of advance rental and Xtron
used it for the Crossover. It might also be noted that, by December 2006, Eng
Han had become involved in Xtron’s search for funds.
44
Xtron’s financial needs subsequently increased to such a degree that,
on 18 January 2007, Serina sent Ye Peng an e-mail informing him that Xtron
required a loan of $11.24 million for Sun Ho’s first album12, and a further $8.3
million if a second album was contemplated. The amount for the first album
increased to $13 million by 25 April 200713. Ye Peng and Eng Han continued
to assist Xtron its search for funds, and to this end they attempted in May 2007
to obtain loans from at least two banks, one being Citic Ka Wah Bank Limited
(“Citic Ka Wah”) in Hong Kong and another being UBS AG (“UBS”). As part
of the effort to secure a loan from Citic Ka Wah, it was proposed that CHC
should deposit about $9 million in the bank in order to build up a relationship
and increase the bank’s amenability to lending Xtron money, but in the event a
decision was made not to take up the loan due to the high loan interest rate.
45
With a bank loan out of the question, the next suggestion put forward
was for Xtron to take a loan from CHC’s BF. The BF was where CHC
deposited all the donations to its Arise and Build Campaign. In this campaign,
church members were given pledge cards and they could pledge an amount of
money towards the BF, and in these pledge cards it was stated, “Building Fund
is to be used for the purchase of land, construction costs, rentals, furniture and
fittings”. Thus the BF was a restricted fund, meant to be used for a specific
purpose only, ie, building-related expenses.
12
A-61, E-191.
13
E-141.
23
46
The suggestion being put forward here was for Xtron to borrow
$2.5 million from the BF, and for CHC then to set aside 10% of whatever
amount it managed to raise in the next round of the Arise and Build Campaign
and put that 10% in the General Fund instead of the BF on the basis that this
portion was meant for missions. Before the end of the financial year,
$2.5 million out of that 10% would be transferred from the General Fund to
the BF in order that the deficit in the BF created by the loan to Xtron might be
removed14. It is not altogether clear that giving a loan to Xtron would have
been an authorised use of the BF, but in the event the suggestion was not
implemented.
The Xtron bonds
47
Not long after, however, Eng Han revisited the idea of Xtron taking a
loan from the BF. He testified that, to his mind, if Xtron took an interestbearing loan from the BF it would be an investment from the BF in Xtron15.
Steps were thereafter taken to obtain approval for the investment of money
from the BF. One important step was the drafting of an investment policy
towards the end of June 2007. This investment policy was meant to fetter the
discretion of any fund manager who would be given the authority to invest
money from CHC’s BF – it set out the types of permissible investments, eg,
Singapore dollar-denominated fixed deposits or gold, and the maximum
percentage of the overall investment portfolio that each type of permissible
investment could comprise. According to the minutes of a CHC board meeting
14
E-90 and E-196.
15
Transcript 26 January 2015, pp 90 to 91.
24
dated 5 July 2007, the board unanimously approved the investment policy
presented to it16.
48
On 7 July 2007, an Extraordinary General Meeting (“EGM”) of CHC’s
EMs was held. Kong Hee informed the meeting that one reason for convening
this meeting was to pass a resolution permitting the investment of money from
the BF. Kong Hee explained that, given the uncertainties of CHC’s search for
a building to acquire, the money in the BF was sitting there untouched, and he
said that it would be better if the money could be invested instead in order to
generate financial return17. A short presentation was made by Eng Han in
which he told the meeting that an investment policy had been drafted, and he
elaborated on the parameters of the policy18. Thereafter Kong Hee informed
the meeting that CHC was appointing AMAC as its fund manager and that
Eng Han was a director and major shareholder of AMAC; he also indicated
that the initial sum from the BF to be invested by AMAC was $25 million19.
Kong Hee said that because Eng Han had talked to AMAC’s board of
directors, they would only be charging CHC a “minimal” management fee at a
rate of 0.1%. It is not disputed however that Eng Han is the sole director of
AMAC and that as a result of this EGM, it became an authorised use of the BF
to make investments out of it.
49
On 17 August 2007, a bond subscription agreement (“BSA”) was
signed between Xtron and AMAC in its capacity as CHC’s fund manager and
16
CH-13.
17
CH-28, p 11.
18
CH-28, pp 16 to 19.
19
CH-28, pp 20 and 21.
25
on behalf of CHC20 – I shall refer to this BSA as the “Xtron BSA”. Under this
BSA, AMAC agreed to subscribe to bonds issued by Xtron of up to
$13 million in value. The interest rate on the bonds was 7%, and the bonds
were due to mature in two years, ie, on 16 August 2009. Clause 2.3 of the
Schedule 3 provided that Xtron would use the bond proceeds for defined
purposes only, viz, “production, publicity, distribution and travelling costs
related to the production and marketing of [Xtron’s] music albums in the US
and Asia and salary costs”.
50
From August 2007 to March 2008, out of the $25 million from the BF
that had been earmarked for investment, $13 million was transferred to Xtron
pursuant to the Xtron BSA. The transfers were done in four tranches; for each
tranche, the transfer would be initiated by a document called the “Form of
Drawdown Notice” that Xtron would send to AMAC stating the desired
amount to be drawn down. AMAC would then send a letter of instruction to
Deutsche Bank – the bank with which CHC maintained its investment account
– instructing the bank to transfer the relevant amount to Xtron. These letters of
instruction were signed by three of CHC’s authorised signatories. The four
tranches were as follows:
20
(a)
August 2007 – $5 million;
(b)
November 2007 – $2 million;
(c)
January 2008 – $3 million; and
(d)
March 2008 – $3 million.
A-68.
26
In accordance with the “use of proceeds” clause in cl 2.3 of Schedule 3 of the
Xtron BSA, Xtron used the $13 million transferred to it from CHC’s BF for
the Crossover.
Xtron’s financial needs in the first half of 2008
51
The $13 million transferred to Xtron from CHC’s BF under the Xtron
BSA was not sufficient to meet all of Xtron’s financial needs. One key reason
for this was that the intended launch of Sun Ho’s first English-language album
was delayed, meaning that there was no incoming revenue even as the cost of
putting the album together increased. It was contemplated that Xtron would
need to draw down further amounts of money from CHC’s BF – for instance,
on 14 February 2008, Serina sent Eng Han and Sharon an e-mail setting out a
revised schedule under which Xtron would draw down $10 million from April
2008 to March 2009 in addition to the $10 million that had already been drawn
down up to that point21.
52
The other reason why Xtron required further funding was that, around
July 2008, the idea took shape that Xtron would purchase a certain property
for CHC’s use. This property was a unit in a commercial building located
between Clarke Quay and Boat Quay called The Riverwalk – I shall refer to
this unit as “Riverwalk”. Since January 2007, CHC had been leasing
Riverwalk for Bible study, cell group meetings and such purposes. Near the
middle of 2008, thought was given to the possibility of CHC acquiring and
owning Riverwalk instead of paying rent every month to use it. The minutes of
a CHC board meeting dated 24 May 2008 record a discussion about the
21
E-147.
27
potential purchase of Riverwalk for $21 million, and the board was recorded
to have agreed that it was a better arrangement to purchase it than to rent it,
and that an alternative space at Beach Road was less suitable. The board also
agreed that money from the BF would be used for any such purchase22. In the
days after this Sharon, Ye Peng and Eng Han gave further consideration to this
proposal of purchasing Riverwalk23, and they also sought the views of the
board members in greater detail24. But the only outcome of these discussions
was that the proposal was put on hold.
53
The idea of purchasing Riverwalk was revived in July 2008 25. Since
such a purchase would be funded using money from CHC’s BF, there
followed some discussion between Ye Peng, Serina, Sharon and Eng Han
about what CHC’s BF accounts would look like if anticipated expenditure for
the purchase of Riverwalk as well as additional Xtron bonds were taken into
account26. On 19 July 2008, CHC the board once again considered the
possibility of purchasing Riverwalk27. Eventually, Xtron did indeed purchase
Riverwalk, and I will touch on that in due course.
Discussions with auditors in June and July 2008
54
Around June 2008, the audit fieldwork for Xtron’s most recent
financial year – which ended 31 December 2007 – was taking place. This gave
22
CH-101.
23
E-877 to E-879.
24
E-880.
25
E-888.
26
E-889 to E-891.
27
CH-42.
28
rise to a number of discussions between Serina and the auditors, specifically,
Tiang Yii, the engagement partner for the audit, and Foong Ai Fang (“Ai
Fang”), the manager assisting her. Even as these discussions involving Tiang
Yii and Ai Fang took place, their managing partner Foong was concurrently
consulted by a few of the accused persons in relation to the Xtron bonds.
55
The discussions concerning the Xtron bonds that certain of the accused
persons had with Tiang Yii, Ai Fang and Foong during this period centred
around two issues. The first was whether there would have to be a write-down
or impairment of the fair value of the Xtron bonds in CHC’s books given
Xtron’s consistent loss-making financial situation, which could affect Xtron’s
ability to redeem the bonds and pay CHC the 7% interest stipulated in the
Xtron BSA. The second issue was whether CHC and Xtron would have to be
considered related parties such that their accounts would have to be
consolidated – such consolidation would mean that Xtron’s financial
statements would have to be disclosed in CHC’s books. The accused persons
say that they did not want consolidation and disclosure as it would reveal the
fact that CHC had been funding the Crossover through Xtron and thereby
undermine the discreet manner in which CHC wished to fund the Crossover.
56
In relation to the issue of consolidation, the initial indication from the
auditors was that this would not be necessary. This came from a phone
conversation that John Lam had with Foong on 27 June 2008 – in an e-mail
that John Lam sent to Ye Peng shortly after the conversation 28, he related
Foong’s advice that no consolidation was required because the Xtron bonds
28
E-423.
29
were a “straight forward bond”. John Lam added, however, that he was
requesting that the auditors “look into the bond structure to ensure there’s NO
equity feature in the bond”, and he suggested that Sharon should send Foong
the Xtron BSA for his perusal. John Lam also told Ye Peng that, in relation to
the issue of a write-down or impairment of the Xtron bonds, the “main
concern” was to ensure that Xtron would not default on the bonds. He said that
there might be a need to “work out a long term cashflow forecast” for Xtron in
order to show the auditors that Xtron would be able to redeem the bonds under
the Xtron BSA.
57
That afternoon, Serina sent Foong and Ai Fang a copy of the Xtron
BSA by way of e-mail. That evening, John Lam wrote to Ye Peng and his wife
Jacqueline pointing out two aspects of the Xtron bonds that might give rise to
concern. The first was that the Xtron BSA contained a certain clause that the
auditors might construe as an “equity feature”, which might result in
consolidation. The second was that the Xtron bonds were due to mature in
little over a year with no mechanism provided by which CHC would be able to
renew the bonds. That meant that Xtron did not have very much time in which
to obtain the $13 million needed to redeem the bonds, and in this connection
John Lam suggested that one solution was “to now extend the maturity date”29.
58
These audit issues continued to cause the accused persons some
concern. On 5 July 2008, for example, Ye Peng wrote to inform Kong Hee
that he and Serina had been “going back and forth” on Xtron’s cashflow, and
he set out two areas of concern30. The first was that there might not be
29
E-474.
30
E-12.
30
sufficient revenue coming in from the Crossover for Xtron to redeem the
$13 million of bonds due to mature in August 2009 and an additional
$11 million of bonds proposed to be issued in August 2008 and maturing in
August 2010. The second area of concern was that, if Xtron was not able to
redeem the bonds that had been issued to CHC, there might be a write-down
of the value of the Xtron bonds in CHC’s accounts, and in that event it would
be “hard to explain to the members the loss in investment”.
59
On 9 July 2008, Serina asked Ai Fang to arrange an “urgent meeting”
with Tiang Yii. When Ai Fang asked Serina exactly what she wanted to
discuss with Tiang Yii, Serina sent Ai Fang three audit-related queries31. I
highlight two of these. One was whether, in a hypothetical situation where
Xtron could not redeem the bonds in 2009 and instead re-issued new bonds to
replace those bonds, there would be a need to write down the value of the
Xtron bonds on maturity, and whether there would be any need for special
disclosure of this circumstance in either CHC’s or Xtron’s accounts. Another
was whether, given that the Xtron bonds constituted a portion of CHC’s
portfolio, it was a requirement that CHC’s and Xtron’s accounts be
consolidated or there be special disclosures made in their accounts. Serina
subsequently sent the same audit-related queries to Foong but added a further
question, asking him if he thought there was “an issue of CHC investing
heavily in Xtron” even though Xtron had been “an insolvent company for the
past few years”, keeping in mind the fact that Xtron was paying CHC “very
high interest”32.
31
E-355.
32
E-346.
31
60
Tiang Yii replied on 11 July 2008. She said, among other things, that
CHC would need to obtain “an independent professional valuer’s valuation to
determine the fair value” of the Xtron bonds, and that CHC would have to
“comply with numerous disclosure requirements”. She also said that CHC
should consult its legal advisor on the question of whether the Xtron BSA
gave CHC any equity option in Xtron such as might require a consolidation of
CHC’s and Xtron’s accounts. In the next few days, Eng Han spoke to
Christina Ng (“Christina”), a lawyer who had previously assisted in the
drafting of the Xtron BSA, and he told Serina, John Lam and Eng Han that
Christina had “verbally said” that the BSA should not give rise to any equity
implication33. This addressed the issue of consolidation; as for the issue of the
valuation of the Xtron bonds, John Lam indicated that he had done an
assessment of the fair value of the Xtron bonds and showed it to Serina, and he
said that on the basis of his assessment “there should be no impairment” of the
Xtron bonds. He pointed out that the “only risk” in his assessment was that it
assumed that Xtron would achieve high sales proceeds from the release of Sun
Ho’s albums in the years to come, hence there was a need to “justify the high
album sales”.
61
Thus, at this stage in the middle of July 2008, it appeared that (i) there
would not be a need to consolidate CHC’s and Xtron’s accounts, (ii) there
would be no need to disclose the Xtron bonds in CHC’s audit report, and
(iii) there would be no write-down or impairment of the Xtron bonds. This was
a desirable outcome from the perspective of the accused persons, as the link
33
E-158.
32
between CHC and the funding of the Crossover could remain out of public
view, and John Lam was able to conclude, “we’re quite safe then”.
62
However, the prognosis changed somewhat in the second half of
July 2008. Around this time, concerns were raised within the CHC board
about CHC’s corporate governance arrangements in the light of a recent
incident involving another charitable organisation known as Ren Ci which
resulted in the prosecution of its founder34. It was decided that Foong should
be consulted in relation to these concerns35. On 21 July 2008, Foong told Ye
Peng that he would be available to meet that day, and in anticipation of the
meeting Ye Peng sent Foong a paper or write-up in which the relationships
between CHC, Xtron and AMAC were set out36.
63
A few days after this meeting, on 24 July 2008, Serina sent John Lam,
Eng Han and Ye Peng an e-mail37 summarising what had been discussed with
Foong at the meeting. According to her, Foong had said, among other things,
that (i) there would be impairment of the Xtron bonds so long as there was
uncertainty as to whether Xtron would be able to redeem the bonds, (ii) it
would have to be disclosed in CHC’s accounts that CHC had “subscribed to
bonds issued by a company in which a key employee is related to one of
CHC’s Management Board members”, and (iii) Sun was considered a “key
player” in Xtron so the auditors would require disclosure on all transactions
between CHC and Xtron. This last point was highlighted in bold.
34
E-408.
35
BB-19.
36
E-269.
37
E-267.
33
Conception of the Firna bonds and Xtron’s purchase of Riverwalk
64
Given the likelihood now that the auditors would require disclosure of
the Xtron bonds in CHC’s accounts for as long as Sun Ho was managed by
Xtron, a plan was formulated to take Sun Ho out of Xtron. This plan involved
Wahju’s assistance and the basic idea behind it was that CHC would purchase
Firna bonds and the bond proceeds would be used to fund the Crossover. A
parallel plan was developed under which Xtron would purchase Riverwalk,
with part of the purchase price, estimated around $17.5 million, to be provided
by CHC in the form of $5.2 million of new bonds issued by Xtron in addition
to the $13 million that had already been issued under the Xtron BSA. This
additional bond issue would be the subject of an amended bond subscription
agreement (“ABSA”) between CHC and Xtron, and the Xtron BSA would be
“subsumed” under this ABSA such that the bonds would no longer mature in
August 2009 but would instead do so in 10 years. Xtron would obtain the
remainder of the purchase price by way of a bank loan secured by a mortgage
over Riverwalk.
65
Shortly after midnight on 28 July 2008, Serina sent Wahju an e-mail to
which Ye Peng and Eng Han were copied38. To this e-mail was attached a
“business plan” which Wahju had apparently requested and which set out the
profit projections for Sun Ho’s albums. In the morning of the same day, Kong
Hee sent Serina an e-mail, copying Ye Peng, with the subject line “4
Concerns”39. This e-mail contained queries about Xtron’s ability to service a
bank mortgage on Riverwalk, as well as a proposed plan to purchase Firna
38
E-107.
39
E-19.
34
bonds so that Wahju “independently supports the crossover project from it”.
The discussion continued by way of e-mail, and at some point Eng Han was
also copied40. That night, Kong Hee summarised his understanding of the
situation in a new e-mail41, the salient points being:
(a)
Xtron owed AMAC $13 million for the Crossover;
(b)
AMAC was planning to purchase another $18 million worth of
bonds from Xtron, and Xtron was to use that to pay for Riverwalk;
(c)
Xtron would then take a bank mortgage worth $13.1 million to
redeem the $13 million worth of bonds it had issued under the Xtron
BSA;
(d)
AMAC was to purchase $18 million worth of bonds from
Firna, and Firna would “independently support” the Crossover from it;
(e)
If only a third of the projected revenue from the Crossover
came in, Firna would have $10.4 million less than it would need to
redeem $18 million of bonds;
(f)
In order to make up this possible shortfall of $10.4 million, the
CHC Multi-Purpose Account and “Big Donors” would be “tapped in”,
and Ye Peng, Eng Han and Serina were to “come up with a solution for
this”.
40
E-18.
41
E-154.
35
66
On 29 July 2008, Kong Hee sent an e-mail to Serina, Ye Peng and Eng
Han which contained yet another summary of the preceding day’s dicussions42.
In all these e-mails on 28 and 29 July 2008, Kong Hee indicated his
instruction that the auditors and Jimmy Yim, a senior lawyer, should “look
through and ok all processes”. On 30 July 2008, Kong Hee asked Ye Peng and
Eng Han when they would be “checking with Jimmy Yim” 43, and by the
following day Serina and Ye Peng were discussing a meeting with Foong that
was scheduled for 1 August 200844.
67
Accordingly, on 1 August 2008, Ye Peng, Serina, Eng Han and John
Lam met Foong at his office at 3.00pm. After the meeting, Serina wrote to
Kong Hee, copying Eng Han and Ye Peng, to apprise him of how the meeting
had gone. She said that Foong’s “replies were favourable regarding our new
plans”. She added that Foong had “advised us the following”45:
1.
Not to mention that Siow Ngea (or any of the XPL
directors: namely Kar Weng) will not take any profits from
Xtron as this doesn’t make commercial sense. Everything
that XPL or its directors do has to be seen to be justifiable
commercially. Whether he chooses to take a profit or not
will be based on verbal agreements with us.
2.
The way that Eng Han has come up with to prevent any of
the XPL shareholders from acting against our interests is
that the $18M bonds that AMAC will buy from XPL are
convertible bonds (CHC can exercise the right to convert
these bonds to equity and take control of XPL).
42
E-409.
43
BB-20.
44
BB-73 to BB-75.
45
E-325.
36
68
3.
Not to paint the picture that CHC has full control but only
some control over XPL. If full control will invite
consolidation.
4.
We can talk about XPL to the members in EOGM but
don’t minute down everything. Just minute down
necessary portions so as not to show too close a
relationship or control over XPL.
5.
Main thing is to proof to the members that all the
transactions that CHC will undertake is justifiable
commercially.
As these plans regarding the Firna bonds and Xtron’s purchase of
Riverwalk were being made, the audit fieldwork for Xtron’s most recent
financial year continued, and in the morning of 1 August 2008 Ai Fang sent
Serina and Sharon an e-mail setting out a number of outstanding audit issues
which required responses from CHC and Xtron46. Serina forwarded this e-mail
to Ye Peng, Eng Han and John Lam47. Among the issues brought up by the
auditors were: (i) whether the Xtron bonds complied with CHC’s investment
policy; (ii) whether the fact that Xtron’s main activity involved the production
of music albums and the fact that its main artiste was Sun Ho would mean that
this would “be viewed as for personal gain”; and (iii) whether Xtron would be
able to redeem the bonds on maturity and what the “fair value” of the bonds
was given that that Xtron had been “making huge losses for the past few yrs”.
69
A decision was made to convene an urgent meeting of the investment
committee on 5 August 2008 in order to address the issues that the auditors
had raised. The day before the meeting, John Lam, Sharon, Ye Peng, Eng Han
and Serina discussed the agenda, and among the items tabled for discussion at
46
E-225
47
E-94.
37
the meeting were (i) whether CHC’s investments were in compliance with the
investment policy, and (ii) whether, on an assessment of Xtron’s financial
projections, Xtron would be able to redeem the $18.2 million of bonds under
the ABSA consisting of $13 million in bonds previously issued and
$5.2 million in new bonds. Serina reminded them that there was also a need to
discuss the Firna bonds at the meeting48.
70
The meeting of the investment committee was duly held on 5 August
2008. According to the minutes of this meeting49, which were dated 29 July
2008 even though the meeting had not in fact taken place on that day, the
committee reviewed a report from Xtron on its financial state and
unanimously agreed on the basis of the report that Xtron would be able to
redeem the bonds in 10 years. The minutes also record that the investment
committee was told that Firna would be issuing convertible bonds due to
mature in three years, with interest to be paid on the bonds at the rate of 4.5%
per annum, and that the committee agreed after a discussion that it was a
“good investment and the risk is considerably low”.
71
Several days later, on 10 August 2008, an EGM of CHC’s EMs took
place. Kong Hee told the meeting about the plan for Xtron to purchase
Riverwalk. As this was apparently the first time the EMs had heard of Xtron,
Kong Hee explained that it was a company that had been “started in 2003 by
three City Harvest Church members to own and manage future buildings that
CHC can use consistently”50. Kong Hee then said that AMAC had advised
48
E-95.
49
A-113.
50
CH-25, p 16.
38
CHC to purchase $18.2 million of “10-year convertible bonds from Xtron”,
which would yield interest at a rate of 4% per annum51. No mention was made
of the Firna bonds, and there was also no mention of the fact that Xtron would
be taking a bank loan in respect of part of the Riverwalk purchase price. The
following day, 11 August 2008, Xtron exercised its option to purchase
Rivewralk.
72
On 13 August 2008, Serina, Sharon, Eng Han, Ye Peng and John Lam
were involved in drafting responses to the auditors’ queries that had been
conveyed by Ai Fang on 1 August52. These responses were eventually sent to
the auditors53. In these responses the auditors were informed, among other
things, that (i) CHC’s investment committee had studied the Xtron bonds and
concluded that the bonds complied with CHC’s investment policy and did not
give rise to issues of impairment, (ii) the new Xtron bonds to be issued under
the ABSA were for the purchase of Riverwalk and not the English album,
(iii) Sun Ho would cease to be managed by Xtron in August 2008, (iv) Xtron
would take a bank loan of $13 million to purchase Riverwalk, and (v) the
$7 million in bonds that had been drawn down under the Xtron BSA in 2007
would be converted from two-year to 10-year bonds, ie, they would mature not
in August 2009 as originally envisaged but in 10 years’ time.
51
CH-25, p 23.
52
E-97.
53
TFW-14.
39
The Firna bonds
73
By 22 August 2008, it was clear that the plan to use the Firna bonds to
fund the Crossover would proceed in the following way: after a bond
subscription agreement between CHC and Firna (the “Firna BSA”) had been
signed, the Firna bonds would be issued and CHC would pay money to Firna.
Thereafter Firna would transfer the money to a foreign entity called Ultimate
Assets (“UA”) which was wholly owned by Wahju, and UA would then
transfer it to Justin’s company JH Music, also known as “JHM”54.
74
This plan, however, met some obstacles along the way. One was that
the execution of the Firna BSA required the signature of Wahju’s father-inlaw, but he was not prepared to sign. He was concerned about the
convertibility option in the BSA under which CHC would have the right to
convert the Firna bonds into shares in Firna. To overcome his reluctance to
sign, what was called a “secret letter”55 was signed by John Lam in September
2008. This letter stated that it had been issued by the CHC board, and it
contained written assurance from CHC that, in the event CHC exercised the
convertibility option, it would sell the Firna shares back to Wahju and his
father-in-law for $1. Wahju’s father-in-law was given the letter and he signed
the Firna BSA accordingly.
75
Another obstacle was that the Firna bonds could not be issued without
the approval of two Indonesian banks from which Firna had taken loans, and
for a few weeks this approval was not forthcoming. By 6 October 2008 formal
54
BB-27.
55
E-211.
40
approval had not yet been obtained from one bank, but on the basis of an
indication from a contact person within that bank that approval would likely
be given, Serina wrote to Kong Hee and Ye Peng informing them that she
would “proceed to execute and draw down the bonds”56.
76
The Firna BSA57 was eventually executed the following day, on
7 October 2008. Under this BSA, CHC and Firna agreed that Firna would
issue and CHC would subscribe to a maximum of $24.5 million in bonds that
would mature in three years and yield interest at a rate of 4.5% per annum.
Pursuant to cl 2.3 of Schedule 3 of the BSA, Firna was to use the bond
proceeds “for general working capital”.
77
From October 2008 to June 2009, $11 million was transferred from
CHC’s BF to Firna pursuant to the Firna BSA. The transfers were done in five
tranches, and the procedure for each transfer was almost identical to that for
the Xtron bonds. Each transfer would be initiated by a document called the
“Form of Subscription Notice” that Firna would send to AMAC stating the
desired amount to be drawn down. AMAC would then send a letter of
instruction to Deutsche Bank instructing the bank to transfer the relevant
amount to Firna. These letters of instruction were signed by three of CHC’s
authorised signatories. The five tranches were as follows:
(a)
October 2008 – $5 million;
(b)
November 2008 – $1 million;
56
E-492.
57
A-116.
41
(c)
December 2008 – $1 million;
(d)
May to June 2009 – $2 million; and
(e)
June 2009 – $2 million.
It is not disputed that, out of this $11 million, about $7.56 million was used for
the Crossover and $2.5 million was used by Wahju for his personal expenses.
78
On each occasion when the Firna bonds were drawn down, Serina
would send Wahju an e-mail stating the drawdown amount and informing him
how he should use that money. For instance, on 8 October 2008, Serina told
Wahju that the first drawdown amount was $5 million, and she said: “From
the S$5million that PT Firna will return to you, kindly process the transfers to
the following accounts asap”, including the return of $990,000 to Siow Ngea
and payment of $2.2 million to CHC for the purchase of a New York
apartment. Serina then informed Wahju that $1,135,000 should be transferred
to UA, and in respect of this sum, she said, “kindly process the transfers from
Ultimate Assets to the following accounts”, including US$200,000 to Justin
for “lawyer’s fees”. She said that, after these transfers had been carried out,
around $145,300 would be “left in Ultimate Assets for the album”58. About a
month later, on 5 November 2008, Serina wrote to Wahju, again copying Ye
Peng and Eng Han, telling him that $1 million in Firna bonds was being drawn
down. She then asked Wahju to transfer $700,000 from Firna to his DBS
account, and to transfer US$446,000 from the DBS account to Justin59.
58
E-21.
59
E-216.
42
79
This plan to use the Firna bonds to fund the Crossover did not proceed
without difficulty even after the execution of the Firna BSA and the first
drawdown of the bonds. After Wahju had transferred the Firna bond proceeds
to UA’s bank account with UBS, he was unable to transfer it out of the
account – UBS was holding the money there in order to cover losses that
Wahju had incurred while trading on that account. This complication was
eventually resolved.
Plans to redeem the Xtron and Firna bonds
80
On 9 April 2009, a number of the accused persons, namely Sharon, Ye
Peng and John Lam, had a meeting with the auditors to discuss audit matters
relating to CHC. Also present was one Lai Baoting (“Baoting”) from CHC’s
accounts department. By this time the engagement partner was no longer
Tiang Yii but Sim Guan Seng (“Sim”). Ye Peng and John Lam both left the
meeting at some point, leaving Sharon and Baoting with Sim.
81
It is not disputed that, after this meeting, plans were made to have the
Xtron and Firna bonds redeemed before the end of the financial year, the last
day of which was 31 October 2009. The position taken by the defence is that
Sharon understood from this meeting on 9 April 2009 that Sim did not like
unquoted bonds on CHC’s books – that is, bonds not traded on the open
market – because such bonds were difficult to value, and he wanted the Xtron
and Firna bonds, both of which were unquoted, removed from CHC’s books.
The defence says that the plans to have those bonds redeemed was thus
motivated by Sim’s direction. The prosecution’s case, however, is that Sim did
not instruct the accused persons to take the bonds off the books, and that what
he said was that he would continue to raise questions about the Xtron and
Firna bonds for as long as they were not redeemed. This appears to be
43
reflected in Sharon’s 9 April 2009 email recording her notes of what Sim had
said60. This, says the prosecution, was a source of concern for the accused
persons as continued questioning from Sim might eventually reveal the true
nature of those bonds, and hence they made plans to redeem the bonds and
thereby remove them from Sim’s scrutiny.
82
In the weeks after the 9 April 2009 meeting with Sim, a few plans were
explored for bringing about the redemption of the Xtron bonds. These bonds
included the $13 million that had been issued under the Xtron BSA executed
in August 2007 as well as additional amounts that had been issued under the
ABSA executed in August 2008, and Xtron required a total of $21.5 million to
redeem all these bonds. The broad idea behind these plans was that Xtron
would obtain the money in two main ways: first, by receiving a lump sum
payment from CHC in connection with some form of rental arrangement
between CHC and Xtron, and second, by selling Riverwalk.
83
I should mention at this point that, towards the end of 2008 and
throughout 2009, efforts were being made by CHC to find and purchase a
building suitable for its use, and it was envisaged that Xtron would own the
building for CHC’s benefit. Eng Han played a key role in these efforts: he was
involved in assessing potential sites for a building, eg, the Capitol Theatre,
Suntec and the Singapore Flyer, and working out the practical details of a
possible purchase, for instance, by arranging meetings with prospective joint
venture partners. CHC even made a bid for Suntec in the first half of 2009 but
this was unsuccessful. I mention this because some of the plans to redeem the
60
E-68.
44
Xtron bonds overlapped with the plan for Xtron to purchase a building for
CHC’s benefit, in that those plans involved Xtron leasing the building to CHC
and CHC paying Xtron either advance rental or a rental deposit in connection
with the lease, and Xtron thereafter using the money to redeem the bonds.
84
I will consider the plans to redeem the Xtron and Firna bonds in
greater detail later in this judgment, but for now it suffices to say that, by
12 September 2009, the plan was as follows. CHC would pay Xtron a sum of
advance rental, and Xtron would use part of that sum to redeem the Xtron
bonds; this would simply be recorded as a set-off. As for the Firna bonds,
Pacific Radiance – a company of which John Lam was chief financial officer –
would invest more than $11 million in AMAC, which would then lend the
money to UA, which would in turn lend it to Firna, and Firna would use this to
redeem the bonds it had issued to CHC. Pacific Radiance would get its money
back not long after in this way: out of the advance rental that CHC had paid to
it, Xtron would lend money to Firna, Firna would return the loan it had taken
from UA, UA would return the loan it had taken from AMAC, and AMAC
would return Pacific Radiance’s investment. It should be noted that the
defence says that this entire plan was presented to the CHC board and
approved by it, but the prosecution’s position is that the board was not so
apprised.
85
The plan subsequently changed because Pacific Radiance could not be
called upon, and by 3 October 2009 the plan had taken its final form
comprising the following steps:
(a)
CHC and Xtron to enter into an advance rental license
agreement (“ARLA”) under which CHC would have the right to use
and occupy premises provided by Xtron for 120 days per year for eight
45
years, in return for the payment by CHC to Xtron of a licence fee of
$46.27 million;
(b)
Xtron to redeem the bonds it had issued to CHC by setting off
the $21.5 million it owed CHC against part of the advance rental due
from CHC under the ARLA;
(c)
CHC to invest $5.8 million in one tranche of the SOF offered
by AMAC, which AMAC lend to UA, which UA would lend to Firna,
and which Firna would use to redeem partially the bonds it had issued
to CHC;
(d)
CHC to invest $5.6 million in another tranche of the SOF,
which AMAC would lend to UA, which UA would lend to Firna, and
which Firna would use to redeem what remained of the bonds;
(e)
CHC to pay Xtron further advance rental in the sum of
$11.5 million, which Xtron would use to purchase Firna bonds, which
Firna would use to return the loan UA had given it, which UA would
use to return the loan AMAC had given it, and which AMAC would
use to return to CHC, with interest, the $11.4 million it had invested in
the two tranches of the SOF.
86
This series of transactions was carried out from 2 October 2009 to
29 December 2009. On 2 October 2009, CHC transferred $5.8 million from its
BF to AMAC as payment for Tranche 10 of the SOF. AMAC transferred
$5.8 million to UA on 5 October 2009, and UA transferred $5.3 million to
Firna on 7 October 2009. Firna then transferred about $5.23 million to CHC
on 9 October 2009, thus purportedly redeeming part of the Firna bonds.
46
87
On 15 October 2009, CHC transferred $5.6 million from its General
Fund to AMAC as payment for Tranche 11 of the SOF. This was also the day
on which the ARLA was signed. On 16 October 2009, AMAC transferred
$5.6 million to UA, and UA transferred $6.1 million to Firna on 20 October
2009. On 22 October 2009, Firna transferred about $6.06 million to CHC, thus
purportedly redeeming the remaining part of the Firna bonds.
88
On 6 November 2009, CHC transferred $15,238,936.61 to Xtron
pursuant to the ARLA – of this sum, $12 million was stated to be part payment
of the advance rental due under the ARLA and the remaining amount of
approximately $3.24 million was stated to be goods and services tax. On
1 December 2009, Xtron purchased $11.455 million in Firna bonds and
transferred that sum of money to Firna, and Firna transferred $11.476 million
to UA in three tranches from 4 to 11 December 2009. On 15 December 2009
UA transferred $5 million to AMAC, which transferred it in turn to CHC the
following day;
and on 28 December 2009, UA transferred about
$6.476 million to AMAC which transferred it in turn to CHC the next day.
89
All the relevant redemption transactions were recorded in CHC’s
accounts by Baoting, who testified that she made those entries on Sharon’s
instructions. Baoting obtained her understanding of those transactions from
Sharon. The net result of these transactions and the corresponding accounting
entries was that the Xtron and Firna bonds were no longer on the books of
CHC.
Events in 2010
90
In January 2010, CHC put in a successful bid to purchase a stake in
Suntec City. The ARLA between CHC and Xtron was subsequently
47
terminated. This meant that Xtron had to return to CHC the money that had
been paid to it under the ARLA. Loans were sought from a number of
individuals for that purpose, and Xtron repaid CHC by October 2010.
91
On 31 May 2010, the Commercial Affairs Department commenced
investigations. It raided the offices of CHC, Xtron and a number of
organisations related to CHC, and in the weeks and months that followed it
called in various people for questioning, including the accused persons.
The law on CBT by an agent and conspiracy
92
The sham investment charges and the round-tripping charges relate to
the offence of CBT by an agent, which is an offence under s 409 of the Penal
Code. This offence is an aggravated form of CBT simpliciter defined by s 405
of the Penal Code. For convenience I set out these provisions:
Criminal misappropriation of property
Criminal breach of trust
405. Whoever, being in any manner entrusted with
property, or with any dominion over property, dishonestly
misappropriates or converts to his own use that property, …,
commits “criminal breach of trust”.
...
Criminal breach of trust by public servant, or by banker,
merchant, or agent
409. Whoever, being in any manner entrusted with
property, or with any dominion over property, in his capacity
of a public servant, or in the way of his business as a banker,
a merchant, a factor, a broker, an attorney or an agent,
commits criminal breach of trust in respect of that property,
shall be punished with imprisonment for life, or with
imprisonment for a term which may extend to 20 years, and
shall also be liable to fine.
48
93
It should be noted that the sham investment charges and round-tripping
charges do not allege that each of the accused persons committed CBT by an
agent by themselves. Rather, they allege that the accused persons abetted one
another in committing CBT by an agent by together engaging in a conspiracy
to do so. The concept of abetment by conspiracy is to be found in s 107(b) of
the Penal Code and it is punishable under s 109. For convenience I set out
these provisions:
Abetment of the doing of a thing
107. A person abets the doing of a thing who —
…
(b) engages with one or more other person or persons in
any conspiracy for the doing of that thing, if an act or
illegal omission takes place in pursuance of that
conspiracy, and in order to the doing of that thing; …
…
Punishment of abetment if the act abetted is committed
in consequence, and where no express provision is made
for its punishment
109. Whoever abets any offence shall, if the act abetted is
committed in consequence of the abetment, and no express is
made by this Code for the punishment of such abetment, be
punished with the punishment provided for the offence.
94
As to the offence of CBT by an agent under s 409 of the Penal Code, it
is apparent that there are two limbs to the actus reus in that the act giving rise
to the offence takes place where a person either “misappropriates” property or
“converts [it] to his own use”. In the present case, the prosecution seems to
rely only on the former limb of misappropriation and not on the latter limb of
conversion. Accordingly, there are four cumulative elements to the offence of
CBT by an agent that are relevant to this case:
49
(a)
The accused was entrusted with property or with dominion over
property;
(b)
Such entrustment was in the way of the accused’s business as
an agent;
95
(c)
The accused misappropriated the property entrusted to him; and
(d)
The accused did so dishonestly.
I will consider the meaning of each of these elements in greater detail
in the course of this judgment, but I should first point out that there is an
overlap in the concepts of “misappropriate” and “dishonestly” in the third and
fourth elements respectively. As Yong Pung How CJ said in Tan Tze Chye v
Public Prosecutor [1997] 1 SLR(R) 876 (“Tan Tze Chye”) at [37], to
“misappropriate” means “to set apart or assign to the wrong person or wrong
use, and this must be done dishonestly”. On this definition, it is inherent in the
act of misappropriation that one does it “dishonestly”, and to that extent the
phrase “dishonestly misappropriates” in s 405 of the Penal Code is
“tautologous”, as Steven Chong J observed in Wong Seng Kwan v Public
Prosecutor [2012] 3 SLR 12 at [54]. Accordingly, when I consider whether
the third element of misappropriation has been made out, I will consider only
the question of whether the relevant property has been put to “wrong use”, and
I will discuss separately the question of whether this was done “dishonestly”.
96
As for the notion of conspiracy, it is not in doubt that, for an accused to
be considered to have engaged in a conspiracy for the doing of a thing, he
must have “knowledge of a common design” and “at least be aware of the
general purpose of the plot”; and further, “that plot must be unlawful”: see
Nomura Taiji v Public Prosecutor [1998] 1 SLR(R) 259, a decision of Yong
50
Pung How CJ, at [110]. But mere knowledge of the design or plot is not
sufficient. In Lau Seng Song and others v Public Prosecutor [1997] 3 SLR(R)
772, the Court of Appeal opined at [87] that it would be an “unattractive
proposition at best” that “mere knowledge or consent to a criminal scheme
involving other individuals would attract liability for criminal conspiracy”; the
Court thus implied the existence of a “requirement that a conspirator play
some role in the conspiracy”.
97
My understanding of the crux of the prosecution’s case against the
accused persons in relation to the sham investment and round-tripping charges
is that they engaged in a conspiracy for the doing of a thing that amounted to
CBT by an agent. In my judgment, in order for this to be established, the
prosecution must prove beyond reasonable doubt that:
(a)
Dominion over CHC’s funds – specifically, the BF or General
Fund as the case may be – was entrusted to the accused persons who
were on the CHC board;
(b)
Such dominion was entrusted to them in the way of their
business as agents;
(c)
Things were done that constituted a “wrong use” of CHC’s
funds;
(d)
Each of the relevant accused persons played some role in the
things done; and
(e)
Each of the relevant accused persons acted “dishonestly”.
51
98
Given the matters which the prosecution must prove, my consideration
of the sham investment and round-tripping charges will proceed in the
following way. First I shall consider if it has been shown that dominion over
CHC’s funds was entrusted to John Lam, Kong Hee and Ye Peng in relation to
the sham investment charges, and to Ye Peng in relation to the round-tripping
charges. Second, if such entrustment is established, I shall consider whether
dominion over CHC’s funds was entrusted to the relevant accused persons in
the way of their businesses as agents.
99
Thereafter I shall consider whether things were done that constituted a
“wrong use” of CHC’s funds. Finally, I will turn to consider the involvement
of the individual accused persons in the things done. I will consider the roles,
if any, that they played in the things done, and whether they can be described
as having acted “dishonestly”.
Whether the second charge is defective
100
Before all that, however, I deal with a preliminary objection that the
second charge is defective because it concerns the very same alleged
conspiracy that is the subject-matter of the first charge, and there should be no
more than one charge in respect of that conspiracy. It is argued that, the
essence of conspiracy being an agreement for the doing of the thing, there
should have been just a single charge arising out of the drawdown of
$13 million of Xtron bonds because there was only one overarching agreement
in relation to that amount of the Xtron bonds.
101
It is true that the first and second charges both arise out of the same
alleged agreement, but in my view the second charge is not defective and I
accept the reason given by the prosecution in support of this view. The offence
52
of abetment by conspiracy under s 109(b) of the Penal Code premises criminal
liability on the commission of the act being abetted. In the case of the Xtron
bonds, the relevant acts being abetted and committed would be the drawdowns
of funds from CHC’s BF. Each drawdown was a separate act being abetted
and committed, and could technically be the subject of a separate charge.
Therefore the prosecution is entitled to differentiate between the first and
second charges.
102
There is potentially a practical ramification of the prosecution’s
decision to distinguish between the first and second charges. In the period of
time between the drawdowns of $10 million and $3 million, the Penal Code
was amended with these amendments coming into force on 1 February 2008.
These amendments affected the offence of CBT by an agent under s 409, in
that the maximum non-life imprisonment term for the offence was increased
from 10 to 20 years. Hence, in the event of convictions being handed down on
the first and second charges, the sentencing ranges applicable to each charge
would be different.
Whether the relevant accused persons were entrusted with dominion over
CHC’s funds
103
I now consider whether the relevant accused persons were entrusted
with dominion over CHC’s funds. The starting point, in my view, is that it is
not in doubt that the CHC board as a whole was entrusted with dominion over
CHC’s BF as well as the General Fund. This is evident from the provisions of
CHC’s constitution61. Clause 6 of Art II gives the board power to make such
61
A-10.
53
investments on CHC’s behalf as it “may from time to time deem to be in the
interests of the Church”, and from funds that the board “deems surplus to the
normal operational needs of the Church. Clause 5a of Art VI empowers the
board to “exercise the power and business” of CHC; cl 5d empowers it to
“manage and control gifts, legacies and beneficiaries of any kind”; and cl 5e
empowers it to “meet any cost, expense and liability from such as may be
needed by the Church”. In addition, cl 5k of Art VI provides that the board
shall have all the powers listed in the Third Schedule to the Companies Act
(Cap 50) as at 31 March 2004 – this is the reference date because the Third
Schedule was repealed with effect from 1 April 2004 – and cl 11 of the Third
Schedule empowers the board to “invest and deal with the money of the
company not immediately required in such manner as may from time to time
be thought fit”.
104
The question that remains is whether John Lam, Kong Hee and Ye
Peng can be considered to have been entrusted with dominion over CHC’s
funds by reason only of their membership of the CHC board. The prosecution
argues that this is so. The defence, on the other hand, contends that, whatever
dominion over CHC’s funds the board as a whole might have been entrusted
with, John Lam, Kong Hee and Ye Peng were not entrusted with such
dominion because (i) they did not form a majority on the CHC board, let alone
control the board, (ii) they could not withdraw CHC’s funds as and when they
liked, (iii) they could not move funds around, and (iv) they did not have final
oversight over CHC’s funds.
105
The prosecution relies on Hon Chi Wan Colman v Public Prosecutor
[2002] 2 SLR(R) 821 (“Colman”), a decision of Yong Pung How CJ, and in
particular Yong CJ’s view (at [53]–[54]) that it was “plainly right” that “sole
54
dominion is not a necessary condition to establishing [CBT]”. The prosecution
takes this to be determinative of the question of whether John Lam, Kong Hee
and Ye Peng had dominion over CHC’s funds. But the defence disagrees, and
urges a distinction between: (i) a situation in which a person can unilaterally
deal with property, where other persons have that same power, and (ii) a
situation in which a person cannot unilaterally deal with property but can only
do so in conjunction with others, eg, where a company’s bank account is
operated by multiple signatories. It is argued that Yong CJ’s view in Colman
applies to the situation in (i) but not in (ii), and that, therefore, a board member
who has dominion over a corporate entity’s property only in conjunction with
other board members does not have any dominion over the property.
106
The defence has cited a number of cases in support of the proposition
that, where a number of persons have been entrusted with dominion over
property, no one of them has been individually entrusted with such dominion.
To begin with, reliance is placed on Colman itself; there, Yong CJ said at [51]
that the authors of a textbook had opined that it was possible for CBT to be
made out “even if there is concurrently another person in overall control of the
operations or day-to-day running of operations” [emphasis added]. It is argued
that the word “concurrently” is significant because it stands in contrast to a
situation of persons acting in “conjunction” with one another. But in my view
that would be reading too much into a single word; I do not think that Yong CJ
intended to point out a contrast between having control “concurrently” and in
“conjunction” with others. The only contrast he seems to have had in mind
was that between sole dominion, ie, a situation where dominion is clearly
entrusted to a single person, and dominion involving multiple persons.
55
107
There is an authority which supports the defence’s position, and it is
the Malaysian case of Tan Liang Chew & Ors v Public Prosecutor [1997] 5
MLJ 338. The first accused there was a director of a society as well as a
member of a committee that made recommendations to the society’s board of
directors as to what housing loans to approve. He was charged with CBT by
an agent in respect of RM350,000 that was the amount of the housing loan that
had been given to a person who was not in fact entitled to such a loan. The
defence relies on what KC Vohrah J said at 349C, which is: “There was no
evidence to show that [the first accused] had dominion over the money of the
society”. He went on to say that, “[i]f at all, the dominion over the property
appears to [be] that of the board of directors since it had the power to approve
housing loans”.
108
Thus it would seem that, to Vohrah J, even if the board of directors had
dominion over property, merely being a director on that board did not suffice
to give the first accused dominion over property. For that reason this case does
appear to be helpful to the defence. However, I am of the view that this case is
not the strongest authority in the sense that the reasoning is not entirely clear.
In relation to the question of whether the first accused had been entrusted with
dominion over property, Vohrah J seemed to focus only on the first accused’s
being a member of the committee that made recommendations on housing
loans, and he seemed not to attend to the first accused’s membership of the
board of directors, even though, as he noted at the beginning of his decision (at
343I), the prosecution’s case against the first accused was that he “was a
director of the society and in such capacity was entrusted with the loan
amount”. This is what he said (at 349C–E):
… and here neither the oral nor documentary evidence show
that the first accused was so entrusted with the money. The
evidence that was produced was that he sat on a committee
56
meeting as a member that recommended housing loan
applications for approval by the board of directors and that he
was a signatory with the second and third accused of a cheque
for an amount that is the subject matter of this charge. If at
all, the dominion over the property appears to [be] that of the
board of directors since it had the power to approve housing
loans. The evidence may well show a lax environment for the
processing of loan applications and of financial procedures
and management but that is not the same as saying the first
accused had dominion over property.
109
Vohrah J did consider the relevance of the first accused’s being a
director of the society, but he appeared to do so only in relation to the question
of whether he was an agent of the society (at 349A–B). In the premises, it
appears to me that he did not address himself to the question of whether the
first accused in that case could be said to have been entrusted with dominion
over property by virtue of (i) the fact that the society’s board of directors had
been entrusted with such dominion, and (ii) the first accused’s membership of
the board. Given that Vohrah J was hearing the matter as an appellate judge, it
is perhaps quite understandable that he did not engage thoroughly with these
matters, which were rightly the province of the trial judge, but the point is that
I do not consider that much weight can be placed on this authority. It is after
all not a decision that is binding on me.
110
The defence relies on another Malaysian case, that of Chang Lee Swee
v Public Prosecutor [1985] 1 MLJ 75. The accused there was charged with
having committed CBT by an agent by transferring funds from a company of
which he was “Executive Director of Finance” to another company. He was
convicted after trial but his appeal against conviction before Gunn Chit Tuan J
was allowed. One of the grounds on which Gunn J set aside the conviction
was that it had not been shown that the accused had been entrusted with the
company’s funds. The peculiar facts of the case were that the company’s
board of directors had resolved to give up all its powers and discretions to the
57
company’s managing director, including the power to manage the funds of the
company. This meant that, even though the accused was an “executive director
in-charge of financial affairs”, he “was not in the position to manage the
funds” of the company “without the overall control” of the managing director,
and therefore in the circumstances he was “not entrusted with or had complete
dominion over” the company’s funds (at 80).
111
In my judgment, that case also does not assist the defence. That case
turned on the fact that the board of directors had given up all its powers to the
managing director; this meant that the board no longer had any dominion over
the company’s property and thus could not be said to have been entrusted with
dominion over property. It would logically follow that no member of the board
could be said to have been entrusted with dominion over the company’s
property. In the present case, there is no suggestion that the CHC board
similarly gave up its powers to an individual or individuals.
112
The other precedents cited by the defence, in my view, are not on
point. Reliance is placed on the local decision of F A Chua J in Lai Ah Kau v
Public Prosecutor [1988] 2 SLR(R) 128, specifically, where it is said at [27]
that “[a] person in total control of a limited liability company … or two or
more such persons acting in concert, are capable in law of stealing the
property of the company”. Although Chua J used the language of “total”
control in coming to his conclusion that there was entrustment of dominion
over property, I do not think it follows that the only situation in which CBT
can be made out is where the accused alone has, or multiple accused persons
together have, “total” control over property.
113
Reliance is also placed on the Malaysian case of Yap Sing Hock &
Anor v Public Prosecutor [1991] 2 MLJ 334, in particular where Abu
58
Mansor J said at 342F: “Over and above that they were directors, I also found
as a fact that the first and second appellants had dominion and did exercised
[sic] dominion over the $12m assets of Lien Hoe”, Lien Hoe being the
company of which the appellants were directors. The argument might be made
that, if mere membership of the board of directors sufficed to give a person
dominion over Lien Hoe’s property, Abu Mansor J would not have needed to
find “as a fact” that the appellants had dominion. It might even be argued that,
given the appellants’ submission that the trial judge erred when he apparently
concluded that, since it had been held that “the first and second accused were
directors per se they were therefore entrusted with dominion over the $12m”
(at 341D), Abu Mansor J must have thought that the mere fact of being
directors per se did not equate to being entrusted with dominion.
114
But in my view, the comments of Abu Mansor J must be read in the
context of the facts of that case. In that case the appellants were the principal
directors and shareholders of a company referred to in the decision as
Holdings. Holdings entered into a sale and purchase agreement to purchase
Lien Hoe. The difficulty was that Holdings lacked sufficient funds for the
purchase, and what was done to overcome this was that the appellants were
made the new directors of Lien Hoe by way of a resolution signed by the old
directors. Another resolution made the appellants signatories of Lien Hoe’s
bank accounts and gave them authority to use three fixed deposit receipts as
security for an overdraft. Thus there was, in effect, an apparent transfer of
dominion over Lien Hoe’s property from the old directors to the appellants.
The appellants sought to argue first and foremost that they had not been
validly appointed as directors at the material time. Abu Mansor J rejected that
argument and held that they were directors at the time. They then argued that,
even if they had been appointed at the time, the old directors had not yet
59
resigned, and point being that they could not have had dominion “when the old
directors were still in their places” (at 342H). It was in response to this point
that Abu Mansor J found as a fact that, over and above the mere fact that the
appellants were directors, they did exercise dominion over Lien Hoe’s assets
in that the old directors had allowed them to use the three fixed deposit
receipts as security and to be signatories to Lien Hoe’s bank accounts.
115
Hence, in my judgment, Abu Mansor J was addressing his comments
to a situation where there was alleged ambiguity as to which of two sets of
directors, old or new, had dominion over the company’s property. His words
should not be taken as establishing the general proposition that a person’s
membership per se of a company’s board where the board has dominion over
the company’s property may never be sufficient to establish that the person
was entrusted with dominion over property. In the present case, there is no
suggestion that there was any uncertainty as to whether the CHC board of
which John Lam, Kong Hee and Ye Peng were a part was entrusted with
dominion over property, and there is no doubt that it was so entrusted.
116
Returning to Colman, Yong CJ explained at [54] that the reason why
sole dominion is not required is that “what is important is only the fact that the
trust was breached, and this is so equally whether or not dominion of the
property was entrusted solely to a specific employee or to a number of
employees”. But I have some sympathy with the argument that this passage
conflates the concepts of entrustment and dominion; in effect, it explains why
sole dominion is not necessary by assuming that dominion has been
established to begin with. It does not answer the logically prior question of
whether mere membership of the board of directors suffices to give a person
dominion over property. I do not think that Colman requires me to take the
60
view that a director has dominion over property only where he deals with
property in conjunction with other directors.
117
In my judgment, the authorities, Colman included, do not mandate any
particular answer to the question of whether John Lam, Kong Hee and Ye
Peng were entrusted with dominion over CHC’s funds by reason only of their
membership of the board. I thus approach the question on the basis of
principle and common sense. At the close of the prosecution’s case,
submissions were put forward on that question, and in the prosecution’s
submissions an analogy was put forward which I found helpful. This analogy
was that of two persons with two keys to a safe, each of which must be turned
in unison for the safe to be opened. In the analogy the two persons no doubt
have dominion over the safe, and they have this dominion only in conjunction
with one another, but in my view it would go against common sense to say
that neither one of them individually has dominion over the safe.
118
In the same way, where dominion over property has been entrusted to a
number of individuals who collectively form the board, I think that dominion
has been entrusted to each of these individuals. While each individual may not
have total control over the property because they must act in conjunction with
one another, I find it difficult to say that they do not have some control simply
by virtue of their membership of the board, and in my judgment that would
suffice for them to be considered as having dominion over the property. In the
present case, since the board undoubtedly was entrusted with dominion over
CHC’s funds, and since John Lam, Kong Hee and Ye Peng were all members
of the board, I am of the opinion that each of them was entrusted with
dominion over CHC’s funds.
61
Whether dominion was entrusted to the relevant accused persons in the
way of their business as agents
119
Turning now to the question of whether John Lam, Kong Hee and Ye
Peng were entrusted with dominion over CHC’s funds in the way of their
business as agents, the defence argument is that, just because these accused
persons were directors of CHC, and being directors were agents of CHC, it
does not follow that the entrustment to them of dominion over CHC’s property
was in the way of their business as agents. In the main, they rely on the
authority of Mahumarakalage Edward Andrew Cooray v The Queen [1953]
AC 407 (“Cooray”), a decision of the Privy Council on appeal from Ceylon.
The Privy Council agreed with the defence submission, which it summarised
at 415, that s 409 of the Penal Code is “limited to the case of one who carries
on an agency business and does not comprehend a man who is casually
entrusted with money … provided that the evidence does not establish that he
carries on an agency business”. It added that it was not “deciding what activity
is required to establish that an individual is carrying on the business of an
agent”, for all that it was saying was that in the case before them the appellant
clearly was not carrying on such a business. This view was founded on the fact
that the appellant “was in no sense entitled to receive the money entrusted to
him in any capacity”.
120
Standing in the way of the defence is the local case of Tay Choo Wah v
Public Prosecutor [1974–1976] SLR(R) 725 (“Tay Choo Wah”), a decision of
F A Chua J. At [27] Chua J considered that the Indian Supreme Court case of
R K Dalmia v Delhi Administration AIR 1962 SC 1821 (“Dalmia”) made it
clear that Cooray could be distinguished. He went on to say at [31] that the
question of whether a person was entrusted with dominion over property in the
way of his business as agent was a question of fact, and that in the case before
62
him there was “ample evidence” that the appellant was so entrusted in the way
of his business as agent. That evidence, as seen at [30], consisted of the fact
that the appellant “was at all material times a director and agent” and “also the
secretary” of two companies named Sin Chew and Modern Housing, that this
“was his full time business occupation”, and that he “received the [shares
comprising the relevant property] in his capacity as agent”. In my view, what
Chua J held was that, if one is an agent, eg, a director, and one is entrusted
with property in one’s capacity as agent, that would be entrustment in the way
of one’s business as agent. Applying this principle to the present case, John
Lam, Kong Hee and Ye Peng were all agents of CHC, being members of
CHC’s board, and CHC’s money was entrusted to them in their capacities as
agents. Therefore they were entrusted with CHC’s money in the way of their
business as agents.
121
Another analysis that reaches the same result is as follows. It is clear
that Chua J in Tay Choo Wah at [27] thought that “the reasoning in Dalmia’s
case makes it clear that Cooray’s case can be and was accordingly
distinguished”. What exactly Chua J meant by this pithy statement is less
apparent, and this calls for examination of Dalmia. It was pointed out at [92]
of Dalmia that in Cooray, as has been noted, the appellant “was in no sense
entitled to receive the money entrusted to him in any capacity”. Hence,
although he was president of a union, vice-president of a bank and president of
a committee which controlled a wholesale depot, he could not have received
the money “in the course of his duties as any of these office-bearers” (at [94]).
The court in Dalmia then went on to articulate the following principle at [96]:
The expression ‘in the way of his business’ means that the
property is entrusted to him ‘in the ordinary course of his duty
or habitual occupation or profession or trade’. He should get
the entrustment or dominion in his capacity as agent. In other
words, the requirement of this section would be satisfied if the
63
person be an agent of another and that other person entrusts
him with property or with any dominion over that property in
the course of his duties as an agent.
From this principle it is clear that the court in Dalmia thought that, if in
Cooray the appellant had received the money “in the course of his duties as
any of these office-bearers”, the Privy Council would have found him to have
been entrusted with the money in the way of his business as an agent.
122
Thus, when Chua J said that the reasoning in Dalmia showed that
Cooray could be distinguished, what he was essentially doing was adopting
the principle in Dalmia that s 409 of the Penal Code would operate “if the
person be an agent of another and that other person entrusts him with property
or with any dominion over that property in the course of his duties as an
agent”. Accordingly, since Tay Choo Wah is authority binding on me, I am
bound to follow that principle in Dalmia. Applying that principle, since John
Lam, Kong Hee and Ye Peng were unarguably agents qua directors of the
CHC board, and they were entrusted with CHC’s money in the course of their
duties as members of the board, they were entrusted with the money in the
way of their business as agents and thus fall under s 409.
123
It remains to be mentioned that the defence argues that Cooray is
authority that is binding on the State Courts, and that it should be followed
rather than Tay Choo Wah. The defence’s premise must be that Tay Choo Wah
erroneously distinguished Cooray, for if it properly distinguished Cooray then
there is no conflict of authority and it would be right to follow Tay Choo Wah.
In support of this premise the defence cites the Malaysian case of
Periamasamy s/o Sinnappan & Anor v Public Prosecutor [1996] 2 MLJ 557
where the Court of Appeal held at 574–575 that it could not accept the
reasoning in Dalmia and preferred the reasoning in Cooray. But I agree with
64
the prosecution’s submission that it is not for me to say that the High Court in
Tay Choo Wah was wrong to distinguish Cooray. As Lord Simon of Glaisdale
said in Miliangos v George Frank (Textiles) Ltd [1976] AC 443 at 478, it is
the duty of a subordinate court “to give credence and effect to the decision of
the immediately higher court, notwithstanding that it may appear to conflict
with the decision of a still higher court”; the decision of that still higher court
“must be assumed to have been correctly distinguished (or otherwise
interpreted) in the decision of the immediately higher court”. Any other
approach would involve “a subordinate court sitting in judgment on a decision
of its superior court”, which would be “contrary to law”. This argument
therefore fails.
Whether things were done that constituted a “wrong use” of CHC’s funds
124
In the course of the trial, the phrase “church funds for church
purposes” was often repeated. This was intended to convey the broad point
that the Crossover, which was synonymous with Sun Ho’s secular music
activities, was something that CHC supported completely. I have no doubt that
the Crossover was indeed an integral aspect of CHC’s evangelistic efforts and
that it was thus a core mission of the church; to that extent it is beyond
question that the Crossover was a “church purpose”. On this premise, it is
contended, it could not be a misuse of church funds to fund the Crossover.
This point is most pertinent in the context of the sham investment charges,
since the $13 million used to purchase Xtron bonds and most of the
$11 million used to purchase Firna bonds went towards the Crossover.
125
An important fact to bear in mind however is that there are different
types of church funds. The money used to purchase Xtron and Firna bonds that
went to the Crossover came from CHC’s BF and not the General Fund; it is
65
not disputed that the BF was a restricted fund meant for specific purposes. The
pledge cards for campaigns to raise funds for the BF stated that “Building
Fund is to be used for the purchase of land, construction costs, rentals,
furniture and fittings”. Donations to the BF would have been made on that
basis, and the BF therefore could not be used for any and all “church
purposes”. The accused persons recognised this at least implicitly, for if this
were not so, the BF would simply have been used directly to finance the
Crossover, being a “church purpose”. Subsequently the EMs of CHC were
informed in August 2007 that, since there was no building to acquire at the
time, rather than have the money stagnate in the BF it would be invested to
earn returns. Thus there are only two authorised uses of the BF: the first being
to pay land- and building-related expenses, and the second being to invest in
order to generate returns.
126
Hence, in relation to the sham investment charges, the question of
whether CHC’s BF was put to the “wrong use” turns on the question of
whether the Xtron and Firna bonds can be considered to be investments, which
would be an authorised use of the BF. I shall discuss first the Xtron bonds and
then the Firna bonds, and thereafter I will discuss the transactions that are the
subject of the round-tripping charges, which involve somewhat different
considerations from those in the sham investment charges.
The Xtron bonds
127
In relation to the Xtron bonds, it is not disputed that, on 17 August
2007, a BSA was signed between AMAC, CHC’s fund manager, and Xtron,
under which Xtron agreed to issue and AMAC to subscribe to bonds worth a
maximum of $13 million. It is also not disputed that bonds worth $13 million
were drawn down in four tranches from August 2007 to March 2008, that
66
AMAC purchased these bonds using money from CHC’s BF, and that the
$13 million disbursed to Xtron was applied towards the Crossover.
128
The defence says that the Xtron bonds were investments, but the
prosecution’s case is that these were “sham” investments and thus an
unauthorised or wrong use of CHC’s BF. In assessing these competing
positions, one important issue is the relationship between CHC and Xtron, and
it is to this issue that I now turn.
Relationship between CHC and Xtron
129
Xtron was ostensibly set up in June 2003 on Eng Han’s suggestion “to
separate [Sun Ho’s] CD work from the church in the public’s eyes” 62. The
prosecution’s case, simply stated, is that Xtron was not independent of CHC,
and by this what is meant is that Xtron’s decisions were not made by its
directors or its staff but by CHC’s board and staff, and in particular, Kong Hee
and Ye Peng. All the accused persons bar Eng Han, on the other hand,
advance the view that Xtron was independent of CHC. They acknowledge that
CHC and Xtron had a common vision and common objectives, and that the
leaders of CHC exercised a substantial amount of influence over Xtron, and
this influence extended to putting forward proposals to the Xtron directors.
But they say that Xtron was nonetheless an entity independent from CHC
because the Xtron directors ultimately had the final say as to what decisions
would be taken on Xtron’s behalf. As directors, they owed fiduciary duties to
Xtron, and they would thus consider if any given proposed decision was in the
62
E-92.
67
best interests of Xtron before committing Xtron to the relevant course of
action.
130
The Xtron directors who gave evidence as prosecution witnesses,
namely Koh Siow Ngea (“Siow Ngea”), Choong Kar Weng (“Kar Weng”) and
Wahju, all gave testimony that supported the position taken by the accused
persons. Siow Ngea and Kar Weng were the Xtron directors at the time the
CAD commenced investigations; Wahju was a director from 2004 and stepped
down around July 2008. They confirmed that they thought of themselves as
owing fiduciary obligations to Xtron, in particular, the obligation to act in
Xtron’s best interests. They said that the CHC leadership and staff would on
occasion place proposals before them, and they would then scrutinise the
proposal in an independent manner before deciding whether or not to take it
up. They readily acknowledged that they had not been involved in the day-today running of the company, but they say that they got involved when there
were important or significant transactions on the table. They denied that they
were mere figureheads rubber-stamping decisions that had in actuality been
made by CHC.
131
In relation to the day-to-day aspects of the Crossover in the US, it is
the defence’s position that the Xtron directors delegated their decision-making
power to Kong Hee. Thus Kong Hee was the one who corresponded with
Justin and the other music industry figures in the US who were working on
Sun Ho’s music. Kong Hee was the one to whom Justin sent various
documents and spreadsheets estimating the expenses that would have to be
incurred in producing and promoting Sun Ho’s music albums and videos, as
well as the projected revenue from the future release and sale of the albums.
Justin would also tell Kong Hee when payment had to be made in respect of
68
the expenses incurred. According to the defence, however, all this did not
mean that the Xtron directors were not the ultimate decision-makers when it
came to the Crossover. At the very least, they would approve what might be
called master or overall budgets for a given period, say, $2 million in a year,
and Kong Hee would then have the discretion to spend up to $2 million that
year; he would be able to decide what to spend it on, and when. But Kong Hee
went further and testified that the Xtron directors would also have approved
the various individual expenses and the timing of the expenditure as part of
their approval of the overall budget63.
132
I am persuaded, for the reasons to follow, that the prosecution’s
characterisation of the relationship between CHC and Xtron is the correct one.
In my judgment, Xtron was in substance no more than an extension of CHC.
From the time it was incorporated in 2003 to 2010, it was controlled entirely
by CHC, and in particular by Kong Hee and Ye Peng. It was CHC’s “special
purpose vehicle” for the very purpose of CHC controlling it; any
independence between CHC and Xtron was in name only, and the Xtron
directors were no more than figureheads or “rubberstamps” who did not and
were not expected to exercise any decision-making authority. In relation to the
Crossover, I am satisfied that the decisions apparently made by Xtron were in
fact made by Kong Hee, with administrative support from Ye Peng and Serina,
without reference to the Xtron directors except in so far as the directors’
approval was required as a matter of form.
63
Transcript 27 August 2014, pp 118 to 120.
69
133
In coming to this view of the relationship between CHC and Xtron, I
necessarily reject the contrary evidence of the Xtron directors and the accused
persons save Eng Han. I do so on the basis of the extensive documentary
evidence which primarily consists of e-mail correspondence between the
accused persons and other members of the CHC board regarding the affairs of
Xtron. On that documentary evidence alone I am satisfied that Xtron was not
independent of CHC, but there is in addition Eng Han’s testimony that CHC
controlled Xtron. Leaving his evidence aside for now, I shall go through the
documentary evidence relevant to this issue.
134
The evidence shows that the CHC board, in particular Kong Hee and
Ye Peng, made decisions regarding Xtron’s structure and personnel. Kong Hee
and Ye Peng selected Xtron’s directors and the directors themselves had no
part to play in the selection process. In February 2006, Ye Peng was in a
position to say that one Henry Chee would not be appointed as Xtron
director64, and when a decision was made to appoint Kar Weng as Xtron
director in late September 2005, Wahju, an Xtron director then, was not
consulted on the appointment and was merely informed of it 65. An attachment
to an e-mail from December 2006 reveals that Suraj, a CHC Board member,
would “work out” Xtron’s organisational structure and show it to Ye Peng,
and Ye Peng would in turn go through it with Kong Hee, thus showing that
Kong Hee, Ye Peng and Suraj were the ones deciding Xtron’s organisational
structure66.
64
E-624.
65
E-245.
66
E-82.
70
135
On three separate occasions over a few years, Kong Hee was presented
proposals on Xtron staff salaries and expenses in a manner which leaves it in
no doubt that his approval was being sought on those proposals – reference
may be had to e-mails dated 28 November 200667, 2 July 200868, and
13 January 201069. It is also telling that Kong Hee sought to hold himself out
at Xtron’s “managing director” and had wanted Xtron name cards printed
describing him as such70. Ye Peng did not dispute that this reflected the reality
of Kong Hee’s executive decision-making role but advised that it would be
preferable to describe him as “consultant”. His reason was that if it were to be
known that Kong Hee was Xtron’s “managing director” which connotes
decision-making and “a top position in the company”, they feared that there
might be related party issues.
136
The day-to-day operations of Xtron were overseen in 2008 by Suraj, as
is apparent from a number of e-mails. In one dated 28 January 2008, Serina
acknowledged that “[i]f any of the Xtron staff are asked, they will have to say
[Suraj] is the manager”, and she said that Suraj should not “be taking over
Xtron in a pseudo way” in the sense of being a CHC board member “running
Xtron”71. In another e-mail from Serina, this one dated 23 April 2008, Suraj
was referred to as “unofficial General Manager” of Xtron, and according to
Serina the only reason he could not be an Xtron signatory was that he was also
67
E-454.
68
E-547.
69
E-517.
70
E-620.
71
E-569.
71
on the CHC board72. In a Blackberry message from Serina to Ye Peng on
10 August 2008, she wrote that Suraj was “managing [Xtron] incognito”73. It is
especially telling that, in December 2008, Suraj suggested to Ye Peng and Eng
Han that Siow Ngea, a director of Xtron, should get involved in negotiations
regarding the possibility of Xtron renting Riverwalk to a certain organisation.
It is difficult to believe that an Xtron director would not already be involved in
such negotiations if the directors truly had any executive functions within
Xtron, and to my mind this is cogent evidence that Xtron’s directors were
figureheads who were not expected to have any real role in the management of
Xtron, and that it was the CHC leadership which managed Xtron.
137
I am persuaded that Kong Hee and Ye Peng effectively controlled
Xtron because of Eng Han’s testimony that they were the most influential
members of the CHC board and that there was hardly any situation in which
the board would reject a suggestion made by one of them. I accept this
evidence without hesitation, especially in relation to Kong Hee. Given that
Kong Hee founded CHC and was all along its spiritual leader, it is in my view
manifestly clear that he would have enjoyed pre-eminence within the
leadership of the church. This is strongly supported by Kong Hee’s email to
Ye Peng of 18 August 2007 titled “Discipleship” chastising him in strong
terms for his various lapses and inadequacies74. It is further supported by, for
instance, an e-mail from Suraj on 19 July 2008 in which he expresses a
number of concerns to Kong Hee in the supplicatory manner of a subordinate
72
E-472.
73
BB-77.
74
E-463.
72
before a superior75. The fact that even Suraj, whose own role in Xtron was
substantial enough for him to be considered a “General Manager”, considered
Kong Hee to be above him in the leadership hierarchy strongly suggests to my
mind that Kong Hee had the final say in all decisions that Xtron (and CHC)
made.
138
The lack of independence between CHC and Xtron is further
demonstrated by the fact that, at various points, the CHC board or a
combination of Kong Hee, Ye Peng, Serina and Sharon were able to make
decisions by themselves on transfers of money between CHC and Xtron. They
were able to work backwards from Xtron’s financial needs to determine how
much money Xtron needed for CHC, and then to find viable justifications for
such payment, for instance, advance rental or an increase in the retainer
payable for the audio-visual and lighting services provided by Xtron to CHC. I
mention the following instances:
(a)
In June 2006, Kong Hee and Ye Peng were able to direct that
CHC would extend a loan to Xtron to tide Xtron through its cashflow
difficulties76.
(b)
In August 2006, Kong Hee told Ye Peng that Xtron would need
to be paid advance rental at certain points in the future, and that the
monies so advanced would have to be paid back to CHC
subsequently77.
75
E-408.
76
E-445.
77
E-447.
73
(c)
In October 2006, Serina and Ye Peng discussed a plan for CHC
to make an advance payment to Xtron of eight months’ worth of
retainer in March 2007, after which Xtron would in June 2007 return to
CHC five months’ worth of retainer78.
(d)
In two e-mails from Serina to Ye Peng towards the end of
2006, she told him that Xtron required more money for CHC in order
to meet its cashflow needs and proposed that certain things be done in
order that it might appear that CHC had valid reason to transfer the
money to Xtron. In one of the e-mails, Serina suggested getting CHC’s
editorial and graphics department to move to Xtron and to provide
services to CHC so that they would be able to “justify” a $50,000
increase in the retainer paid by CHC to Xtron79, and in the other e-mail,
Serina told Ye Peng that CHC would have to transfer about $157,000
to Xtron, and the precise reason for this transfer would be worked out
later – it would be classed either as payment for the production of
seven DVDs, or as pre-payment for unspecified projects in the
following year80. I find it difficult to believe the explanation that the
editorial and graphics personnel would be able to improve their skills
in Xtron and that this would be a good reason for the $50,000 increase.
(e)
In January 2007, the CHC board unilaterally decided that Xtron
would charge CHC a mark-up in sub-leasing the Expo hall on the basis
78
E-449.
79
E-187.
80
E-600.
74
that it would not “make business sense for Xtron to charge CHC zero
markup”, and so that “it will be deemed an arms length transaction”81.
(f)
In an e-mail from Serina to Ye Peng and Eng Han in July
2008, she informed them that they had all to think of a reason for
Xtron “to legitimately earn” a sum of US$2 million from CHC each
year82.
(g)
In an e-mail to Kong Hee in July 2008, Serina suggested, with a
view to solving Xtron’s cashflow difficulties, “transferring some other
non-core CHC [departments] over to [Xtron]” in order that Xtron could
“charge CHC for the services” provided by those departments83.
(h)
On 16 July 2008, Serina noted that Kong Hee had “already
made provision” to set aside $2 million from the General Fund “to give
to Xtron via some projects” in order that Xtron might have additional
funds that would go towards redeeming the Xtron bonds CHC had
purchased in 200784.
(i)
On 26 February 2009, Sharon told Kong Hee that CHC would
have to increase the retainer paid to Xtron by $400,000 so that Xtron
would incur no loss from the reduction of the rental paid by CHC to
Xtron from $8 to $5 per square foot. This reduction in the rental had
81
E-457.
82
E-16.
83
E-571.
84
E-480.
75
been made necessary by a representation made to the EMs at a
previous EGM that this would be the rent payable85.
(j)
On 29 March 2009, Sharon told Kong Hee that the redemption
of the Xtron bonds might be “delayed by one or two years” because
CHC had reduced the retainer and other fees payable to Xtron, and
that, if CHC’s income improved over the next few years, “we can
increase retainer and other charges”86.
139
Kong Hee’s decision-making authority in Xtron is starkly illustrated by
an e-mail exchange from July 2008 demonstrating that Eng Han considered
that he could start negotiating on Xtron’s behalf for the purchase of Riverwalk
once Kong Hee had given his approval87. Kong Hee’s evidence was that he
was not approving a decision but was merely endorsing a proposal that would
then be placed before the Xtron directors. But I do not find that at all
convincing because, on a plain reading of the e-mail, it appears that Eng Han
felt that Kong Hee’s agreement was all that he needed to take concrete steps
towards the Riverwalk purchase. In a similar vein, in early May 2010, when
Eng Han suggested to Kong Hee that Riverwalk should be sold, Kong Hee felt
able to say, nine minutes later and without reference to the Xtron directors,
“Sell asap”88. Eng Han was also able to say that since Kong Hee agreed, the
85
E-22.
86
E-554.
87
E-151.
88
BB-47.
76
CHC board would be agreeable as well as there was hardly any situation
where the board differed from his view89.
140
I find that, even as the CHC leadership made decisions for Xtron,
efforts were made to make it appear as if it was the Xtron directors making
those decisions. There are e-mails showing that Ye Peng and Serina would
prepare minutes of meetings between the Xtron directors that had apparently
happened in the past90. For instance, on 24 November 2007, Serina sent Ye
Peng an e-mail saying that she had “just finished doing all the minutes”, and
attached to this e-mail were draft minutes of meetings that had apparently
taken place between the Xtron directors on 5 May, 25 July, 23 August and
some other days in 200791. Serina would sometimes ask Ye Peng if he had
anything to add to the draft minutes even though it was never suggested that
Ye Peng attended the Xtron directors’ meetings92.
141
In fact, as Serina accepted, some of the alleged meetings never took
place at all. Ye Peng testified that he would make day-to-day decisions
regarding the Asian Crossover, and he had no explanation as to why the
minutes were drafted in such manner as to suggest that these were decisions
made by the Xtron directors: he said that only Serina would know why as she
was the one who drafted the minutes. All this makes it exceedingly difficult to
believe that the Xtron directors were the ones actually making the decisions
recorded in the minutes of their supposed meetings. The explanation that these
89
Transcript 3 February 2015, p 26.
90
E-17.
91
E-350.
92
E-167, E-310.
77
among other anomalies were mere lapses in corporate governance is hardly
convincing when the evidence is considered as a whole and in context.
142
Further evidence of the lack of executive authority exercised by the
Xtron directors is that it was only at a late stage, in April 2010, that Angie Koh
Lee Ching (“Angie”), an employee of Serina’s company Advante Consulting
Pte Ltd (“Advante”) which was handling Xtron’s accounts, was told by Serina
that from that point on, she had to obtain the Xtron directors’ approval “before
transacting”93. Angie testified that, prior to this instruction from Serina, she
would seek approval from Serina herself.
143
When it came to the specific area of Xtron’s business that was the
Crossover, this was controlled entirely by Kong Hee and Ye Peng. I am
satisfied that the Xtron directors were, in this area, also mere figureheads who
did not make decisions for Xtron. This is shown by the following:
(a)
From February to August 2006, without the prior approval of
the Xtron directors, Kong Hee was able to direct that four payments
amounting to more than $1.3 million be made from Xtron to Justin in
the US. It was only after all these payments had been made, in October
2006, that Serina asked Ye Peng how she should “present” these
payments in the “board resolution for [the Xtron directors] to sign”,
and even then Serina said that she did not have “any budget details” as
to what the payments were for94.
93
E-170.
94
E-185; see also E-855 and E-868.
78
(b)
In entering into the Xtron BSA in August 2007, the Xtron
directors were not made aware of the “conservative” estimate that the
sales of Sun Ho’s album would not exceed a figure of 200,000 and the
consequence that Xtron would not enjoy sufficient revenue to be able
to redeem the bonds on maturity in two years’ time. The Xtron
cashflow that the directors were shown did not even take into account
Xtron’s liability to repay principal and interest on the bonds95.
(c)
Kong Hee and Ye Peng controlled when Xtron drew down on
the bonds, and in what amount. One particularly compelling piece of
evidence is that the Xtron directors were willing to sign on blank
drawdown forms that could be used in an “emergency”96, which
demonstrates that the amounts and timings of the drawdowns were
entirely out of their hands.
(d)
Based on Serina’s testimony, which I accept, it was Kong Hee
and Ye Peng who controlled how the Xtron bond proceeds were spent
on the Crossover, that is, what were the precise items of expenditure to
be incurred in relation to production, publicity and the like, and how
much to spend on each item.
(e)
In August 2008, Kong Hee was able to make the decision, after
consultation with Eng Han and Ye Peng, that Sun Ho should sign a
fresh artiste management agreement not involving Xtron, and that UA
95
E-537.
96
X-65.
79
should be the entity to deal with Justin, this in order “to sever any
paper link or face the need for disclosure”97.
144
As against all this, it was argued by Ye Peng that the Xtron directors’
independence was demonstrated by the fact that Kar Weng had on at least one
occasion objected as Xtron director to the plans that CHC had for Xtron. The
occasion he pointed out was said to have occurred around 21 July 2008, when
the plan being discussed was Xtron’s purchase of Riverwalk. According to Ye
Peng, the initial plan was for Xtron to purchase Riverwalk using advance
rental paid by CHC, but when Kar Weng objected to this method of funding
Xtron, the plan changed so that Xtron would be put in funds by way of an
issue of bonds instead98. Given the lack of evidence to the contrary, I am
prepared to accept that Kar Weng had indeed expressed some concern over the
use of advance rental, and that this was acted upon. But it hardly follows, in
my view, from this isolated instance that Kar Weng exercised any real control
over Xtron.
145
In an e-mail Kar Weng sent to Ye Peng on 21 July 2008 regarding the
purchase of Riverwalk99, he said that he was “a little uncomfortable with the
arrangements”, that is, the arrangement that Xtron be the vehicle for owning
the property even though CHC would be the “ultimate beneficiary”. Kar Weng
expressed his view, among other things, that “the correct vehicle should be
CHC”. This view was ultimately not acceded to as Xtron purchased and
owned Riverwalk, but that is not so much the point as it is that the tone in
97
BB-26 and E-488.
98
Transcript 23 March 2015, pp 74 and 75.
99
E-978.
80
which Kar Weng wrote to Ye Peng was as a subordinate to a superior. He
went so far as to tell Ye Peng, “Pastor, if I have misunderstood our discussions
yesterday and my concerns are unfounded, please forgive me”. In my
judgment, this e-mail hardly goes to show that the Xtron directors exercised
any real executive authority in Xtron. Rather, it strongly suggests that their
role was limited to raising points for the consideration of the ultimate
decision-makers, Kong Hee and Ye Peng.
146
There is in truth more evidence showing that Xtron was not
independent of CHC and that the Xtron directors were not the ones who
controlled the company, but I see no need to belabour the point. In my
judgment, the evidence I have set out above suffices to amply show
unequivocally that Xtron was entirely controlled by CHC and in particular by
Kong Hee and Ye Peng. I turn now to consider the question of whether the
Xtron bonds were investments, and thus authorised uses of the BF, in the light
of the relationship between CHC and Xtron as I have described.
Whether the Xtron bonds were investments
147
All the accused persons facing the sham investment charges take the
position that the Xtron bonds were genuine investments and thereby an
authorised use of CHC’s BF. They submit that the definition of an
“investment” is a very broad one that effectively encompasses any outlay of
money in the hope or expectation that the principal sum will be paid back
together with additional return. At the outset, I question the premise of this
submission as it would seem to suggest that any outlay no matter how
exorbitant or unrealistic and any hope or expectation no matter how tenuous or
unfounded can form the basis for asserting that a genuine “investment” was
being made.
81
148
Reference was made in Eng Han’s submissions to a portion of a UK
Charity Commission paper referring to a passage in Culverden Retirement
Village v Registrar of Companies [1997] 1 NZLR 257 where the Privy
Council said that “one of the everyday meanings of investment is the laying
out of money in the acquisition of property in the hope of return”. Reliance
was also placed on two decisions of Singapore statutory tribunals not within
the court hierarchy: in AYH v The Comptroller of Income Tax [2011] SGITBR
4, an investment was said (at [41]) to have the “ordinary meaning” of “an
outlay, usually in money or money’s worth, for the acquisition of an asset with
a view to the generation of income and/or the expectation of profit from the
asset acquired”, and in Law Society of Singapore v Ong Teck Ghee [2014]
SGDT 7, the tribunal referred to a definition of an investment in terms of
“laying out of money in such a manner that it may produce a revenue, whether
the particular method be a loan of the purchase of stocks, securities, or other
property”.
149
The defence position is that, on the premise that the proper definition
of an investment is an outlay of money in the hope or expectation of return,
the Xtron bonds were investments because they involved an outlay of money
by CHC in the expectation that the principal sum would be repaid together
with a fixed quantum of interest. Under the terms of the BSA, Xtron was
legally obliged to redeem the bonds in two years, and so CHC could fully
expect to recoup its outlay at that time.
150
The prosecution, however, says that the Xtron bonds were nothing
more than a “sham” investment, in the sense that the accused persons who
brought about the execution of the Xtron BSA did not intend that it should
generate the legal rights and obligations that the documents appeared to create.
82
The prosecution relies on what it considers to be the definition of any “sham”
transaction articulated in the English Court of Appeal decision of Snook v
London and Wester Riding Investments Ltd [1967] 2 QB 786 (“Snook”), where
Diplock LJ states (at 802):
As regards the contention of the plaintiff that the transactions
between himself, Auto Finance and the defendants were a
“sham”, it is, I think, necessary to consider what, if any, legal
concept is involved in the use of this popular and pejorative
word. I apprehend that, if it has any meaning in law, it means
acts done or documents executed by the parties to the “sham”
which are intended by them to give the appearance of creating
between the parties legal rights and obligations different from
the actual legal rights and obligations (if any) which the
parties intend to create. But one thing, I think, is clear … that
for acts or documents to be a “sham”, with whatever legal
consequences flow from this, all the parties thereto must have
a common intention that the acts or documents are not to
create the legal rights and obligations which they give the
appearance of creating. No unexpressed intentions of the
“shammer” affect the rights of the party whom he deceived.
151
This passage in Snook has been cited with approval in a number of
local High Court decisions which I do not need to list. I am satisfied that it is
good law in Singapore. The prosecution says that, applying the Snook
definition, the Xtron BSA was a sham because it purported to create legal
obligations between CHC and Xtron when in reality no such obligations were
intended. That there was no intention to create a legal obligation owed by
Xtron to CHC is said to be evident from a number of factors, including (i) the
lack of negotiation between CHC and Xtron as to the terms of the BSA,
(ii) the absence of any considered decision by the Xtron directors in entering
into the transactions, and (iii) the lack of any real responsibility for repayment
on the part of Xtron.
152
In my view, it is not strictly necessary for me to find that the Xtron
BSA was a “sham” within the meaning given to the word in Snook in order to
83
arrive at the conclusion that the Xtron bonds were not genuine investments. As
the defence has pointed out, the difficulty with applying the Snook test in the
present case is that there is no suggestion that the members of the CHC board
other than the accused persons intended that the Xtron BSA should not create
the legal rights and obligations that it appeared to create. In the circumstances
it may be difficult to say that there was a common intention on the part of all
the parties to the Xtron BSA that it should not create the legal rights and
obligations it appeared to create. I note in passing that there is some merit in
the prosecution’s response that the “common intention” may be assessed by
reference only to what the intentions of the accused persons were, but it is not
necessary in my view to engage with these arguments for present purposes.
153
Nevertheless, in my judgment, the Xtron bonds were not genuine
investments, and I say that because I consider that the substance of the
transaction was a “temporary loan” of money from the BF to Kong Hee, just
that he used the money not for personal purposes but for the Crossover. When
the substance of the transaction is so characterised I do not think it can
sensibly or properly be called an investment. That appears to me to be the
substance of the transaction for two main reasons. The first is that, as
previously discussed, Xtron was effectively controlled by Kong Hee with the
assistance of Ye Peng at least. What this means is that, when money belonging
to CHC was disbursed from its BF pursuant to the Xtron BSA, it effectively
came under the control of Kong Hee so that it was entirely at his disposal. It
was his to use in his unfettered discretion.
154
The second main reason is that, as the prosecution says, it was Kong
Hee, together with Ye Peng, Eng Han and Serina at least, who bore the
responsibility for ensuring that the Xtron bonds would be redeemed. In August
84
2007, Eng Han told Serina that, if Xtron was short of money as a result of the
sales of Sun Ho’s albums not coming in, one solution might be to “scrap (sic)
something together from individuals to help in the wordst (sic) case if album
sales don’t come in” in order to enable Xtron to meet its interest payment
obligations under the BSA100. In February 2008, in an e-mail to Kong Hee, Ye
Peng proposed a way in which Xtron would be able to redeem the bonds
without having to depend on the revenue from the sales of Sun Ho’s album –
this proposal would entail CHC paying Xtron money for audio-visual and
multimedia services as well as advance rental for stadium rental, and it would
also entail Wahju giving Xtron $1 million a year101. In July 2008, Eng Han
proposed a plan to Kong Hee and Ye Peng for increasing Xtron’s income
whereby Xtron would purchase Riverwalk and lease it to CHC, and so collect
rental from CHC102. Within a few weeks this plan had been developed further
by them and Serina103 and it was eventually put into action.
155
In short, I find that, in relation to the $13 million drawn down under
the Xtron BSA, the money effectively went into the pockets of Kong Hee and
a number of the other accused persons – I need not at this juncture consider in
detail their individual involvement. That, in my judgment, prevents the Xtron
bonds from being characterised as an investment; in substance they would be
more accurately characterised as a loan to them from CHC’s BF in order that
the bond proceeds could be used for the Crossover. It was thus an
unauthorised or “wrong use” of money from CHC’s BF. For the same reason I
100
E-199.
101
E-3.
102
E-100.
103
E-18.
85
do not think that they can be considered to be “hybrid”, “mixed motive” or
“dual-purpose” investments – that is, investments which had a non-financial
purpose in addition to the financial purpose of obtaining a monetary return,
that non-financial purpose being the furtherance of CHC’s evangelical efforts
in the Crossover.
156
The argument is advanced by Eng Han that the Xtron bonds were a
genuine investment in the sense that they were an investment into the
Crossover. The premise of this argument is that the BF monies could have
been transferred directly to Justin’s company in the US for the purpose of
funding the Crossover, and that would have been a genuine investment. On
this premise, it cannot make a difference that the same investment in substance
was made in a different form or under a different structure, ie, having the
money go through Xtron. I am prepared to accept that it would have been a
genuine investment, and therefore an authorised use of the BF, to have
pumped money directly into Justin’s company for the purposes of the
Crossover. But in my view it does not follow that the Xtron bonds were a
genuine investment even if the ultimate purpose is the same, that is, to fund
the Crossover. The material difference between the two situations is not
simply a matter of form; the difference of substance is that, in the case of the
direct investment into Justin’s company, Kong Hee and the relevant coaccused would be relinquishing any control over the BF monies that they
might have had as CHC leaders and staff, whereas in the case of the Xtron
bonds they were putting those monies within their complete control.
157
It appears to me therefore that the Xtron bonds were conceived first
and foremost for the purpose of supporting the Crossover and not for financial
return. The prospect of financial return was at best a secondary consideration.
86
This is especially apparent when one considers certain communications
involving one or more of the accused persons after the CAD commenced
investigations, in which the accused persons discussed the defences they
intended to run. In Eng Han’s 6 September 2010 Blackberry exchange with
Kar Weng104, he had expressed his frustration thus: “it is a wonder why they all
took so long to come back to the original stand that what we are doing is
missions..”. In his email of 4 February 2013, Eng Han attempted to cast a
different complexion to the bonds and sought to rationalise that “[t]he truth is
that there were 2 motives – financial return and missions”. This was after he
saw that the accused persons had “swung” between what he termed two
extreme views, that the bonds were either for “normal investment” or
“primarily for the crossover”105. The very fact that they could not say with any
certainty or clarity what the bonds were for even after being charged speaks
volumes and the subsequent shifts in characterisation are noteworthy. In the
same email from 2013, Eng Han went on to insist that from that point
onwards, they should just term the SOF transactions “restructuring”. I will say
more about this in due course.
158
That a “missions” objective formed the actual purpose for the bonds, as
well as being the reason for launching the Crossover itself, is supported by
Kong Hee’s view when cross-examined by Eng Han106. He said that he did not
consider the Crossover to be a financial investment as there was primarily only
the expectation of a “spiritual return” at least in relation to the Asian
Crossover phase. This ties in entirely with his knowledge, which the other
104
BB-90.
105
E-831.
106
Transcript, 15 August 2014 p 11.
87
accused persons (other than Sharon) would have shared up to 2007, that Xtron
was not profitable all along as Sun Ho’s albums were loss-making. However,
Kong Hee subsequently also claimed that the Xtron and Firna bonds were for
dual purposes, both financial return and missions, and it is evident that he said
so with the benefit of hindsight that the money did come back to the church.
But when one examines Eng Han’s evidence in his CAD statement, a starkly
different picture emerges. When asked on 15 June 2010 what the purpose of
the issuance of bonds by Xtron was, he answered that “the purpose was to
raise funds for Sun’s Crossover project and not an actual investment”107. When
asked whether it made commercial sense for CHC to be subscribing to $21.5
million worth of bonds from a loss-making company, he said that the
Crossover was “not an investment decision”, and that it should be a church
board decision whether to commit the funds to the Crossover108. Further, when
asked what the real reason behind the investment in Xtron bonds by CHC was,
he replied that it was to fund the Crossover project. Not long after these
answers were given to the CAD, Eng Han sent Kar Weng the 6 September
2010 Blackberry message confirming the “original stand that what we are
doing is missions..” 109.
159
The bond transactions were in effect meant to transfer BF monies to
Kong Hee and the accused persons for use on the Crossover expenses. In my
judgment, the evidence reveals that from the outset the funds were meant for a
missions purpose only as they were channelled for the Crossover. In my view
107
P4, Q226.
108
P4, Q264. He did also say in his response to Q267 that the Xtron bonds were “never
a pure investment decision”.
109
BB-90.
88
the purported “hybrid” investment rationale came to mind much later, as well
as the strained idea that even a missions purpose could be termed an
“investment” as well. This was contrived to square with the use of bonds as
the means to channel funds to the Crossover and Xtron and Firna as the
“vehicles” for the scheme. The extended argument was conceived ex post
facto; it distorts the meaning of an “investment” and does not reflect the true
intent behind the bonds. In my judgment, it is clearly an afterthought.
The Firna bonds
160
The defence position is that the Firna bonds were genuine investments.
According to the accused persons, Wahju “independently” supported the
Crossover using his “personal monies”. So far as the Firna BSA provided that
Firna would use the bond proceeds for “general working capital”, they say that
this was not inaccurate even though the money eventually flowed to the
Crossover. This is because Wahju had previously given Firna a shareholder’s
loan in order to increase Firna’s working capital, and the plan conceived was
that CHC would buy Firna bonds in order that the bond proceeds could be
used for Firna’s working capital, thus freeing up a corresponding amount of
Firna’s funds and allowing Firna to return Wahju’s loan and thereby give
Wahju the financial ability to support the Crossover. In support of this, the
defence relies on Wahju’s testimony that he had indeed previously given a
loan to Firna, and that the injection of the bond proceeds into Firna enabled
him to withdraw his loan and “independently” fund the Crossover.
161
I am, however, unable to accept the defence’s characterisation of the
Firna bonds, Wahju’s testimony notwithstanding. In my view the documentary
evidence leaves it in no doubt that a number of the accused persons – Kong
Hee, assisted by Ye Peng, Eng Han and Serina – had complete control over the
89
Firna bond proceeds, and that Wahju was no more than a conduit through
which the funds flowed. I also have no doubt that the intention all along was
never that Firna would redeem the bonds using revenue and profits from its
glass factory business, and that it was the responsibility of those accused
persons to give Firna the funds that it needed for such redemption.
162
It should be noted at this juncture that not all of the Firna bond
proceeds were intended to be used to fund the Crossover. Part of the proceeds
were meant to be a loan to Wahju – the initial plan in late July and early
August 2008 was that a total of $24.5 million would be drawn down under the
Firna BSA, out of which loans of US$2.67 million and $1.67 million would be
made to Wahju110. What actually happened was that $11 million was drawn
down and $2.5 million out of this was lent to Wahju. In my view, a loan to
Wahju cannot be considered to be an investment in Firna; the mere
interposition of Firna as an intermediate recipient of funds between CHC’s BF
and Wahju cannot alter the substance of the transaction. Accordingly I
consider that the part of the Firna bonds which was intended to be lent and
was in fact lent to Wahju cannot be considered an authorised use of the BF,
and it would therefore have to be considered a “wrong use” of it.
163
Returning to the part of the Firna bonds which were intended to be
used and were in fact used for the Crossover, I go on now to discuss the
evidence that the accused persons exercised complete control over the Firna
bond proceeds after the monies had been transferred out of CHC’s BF. There
are a number of e-mails in which Serina informs Wahju of imminent transfers
110
E-169 and E-324.
90
of funds from CHC’s BF to Firna, and gives him instructions as to how to use
those funds:
(a)
On 8 October 2008, in an e-mail to which Ye Peng and Eng
Han were copied, Serina informed Wahju that Firna would “return”
$5 million to him and instructed him to (i) pay $990,000 to Siow Ngea
to discharge a loan Siow Ngea had previously given, (ii) pay
$2.2 million to CHC’s Deutsche Bank account for the purchase of a
New
York
apartment,
(iii) transfer
$1,135,000
to
UA,
and
(iv) thereafter transfer money from UA to a number of designated
accounts, including US$200,000 to Justin for “lawyer’s fees”. Serina
also said that, following all these transfers, around $145,300 would be
“left in Ultimate Assets for the album”111.
(b)
On 5 November 2008, in an e-mail to which Ye Peng and Eng
Han were also copied, Serina told Wahju that $1 million would be
transferred from CHC’s BF to Firna. She instructed him to transfer
$700,000 from Firna to Wahju’s DBS account, and then to transfer
US$446,000 from the DBS account to Justin112.
(c)
On 10 December 2008, Serina told Wahju that $1 million
would be transferred from CHC’s BF to Firna within the day, and
instructed him to transfer $900,000 to UA’s UBS account as soon as
the funds reached Firna. The following day, Serina sent him an e-mail
updating her e-mail from the day before. She gave Wahju “new
111
E-21.
112
E-216.
91
transfer instructions” on the basis that, for the time being, Justin did
not need the money that was to have been transferred to him113.
(d)
In February 2009, Wahju asked Serina if he could send
$1 million from his UBS account to Justin even though Justin had not
yet asked for the money, the reason being that he was worried that the
funds might be withheld by UBS again to cover his trading losses, and
Kong Hee told Serina, copying Ye Peng, to inform Wahju that he
should send it to Justin114.
(e)
On 2 June 2009, Serina told Wahju that $2 million would be
transferred to Firna by the following day, and instructed him to transfer
all $2 million to UA’s UBS account, and thereafter transfer
US$1.4 million to Justin “being advance for the album & publicity
expenses”115.
164
In spite of these e-mails, the accused persons maintained their position
that Wahju was the one controlling the Firna bond proceeds, and their
explanation was this: Wahju had made a pledge to support the Crossover
financially, but trusted Kong Hee to correspond with Justin and the music
industry professionals in the US and to make the best use of the funds he had
pledged to the Crossover. Since Wahju was not personally involved in
corresponding with the music professionals in the US, he would not know
113
E-370.
114
E-498.
115
E-47.
92
where to send the funds, and when to do so; thus, he relied on Serina to
apprise him of these details, and this was all she was doing in those e-mails.
165
I am unable to accept this explanation. It is inherently improbable to
begin with that Wahju would give such a significant financial commitment
without bothering even to enquire into what the money was being used for.
There is also an e-mail exchange from 31 October to 2 November 2008 that
makes it clear that Wahju was nothing more than a conduit for the money and
that he exercised no real control over it. This exchange concerned fees to be
paid to lawyers for their services in drafting the Firna BSA – when Wahju was
told, in relation to these fees, that Firna “will pay using some of the bond
proceeds”, he registered unhappiness that Firna would have to pay the fees,
saying, “This whole set up was more for [AMAC] or Xtron purpose and Firna
is only helping to pass thru the money”. Eng Han reassured him that “in the
end” it would be “us” – referring to the relevant accused persons – who would
“take care of the repayment of the bonds when it matures”116. I find this e-mail
reveals the true role that Wahju played in the plan to transfer money from
CHC’s BF to Firna for use on the Crossover, which was to carry out
unquestioningly and uncritically the instructions given by Serina. In these
circumstances, I have no hesitation in finding that control over the Firna bond
proceeds belonged entirely to Kong Hee and those of the accused persons who
assisted him.
166
It is true that Wahju did not always act in accordance with the
instructions that he had been given. On 5 November 2009, Serina, Ye Peng
116
E-260.
93
and Eng Han had a discussion on Wahju’s use of funds that had been
transferred to him – specifically, his use of some of the funds to make
trades117. The defence argues that this shows that Wahju had freedom to do
what he liked with the money, but I do not accept this. In that discussion those
accused persons had, Serina described her e-mail as a summary of “what
Wahju owes us”, and she asked if the gains on the investments Wahju had
made should belong to him or to “us” because “technically he is using our
money”. It is clear that Wahju had acted in disregard of that trust to suit his
own purposes and out of calculated self-interest and expediency. But the
accused persons had always regarded this as money that Wahju owed them
and not for him to deal with as he pleased.
167
It is clear from other e-mail exchanges that this was generally how
Wahju himself also regarded the money. Towards the end of 2008, a
complication arose in the intended sequence of fund transfers, in that, after
money had been transferred into UA’s UBS account, it could not be
transferred out because UBS would hold the funds in the account as a result of
losses that Wahju had incurred in his trading activities. On 25 October 2008,
Wahju wrote to apprise Eng Han and Ye Peng of this complication, and in the
e-mail he referred to money being held as “all your fund (sic)”118. This clearly
indicates that he viewed the money not as belonging to him but as belonging
to the accused persons.
168
The defence argues that there is evidence pointing the other way
towards the position that Wahju was independently supporting the Crossover.
117
E-175.
118
E-261.
94
First, there are e-mails from Kong Hee to Ye Peng, Eng Han and Serina on 28
and 29 July 2008 in which he alludes to Wahju “independently” supporting the
Crossover119. That, it is urged, reveals the reality of the situation. Second, there
is an e-mail sent shortly after midnight on 28 July 2008 in which Serina wrote
to Wahju, copying Ye Peng and Eng Han, attaching a “business plan” which
Wahju had apparently requested. This business plan set out profit projections
for Sun Ho’s albums120. The fact that Wahju asked for and received such a
business plan is said to demonstrate his oversight of the Crossover. Third,
there is an e-mail on 14 August 2008 in which Serina tells Eng Han and Ye
Peng that, for the plan to fund the Crossover by way of the Firna bonds to
work, “Wahju has to be comfortable that Xtron is taking a stake in his
company Firna”121. This is said to show that Wahju exercised independent
judgment in supporting the Crossover.
169
I am unable to accept all these arguments. In relation to Kong Hee’s
use of the word “independently”, this cannot be given much weight in the light
of the other evidence demonstrating the degree of control that he and his coaccused had over the Firna bond proceeds. I read “independently” as meaning
only that an external party, ie, a party outside CHC, would be managing the
Crossover on the surface of things. In my view the objective substance of the
Firna bond transaction was that Kong Hee and the accused persons would
retain complete control over the bond proceeds. As for the fact that Wahju
asked for and received a business plan, that is neither here nor there; he may
simply have wanted to gain a better understanding of the persons and entities
119
E-18, E-154.
120
E-107.
121
E-169.
95
involved in the Crossover since he would have to carry out the instructions
given to him and transfer the Firna bond proceeds to the correct recipients. As
for the mention of the need for Wahju to be comfortable with Xtron taking a
stake in Firna, I consider that all this demonstrates is the accused persons’
recognition that they needed Wahju’s consent even to be a conduit.
170
I have no doubt, therefore, that Kong Hee and the accused persons had
full control over the Firna bond proceeds. It follows that the Firna bonds were
no more than a device to put money from CHC’s BF into their hands in order
that they might use it on the Crossover. This characterisation of the Firna
bonds is buttressed by what I find to be the fact that there was no intention on
the part of the accused persons that the principal and interest under the bonds
would be paid from the profits of Firna’s glass factory business, which would
have been the case if there had been a true investment in Frina.
171
It is clear from Kong Hee’s e-mails to Ye Peng, Eng Han and Serina
on 28 and 29 July 2008 that the interest on the Firna bonds would be paid
using profits from the Crossover, and that those profits would also be used for
redeeming the bonds. Kong Hee then addressed the possibility that the sales of
Sun Ho’s album would not generate sufficient revenue for redemption of the
bonds, and he assigned to his three co-accused the task of thinking of ways to
acquire the $10 million that would be needed for redeeming the bonds in that
contingency. It is evident on the face of the e-mails that they would have
looked to the Multi-Purpose Account and “Big Donors”, and not Firna’s own
capacities, for that money122. It was even contemplated that CHC might have
122
E-154.
96
to pay itself the interest due on the Firna bonds: on 14 May 2009, Serina sent
Ye Peng an e-mail listing various matters she intended to bring to Kong Hee’s
attention, and one of these matters was Eng Han’s suggestion that Firna draw
down another $2.5 million in bonds so that it could pay CHC $1.9 million in
interest123 – which would mean that CHC was paying Firna an additional
$2.5 million in order that it might receive $1.9 million from Firna.
172
In the light of all the evidence, I have no doubt that the Firna bonds
were not an investment; they would more accurately be characterised as a loan
from CHC’s BF to Kong Hee, Ye Peng, Eng Han and Serina in order that they
might use the bond proceeds for the Crossover. It was thus an unauthorised or
“wrong use” of money from CHC’s BF. The Firna BSA was no more than a
guise meant to lend an appearance of legitimacy to the transaction: the clause
therein stating that Firna would use the bond proceeds for working capital was
misleading, and the BSA itself was misleading so far as it suggested, contrary
to reality, that CHC was investing into the strength of Firna’s glass factory
business.
The round-tripping transactions
173
I turn now to Tranches 10 and 11 of the AMAC SOF and CHC’s
payment of $15,238,936.61 to Xtron under the ARLA. It is not disputed that
the $11.4 million disbursed into the SOF – the $5.8 million for Tranche 10
coming from CHC’s BF, and the $5.6 million for Tranche 11 coming from the
General Fund – was eventually transferred back to CHC after proceeding
through AMAC, UA and Firna. It is also not disputed that the $15,238,936.61
123
E-577.
97
paid to Xtron under the ARLA was also eventually transferred back to CHC
after having flowed through Firna, UA and AMAC.
174
It is beyond question, in my view, that Ye Peng, Eng Han, Sharon and
Serina planned the entire series of transactions by which CHC paid money out
and received it again after its journey through various entities. In the
circumstances, I am entirely unable to see how Tranches 10 and 11 of the SOF
were investments. The true nature of the transaction was that it was one part of
an overall scheme to substitute one debt owed to CHC, ie, the Firna bonds,
with another debt owed to CHC, ie, the AMAC SOF. The $11.4 million was
not put into any underlying asset but was simply channelled to Firna in order
that Firna might apparently redeem the bonds. The entities through which the
funds flowed were mere conduits, and this is starkly shown by an e-mail on
11 November 2009 in which Wahju told Agus Gunawan, Firna’s chief
financial officer, that Firna would not bear the legal fees for the BSA entered
into between Xtron and Firna because “we’re just instrument to make things
happen and will never be at our cost”124.
175
I am similarly unable to see how the advance rental paid under the
ARLA was a property- or building-related expense. The true nature of that
transaction was that it was part of a design to create the appearance that
AMAC was returning to CHC the sums it had disbursed into those two
tranches of the SOF, with interest. It is quite clear that $11.455 million out of
the $15,238,936.61 paid over could not have been used by Xtron to rent
premises that it could then sub-lease to CHC, since that sum eventually went
124
E-265.
98
back to CHC; for the same reason, that $11.455 million could not have been
used by Xtron to acquire a property for CHC’s use. It is not exactly clear what
happened to the remaining $3.784 million, but for reasons that I will shortly
give I am of the view that this remainder was a “wrong use” just as the
$11.455 million was.
176
The defence has characterised this entire series of transactions as a
“restructuring”, in that the debt owed to CHC by Firna was transformed into
an obligation owed by Xtron to CHC. But that is to acknowledge, in my
judgment, that Tranches 10 and 11 of the SOF were not investments and the
payment of at least $11.455 million under the ARLA was not a property- or
building-related expense. Since the money paid into Tranche 10 of the SOF
and the money paid under the ARLA came from CHC’s BF, those monies
could be used for building-related expenses and investments only; on the
premise that these transactions were a “restructuring” exercise, Tranche 10 of
the SOF and $11.455 million out of the $15,238,936.61 paid under the ARLA
would both be wrong uses of CHC’s BF.
177
As for Tranche 11 of the SOF, into which was disbursed money from
the General Fund and not from the BF, it might plausibly be argued – although
I do not understand the argument to have been made – that this was not a
“wrong use” of the General Fund because that was not a restricted fund, and
there is no reason why it could not be used for “restructuring”. In my view,
however, “restructuring” would be too benign a characterisation of Tranche 11
of the SOF, and for that matter Tranche 10 and the ARLA as well. It was
nothing less than the perpetration of a fraud, in that it involved using CHC’s
own money to create the appearance that other entities were fulfilling their
obligations to CHC.
99
178
I consider it an incontrovertible proposition that, whatever might be the
full range of the permissible uses of the General Fund, the perpetration of
fraud is not one of them. Accordingly I am satisfied that Tranche 11 of the
SOF was a “wrong use” of CHC’s funds. As for the remaining $3.784 million
paid by CHC to Xtron as advance rental, I take the view that this sum was also
paid in perpetration of a fraud, in that it was stated to be the amount of goods
and services tax on the ARLA. Thus it was designed to convey the impression
that the ARLA was a genuine agreement for the provision of rental premises
for eight years when in fact it was nothing more than an excuse for CHC to
transfer money to Xtron. That means that the payment of that $3.784 million
was intended to create a false appearance of things, and in my judgment,
whatever uses Xtron might have put that sum towards, the payment of it from
CHC to Xtron was a “wrong use” of CHC’s funds.
179
In summary, I am satisfied that the $11.4 million disbursed to AMAC
pursuant to Tranches 10 and 11 of the SOF and the payment of
$15,238,936.61 from CHC to Xtron under the ARLA all constituted a “wrong
use” of CHC’s funds. Hence the element of “wrong use” is fulfilled in relation
to the round-tripping charges.
Approach to take in determining whether the accused persons acted
dishonestly
180
Having found that the sham investment and round-tripping charges
involved plans to use CHC’s funds in a manner that amounted to “wrong use”,
the questions that remain are, first, whether the individual accused persons
participated in those plans to such an extent that they may be said to have
engaged in a conspiracy to put CHC’s funds to the wrong use, and second,
whether they can be said to have acted dishonestly. But before I consider the
100
involvement of the individual accused persons I should set out my
understanding of what it means to have acted “dishonestly”.
181
The meaning of the word is set out in s 24 of the Penal Code. That
provides: “Whoever does anything with the intention of causing wrongful gain
to one person, or wrongful loss to another person, is said to do that thing
dishonestly”. The prosecution in the present case has indicated that it is
relying only on “wrongful loss” and not “wrongful gain”. The meaning of
“wrongful loss” is in turn set out in s 23 of the Penal Code, and it is “loss by
unlawful means of property to which the person losing it is legally entitled”.
182
Thus an accused has acted dishonestly who intends to cause wrongful
loss to the person who entrusted to him dominion over property, that is, where
he intends to cause loss to that person, by unlawful means, of the property so
entrusted. This definition has been the subject of some elaboration in case law
and for the purposes of the present case there are two important principles to
note.
183
The first principle is that an intention to cause wrongful loss requires
knowledge that such loss was wrongful, ie, it requires that the accused knew
that he was not legally entitled to use the property entrusted to him in the way
in which he did. The authority for this proposition is Ang Teck Hwa v Public
Prosecutor [1987] SLR(R) 513, a decision of Wee Chong Jin CJ. In that case,
under a hire-purchase agreement in respect of a car between Sim Lim Finance
Ltd (“SLF”) and one Seow, payments in instalments were to be made to SLF
by Seow. These payments were made to the accused, who received the money
on behalf of SLF. However, the accused failed to remit to SLF a total of
$5,819.80 and instead used that money for his own expenses. The accused was
convicted in the District Court on a charge of CBT by an agent under s 409 of
101
the Penal Code. Wee CJ allowed the appeal and set aside the conviction, and
in so doing he said at [36]:
To intend a wrongful gain or loss requires that one knows the
gain or loss is wrongful. Thus, if the appellant made use of the
$5,819.80 for his own purposes knowing that he was not
entitled to do so, then he would be doing so with the intention
of causing wrongful gain to himself and wrongful loss to SLF.
Conversely, if the appellant can show that he did so honestly
believing that he was legally entitled to do, then he could not
be said to have acted dishonestly.
The District Judge below had found that the accused intended to conceal from
SLF the payments made by Seow. But Wee CJ held that the District Judge had
failed to give due consideration to the fact that the accused had not attempted
to conceal these payments in his accounts, which were maintained as required
by the hire-purchase agreement and subject to inspection by SLF at any time
(at [41]). Accordingly, Wee CJ held that it had not been proved beyond
reasonable doubt that the accused had had a dishonest intention.
184
The words of Wee CJ in the passage reproduced above were quoted
with approval by Yong Pung How CJ in Tan Tze Chye at [48]. The accused in
that case was the managing director of Vigers Singapore Pte Ltd (“Vigers”). It
was agreed that he would be responsible for the company secretarial work and
other administrative matters, and there was no agreement that the accused
would be paid any additional sum other than his director’s pay for this work.
The accused caused Vigers to issue two cheques totalling $1,500 to a company
called Resource Pool Business Services, purportedly for “company secretarial
services”. This company in turn issued a cheque for $1,350 to Sloane
Management Services, a sole proprietorship in the name of the accused’s wife
and managed by the accused, purportedly for “consultancy services”.
102
185
The District Judge convicted the accused on a charge of CBT by an
agent under s 409 of the Penal Code. Yong CJ upheld the conviction. He
inferred, from the convoluted and surreptitious manner in which the money
from Vigers ultimately wound up in the accused’s hands, that the accused
knew that the gain to himself, and the corresponding loss to Vigers, was
wrongful (at [71]). The pertinent point from that case, however, is that Yong
CJ said that, if the accused had really believed that he should be paid for doing
the secretarial work for Vigers, he would not have been dishonest (at [66]).
This was so even though Yong CJ found that the accused was “not rightfully
entitled to the money” (at [47]).
186
The second important principle is that an accused may be said to have
acted “dishonestly” even if he intended that the loss of the property entrusted
to him would be temporary only. This is derived from Explanation 1 to s 403
of the Penal Code, which provides: “A dishonest misappropriation for a time
only is a misappropriation within the meaning of this section”. That principle
was applied by Yong Pung How CJ in Lee Yuen Hong v Public Prosecutor
[2000] 1 SLR(R) 604. This case involved an alleged conspiracy to commit
CBT of a sum of money that a buyer of furniture had handed over to one Don
Wee, who was an employee of the furniture company to which the money was
due. Don Wee used the money for his own purposes, but he said that he had
not been dishonest because he had intended from the outset to return the
money to the company after a period of time. The trial judge held that, even if
Don Wee had had such an intention, he had nonetheless intended to cause
temporary wrongful loss to the company and had thus acted dishonestly.
Yong CJ upheld the trial judge’s decision on this point (at [44]–[48]). More
recently, the principle was reiterated by Tay Yong Kwang J in Goh Kah Heng
(alias Shi Ming Yi) v Public Prosecutor and another matter [2010] 4 SLR 258,
103
where he said (at [54]): “Even if an accused intends a misappropriation to be
temporary only, this is sufficient to satisfy the element of dishonesty”. In the
District Court’s grounds of decision for Public Prosecutor v Goh Kah Heng
alias Shi Ming Yi and Another [2009] SGDC 499, the following pertinent
observations were made at [185]:
In order to establish that there is an intention to cause
wrongful gain or wrongful loss, it is not necessary to show
that the accused wanted or desired to cause Ren Ci to suffer
loss. Very often, motive is confused with intention. Motive
refers to the subjective reasons a person may have for acting
whereas intention connotes cognition. A person can be said to
intend a certain consequence if he does an act with the desire
to produce the consequence or if he foresaw the consequence
as a virtual certainty: see R v Woolin [1998] 3 WLR 382 (House
of Lords) and Ong Beng Leong v PP [2005] 1 SLR 766 at [24].
[Emphasis in original]
187
It is apparent that the element of dishonesty is premised on the
intention of an accused, and in my view that is quite distinct from his motive.
One may intend to cause wrongful loss from the most laudable motives, but
that is not a defence and goes only to mitigation. In the present case, the
accused persons all say that they acted throughout in what they truly believed
were the best interests of CHC. I have no doubt that they loved CHC and had
no wish to do any harm to it, and I accept that, in using CHC’s funds for the
Crossover, they believed that they were using church funds for an evangelistic
purpose that was not just permitted but positively mandated by the vision and
mission of CHC, and which was supported by the vast majority if not the
entirety of the congregation. But saying that they believed they were using
“church funds for church purposes” is not an answer to the charges; so long as
they intended to use CHC’s funds in such manner as amounted to a wrong use
in the knowledge that they were not legally entitled to do so, the element of
dishonesty would be made out.
104
188
The defence has argued, however, that Illustration (d) to s 405 of the
Penal Code indicates that an accused would not have acted dishonestly where
he acts in what he genuinely believes to be the best interests of the person who
entrusted property to him, even if he knows that he is not authorised to use the
property in the way he did. I set out Illustration (d) here together with the
preceding illustration which sets it in context:
(c) A, residing in Singapore, is agent for Z, residing in
Penang. There is an express or implied contract between A
and Z that all sums remitted by Z to A shall be invested by
A according to Z’s direction. Z remits $5,000 to A, with
directions to A to invest the same in Government
securities. A dishonestly disobeys the direction, and
employs the money in his own business. A has committed
criminal breach of trust.
(d) But if A, in the last illustration, not dishonestly, but in
good faith, believing that it will be more for Z’s advantage
to hold shares in the Bank X, disobeys Z’s directions, and
buys shares in the Bank X for Z, instead of buying
Government securities, here, though Z should suffer loss
and should be entitled to bring a civil action against A on
account of that loss, yet A, not having acted dishonestly,
has not committed criminal breach of trust.
189
I accept that the interpretation of Illustration (d) is not free from
difficulty. It does suggest that a person may know that he is using funds for a
purpose that, in some sense, has not been authorised, yet not have acted
“dishonestly”. It contemplates, in other words, that a person may know that he
is not legally authorised in some sense to use property in a certain way, yet in
using it in that way, he may not have intended to cause wrongful loss. But, in
my view, the illustration is confined to a situation where a person is authorised
to make a specified investment for purposes of financial profit, and instead
makes a different investment honestly believing that this would bring in
greater financial profit. I cannot accept that the illustration, premised as it is on
that narrow set of hypothetical facts, is intended to lay down a general, wide105
reaching proposition that an accused would not have acted “dishonestly” so
long as he asserts that he genuinely believed that he was acting in the best
interests of the person who entrusted property to him.
190
In the present case, the prosecution’s allegation is that the accused
persons purported to be making investments but knew that these were not truly
investments. If the prosecution’s case is made out, it would not be a situation
of making one type of investment where only a different type of investment
was authorised, as it would be, instead, a situation of making no investment at
all, and hence that would fall outside the situation contemplated in Illustration
(d). On the other hand, if the prosecution does not prove beyond a reasonable
doubt that the accused persons did not genuinely believe that they were
making investments, there would be no need to rely on Illustration (d) since
there is no allegation that the accused persons were limited to certain types or
classes of investments and exceeded those limits. Therefore, I consider that I
do not need to resolve the difficulties involved in interpreting Illustration (d).
191
In summary, in order to establish that the accused persons acted
“dishonestly”, the prosecution must prove beyond a reasonable doubt that they
intended to cause wrongful loss. What that means in the present case, in my
judgment, is that the prosecution must prove, first, that the accused persons
intended to put CHC’s funds to uses which amounted to wrong uses of those
funds, and second, that they did so knowing that they were not legally entitled
to use the funds in that way. Given my finding that the uses to which the
accused persons put CHC’s funds in the transactions which form the subjectmatter of the sham investment and round-tripping charges did amount to a
wrong use of those funds, and given that they could not possibly have put the
106
funds to those uses inadvertently or accidentally, I am satisfied that the first
point has been proven.
192
The remaining enquiry is whether the accused persons knew that they
were not legally entitled to use CHC’s funds in the manner in which they did.
In this connection, they say that, in relation to the first to fifth charges, they
honestly believed that they were making genuine bond investments; and in
relation to the sixth charge, they honestly believed that they were bringing
about the payment of advance rental by CHC to Xtron. They say that, to their
minds, any outlay of money meant to generate a return would be considered an
investment. When they brought about the purchase of Xtron and Firna bonds
by CHC, and the disbursements of CHC’s money into Tranches 10 and 11 of
the SOF, they did so intending that CHC would eventually receive its principal
and interest; hence, on the definition of an investment that was in their minds,
these were all investments.
193
Whether or not the accused persons acted “dishonestly” is of course a
subjective enquiry that must be answered by reference to their actual state of
mind at the time of the alleged offences. The mere fact that the purported
investments in the Xtron and Firna bonds and Tranches 10 and 11 of the SOF
were not actually investments – as I have found they were not – is not
determinative of that subjective question of what the accused persons
believed. Likewise, the mere fact that the purported payment of advance rental
pursuant to the ARLA was not in fact a payment of advance rental – as I have
also found it was not – does not mean that they did not believe it was so. My
task, at bottom, is to infer what the accused persons’ state of mind was from
all the available evidence.
107
194
In my view, the answer to this question of whether the accused persons
knew that they were not legally entitled to use CHC’s funds in the manner in
which they did depends to a large extent on an assessment of the degree to
which they disclosed or hid or obscured facts material to the transactions
which form the subject-matter of the charges from other persons, namely, the
EMs of CHC, the CHC board, or the auditors and lawyers whom they
consulted and sought advice from. It is not disputed, as it can hardly be
disputed, that the accused persons were not always fully frank and
forthcoming when it came to the Crossover. For instance, when CHC entered
into the Xtron and Firna BSAs, that fact was not made known to the EMs, and
they were also not told that the bond proceeds would eventually be used to
fund the Crossover. And despite all that they had said about having consulted
and relied on professionals, it would appear that the lawyers and auditors were
never expressly consulted on whether the BF could be used to fund Sun Ho’s
music career.
195
The accused persons say, of course, that they had legitimate reasons
for such reticence and surreptitiousness. They say that Kong Hee wanted to be
discreet about the Crossover and the financing of it because carrying out
overtly evangelical work might compromise CHC’s efforts to reach out to
China given its government’s antipathy to religious groups. In his testimony
Kong Hee acknowledged that it was “quite a known fact”, perhaps even in
China, that Sun Ho was a Christian from CHC and “a pastor’s wife”125, and he
accepted that, even in China, she was introduced as the co-founder of a
church. What Kong Hee’s reason amounted to was that he wanted to keep the
125
Transcript 21 August 2014, p 40.
108
financing of the Crossover discreet because, if it was discovered that Sun Ho
was being financed by CHC, she would be perceived as a gospel singer and
would be unable to obtain permits to put up concert performances in China.
The other accused persons say that they understood and followed Kong Hee’s
preference for discretion and secrecy. They did not want the sort of baseless
and unjustified negative publicity that they had had to endure during the
Roland Poon incident in 2003. Hence they did not think it wise to tell the EMs
everything – telling them anything would have meant a very high probability
of it being made public knowledge.
196
The accused persons therefore say that the critical fact exonerating
them is that they did not keep the relevant transactions hidden from the
professionals who were advising them, ie, the auditors and the lawyers. The
fact that their affairs were entirely open to the scrutiny of these professionals
is said to demonstrate their lack of any cognisance that they were doing that
which they were not legally entitled to do in causing CHC to purchase the
Xtron and Firna bonds and disburse money into Tranches 10 and 11 of the
SOF and pay advance rental to Xtron pursuant to the ARLA.
197
Given the importance of the question of the extent to which the
accused persons disclosed or did not disclose material information to other
persons to the ultimate question of whether they acted dishonestly, and given
also that this question of the extent of disclosure or non-disclosure affects the
positions of all the accused persons, I turn now to consider what the EMs of
CHC, the CHC board, the auditors and the lawyers knew and did not know
about the transactions that form the subject-matter of the charges. For the
purposes of assessing what the auditors knew, I am prepared to accept that
their knowledge should be equated with Foong’s because I accept that the
109
accused persons believed, as it was reasonable to, that giving information to
Foong would amount to the giving of that information to the auditors even if
Foong was not the engagement partner for CHC’s or Xtron’s accounts. I am
able to accept this because Foong held himself out as the “lead partner in
charge of City Harvest Church’s accounts” in 2003126, and in an e-mail dated
12 January 2006 he called himself “the Consultant Partner to the whole of
CHC group of companies”127 even though he was at those times not the
engagement partner for CHC’s or Xtron’s accounts.
The Xtron bonds
198
At the time CHC entered into the Xtron BSA in August 2007, the EMs
were not told that this had been done. What they had been told at the EGM of
7 July 2007 was that CHC would be investing its BF monies in order to earn a
better monetary return; they were not expressly told, however, that CHC
would be purchasing Xtron bonds, let alone that the bond proceeds would be
used to fund the Crossover. The EMs were told about the Xtron bonds for the
first time the following year, at the EGM on 10 August 2008 – and even then,
they were told not about the BSA that had been signed in 2007 but about the
ABSA which was signed in 2008.
199
At this EGM on 10 August 2008, Kong Hee told the EMs that Xtron
was a “vehicle” that CHC was using, and which needed to be “held at arm’s
length” from the church. Kong Hee explained that CHC was planning to
purchase Riverwalk, and that Xtron was “a fully privatised company to
126
A-53.
127
E-362.
110
manage this commercial property”. He said that Xtron was “started in 2003 by
three City Harvest Church members to own and manage future buildings that
CHC can use consistently” and that CHC had no shareholding in Xtron so that
Xtron’s profit and loss statements would not have to be consolidated in CHC’s
accounts; he said also that the management and staff of Xtron were neither
church workers nor members of the CHC board. Kong Hee then said that
AMAC – whom the EMs understood from the 7 July 2007 EGM to be CHC’s
fund manager – had advised CHC to “purchase [$]18.2 million of 10-year
convertible bonds from Xtron”128. It is clear to me that the EMs were given a
misleading impression so far as they were led to understand that the bond
proceeds worth $18.2 million were meant for the purchase of Riverwalk,
which Kong Hee said had been valued by the bank at somewhere between
$17 million and $18 million, when in fact the $13 million of bonds issued
under the original Xtron BSA in 2007 was being subsumed under the ABSA,
meaning that the amount of money actually moving to Xtron would be no
more than $5.2 million, thus necessitating the solicitation of a bank loan by
Xtron.
200
Turning to the CHC board and the question of what they knew about
the Xtron bonds, the evidence of a number of the accused persons is that, at a
board meeting on 6 July 2007 – over a month before the execution of the
Xtron BSA – Ye Peng told the board that AMAC would be appointed as
Xtron’s fund manager and Eng Han would then invest in Xtron bonds 129. Also
present at this meeting were John Lam and Serina; they testified that this was
128
CH-25, pp 13 to 23.
129
111
indeed what Ye Peng told the board and they say that he also told the board
that the $13 million of Xtron bonds would be used for Sun Ho’s English
album130. As against this, there is nothing in the minutes of this board meeting
that suggests that the Xtron bonds were mentioned at all131. At this juncture I
should say that, having heard evidence on the way in which CHC staff
prepared minutes of meetings, I am satisfied that the absence of a record of a
given item being discussed in the minutes of a meeting is not determinative of
the question of whether that item was in fact discussed at that meeting. I am
satisfied that there were occasions on which, for one reason or another,
discussions that took place in board meetings were not recorded in the official
minutes of those meetings.
201
I am satisfied that there was no attempt to hide from the board the fact
that CHC had purchased Xtron bonds. I say this for a few reasons. The first is
that, according to the minutes of a board meeting dated 8 March 2008132, the
board reviewed at that meeting the minutes of an investment committee
meeting on 2 February 2008133 to which a detailed investment report was
attached, and this investment report stated that $10 million in Xtron bonds had
been purchased as at January 2008. The second reason is that, when the board
was told about the plan for Xtron to purchase Riverwalk and for this purchase
to be funded by bonds issued to CHC under the ABSA, it would have been
apparent to the board that $13 million in bonds had previously been issued to
130
Transcript 17 July 2014, p 163 (John Lam); Transcript 17 April 2015, pp 61 and 62
(Serina).
131
CH-13.
132
CH-19.
133
CH-17.
112
CHC. The minutes of the investment committee meeting held on 5 August
2008 stated that “an additional of $5.2 million convertible bonds” would be
issued by Xtron, meaning that, in total, “CHC will hold $18.2 million
convertible bonds” in Xtron134 – this would have revealed the prior issue of
bonds worth $13 million, and the board did review these investment
committee meeting minutes on 23 August 2008135. Moreover, Sharon’s notes
from the 19 July 2008 and 11 October 2008 board meetings136 suggest that the
board was given the understanding that Xtron would have to take a large bank
loan in order to purchase Riverwalk, which would have made it fairly clear
that the $18 million of bonds under the ABSA did not mean that Xtron would
be getting a fresh sum of $18 million, which in turn would have indicated that
Xtron had previously issued bonds to CHC. Therefore I consider it is more
likely than not that Ye Peng did tell the board on 6 July 2007 that CHC would
be purchasing Xtron bonds.
202
It is less clear, however, whether Ye Peng told the board at the 6 July
2007 meeting that the Xtron bond proceeds would be used for the Crossover,
as Serina and John Lam said he did. The prosecution argues that an e-mail
from Sharon to Ye Peng more than two years later, on 11 September 2009,
strongly suggests that he did not – in this e-mail Sharon said that she was “not
sure if we ever let the Board know what are the funds for XPL and Firna
bonds spent on and I am not sure if they should know”. She added that Martin
Ong (“Martin”), a board member, had asked “why does XPL need so much
funds and what is it spent on”. I agree that it is doubtful whether the board was
134
A-113.
135
CH-43.
136
1D-3 and 1D-4.
113
in July 2007 apprised of the uses to which the Xtron bond proceeds would be
put, but in my view it is not necessary to make a firm finding on that because
the important point is that the Xtron BSA explicitly stated, in a “use of
proceeds” clause, that Xtron would use the bond proceeds for the production
and marketing of Xtron’s music albums in the US and Asia, and it was known
to the board that Xtron managed Sun Ho. I accept that it would have been easy
for any board member to come to the realisation that the Xtron bond proceeds
were being used for the Crossover and hence I consider that there was no
attempt to keep that fact from the board.
203
I focus now on the auditors. I am satisfied that the auditors knew that
CHC had purchased the Xtron bonds using the BF. They knew, by April 2008
at the latest, that Xtron would be using the bond proceeds for expenses related
to its music albums in the US and Asia. In fact, Ai Fang acknowledged that
the documentary evidence indicated the auditors had seen a copy of the Xtron
BSA as early as 22 August 2007137. Moreover, by 1 August 2008, the auditors
were aware that Xtron’s “main artise [sic] is Sun Ho, spouse of Pst Kong
Hee”, and they even queried whether this would be “viewed as for personal
gain”. By that time they also knew that Xtron had been making “huge losses”
of more than a $1 million each year in 2005 and 2006, and in this regard they
expressed concerns about Xtron’s ability to redeem the bonds and what the
fair value of the Xtron bonds ought to be in the light of Xtron’s poor financial
health138.
137
Transcript 6 February 2014, pp 50 and 51.
138
TFW-14.
114
204
I have said that the auditors knew by 1 August 2008 that the Xtron
bond proceeds had been used for Sun Ho’s music activities – this was almost a
year after the execution of the Xtron BSA – but Eng Han and Ye Peng
testified that Foong was apprised of this at an even earlier stage, specifically,
on 25 June 2007139. They say that they met Foong on this day and that they
told him that CHC would be investing in Xtron and Xtron would use the funds
for the Crossover. Foong accepted that he had met Eng Han and Ye Peng on
25 June 2007 but he said that he could not recall what was discussed at the
meeting. I find that Eng Han’s evidence is corroborated to some extent by an
e-mail that he wrote on 4 July 2007 to Serina and Ye Peng – Eng Han testified
that, at the 25 June 2007 meeting, he also asked Foong about disclosure, ie,
what exactly would have to be disclosed in CHC’s accounts regarding its
purchase of Xtron bonds, and Foong’s reply was that there was no need to
disclose the Xtron bonds specifically because individual stocks and bonds did
not have to be disclosed separately. In the 4 July e-mail Eng Han mentioned
that Foong had told him and Ye Peng about the disclosure that would be
required for an alternative method of sending funds to Xtron, and in my view
that suggests that Eng Han did indeed ask Foong about matters of disclosure,
and that in turn suggests that Eng Han’s recollection of the meeting is
accurate. In the circumstances, I consider it more likely than not that Eng Han
and Ye Peng did tell Foong on 25 June 2007 that Xtron would be using the
bond proceeds from CHC to fund the Crossover.
205
In addition, I accept that the auditors had some knowledge of the
history of Xtron. Back in March 2002, they knew that CHC had expended
139
Transcript 4 February 2015, pp 173 and 174 (Eng Han); Transcript 23 March 2015,
p 91 (Ye Peng).
115
money on Sun Ho’s music activities in 2001140. They were aware of the events
of the Roland Poon incident, and they were thus aware that, in the aftermath of
the incident, the CHC leadership wished to separate the church from the
funding of Sun Ho’s music activities. The auditors were aware that CHC had
initially funded the Crossover, and they were told that Wahju had thereafter
asked for a refund of his donations to the BF so that he could direct the
refunded money to the Crossover expenses that had initially been borne by the
church141. Cognisant of this arrangement, Foong was nonetheless prepared to
state that “no Church funds were ever used in the promotion of [Sun Ho’s]
secular singing career”. They were Xtron’s auditors from the time it was
incorporated, and on 16 July 2003, Ai Fang was informed by Wong Foong
Ming (“Foong Ming”), who was then a CHC board member and also their
human resource and admin manager, that the “principal activities” of Xtron
were “production of CDs and albums and events management”142. The auditors
were also aware of the practice of other donors to the BF seeking refunds of
their donations and directing the money to Xtron for the purpose of supporting
the Crossover, just as Wahju had done; Foong said that he had “no problem”
with it so long as those donors were voluntarily doing so143.
206
I am satisfied that, not least because the auditors knew the
circumstances leading to the incorporation of Xtron in 2003, they were aware
that there was a close relationship between CHC and Xtron. They knew that
Xtron’s primary source of income was the provision of services to CHC, and
140
E-427.
141
E-91.
142
E-348.
143
E-414.
116
that CHC and Xtron had a common vision and common interests. They
understood that Kong Hee was Xtron’s “voluntary advisor” for the “US
market”, and was the one who liaised with the producers there144. Foong even
expressed himself in terms that Xtron was part of a CHC “group”145. At the
same time, they were aware that Kong Hee and the CHC leadership were very
concerned that CHC and Xtron should not be seen to be related parties and
should instead be seen as separate and independent entities146.
207
Thus it appears that the auditors knew a great deal about Xtron and the
Xtron bonds. But, in my view, there was at least one critical gap in their
knowledge. They knew that CHC and Xtron had a close relationship, but what
they did not know was that Xtron was effectively being controlled by the CHC
leadership, and in particular, they did not know that Kong Hee was making
decisions on Xtron’s behalf in relation to the Crossover and that the Xtron
directors were in that respect mere figureheads. I do not accept that such
control would have been evident to the auditors, and I say this for a few
reasons. First, the auditors had been told from an early stage that Xtron was
not related to CHC – this was in 2003147 – and that all of Xtron’s business
decisions were made by its directors independent of the CHC board, as shown
by an e-mail from 27 July 2004148. Second, minutes were kept of supposed
meetings between the Xtron directors in which they were recorded as having
discussed the affairs of Xtron and made decisions; this would have led the
144
TFW-38, p 3.
145
E-421.
146
E-362, E-418 and E-334.
147
E-348.
148
E-88.
117
auditors to believe that the Xtron directors were indeed making decisions in an
independent way. Third, in the write-up which Ye Peng sent Foong on 21 July
2008, the language used in the write-up conveyed the impression that the
Xtron directors made decisions for Xtron – for instance, “Since May 2007, the
directors have been trying to source for funding for the [Crossover] project”.
208
There is an e-mail from Serina to Kong Hee, with Ye Peng and Eng
Han copied, on 1 August 2008149 which contains language suggesting that
Foong at least might have been aware of the control that CHC had over Xtron.
In this e-mail Serina referred to a meeting with Foong earlier in the afternoon
and said that Foong had “advised” on a number of matters, including: “Not to
paint the picture that CHC has full control but only some control over XPL. If
full control will invite consolidation” [emphasis in original]. It may appear
from this that Foong was apprised of the fact that CHC in fact enjoyed “full
control” over Xtron, but the evidence given by the accused persons is that they
told Foong that CHC did not control Xtron and that Xtron was an independent
entity. Ye Peng said that he told Foong that the Xtron directors “can go on
their own direction” and that the “company is independent from the church”,
and Foong’s apparent remarks about control were made in the context of his
being told that the Xtron directors had given their commitment not to take a
director’s fee150. Serina’s memory of the context is slightly different as she
testified that Foong made his comments about control in response to the
question of whether the appointment of Siow Ngea – at that time a CHC board
149
E-325.
150
Transcript 27 March 2015, pp 185 to 187.
118
member – as Xtron director would mean that CHC controlled Xtron151. But the
essential point is the same, which is that Foong continued to be told that Xtron
and CHC were independent, and hence I am unmoved from my finding that
the auditors did not know that CHC controlled Xtron, and in particular, that
Kong Hee was making decisions on Xtron’s behalf on Crossover matters.
209
It seems to me that this crucial deficiency in the auditors’ awareness
concerning the Xtron bonds has the potential to alter drastically the
characterisation of CHC’s purchase of the Xtron bonds. As I have said, a key
reason for my view that the Xtron bonds were not genuine investments is that
Kong Hee, assisted by some of the other accused persons, effectively had
complete control over the Xtron bond proceeds. That fact of Kong Hee’s
control, however, was never brought to the attention of the auditors. It is of
course possible that there is some good explanation for omitting to bring that
to their attention, and I will consider that later when I discuss the involvement
and state of mind of the accused persons individually, but for now I make the
point that it cannot be said that the auditors were informed of everything that
they needed to know in relation to the Xtron bonds.
210
Finally, I consider the knowledge that the lawyer Christina had of the
Xtron bonds. I readily accept that she knew that the Xtron bonds would be
used to fund the Crossover; I am satisfied that she knew that Xtron was
managing Sun Ho and the fact that she drafted the “use of proceeds” clause in
the Xtron BSA strongly suggests that she knew that the bond proceeds would
go towards Sun Ho’s music albums. Moreover, I am satisfied that she knew
151
Transcript 4 May 2015, pp 10 to 13.
119
that CHC and Xtron had a close relationship. It is apparent from an e-mail that
she wrote to Eng Han on 9 October 2008 that she knew that Xtron was
“intended to be the Church's entity for outreach except that we want to avoid
consolidation”152. There is another e-mail from her to Eng Han, this one dated
4 August 2007, in which she sent him a first draft of the Xtron BSA and told
him that the BSA was “on arms-length terms”; in this e-mail Christina also
said that it was possible for Eng Han to “water down” the terms of the BSA
but it would be good “cosmetically” to keep the “full slew” and “refrain from
calling breach unless you need to”153. In connection with this e-mail, Eng Han
testified that Christina knew that Xtron was a “friendly vehicle” vis-à-vis CHC
and that CHC would be “unlikely to sue” Xtron154; Eng Han also testified that
that he would have told Christina something along the lines of CHC having
“significant control” over Xtron155.
211
I am satisfied that Christina knew that CHC had a good deal of
influence over Xtron, and that the relationship between them was of such a
nature that each would be very unlikely to seek to enforce its legal rights
against the other, so much so that the terms of agreements between them
would be largely for appearance’s sake. There is an e-mail from 9 March 2008
in which Eng Han seems to suggest to Christina that Xtron was the entity
initiating the issue of bonds – he told her that “Xtron plans to issue up to
another $11m of bonds starting from April, and AMAC has agreed to
152
E-954.
153
E-637.
154
Transcript 20 March 2015, p 142.
155
120
subscribe to it”156 – when in fact, as I have found, the Xtron bonds were
initiated not by Xtron’s directors but by a number of the accused persons. But
I do not think it can be said that Eng Han was seeking to deceive Christina into
thinking that Xtron was initiating the bonds issue given her knowledge of the
close relationship between CHC and Xtron.
212
On the other hand, it does not appear that Christina knew that the
Xtron directors were nothing more than figureheads and that Kong Hee made
all decisions on Xtron’s behalf in relation to the Crossover. There is no
suggestion that she knew that Kong Hee had complete control over the Xtron
bond proceeds, or that she knew that a number of the accused persons had
undertaken the task of putting Xtron in funds so that Xtron would be able to
redeem the bonds. In the premises, although Christina was given a substantial
amount of information on the Xtron bonds, I do not think it can be said that
she knew everything that was material to the characterisation of the Xtron
bonds.
The Firna bonds
213
I am satisfied that the EMs of CHC were not told about the Firna bonds
until well after the execution of the BSA, and after the CAD investigations
against the accused persons had commenced. This belated disclosure took
place at an EGM on 1 August 2010, and what Ye Peng told the EMs was that
Firna had sold $11 million worth of bonds to CHC, and the bond proceeds had
gone “to help Firna’s business”, and further, he “underst[ood] from Wahju that
156
E-703.
121
part of the funds also went to support the Crossover Project”157. In my
judgment, what Ye Peng said here was a misrepresentation of the facts, in that
he made it seem as if it was Wahju’s independent decision to use the bond
proceeds to support the Crossover when the actual situation was that the
decision was made by Kong Hee and his co-accused, and those same persons
controlled the use of the Firna bonds proceeds entirely.
214
As for the CHC board, John Lam and Ye Peng both testified that the
board had been told at a meeting on 23 August 2008 that CHC would be
buying Firna bonds, and that Firna would use the bond proceeds to return a
shareholder’s loan to Wahju, who would in turn use the money to fund the
Crossover158. There is no suggestion in the minutes of that meeting that the
board had been told all of this159; the minutes record only that the board
reviewed the minutes of the investment committee meeting held on 5 August
2008160, and those minutes indicated nothing further than that the investment
committee had agreed that the Firna bonds would be a “good investment” with
“considerably low” risk, given that Firna was the “largest glass factory in
Indonesia” and “reported to earn about US$2 million a year”.
215
It is more likely than not that the board was told that CHC would be
purchasing Firna bonds, but it is far less clear whether the board was told that
the Firna bond proceeds would be used for the Crossover. Although, as I have
157
CH-29, p 31.
158
Transcript 16 July 2014, pp 10 to 13 (John Lam); Transcript 25 March 2015, p 65
(Ye Peng).
159
CH-43.
160
A-113.
122
said, I am satisfied that the board’s discussions would not always find their
way into their minutes, the veracity of John Lam’s and Ye Peng’s testimonies
is undermined by contrary things that they said in their statements to the CAD.
John Lam said that the board had been told that the Firna bonds were “purely
investment” and that the board had agreed to the purchase of those bonds on
that basis alone161, while Ye Peng said that “it was not brought up in the Board
meeting that the funds for the bonds will be used to support Sun Ho’s music
career”, although he also said that the board members “informally” knew the
purposes to which the bond proceeds would be used162. In the circumstances, I
consider it unlikely that the board was at the 23 August 2008 meeting
informed that the Firna bond proceeds would be used for the Crossover.
216
I would add that, even on Ye Peng’s testimony that he told the board
that Firna would be returning a shareholder’s loan to Wahju and Wahju would
use his personal money to support the Crossover, I consider that this was
misleading. The true situation was that the Firna bond proceeds belonged to
and were completely controlled by a number of the accused persons and not
Wahju.
217
Turning to the lawyers, I accept that Christina and her legal team were
aware of the fact that the Firna bond proceeds would be used for the
Crossover. This is evident from a version of a draft board resolution prepared
by the lawyers which was sent to Eng Han and Serina in an e-mail of
19 August 2008163. In that version164, it was stated: “The proceeds of the Firna
161
P-1, questions 292 and 293.
162
P-5, question 321.
163
E-633.
123
Notes will be used by PT Firna for purposes of general working capital [and
such purposes may include the provisions of funds to further the Church’s
global outreach strategy, including the role played by Ms Ho)”. I accept Eng
Han’s testimony that what he had told Christina was that CHC would purchase
Firna bonds, and Wahju would then withdraw his shareholder’s loan and,
using these “personal monies”, fund the Crossover165. I also accept his
testimony that he explained to Christina how related-party issues had resulted
in plans to move the management of Sun Ho away from Xtron166; I consider
that this is supported by an e-mail from Eng Han to Kong Hee and Ye Peng on
29 July 2008167 in which he said he had told Christina “why we are using this
structure for the crossover”, to which Christina’s reply was that “God is with
us”. In addition, Ye Peng testified that he had told Jimmy Yim that Xtron
would cease to manage Sun Ho, and that there were plans to invest into Firna,
whereupon “Wahju will independently be taking over this Crossover Project
and Sun will be signed with Wahju’s company”168.
218
In a similar vein, in relation to the auditors, there was testimony that
Foong had been told about the plans to discontinue Xtron’s management of
Sun Ho, and for CHC to purchase Firna bonds and for the bond proceeds to be
used for the Crossover. It is not disputed that Foong had a meeting on
1 August 2008 with Ye Peng, Eng Han, Serina and John Lam. Serina testified
that Foong was told, by way of background, that AMAC would be purchasing
164
Attachment with title “WSComparison”.
165
Transcript 28 January 2015, pp 25 and 26; Transcript 19 March 2015, p 71.
166
Transcript 27 January 2015, p 17.
167
E-403.
168
124
Xtron bonds worth $18 million which Xtron would use to purchase Riverwalk,
and that Xtron would take a bank loan of $13 million to redeem the bonds that
CHC had bought under the 2007 Xtron BSA. According to Serina, Foong was
then told that, since CHC and Xtron would be considered related parties from
that point because of Sun Ho, Sun Ho would no longer be managed by Xtron
and would be managed by Wahju. Serina further testified that Foong was told
that CHC would buy Firna bonds “to continue to support Sun and support the
Crossover”169. Her testimony was supported by Eng Han, who gave evidence
that he told Foong at the meeting that Wahju owned a glass factory and that
“that factory is going to issue bonds to the church and then Wahju is going to
use those moneys, in his personal capacity, to fund the Crossover”170.
219
Foong’s own evidence was that he did not remember what was
discussed at that 1 August 2008 meeting. In my judgment, it is highly likely
that Foong would have been told at least that CHC was planning to purchase
Firna bonds. I say this because, in an exchange of Blackberry messages
between Eng Han, Kong Hee and Ye Peng on 30 July 2008171, two days before
the meeting, Eng Han suggested that there was no need to get Foong to vet the
draft Firna BSA and that it would suffice “to tell him about the plan to buy
bonds in Firna”, and Kong Hee agreed, adding a further suggestion that Foong
should be kept “in the loop”. I consider it more likely than not that Foong was
also told that the Firna bond proceeds would be used for the Crossover –
specifically, that Wahju would use the money “in his personal capacity” to
fund the Crossover. Given that this was the essence of what Eng Han told
169
Transcript 27 April 2015, pp 3 and 4.
170
171
BB-21.
125
Christina, I think it is fair to conclude that he would also have apprised Foong
of this.
220
Although it appears that the accused persons were rather forthcoming
with the auditors and lawyers in relation to the Firna bonds, in my view, two
key features of the bonds were kept away from them. First, by telling the
professionals that Wahju was supporting the Crossover in an “independent”
manner with his “personal monies” and “in his personal capacity”, in that
Firna would use the bond proceeds to return Wahju a shareholder’s loan he
had previously extended, the relevant accused persons obscured the fact that
Kong Hee and others assisting him enjoyed full control over the Firna bond
proceeds and treated the money as theirs to use and not Wahju’s. Second,
there was no disclosure of the fact that neither Firna nor Wahju were truly
responsible for redeeming the bonds – meaning that, no matter how profitable
Firna’s business was, those profits would not be tapped to redeem the bonds.
The impression thus conveyed to the professionals was that the Firna bonds
were backed up by the strength of Firna’s glass factory business when, as I
have found, this was not in fact the case.
221
In the circumstances, for all their consultation with the lawyers and
auditors on the Firna bonds, I consider that the accused persons did not tell
them everything that would have affected the professionals’ understanding of
the transaction and their consequent characterisation of it. I find, on the
contrary, that there was a deliberate effort to give those professionals an
incomplete and hence misleading picture of the transaction.
126
222
The accused persons facing the round-tripping charges all say that they
honestly believed that Tranches 10 and 11 of the SOF were genuine
investments and that the advance rental paid to Xtron pursuant to the ARLA
was meant to put Xtron in funds so that Xtron could acquire a property for
CHC’s use. At the same time, they say that they believed that the series of
transactions which are the subject-matter of the round-tripping charges
constituted an exercise in “restructuring”, under which the Xtron and Firna
bonds were converted into advance rental – that is, the debts which Xtron and
Firna owed CHC under the Xtron and Firna BSAs were restructured into an
obligation on Xtron’s part to provide CHC with premises for eight years under
the ARLA.
223
I should say at this juncture that it is not entirely clear to me how both
these sets of beliefs – one set of beliefs being that Tranches 10 and 11 of the
SOF were genuine investments and that the advance rental paid under the
ARLA was meant to enable Xtron to acquire a property for CHC, and the
other set being that the entire series of transactions was a restructuring
exercise – relate to each other. I will assume that they are advanced as
alternative cases, such that, if I find that the relevant accused persons did not
believe that the transactions were genuine investments or building-related
payments, the defence will seek to persuade me that the accused persons
nonetheless had not acted dishonestly because they believed that the
transactions were nothing more sinister than a restructuring exercise.
224
Turning to the question of what the EMs knew about Tranches 10 and
11 of the SOF and the ARLA, I see no evidence to suggest that they knew
127
anything about those transactions. Accordingly, I find that they had no
knowledge of the transactions.
225
As for what the auditors knew, I accept that Sim was told at a meeting
on 22 September 2009 with Sharon, John Lam and two other board members
that there was a plan for CHC to pay advance rental to Xtron and for Xtron to
set such payment off against the $21.5 million that it owed CHC under the
Xtron BSA. I say this largely on the basis of an e-mail on 23 September 2009
from Sharon to Ye Peng in which she said that John Lam had “mentioned
about XPL’s intention of redeeming the bonds and our arrangement of giving
advance rental”172. Furthermore, Ye Peng testified that, at a meeting he had
had with Foong several months before on 27 April 2009, he had told Foong
that, when there had come into the picture a building which was suitable for
CHC, CHC would pay Xtron advance rental and the Xtron bonds would be
redeemed173. I am prepared to accept that testimony.
226
On the other hand, I am satisfied that the auditors did not know that the
substance of the transactions was that, first, the money disbursed into
Tranches 10 and 11 of the SOF would be routed to Firna so that the early
redemption of the Firna bonds could take place, and second, that the advance
rental paid by CHC to Xtron under the ARLA would be routed to AMAC so
that CHC would receive its return under Tranches 10 and 11. Sim testified that
he had not been apprised of this and I accept his testimony174.
172
E-683.
173
174
Transcript 21 January 2014, pp 64 and 65.
128
227
In relation to Tranches 10 and 11 of the SOF, the documentary
evidence suggests that they were presented to the auditors as investments of a
purely commercial nature with no purpose except financial return. There was a
meeting on 31 December 2009 between Sim and Ai Fang for the auditors and
Sharon, John Lam, Nicholas Goh and Baoting for CHC, and in both the
auditors’ notes of the meeting175 and the internal minutes prepared by
Baoting176, there is no indication that the auditors were told of the plan to bring
about the early redemption of the Firna bonds. The auditors’ notes record that
they were told that Tranches 10 and 11 of the SOF were investments “mainly
in bond coupons” which were paid back in December 2009 “at subscription
price of $1”, while Baoting’s minutes record that John Lam told the auditors
that he could not reveal what the investments were exactly because “AMAC
would not disclose what funds they placed the money with”.
228
In relation to the ARLA, Sim’s evidence, which I accept, was that he
was told that the rationale behind the ARLA was two-fold. The first was that
CHC would enjoy a discount from Xtron in return for pre-paying rent, and the
second was that Xtron would have additional funds to look for a new property
for CHC’s use177. Sim’s evidence in this regard is corroborated by the auditors’
notes of the 31 December 2009 meeting178, which records that the auditors
were told that the “prepayment is to assist Xtron to bid for a property for the
Church”. It is also corroborated by Sharon’s testimony that Sim was told that
Xtron was CHC’s vehicle for holding a building and that CHC needed to give
175
TFW-1.
176
E-287.
177
Transcript 21 January 2014, pp 4 and 5.
178
TFW-1.
129
Xtron advance rental in order to give Xtron a mandate to secure that
building179. I therefore find that the auditors were not told that the advance
rental paid to Xtron would be used to purchase Firna bonds, in order that the
money would eventually be paid back to CHC as a purported realisation of its
so-called investments in Tranches 10 and 11 of the SOF.
229
As for the lawyers, Eng Han’s testimony was that Christina had no
knowledge of Tranches 10 and 11 of the SOF, and that she was told that the
purpose of paying advance rental under the ARLA was to equip Xtron
financially to acquire a property for CHC’s benefit. He did not tell her that the
plan all along was that Xtron would use advance rental to purchase Firna
bonds, but he says that, given that she drafted the BSA between Xtron and
Firna, she would have seen that Xtron was using the advance rental to do
exactly that180. Eng Han testified that Christina also knew that Xtron would
have free use of the advance rental paid to it by CHC181, meaning that Xtron
was free to use the money to purchase bonds. He acknowledged, however, not
having told her that Xtron would purchase Firna bonds in order to allow the
return to CHC of its money disbursed under Tranches 10 and 11 of the SOF182.
230
Hence it is evident that the substance of the round-tripping transactions
was not disclosed to the auditors and lawyers. But the accused persons say that
the important fact is that the CHC board was given detailed information about
early versions of the round-tripping or redemption plans at meetings on
179
Transcript 17 September 2014, pp 41 and 42.
180
181
E-132, 22 September 2009.
182
130
18 July 2009 and 12 September 2009, and the board had no difficulty with
these plans.
231
It is not disputed that the official version of the minutes of the 18 July
2009 and 12 September 2009 board meetings do not mention the details of the
round-tripping plans. According to the official minutes of the 18 July 2009
meeting, ARLA was a means of enabling Xtron to secure a land or building
for CHC183, and according to the official minutes of the 12 September 2009
meeting, Eng Han informed the board that Firna would be redeeming the
$11 million bonds at an earlier date prior to maturity, and the board approved
Eng Han’s proposal to invest $11.4 million in the SOF184. It is also not
disputed that the board could not have approved the investment of
$11.4 million in the SOF on 12 September 2009 because the precise amount to
be invested in the SOF was decided only after that time. But the accused
persons say that the board was apprised of earlier versions of the roundtripping plans which were similar to the final plans in that the common
purpose of all the versions of the plans was to redeem the Xtron and Firna
bonds. In this connection, the accused persons rely on handwritten notes
prepared by Sharon which they say capture the substance of what the board
was told at those two meetings185.
232
According to Ye Peng, at the 18 July 2009 meeting, the CHC board
was told that Xtron would continue to be the vehicle for CHC to own a
property, and that CHC would pay Xtron an estimated $65 million so that
183
CH-49.
184
CH-50.
185
CH-49b (18 July 2009 meeting) and CH-50b (12 September 2009 meeting).
131
Xtron would have sufficient funds for that purpose. The CHC board,
according to him, was also told that the auditors had raised concerns regarding
the valuation of CHC’s investments in unquoted bonds, namely the Xtron and
Firna bonds, and had said that these bonds should be cleared from the books of
CHC, and that the Xtron and Firna bonds would therefore be redeemed. Ye
Peng said that Eng Han then drew a diagram on a whiteboard illustrating a
series of transactions by which these bonds would be redeemed and gave the
board an explanation of the diagram: the plan was for CHC to give Xtron
$65 million in advance rental, and Xtron to redeem the Xtron bonds by way of
set-off; Pacific Radiance would then invest money in AMAC which would in
turn buy Firna bonds so that Firna would be able to use the proceeds to redeem
the bonds; and in the next financial year, Xtron would purchase Firna bonds so
that Firna would redeem the bonds AMAC had purchased and AMAC would
then return Pacific Radiance’s investment186. The board then approved the
plan. Ye Peng’s account was broadly corroborated by the testimonies of the
other accused persons who were present at the meeting – John Lam testified,
among other things, that he recalled the diagram being drawn on the
whiteboard187, and Eng Han testified that the substance of the diagram would
have come from him although he could not recall if his presentation had been
made to the whole board188.
233
Ye Peng testified that, at the subsequent board meeting on
12 September 2009, the plan to redeem the Xtron and Firna bonds was again
presented. This plan also involved Pacific Radiance investing into the SOF
186
187
Transcript 16 July 2014, p 118.
188
132
with AMAC thereafter pumping the money into Firna; this was characterised
as Pacific Radiance giving Firna bridging finance to redeem the bonds that
CHC had purchased. Ye Peng said that he told the board that Foong had given
his blessing to the plan, and that someone, probably Eng Han, told the board
that the lawyers similarly had no problem with it. Ye Peng’s testimony was
once again broadly corroborated by the testimonies of Sharon and John Lam,
both of whom attended this meeting.
234
It is not disputed that the plan to redeem the Xtron and Firna bonds
subsequently changed around 30 September 2009, in that it was to be CHC
investing directly in the SOF without the involvement of Pacific Radiance.
According to Ye Peng, when the board met again on 31 October 2009 after the
round-tripping transactions had been carried out, they were informed of the
change that had been made to the plan, and no objections were expressed.
235
In summary, the position of the accused persons is that the CHC board
was apprised of all material information concerning the round-tripping
transactions. The board knew that the auditors were not comfortable with the
presence of the Xtron and Firna bonds on CHC’s books, and that the plan was
to have these bonds redeemed before 31 October 2009; that CHC would be
paying Xtron a large amount of advance rental for purposes of acquiring a
property, and that Xtron would set part of that amount off against the bonds
which CHC had purchased; that bridging finance would be provided to Firna
by Pacific Radiance to enable Firna to redeem the bonds it had issued to CHC;
and subsequently, when Pacific Radiance dropped out of the picture and it was
decided that the bridging finance would proceed instead from CHC by way of
Tranches 10 and 11 of the SOF, the accused persons say that the CHC board
was kept informed of that development.
133
236
The prosecution, on the other hand, argues that Sharon’s handwritten
notes may not in fact be a record of what was presented to the CHC board at
the 18 July 2009 and 12 September 2009 meetings. It is pointed out that these
discussions about the round-tripping plans that allegedly took place are
conspicuously absent from the official versions of the minutes; it is argued
that, since Sharon’s notes do not record everything that eventually went into
the official minutes, it is doubtful that those notes are truly a record of the
discussions at the meetings; it is also pointed out, in relation to Sharon’s
alleged notes of the 18 July 2009 meeting189, that the page on which the
alleged discussion of the round-tripping plans are recorded is not numbered,
whereas all the other pages of her notes, which contain discussions that were
put into the official minutes, are numbered, and the suggestion is that all those
pages may not be of the same nature – that is, the numbered pages might
indeed be a record of the discussions at the meeting but it does not follow that
the unnumbered page is too.
237
In my judgment, it is more likely than not that Sharon’s handwritten
notes are reasonably accurate records of what was discussed at the CHC board
meetings on 18 July 2009 and 12 September 2009. At the very least, it can be
said that some parts of her notes almost certainly reflect discussions that took
place at these meetings because they are found in the official versions of the
minutes. As for the other parts of her notes the veracity of which is contested,
I am satisfied that they were at least prepared contemporaneously with the
parts of her notes that are of unquestioned provenance. That would mean one
of two things: either the disputed parts of her notes were taken at the board
189
CH-49b.
134
meetings, or they were taken on some other occasion around the time of the
meetings. I find it more likely that they were taken at the board meetings as
opposed to on 18 July 2009 and 12 September 2009, with Eng Han and/or Ye
Peng sitting down with Sharon before or after the board meetings and
expounding at length while she took notes of what they were saying. Finally,
there is an e-mail from Sharon to Ye Peng on 11 September 2009190, the day
before the 12 September 2009 board meeting, in which she reminds Ye Peng
that the “main thing” to discuss at the meeting was the Xtron and Firna bonds.
I consider, on this evidence, that it is likely that Ye Peng did tell the CHC
board at the 12 September 2009 meeting that there was a plan to redeem the
Xtron and Firna bonds, and it follows that it is likely that Sharon’s handwritten
notes reflect what he told them then.
238
I therefore find that, at the very least, the CHC board was told about an
early version of the round-tripping plans in which Pacific Radiance would
provide Firna with bridging finance, and in which Tranches 10 and 11 of the
SOF did not feature. I am satisfied that the board expressed no objections to
this plan and that it would be entirely reasonable to believe that the board had
given approval to it. But, in my view, that is not determinative of the question
of whether the relevant accused persons acted dishonestly in designing and
executing the round-tripping transactions. Their readiness to disclose
information to the CHC board must ultimately be weighed against their failure
to apprise the auditors and lawyers of that information.
190
E-622.
135
239
In particular, the assurance that Ye Peng says the CHC board was
given at the 12 September 2009 meeting that the lawyers and the auditors had
no problems with the redemption plans must be seen in the light of the fact
that full disclosure was not made to the lawyers and auditors. I consider that
those accused persons who were at the meeting must have known that the
CHC board was giving its approval to the transactions on the basis that they
had been passed by the professionals, and to the extent that they knew that the
professionals had not been given the full picture, they must have known that
board approval was being given on a false premise. In the circumstances, I
cannot hold that the mere fact that approval was apparently obtained from the
CHC board necessarily exonerates the accused persons.
The individual accused persons’ involvement and state of mind
240
I turn now to consider the situation of each individual accused person
to determine whether they can be said to have engaged in a conspiracy to
commit CBT by an agent of CHC’s funds, and whether they can be said to
have acted dishonestly. I will consider them in this sequence: John Lam, Kong
Hee, Ye Peng, Eng Han, Serina and Sharon – I consider Sharon last because
her involvement does not extend to the first three charges involving the sham
bonds.
John Lam
241
The prosecution has pitched its case against John Lam in the following
way: he was the “inside man” in CHC’s governance and oversight bodies,
namely, the CHC board, investment committee and audit committee, in as
“inside man” he prevented those bodies from finding out the true nature of the
Xtron and Firna bonds. The prosecution alleges that he helped to conceal facts
136
from the auditors, gave input on proposed methods of financing the Crossover,
and assisted in finding ways to ensure that Xtron and Firna had sufficient
funds to redeem the bonds they had issued to CHC.
242
John Lam’s defence centred around the following aspects. He was a
CHC “volunteer” who was not part of the “Crossover team” and had less
knowledge and involvement than the rest of the accused persons. John Lam’s
defence, in essence, is that he was not involved in the plans concerning the
Xtron and Firna bonds to a sufficient degree to be considered a party to the
conspiracy or to have acted dishonestly. He argues that his involvement in
those plans was limited to a very discrete area corresponding to audit and
accounting matters, which formed his field of expertise. He claims that,
notwithstanding his knowledge that the bond proceeds under the Xtron and
Firna bonds would be used for the Crossover, he believed that they were both
genuine investments and were thus authorised uses of the BF, and hence he
did not know that there was no legal entitlement to use CHC’s BF to purchase
the Xtron and Firna bonds.
The Xtron bonds
243
John Lam was involved in the incorporation of Xtron in 2003. I am
satisfied that, prior to that, he participated in a plan to return donations that
Wahju had made to the BF in order that Wahju might use the money to cover
expenses that CHC had incurred in 2002 in funding the Crossover. John Lam
knew that it was only in January 2003, after Roland Poon had gone public
with certain allegations, that Wahju agreed to withdraw donations he had
previously made to the BF to bear these Crossover expenses. He testified that
his understanding at the time was that Wahju had intended all along to
contribute to the Crossover in 2002 but had transferred the money into the BF
137
because he did not know where else to give it to. But I am unable to accept
that this was truly his understanding given his receipt of an e-mail on
17 March 2003 in which Foong Ming mentioned that the auditors had been
told that Wahju had asked “for a refund from his BF to sponsor the album”191.
244
I consider it more plausible that John Lam knew that CHC had spent
money on the Crossover in 2002, and that it was in order to create the
impression that no church funds had been spent on the Crossover that Wahju
was asked to bear the Crossover expenses using the device of “redirecting” BF
donations which he had already made. Moreover, John Lam was prepared to
sign a letter backdated to 23 December 2002 on behalf of Attributes Pte Ltd
thanking Wahju for his contribution of $1.27m to the Crossover, to portray
Wahju as having agreed to sponsor the Crossover even before January 2003
when that was not in fact the case192. He conceded that the letter was in fact
given to him sometime around 27 April 2003 ie. after the Roland Poon
incident193. What all this shows is that John Lam was already being somewhat
economical with the truth at this early stage. And even at this stage, he was
conscious that CHC had been engaging in a “merry go round transferring
funds” for the Crossover194.
245
John Lam was one of Xtron’s initial directors and stepped down from
that position in August 2004. He knew that the purpose of incorporating Xtron
was to separate CHC from the management of Sun Ho’s secular music
191
E-91.
192
A-54
193
Transcript 4 August 2014, p 34
194
E-92, John Lam’s email to Ye Peng and Eng Han dated 2 May 2003 02:08 pm
138
activities. I am satisfied that he was not accurate when he said, in a statement
to the CAD, that it was his and Eng Han’s idea to set up Xtron and that the
Xtron was set up “to allow the church members to do work in the line of
video, sounds and lightings”195; he was also not accurate when he said in a
voluntary statement to the Commissioner of Charities on 14 October 2010 that
Xtron’s incorporation had “no connection with the Roland Poon incident or
meant to finance the crossover project at that point in time”196. But these
inaccuracies may not reveal very much about John Lam’s state of mind in
2007. In relation to what he said in his CAD statement, I consider it plausible
that he was referring to Xtron’s genesis as a partnership in 2002 rather than its
incorporation in 2003; and in relation to what he said to the Commissioner of
Charities, he added that Xtron eventually “started to manage Sun as an artiste
and it became the vehicle used to finance Sun”, which suggests that there was
no intent to deceive anyone as to the relationship between Xtron and Sun Ho.
246
John Lam testified that, a director of Xtron, he regarded himself as
independent in the sense of having the authority to make decisions on Xtron’s
behalf, and he says that this is demonstrated by his objection in July 2003 to
the practice of keeping $10,000 as petty cash197, as a result of which objection
the amount was reduced to $5,000. I doubt, however, that he truly regarded
himself as independent in that way. I say this because, on 7 July 2003, shortly
after Xtron’s incorporation, he agreed to a suggestion that rubber-stamps be
made of the signatures of the Xtron directors so that it would not be necessary
195
P-1, Question 28.
196
P-7, para 20.
197
E-173.
139
to seek them out whenever the directors’ signatures were required for
individual invoices issued by or to Xtron198.
247
Having said that, I accept that John Lam had no working relationship
with Xtron after he ceased to be director in August 2004. I consider that his
willingness in 2003 to have a rubber-stamp made of his signature may not be
of great probative value in assessing his understanding of the relationship
between CHC and Xtron in 2007. He testified that, in relation to the US phase
of the Crossover, he understood that Xtron was independent in the sense that
its directors would make decisions for it, except that they would work together
with Kong Hee199. But he also accepted having had knowledge that Kong Hee
made the day-to-day decisions concerning the Crossover’s expenditure200.
248
As a member of the CHC board, I consider it likely that he knew that
the CHC board was in a position to make decisions on transactions between
CHC and Xtron without consulting the Xtron directors. I say this because, in
an e-mail from Serina to most of the members of the board on 18 January
2007201, she alluded to a discussion the board had had several days before on a
proposal that CHC pay Xtron a “markup” in sub-leasing Expo premises from
Xtron in order that the sub-lease might be “deemed an arms length
transaction” – the reasoning was that it would not make “business sense” from
Xtron’s perspective if the rent which it charged CHC under the sub-lease was
not marked up from the rent which it was paying the landlord. Serina then
198
E-826.
199
Transcript 18 July 2014, pp 101 to 103.
200
Transcript 4 August 2014, pp 53 and 54.
201
E-457.
140
asked if the board members were “ok” with the mark-up figures that she was
proposing.
249
In addition, there is evidence that John Lam knew about the entire
network of organisations falling under the CHC group, with CHC remaining in
overall control of the group202. He described this as “the Matrix” in his email to
Eng Han, Ye Peng and others on 13 September 2006203 John Lam clearly knew
that Xtron was not really independent from CHC but had to made to appear so.
250
I am thus satisfied that John Lam knew that the CHC board exercised a
significant measure of control over the affairs of Xtron, although I would add
that the extent of his knowledge does not appear to have been greater than that
of his fellow board members.
251
The BSA between CHC and Xtron was a culmination of efforts
towards the end of 2006 and in the first half of 2007 to obtain funding for the
Crossover, but I am satisfied that John Lam was not intimately involved in
those efforts to obtain funding. The prosecution argues that he had some
familiarity with Xtron’s attempts to obtain a loan from Citic Ka Wah around
May 2007, in that he knew that the reason why CHC planned to make a
$9 million deposit in Citic Ka Wah was so that there would be security on the
basis of which Citic Ka Wah might be willing to extend a loan to Xtron. In
this regard the prosecution relies on the testimonies of Serina204 and Eng Han,
but I note that Eng Han subsequently clarified that he was not sure if John
202
E-112, E-815.
203
E-673.
204
Transcript 7 May 2015, p 22.
141
Lam knew of the real reason why the $9 million deposit was needed205. I also
note the absence of documentary evidence that John Lam was involved in the
efforts to obtain a loan from Citic Ka Wah on Xtron’s behalf, and it is
undisputed that he was not involved in efforts to obtain a loan from UBS
around the same period.
252
I am satisfied, on the basis of John Lam’s own testimony, that he
became aware sometime in June 2007 that there was a need to raise funds for
the Crossover, and that the plan was that money from CHC’s BF would be
“invested” in Xtron, and Xtron would use the proceeds for the Crossover206.
This would be the first time that money from the BF was being placed in
bonds or other financial instruments. I accept that John Lam assisted in
bringing the plan to fruition by taking the lead in drafting an investment policy
that was meant to define the parameters of a prospective fund manager’s
mandate to invest money from the BF. He prepared a draft investment policy
and sent it to the investment committee members for comment near the end of
June 2007207. I accept that John Lam prepared the investment policy on the
understanding that this was something Foong had suggested.
253
It appears that the investment policy was again discussed in the middle
of August 2007208; at this time, John Lam suggested to the investment
committee that giving CHC’s fund manager AMAC a mandate to invest 70%
of the funds in “SGD denominated fixed income” would “present a balanced
205
206
207
E-183.
208
E-651.
142
portfolio” as such SGD-denominated investments were “among the safest
investment now”. I am satisfied, however, that John Lam’s concern in drawing
up the investment policy was not so much to ensure that CHC’s investments
would be “safe” as it was to ensure that the Xtron bonds would fall within the
mandate given to AMAC. I make this finding in large part on the basis of an email from him to Eng Han on 6 July 2007209. This e-mail concerned Kong
Hee’s draft presentation slides for the EGM scheduled to take place the
following day. The slides apparently provided that the investment mandate
extended to “SGD corporate bonds” only, and John Lam suggested that such a
mandate might be too restrictively stated because the phrase “corporate bonds”
connoted “investment grade” bonds whereas the Xtron bonds were “higher
risk”. What that plainly shows is this: to John Lam’s mind, the end goal was to
purchase the Xtron bonds, and what the EMs were told about the permissible
classes of investments would have to be adjusted in order to fit the Xtron
bonds. This strongly suggests to me that, when he drafted the investment
policy, the end goal of the drafting process was likewise the purchase of the
Xtron bonds. Thus he reverse-engineered the investment policy in order that
the mandate given to AMAC would be wide enough to encompass the Xtron
bonds.
254
All that this means, however, is that John Lam knew from June 2007
that there was a plan to purchase Xtron bonds using money from CHC’s BF
for the purpose of funding the Crossover, and that he subsequently helped to
pave the way for the implementation of that plan by drafting an investment
policy, as well as answering a query posed by Serina in August 2008 on the
209
E-647.
143
“use of proceeds” clause in the draft Xtron BSA210. It does not inexorably
follow that John Lam knew that he was not legally entitled to assist in carrying
out the plan.
255
More pertinent to the question of dishonesty in relation to John Lam is
his acquiescence in hiding information from his fellow investment committee
member Charlie Lay. On 12 October 2007, Serina sent him and Eng Han a
report from Deutsche Bank listing all the investments that CHC had made, and
asked John Lam if it was “ok to forward” the report to the other members of
the investment committee, who were Charlie Lay and Martin. Eng Han made
known his view that it was better not to distribute the report to Charlie because
it contained information on the Xtron bonds211. Subsequently, John Lam asked
Eng Han to reconsider that view, pointing out that Xtron was “going to be
there for a long time & he might find out eventually” and suggesting that it
was better to “test” Charlie at an early stage. Eng Han’s response was that
Charlie was “not exactly 100pct with chc leadership” and that he preferred to
keep knowledge of the Xtron bonds “within a small circle” lest people “say all
kinds of baseless things”. Eng Han also reasoned that the investment
committee did not need to scrutinise the individual investments that the fund
manager had made, and he said that this level of scrutiny was “normal market
practice”. John Lam agreed with Eng Han and replied “OK then we go with
your idea”212.
210
E-157.
211
E-564.
212
E-322.
144
256
This readiness to acquiesce in hiding information from an investment
committee member could of course indicate a consciousness of wrongdoing on
John Lam’s part. I grant that that is not the only possible explanation – it is
possible that he might genuinely have believed at the time that there was no
need for the investment committee to scrutinise the fund manager’s decisions
in great detail, as Eng Han had said. In the event, the Deutsche Bank report
which had been kept from Charlie Lay was eventually presented to the
investment committee on 2 February 2008213 but by that time, Charlie Lay was
no longer a member of the investment committee. The appropriate conclusion
to be drawn from John Lam’s conduct in concealing information from Charlie
Lay will have to be assessed in the context of all the other evidence.
257
From the time the Xtron BSA was executed on August 2007 to the
time of the final drawdown under the BSA in March 2008, I am satisfied that
John Lam did not have any role to play in the Crossover. He was not involved
in making decisions on matters of music production, and he was not kept
apprised of the expenses that had been incurred in the Crossover and the
projected revenue from the planned albums.
258
He became involved in the Xtron BSA again in the middle of 2008 in
respect of a few accounting and auditing issues. By 27 June 2008, he was
aware that Xtron had incurred substantial net losses for two years in a row for
2006 and 2007, amounting to $1.647m and $1.862m annually214. On the same
day, after having read through the BSA, he pointed out that there were two
potential issues: one was the possibility that a clause in the BSA would be
213
CH-17.
214
E-423.
145
construed by the auditors as an “equity feature” and thus require consolidation
of CHC’s and Xtron’s accounts, and the other was that there was no
mechanism by which CHC could renew the bonds, meaning that Xtron would
have to repay the $13 million by August 2009 unless the maturity date of the
bonds was extended215. These concerns were brought to the attention of the
auditors by Serina on 9 July 2008. She wrote to Ai Fang asking, among other
things, (i) whether there would be a need for consolidation of CHC’s and
Xtron’s accounts, or “special disclosures” in their accounts, if the Xtron bonds
were part of CHC’s portfolio, and (ii) whether there would be a need to write
down the value of the Xtron bonds if “[h]ypothetically speaking” Xtron could
not redeem the bonds on maturity. Ai Fang subsequently conveyed Tiang Yii’s
responses to these questions, and after some exchanges between Serina and Ai
Fang, Ai Fang asked to see the CHC board resolution approving the purchase
of the Xtron bonds. John Lam stepped in at this juncture, informing Ai Fang
that there was no such board resolution because the board left it to AMAC to
make such investments as it fell within the mandate the board had given216.
259
The discussions between the auditors and the audit teams of CHC and
Xtron continued through July 2008 and into August 2008. John Lam was
involved in these discussions every now and then. On 24 July 2008, he
received an e-mail from Serina, which was also sent to Ye Peng and Eng Han,
in which Serina summarised a discussion with Foong that had taken place a
few days before. In this summary she said, among other things, that there
would be an impairment of the Xtron bonds – ie, a writing down of the value
215
E-474.
216
E-357.
146
of the bonds – as long as there was uncertainty as to whether Xtron could
redeem the bonds by the maturity date, and that all transactions between CHC
and Xtron would have to be disclosed from then on because Sun Ho would be
considered a “key player” in Xtron217. On 1 August 2008, John Lam received
another e-mail from Serina in which she forwarded to him, Ye Peng and Eng
Han a spreadsheet that she had received from the auditors – this spreadsheet
set out the audit issues that the auditors considered unresolved.
260
In the meantime, towards the end of July 2008, John Lam became
privy to proposals being drawn up by Eng Han, Ye Peng and Serina
concerning Xtron’s funding needs. In an e-mail dated 24 July 2008 to him,
Eng Han and Ye Peng218, Serina wrote that Xtron had already drawn down
$13 million in bonds and needed to draw down an additional $18 million from
August 2008 to March 2009. Serina also set out a proposal under which
AMAC would take a loan from UBS with CHC’s investments as collateral and
purchase Xtron bonds in its own right, and Xtron would use part of these bond
proceeds to redeem the bonds CHC had purchased. Serina then addressed a
question directly to John Lam which had to do with impairment of the Xtron
bonds that CHC had purchased.
261
What emerges from all this is that, from the end of June 2008 to the
start of August 2008, John Lam was involved in addressing the auditors’
queries concerning the Xtron BSA, and I find that he was primarily involved
in addressing their queries on the possible write-down and impairment of the
Xtron bonds. I am satisfied that he knew at this point that Xtron might have
217
E-267.
218
E-102.
147
difficulty in redeeming the bonds at the maturity date. I am also satisfied that
he knew that Xtron required even more funding, and that there would have to
be disclosure in CHC’s accounts of all transactions between CHC and Xtron
by reason of Xtron’s management of Sun Ho.
262
John Lam was then involved in convening an investment committee
meeting that took place on 5 August 2008. It is apparent from the e-mail
correspondence between John Lam, Sharon, Ye Peng, Eng Han and Serina that
one reason for convening this meeting was to address the audit issues that had
been raised in the past month or so. Hence one of the items on the agenda for
this meeting called for the investment committee to assess whether Xtron
would be able to redeem the bonds219. According to the minutes of the meeting
– which were backdated to 29 July 2008 – the committee was reminded that
CHC had purchased $13 million of bonds from Xtron, and a proposal was
made for CHC to purchase an additional $5.2 million of Xtron bonds, and in
considering this proposal the committee agreed that Xtron would be able to
redeem the bonds in 10 years.
263
In my view, the evidence shows that, although John Lam did not play
as large a part as the other accused persons in bringing about the execution of
the Xtron BSA and the drawing down of money from the BF pursuant to that
BSA, he did play a role that cannot be described as negligible. At any rate, his
participation cannot be ignored. Although he became aware of the effort to
obtain funding for Xtron at a fairly late stage, in June 2007, he contributed
nonetheless by drafting the investment policy that gave AMAC the mandate to
219
E-95.
148
purchase the Xtron bonds, and by helping to select the information that would
be available to the investment committee members.
264
The question then is whether John Lam did all this “dishonestly”, and
this turns on whether he honestly believed that the Xtron bonds were a
genuine investment. In my judgment, the evidence points to the conclusion
that he did not hold such an honest belief. He knew that Kong Hee was
effectively making the day-to-day operational decisions on Xtron’s behalf,
even if he might not have been aware of how fully in control he was. He knew
that the whole purpose of the Xtron bonds was to take money out of the BF
and use it for the Crossover. He was therefore aware that entering into the
Xtron BSA would, in effect, channel money from the BF into Kong Hee’s
hands for use for the Crossover.
265
John Lam testified that there were two important reasons why he
believed that the Xtron bonds were a genuine investment. The first was that he
believed that Wahju had given a personal guarantee, and the second was that
he believed that the revenue from album sales would enable Xtron to redeem
the bonds and pay CHC the interest due on the bonds. However, as to the first
reason, I do not think he truly believed that there was such a guarantee. John
Lam claimed that he recalled having had a specific conversation with Eng Han
some time before 25 June 2007, but after the plan to purchase Xtron bonds had
been formulated, in which Eng Han apprised him of Wahju’s purported
guarantee. This was roundly contradicted by Eng Han, who testified that he
would have been overseas during the relevant duration when they might have
had the opportunity to meet. I find that no such conversation had taken place
at the time. At best, John Lam only knew that Wahju had previously supported
the Crossover by contributing sums in excess of $1 million at a time; in my
149
view, however, this can hardly equate to a belief that Wahju had given a
personal guarantee underwriting all $13 million of the bonds.
266
As for the second reason, although I accept that John Lam did not have
knowledge of the financial status of the Crossover, I find it difficult to believe
that he could have thought that the Xtron bonds would be repaid on maturity.
John Lam had already known by November 2003 that Sun Ho’s albums were
not profitable. The album sales figures listed for Attributes showed a net loss
of $690,000220 and Serina had been asking “how do we explain during AGM
or how do we make the P & L show a profit rather than a loss?”. From Xtron’s
financial statements for 18 June to 31 December 2003, $398,264 worth of
unsold albums was listed under “Inventories written down”. Xtron was in a
pre-tax net loss position of $969,787221.
267
By August 2004, John Lam knew that CHC was arranging for a buy-
back of all of Sun Ho’s 32,500 unsold “Lonely Travel” albums as well as
remaining unsold “Sun with Love” and “SunDay” albums, underwriting a loss
of $447,000222. John Lam acknowledged in cross-examination that he already
knew Sun Ho’s albums were loss-making back in 2003 and 2004. Yet he
claimed to have relied on Kong Hee’s optimistic updates about Sun Ho’s
album sales and that her albums were doing well. He had no idea what
“double platinum” album sales meant and merely accepted what he was told
by Kong Hee, namely that one of Sun Ho’s albums (“Sun with Love”) had
sold at least 150,000 copies. I am unable to believe John Lam when he
220
E-116.
221
X-58 p 6.
222
E-127.
150
maintained under cross-examination that it “didn’t occur” to him and he
“didn’t connect” that the albums were making losses223.
268
Most telling were his concessions that he knew by 2007 that Xtron had
next to no assets – only one laptop, in fact224 – and he knew that the Xtron
bonds were, in his own words, not “investment grade” but were “higher
risk”225. Serina had informed him on 15 July 2008 that she thought Kong Hee
had “some figures” for projected album sales and there were “quite detailed”
projections226. Yet at the same time John Lam understood and accepted that the
details were “not ready” even at that point227. Even then he was fully cognisant
of the “big test” they would face in convincing the auditors of the very high
album sales projections of $16m and $23m sales for 2011 and 2012, more than
three years down the road228. Perhaps he himself did not seem convinced.
269
In these premises, and given the lack of any perceptible interest or
genuine enquiry whatsoever on his part into the projected profitability of the
Crossover, I find that the truth of the matter is that he was simply not
concerned about Xtron’s ability to meet its obligations under the BSA. To his
mind, all that mattered was that the BF monies should be channelled towards
the Crossover and that the public should not come to know of it. This reflected
his dishonest intent to use the BF for an unauthorised purpose.
223
Transcript 4 August 2014 pp 148, 149.
224
E-157.
225
E-647.
226
E-158.
227
228
E-603.
151
270
I consider that John Lam’s involvement in various e-mails in the
course of the audit queries in the middle of 2008 further corroborates a finding
that he did not genuinely believe that the Xtron bonds would be redeemed on
maturity. It is clear from those e-mails that, by that time, he knew that Xtron
needed much more funds – $18 million from August 2008 to March 2009,
when $13 million had already been drawn down – yet he did not express any
concerns. His indifference strongly suggests that he was unconcerned all along
with Xtron’s ability to meet its obligations under the BSA.
271
A further illustration of John Lam’s indifference is when Kong Hee
had told the CHC EGM on 10 August 2008 that Xtron was “started in 2003 …
to own and manage future buildings that CHC can use consistently”229. John
Lam knew very well that Xtron was set up in 2003 to manage the Crossover
and separate Sun Ho’s music career from CHC “in the public’s eyes” 230. He
saw no need to correct Kong Hee when he knew that misleading statements
had been made by Kong Hee relating to what Xtron was originally set up for.
Even if it was not appropriate to correct Kong Hee in full view of all the EMs,
John Lam evidently saw no need to set the record straight with Kong Hee in
private after the EGM.
272
Finally, there is his willingness to hide material information from
Charlie Lay. Eng Han had intimated that Charlie was “not exactly 100 pct with
chc leadership”. In all the circumstances, I consider that the most probable
explanation for his conduct is that he, like Eng Han, feared that Charlie would
proceed to dig deeper and find out the facts surrounding the Xtron BSA, and
229
CH-25 p 16.
230
See eg. E-92 and also E-810.
152
that strongly suggests that he knew that there was no legal entitlement to enter
into the Xtron bonds. I am therefore satisfied beyond a reasonable doubt that
he acted dishonestly.
The Firna bonds
273
As with his involvement in the Xtron BSA, John Lam’s involvement in
the execution of the Firna BSA was not extensive. He was not privy to Kong
Hee’s e-mails in late July 2008 in which he first set out the plan for the
Crossover to be funded by way of the Firna bonds, and he was not involved in
making arrangements with Wahju leading up to the execution of the BSA. He
was also left out entirely of the e-mails in which Serina gave instructions to
Wahju as to what to do with the Firna bond proceeds. He confirmed in his
CAD statement that he did not know anything about Firna’s credit standing
but only relied on the fact that it was Wahju’s company, and the board had not
undertaken any due diligence in relation to the Firna bonds231.
274
It is not disputed, however, that he was involved in at least one
material way, which was that he signed the so-called “secret letter” by which
CHC undertook that, in the event it exercised the convertibility option in the
Firna BSA and acquired Firna shares, it would sell those shares back to Wahju
and his father-in-law for a nominal sum of US$1. It is also not disputed that
this letter was drafted in order to persuade Wahju’s father-in-law to give his
consent to the Firna BSA, and to the extent the letter was a necessary part of
the process leading up to the execution of the Firna BSA. John Lam conceded
in cross-examination that the letter was intended to “trick and bluff” Wahju’s
231
P-1 Q289, Q381.
153
father-in-law although he denied that this was because he knew the Firna
bonds were a sham232.
275
John Lam testified that he considered the Firna bonds to be an arm’s
length transaction between two independent parties. He says he was first
apprised of the Firna bonds on 1 August 2008, when Eng Han told him that
Firna was a profitable glass factory in Indonesia and that Firna would use the
bond proceeds to repay a shareholder’s loan, and Wahju would then use his
personal monies to fund the Crossover233. He thus acknowledged that he knew
that one of the purposes of the Firna bonds was to provide money for the
Crossover234, and he consistently stated that, to his understanding, there were
two reasons for the Firna bonds. One was to secure financial return for CHC,
and the other was to fund the Crossover – he said that he would have been
prepared to invest in Firna on the basis of its financials alone without the
Crossover aspect235. He says that he understood from Eng Han’s presentation
to the investment committee on 5 August 2008 that there was a report valuing
Firna at US$46 million or so and that Firna made US$2 million in profit a
year236.
276
In my view, however, the evidence demonstrates that John Lam knew
that the only reason for the Firna bonds was the need to channel BF monies
towards the Crossover. I say this in large part because of an e-mail that he
232
233
Transcript 15 July 2014, pp 107, 108.
234
235
236
Transcript 15 July 2014, pp 151 and 152; 16 July 2014, pp 8 and 9.
154
received on 30 September 2008 from Serina, in which she informed him that
Eng Han was “thinking of reducing the Firna bonds but increasing the CHC
bonds”237 – when she referred to “CHC bonds” she meant Xtron bonds, ie,
bonds that Xtron issued to CHC. The common premise between Serina, Eng
Han and John Lam on this occasion must have been that the Firna and Xtron
bonds were interchangeable, and this leaves me in no doubt that John Lam was
fully aware that the Firna and Xtron bonds were similar in that they were
ultimately mere means to the end of funding the Crossover. I am thus satisfied
that, to his mind, it did not matter whether CHC purchased Xtron or Firna
bonds, so long as money flowed from CHC’s BF to the Crossover. I find that
this is entirely inconsistent with his claim that he believed that there were
good financial reasons for purchasing the Firna bonds.
277
Moreover, in that e-mail from Serina, a chain of e-mails which she had
exchanged with Eng Han were forwarded to John Lam, and in an e-mail near
the top of the chain, Eng Han had suggested a course of action in order that
“we don't have to crack (sic) our brains how firna is going to pay back the
5.8m one day”. John Lam claimed that he did not understand the contents of
the e-mail chain forwarded to him because it was very lengthy, but I find this
an inherently dubious claim. Even if John Lam did not understand Eng Han’s
e-mail, the material point is that Serina had no qualms forwarding the e-mail
to him, which suggests that they had a similar understanding of the nature of
the Firna bonds – and that understanding was that Firna would not be
responsible for figuring out how to redeem the bonds that CHC had purchased,
and that such responsibility lay instead with Eng Han and Serina at least.
237
E-609.
155
278
There is a further reason why I am of the view that John Lam did not
believe that the Firna bonds were genuine investments, and it is that he did not
tell the truth about the Firna bonds on two different occasions. First, at the
9 April 2009 meeting with Sim, he told Sim that the Firna bonds were a “pure
commercial paper for investment”238. I am unable to accept that this was
anything other than an untruth; even on his claim that he believed that the
Firna bonds were for financial return as well as funding the Crossover, that
would not make it a “pure” commercial paper. Second, in the course of
investigations he told the CAD that the Firna bonds were “purely
investment”239. This was likewise false. He testified that when he was
interviewed by the CAD he had forgotten that the Firna bond proceeds had
been used for the Crossover, but I find this difficult to accept.
279
Although the mere fact that John Lam told untruths does not
necessarily mean that he acted dishonestly, it is a fact from which inferences
may be drawn. The most likely and coherent explanation, in my judgment, is
that he knew that there was no legal entitlement to use BF monies to purchase
the Firna bonds. He knew, after all, that the Firna bonds were but a means by
which money from the BF would be directed towards the Crossover, and that
there was no real intention to rely on the strength of Firna’s business to
redeem those bonds. In the circumstances, I am satisfied beyond a reasonable
doubt that when John Lam signed the secret letter, which was his participation
in the execution of the Firna BSA, he did so dishonestly.
238
CH-3.
239
P-1, question 292.
156
Summary – John Lam
280
I accept that John Lam’s participation and involvement was much less
extensive compared to that of the other accused. However, a lesser degree of
participation does not immediately absolve him of culpability. No doubt he
was not aware of all the details; but arguably none of the others, Kong Hee
included, knew each and every detail either. This broadly reflected how CHC
chose to carry out its affairs and operations relating to the funding of the
Crossover. Being discreet meant being prepared to work in a covert and
opaque manner while playing their respective assigned roles. As such even
those like John Lam who worked within CHC’s trusted inner circle did not
always know the full picture and would only be told to see the wood but never
ask about the trees. They were told that being discreet about Xtron meant not
asking questions240, and placing their trust in their leaders.
281
John Lam was happy to play his part and be recognised as an expert in
finance and a leader in CHC. He chose not to ask too many questions but
placed his trust in CHC’s leaders such as Kong Hee, Ye Peng and Eng Han.
He went along to assist whenever he was called upon to do so. He became
involved mainly in the audit and impairment issues and was roped in to help as
and when needed, like the lubricant to help ease the functioning of the
machinery. Arguably, this was an essential role in itself even if he could not be
properly described as being one of the crucial cogs in the conspiracy. As the
prosecution submitted, John Lam’s role was to “smooth the way” for
execution of the Xtron and Firna BSAs. I find that this is precisely what John
Lam did.
240
CH-25 pp 27, 28.
157
282
There is ample evidence supporting the prosecution’s submission that
John Lam did think and act like a conspirator. He was not a full-fledged
member of the “Crossover team” despite suggestions from Eng Han to the
contrary. But it is not material whether one considers him to be among the
“Crossover team” members or not. It is more important to look to the
substance of what he did and what he intended. I accept that he was activated
by Kong Hee, Ye Peng and Serina wherever necessary on the planning for Sun
Ho’s music album. He would be “looped in” when his specialist expertise was
needed, and he would actively assist whenever required. In this connection,
there is some similarity between his position and that of Eng Han. The
difference lies in the degree of knowledge and participation.
283
I am persuaded by the evidence and the prosecution’s submission that
John Lam performed a special role that none of the conspirators could have
fulfilled. He was the “inside man” from within CHC’s trusted inner circle,
occupying key positions of financial responsibility as treasurer, finance
committee member, investment committee chairman and audit committee
member. Working from those positions, I agree that John Lam actively
participated in the scheme to ensure that funding for Sun Ho’s music career
would be obtained through the Xtron and Firna bonds. I am satisfied that he
did so dishonestly, knowing that there was no legal entitlement to use CHC’s
BF to purchase the Xtron and Firna bonds.
Kong Hee
284
There is no dispute that Kong Hee is the leader of CHC and the person
from whom the entire church, and its related entities, takes its overall
direction. In relation to the Crossover, the project was his vision and
brainchild. He initiated the idea of Sun Ho singing and recording secular
158
music, as well as the subsequent expansion of the Crossover from Asia to the
US. Kong Hee took overall charge of the Crossover and all matters pertaining
to the budgeting and financing of the project came under his supervision and
instruction. It was from him that the other accused persons sought approval
and guidance. I am satisfied that it was on his direction that the Crossover was
carried out in a discreet fashion. As Eng Han testified, after the Roland Poon
incident, Kong Hee’s preference was for discretion, and I find that this
preference was transmitted to all those under him who were working on the
Crossover.
285
The thrust of Kong Hee’s defence is that he could not possibly have
known that there was no legal entitlement to enter into the Xtron and Firna
BSAs because he sought out the advice of auditors and lawyers in connection
with those transactions and did not proceed until he was assured that the
transactions were lawful. He acknowledges that the EMs of CHC were not
kept apprised of the transactions, but he says that such non-disclosure was not
a result of a consciousness of wrongdoing but simply a result of a desire not to
reveal to the public the link between CHC and the financing of the Crossover.
286
I would however also point out that Kong Hee’s preference to avoid
disclosure of CHC’s involvement in Xtron and financing of the Crossover
appears to be driven by deep insecurity and a desire to pre-empt enquiry and
scrutiny that might lead to the revelation of some discomforting facts. I say
this because Kong Hee’s evidence betrays his motives: he explained in reexamination241 that he wanted to be discreet about the financing of the
241
Transcript 9 September 2014, p 149.
159
Crossover to avoid misconceptions that Sun Ho’s music career was “not real”
and that CHC was using church funds in a “cavalier and flippant” way to
promote her career. On both counts, the evidence presented at trial suggests
that if there were any such perceptions, they were not exactly misconceptions
but were in fact much closer to the truth than Kong Hee would have wanted
others to believe.
The Xtron bonds
287
Kong Hee was involved in Xtron from its incorporation. He
acknowledged that Xtron was incorporated for the purpose of separating CHC
from the management and financing of Sun Ho’s music activities. I find that
Kong Hee intended that Xtron would effectively be under CHC’s control even
though, in name and in form, they were two separate entities. He had the final
say on Xtron’s operational matters, such as manpower requirements and salary
levels, although he would delegate some oversight to CHC board members, in
particular Ye Peng and Suraj.
288
When it came to the Crossover, I think it beyond question that Kong
Hee made all significant decisions on Xtron’s behalf. After the Crossover
entered the US phase, he corresponded with Justin and the music producers
there, and he alone made the strategic decisions as to Sun Ho’s music
activities, for instance, how many albums to produce, what the concepts of
those albums should be, and which music producers and musicians she should
collaborate with. He also made decisions on how much money to spend on
such aspects of the music production as recording and publicity, and I have no
doubt that, in so doing, he unilaterally committed Xtron to expenditure
without reference to the Xtron directors.
160
289
In coming to this view, I refer again to the fact that, from February to
August 2006, Kong Hee instructed that $1.3 million be paid from Xtron to
Justin without having sought the directors’ prior approval. These payments
were to have been brought to the attention of the Xtron directors only in
October 2006, and even then Serina did not know what exactly the money had
been used for242. Moreover, as Serina testified, she omitted to draft the
resolution or minutes by which the Xtron directors would apparently approve
these payments, and the closest thing to approval which the Xtron directors
gave was when, long after the fact, they gave their general approval to the
accounts for that year243. I might also add that Kong Hee acknowledged that
he, along with Ye Peng and Eng Han, planned the transfer of Sun Ho’s
management from Xtron to UA244. Also, Ye Peng testified that, when in
August 2008 a question arose as to the place that Xtron should have in a joint
venture in the US formed for the Crossover, Kong Hee made the decision after
a discussion with Eng Han and Ye Peng, without consulting the Xtron
directors245.
290
In the circumstances, I do not think it is possible that Kong Hee truly
believed that Xtron was independent in the sense that its directors were
responsible for making decisions on its behalf. He testified repeatedly that, to
his mind, the Xtron directors were in charge and he could not make them do
something if they did not want to do it; he was prepared to acknowledge that
he had significant influence over Xtron but not that he had control over it. In a
242
E-185; see also E-855 and E-868.
243
Transcript 5 May 2015, pp 34 and 35.
244
Transcript 24 August 2014, pp 52 and 53.
245
161
sense this is a matter of semantics and not substance, for influence may readily
shade into control; the essential point is simply that he never believed that the
Xtron directors presented any impediment to his ability to do what he wished
with Xtron.
291
I am satisfied that Kong Hee was fully aware of the difficulties that
Xtron was experiencing in obtaining funding for the Crossover once it had
entered the US phase, and I consider that it was he who assigned to Ye Peng
and Eng Han the task of finding ways to bring funds into Xtron. Hence, I am
satisfied that Kong Hee was kept apprised of such plans as (i) obtaining a loan
from Citic Ka Wah bank and (ii) having CHC pay advance rental to Xtron
which could then be used for the Crossover, and that these plans were subject
to his approval. There is documentary evidence that, on at least one occasion,
he was personally involved in Xtron’s search for funds. On 30 August 2006,
he sent an e-mail to Ye Peng setting out the cashflow projections up to
December 2010 on the basis that US$1.75 million in a “worst case scenario”
would have to be spent to get Wyclef involved in the production of Sun Ho’s
planned album246. Kong Hee wrote that, in order to ensure that Xtron had
sufficient funds at the appropriate times, Xtron would need five months’ worth
of advance rental in February 2007, which it would pay back by July 2008,
and it would need 12 months’ worth of advance rental in December 2008,
which it would pay back in December 2010. What this e-mail demonstrates,
apart from the mere fact that Kong Hee personally participated in Xtron’s
search for funds for purposes of the Crossover, is that he saw advance rental as
a convenient excuse for CHC to pay money to Xtron in what was in substance
246
E-447.
162
a loan from CHC to the persons controlling the Crossover, with him as the
project leader orchestrating the planning for funds.
292
Given Kong Hee’s control over Xtron and his ability to make decisions
on its behalf without reference to its directors, including decisions pertaining
to the Crossover, I do not think it possible that Kong Hee could have failed to
realise that, once CHC had purchased the Xtron bonds, the bond proceeds
would be entirely within his control. I am satisfied that he was in fact fully
aware and had all along intended that he could spend those proceeds as he
deemed fit.
293
I also find that, even though Kong Hee testified that he had believed at
the time the Xtron BSA was executed that Xtron would be able to pay CHC
the principal and interest due under the bonds, he knew that, realistically,
Xtron might not be able to redeem the bonds from the album sales by the time
of maturity two years later. I am satisfied that, around the time the Xtron BSA
was executed in August 2007, the premise on which Kong Hee and his coaccused operated was that Sun Ho’s planned English album would be
projected to sell 200,000 copies and the profit from this would not be
sufficient to redeem the bonds when they matured in two years. I say this on
the basis of an e-mail exchange on 3 July 2007247 and an e-mail on
28 September 2007248. Kong Hee was not involved in these e-mails but I have
no doubt that he was kept apprised of the matters discussed therein, and in fact
I consider that those discussions would have been initiated by him.
247
E-1.
248
E-146.
163
294
In the e-mail exchange on 3 July 2007, Serina and Eng Han discussed
what the maturity date of the Xtron BSA should be, and Serina told Eng Han
that Xtron’s cashflow projections had been based on “200,000 copies of
English Album sold which will only yield us $2.17M, hardly enough to pay
off the $13M”, meaning that Xtron would need 10 years to earn sufficient
profit to redeem the bonds “assuming no other new unbudgeted expenditure”.
In the e-mail on 28 September 2007, Serina sent Ye Peng the projected Xtron
cashflow and informed him that this was “based on the conservative estimate
of 200K albums sold”, and that on this basis Xtron “will not be able to repay
the $13M bonds”. What this goes to show is that, about a month before and
about a month after the execution of the Xtron BSA, Kong Hee and the
accused persons were aware that Xtron was unlikely to be able to redeem the
bonds that CHC had purchased when they matured in two years.
295
The defence’s response to these e-mails has been to say that the
accused persons did not truly believe that the album sales would be so dismal.
They say that there are other e-mails in which the accused persons are shown
to be planning on the basis of, for instance, 1.5 million albums sold. Kong Hee
also testified that, in his correspondence with Justin, he was told that he could
expect much higher sales figures. He claimed that Wyclef was also
enthusiastic about the sales potential. In these circumstances, they say, the
estimated sales of 200,000 albums seen in the e-mails I have mentioned should
be seen as instances of what might be called “worst-case scenario planning”
which did not reflect the accused persons’ true expectations. It is pointed out
that, in Serina’s 28 September 2007 e-mail, she used the words “conservative
estimate” to describe the figure of 200,000 album sales.
164
296
I accept that, from August 2006 to the execution of the BSA in August
2007, there were different estimated album sales figures put forward for the
purposes of planning Xtron’s projected cashflow. I accept that there were
occasions on which Kong Hee said that selling 400,000 or 900,000 copies was
the “absolute worst case scenario” – this would be 30 August 2006249 and
19 November 2006250 respectively. I also accept that Kong Hee and his coaccused might have believed at certain points in time that 1.5 million albums
sold was a realistic enough prospect to form the basis of Xtron’s cashflow
planning, for example, as late as 15 March 2007251. I accept that, in his
dealings with Justin, Kong Hee demonstrated a degree of meticulousness and
conscientiousness in that he would, together with Ye Peng and Serina,
scrutinise Justin’s budgets and projections carefully and that led on occasion
to pointing out errors that Justin had made252; Kong Hee would also challenge
certain of Justin’s premises and assumptions253.
297
But all that does not change the fact that, going into the second half of
2007, the projected album sales took on a more conservative shape, and this
was the way it stayed up to the end of September 2007 at least. Even if the
estimate of 200,000 albums sold could be characterised as a “worst-case
scenario”, the material point is that Kong Hee and his co-accused considered it
realistic enough that they planned the Xtron cashflow around it. There is no
suggestion that there existed around August 2007 alternative cashflow
249
E-447.
250
E-188.
251
E-140.
252
E-361, pp 25 and 26 (13 May 2008); E-549 (13 July 2008).
253
E-361, p 39 (27 June 2008).
165
projections in which higher album sales figures were projected. In these
circumstances, whatever the precise semantics employed on the 200,000
album sales figure, I am satisfied that this was the figure that Kong Hee and
the co-accused realistically expected when they executed the Xtron BSA.
They may well have been hoping for a much higher number but that is another
matter altogether. Equating hopes with expectations would be mere wishful
thinking.
298
It is therefore clear to me that Kong Hee and the co-accused executed
the Xtron BSA with the consciousness that Xtron would not have sufficient
funds to redeem the bonds when they matured in two years. The defence
argues that it does not follow that they believed the Xtron bonds were not
genuine investments – it is not uncommon in the world of commerce and
finance for bond maturity periods to be extended when the issuer of the bonds
does not have sufficient funds to redeem the bonds on maturity, hence it is
quite possible that Kong Hee and the other accused persons might have
believed that the Xtron bonds were genuine investments even if they were
aware on inception that the maturity date might have to be pushed back. I
accept that this is indeed a possibility, but it is no more than that. In my
judgment, the fact that the accused persons did not think that the bonds would
be capable of being redeemed on maturity when they brought about the
execution of the Xtron BSA tends to suggest that they were not seriously
concerned about the question of whether and when CHC would enjoy the
financial return that was supposed to result to it under the BSA, and that in
turn strongly suggests that Kong Hee and the accused persons did not believe
that it was a genuine investment.
166
299
I find, in addition, that Kong Hee was involved in planning alternative
ways to put Xtron into funds so that Xtron would be able to meet the
Crossover expenses and/or redeem the bonds, and some of these ways
involved taking money from CHC under the guise of legitimate transactions. I
would refer in this connection to an e-mail to him from Ye Peng on
15 February 2008254. In this e-mail, Ye Peng told Kong Hee that for the past
two days he had been working on a plan under which Xtron would be able to
redeem the bonds that CHC had purchased without having to depend on the
sales of Sun Ho’s album. It is apparent from the opening words of this e-mail
– “Sorry to get back to you so late” – that Ye Peng had been working on this
plan at Kong Hee’s instruction. Operating on the assumption of 300,000
albums sold, Ye Peng outlined a number of methods by which CHC’s funds
could be transferred to Xtron in the event that “the stadium project gets
underway”, ie, the event that Xtron acquired an interest in a stadium for
CHC’s use: CHC could pay Xtron three years’ worth of advance rental plus a
security deposit for the use of the stadium, and Xtron could enjoy a profit
margin representing the difference between the rent it paid the landlord and
the rent that it received from CHC. Kong Hee’s knowledge that CHC might
effectively have to pay Xtron in order to pay itself militates against a finding
that he believed that the Xtron bonds were genuine investments.
300
I am satisfied also that Kong Hee was conscious that the Xtron bonds
were not quite of the same nature as the other investments that CHC held. I
say this on the basis of a Blackberry message from Ye Peng to Sharon on
254
E-3.
167
24 March 2010255. In that message Ye Peng told Sharon that Kong Hee wanted
to know, of the $7 million in “investment profit” that CHC enjoyed in the
previous financial year, how much was “real money earned outside of bonds”
between CHC, Xtron and Firna, and he clarified that this meant “actual money
in from the ‘world’”. Although Kong Hee was not privy to this message I have
no doubt that the query Ye Peng was posing to Sharon proceeded from him.
What this shows is that Kong Hee was cognisant of the fact that the financial
return apparently enjoyed by CHC under the Xtron bonds was not “real” or
“actual” profit in some way. That points towards the conclusion that he knew
that the Xtron bonds were not genuine investments capable of generating such
profits.
301
I turn now to Kong Hee’s defence that he regularly consulted
professionals, specifically auditors and lawyers, on the various financial
transactions that were planned, and that CHC’s financial affairs were entirely
visible to these professionals, and he placed reliance on the fact that the
professionals at no point indicated that there was anything unlawful in what
was being done. As I have said, I accept that the auditors were cognisant of a
number of things, but there was one important gap in their knowledge, which
was the true nature of the relationship between CHC and Xtron. I find that
Kong Hee contributed to giving the auditors the misleading impression that
CHC and Xtron were independent entities in that the Xtron directors made
decisions on its behalf. He edited the paper which Ye Peng sent to Foong on
21 July 2008256, which contained statements that conveyed the impression that
255
BB-33.
256
E-482 and E-483.
168
the Xtron’s decisions were made by its directors. He signed management
representation letters stating that Xtron was not related to CHC. In this
connection he testified that he was not aware that CHC and Xtron were related
parties, and that he relied on the auditors to tell him if they were related
parties. In other words, he said that when he signed the letters all he was doing
was confirming the auditors’ findings257. However, I find this explanation
inherently improbable even though the evidence is that the letters were drafted
by the auditors – I hardly think it could have escaped his notice that the whole
point of those letters was that they were a warranty of sorts given by the
management to the auditors and not the other way around.
302
What is more, I find that Kong Hee also sought to mislead a different
set of auditors – Ernst & Young – conducting a governance review of CHC on
behalf of the government towards the end of 2007. He acknowledged that he
was involved in drafting a set of responses to questions that those auditors
might ask. One of the anticipated questions was, “How is CHC currently
related to Xtron”, and the answer prepared in response to that was: “The
Directors of Xtron are separate and independent from the Board and
Management of CHC”258. I find that this was untrue in the light of Kong Hee’s
actual control over Xtron, and that Kong Hee knew it was untrue.
303
I have rejected Kong Hee’s claim that he truly believed that Xtron was
independent. There is ovewhelming evidence that he had overall control over
Xtron, together with his co-accused, but had sought to conceal this fact. But
his alternative case, if I may call it that, is that his failure to disclose the true
257
258
E-568.
169
relationship between CHC and Xtron was not caused by knowledge that he
was doing what he was not legally entitled to do, but by the same desire for
discretion in relation to CHC’s financing of the Crossover that resulted in
selective disclosure or non-disclosure of information to the EMs. He says that
what he wanted to avoid was consolidation of CHC’s and Xtron’s accounts,
which would have meant that Xtron’s financials would be published in CHC’s
books, which in turn would enable any reader of CHC’s financial statements
to discover that CHC had funded the Crossover. Hence he took care not to
suggest that CHC and Xtron were related parties lest such consolidation be
required. He points out that, in all other matters, he was fully frank – in
particular, he had no qualms letting the lawyers and auditors know that the
Xtron bond proceeds would be used for the Crossover. While this is not an
implausible explanation, given all the surrounding evidence showing that he
could not have believed the Xtron bonds were a genuine investment, it is more
likely in my view that he did not want consolidation of CHC’s and Xtron’s
accounts because he knew that it would reveal that something had been done
which they were not legally entitled to do.
304
In summary, Kong Hee knew that he had full control over Xtron,
especially in relation to the Crossover, and that Xtron was not an independent
entity. He knew that Xtron would not be able to redeem the bonds at the time
of maturity, and he was aware that Xtron would need financial assistance from
CHC when CHC was supposed to enjoy financial return from the bonds; on a
related note, he knew that the so-called profit to be earned on the Xtron bonds
was somehow not “real” or “actual” profit. Furthermore, he misled auditors as
to the true nature of the relationship between CHC and Xtron. The cumulative
result of these factors is that I am satisfied beyond a reasonable doubt that
Kong Hee did not believe that the Xtron bonds were genuine investments. It
170
follows that he caused CHC to enter into the Xtron BSA knowing that he was
not legally entitled to do so, and that he acted dishonestly in that regard.
The Firna bonds
305
As Kong Hee was the main person controlling the Xtron bond
proceeds, so also he was the person controlling the Firna bond proceeds. He
was in a position to “pull the plug” on the Firna bonds as a means of funding
the Crossover as can be seen from his email of 13 October 2008259, and he was
also in a position to tell Serina on 28 July 2008: “Don’t send out any money
until I confirm it” in relation to the Firna bond proceeds260.
306
The evidence clearly shows that the Firna bonds were just another
means by which money from CHC’s BF would be directed towards the
Crossover. The relevant background is that a decision was taken sometime in
August 2008 for Xtron to cease managing Sun Ho in order to avert the
possibility of disclosure in CHC’s accounts of transactions between CHC and
Xtron261. The management of Sun Ho was taken over by UA instead. The Firna
BSA was evidently executed so that CHC could channel money to UA to
support the Crossover, and I find that the intended flow of money is clear from
a message that Eng Han sent to Kong Hee and Ye Peng on 23 August 2008262.
In this Blackberry message exchange between Kong Hee, Ye Peng and Eng
Han, it reveals that the entire Firna bond arrangement was orchestrated by
259
E-640.
260
E-18.
261
BB-26.
262
BB-27.
171
them – Eng Han tellingly mentioned that “we then try to get any amendments
wrapped up by tues. After that we can issue the bonds …” .
307
I have no doubt that the Firna bond proceeds were controlled entirely
by Kong Hee and the co-accused assisting him. I have already found that, on
the basis of a number of e-mails from October 2008 to June 2009 in which
Serina gave detailed instructions to Wahju as to how he should apply the Firna
bond proceeds, Wahju was not the one controlling the money but was merely
assisting to facilitate the flow of funds which would eventually be used on the
Crossover. I have no doubt that Kong Hee knew and intended that he would be
in a position to dictate what was to be done with the money, and that even
though the money would be in bank accounts belonging to Wahju, the
common understanding between Kong Hee, his co-accused and Wahju was
that the money belonged to Kong Hee and his co-accused.
308
It is true that, in e-mails in late July 2008263 in which he set out the plan
for CHC to purchase Firna bonds in order that the Crossover might be funded,
Kong Hee referred to Wahju “independently” supporting the Crossover out of
the bond proceeds. But I cannot accept that this means that Kong Hee
genuinely believed that Wahju was acting independently in that regard. It is all
too clear from the e-mails where control over the bond proceeds lay, and I find
it impossible that Kong Hee should have been under any illusions as to who
had control over the money.
309
The position taken by Kong Hee is that he genuinely expected the
Firna bonds to be redeemed on maturity because Wahju had given a personal
263
E.g. E-19.
172
guarantee and because Firna was a profitable business in its own right. But I
am unable to accept this. First, the purported personal guarantee was nonexistent at the time. I say this because, when the time came to make good the
losses incurred on the Crossover in 2010, Kong Hee asked on 3 April 2010 to
“borrow” US$5 million from Wahju. This appears to me entirely inconsistent
with the existence of an actual guarantee given by Wahju. As for the
contention that Firna was a profitable business, I have no doubt that there was
never any intention to look towards that business for redemption of the bonds.
This is clear from Kong Hee’s e-mails on 28 and 29 July 2008264: he said there
that Wahju would pay the bond interest “from the profits of the project”,
meaning the Crossover, and he expected Ye Peng, Eng Han and Serina to
come up with a solution for the redemption of the bonds in the event that the
projected Crossover profits did not materialise and there was a $10 million
shortfall. The solution that they came up with on 14 August 2008 involved
getting Xtron to pump money into Firna265.
310
Once again Kong Hee says that there could have been no
consciousness of wrongdoing on his part because he specifically instructed
that the auditors and lawyers – that is, Foong and Jimmy Yim – should “look
through and ok” the plans concerning the Firna bonds266. There is no question
that he gave such an instruction, but it does not mean that he intended to be
wholly frank and forthcoming with them. As I have found, the auditors and
lawyers did not know at least two critical facts about the Firna bonds: first,
that the proceeds would be controlled by Kong Hee and his co-accused, and
264
E-18, E-19 and E-154.
265
E-491.
266
E-18.
173
second, that there was no intention to look towards Firna’s glass factory
business, such that the prospect of financial return was divorced entirely from
the profitability of the business, which on the surface was what was supposed
to underpin the bonds. I am satisfied that, even though Kong Hee did not deal
with the auditors and lawyers directly, the obscuring of these facts was done at
his direction. Put simply, if he had wanted those professionals to render advice
based on the full picture, it is inconceivable that they would not have been
given full access to information that was material to the Firna bonds.
311
Thus Kong Hee knew that the Firna bonds were devised for the
purpose of funding the Crossover; he knew that the bond proceeds would be
his to use in his discretion, aided by his co-accused; he knew that the prospect
of financial return to CHC under the bonds depended entirely on the success
of Sun Ho’s music activities and not at all on the profitability of Firna’s glass
factory business; and that he and his co-accused might have to help Firna
obtain money to redeem the bonds in the event that Sun Ho’s albums did not
sell well; he knew that the auditors and lawyers were not receiving all material
information about the Firna bonds. Given his knowledge of all these facts, I
am satisfied beyond a reasonable doubt that he did not believe that the Firna
bonds were genuine investments. I therefore find that he acted dishonestly in
causing CHC to enter into the Firna BSA and disburse money from the BF
into Firna pursuant to the BSA.
Summary – Kong Hee
312
I do not doubt that Sun Ho did enjoy some measure of success as a
secular pop singer but Kong Hee appears to have consciously oversold her
popularity and potential. He continued to maintain that her popularity and
album sales were genuine and had nothing to do with CHC’s efforts, in the
174
face of glaring evidence showing that Xtron was not profitable and CHC and
its members had helped to prop up the sales figures. He expressed his
frustration over having to create a “buzz” for her267 among her fan base
everytime they release an album, and over the fact that the zone CD purchases
for her album were slow and not meeting their “targets”, voicing his
exasperation that “our members don’t get it!” in not buying up her CDs as
hoped268. He could not possibly have been unaware that her albums were not
selling as well as he claimed, given Xtron’s dismal financial position which
Serina had described as being “insolvent”. In fact, he had to concede that he
was aware that her Mandarin albums were making losses269. He could also not
have been ignorant that Sun Ho did not actually appear on “official” Chinese
government-issued first day covers, or sing “the” official Special Olympics
theme song – all of which he claimed she did.
313
In my assessment, Kong Hee’s evidence reveals his tendency to lapse
readily into embellishment or exaggeration. Thus the evaluation of his
credibility has to be approached with added caution. He can be meticulous and
detailed but also casual and imprecise with both words and numbers. He does
not appear to dispute that he demonstrates a penchant for hyperbole, a word he
had used a few times on the witness stand, including when he realised he had
overstated his case in claiming that CHC was “100% supportive” of Sun Ho’s
efforts270. He claimed that in her early outreach concerts for “Sun With Love”,
267
E-463.
268
E-863.
269
270
Transcript 15 August 2014, p 76 – he corrected himself and changed it to “very
supportive”.
175
“100s if not 1000s responded to the altar call”. He never made clear what the
exact number was and it would appear that he did not really know or care
about the specifics. He then went on to assert that after the 2003 and 2004
concerts, 100,000 decisions to respond to Christ were made but this is again
not a number that can be independently verified.
314
Kong Hee maintains that he is a pastor and not an expert in legality271.
But one does not need to be an expert in legality to appreciate certain
fundamental aspects of honesty, truth and integrity. He maintains that he did
not control Xtron but the weight of the evidence contradicts this claim flatly.
He had also previously maintained emphatically that no church finds were
ever used (in his own words, “not a single cent”272) to support Sun Ho’s music
career and boost her sales prior to the Roland Poon incident but this is again
flatly contradicted by the evidence which emerged at the trial. While on the
witness stand, he had maintained that Sun Ho’s last two Mandarin albums
were “reasonably” and “rather” successful, conveniently failing to mention
that her five Mandarin albums resulted in substantial accumulated net losses
for Xtron.
315
Aside from asserting that he did not act dishonestly, Kong Hee’s
defence is founded on having sought out the advice of auditors and lawyers
and having relied on their assistance. He felt assured that his house was not
“dirty” since they had asked the professionals to help scrutinise the
transactions and he felt assured that the bond transactions were lawful. But as I
have explained above, the lawyers and auditors (Foong in particular) were not
271
272
CH-20b p 27.
176
told the complete picture, and they remained unaware of Kong Hee’s control
over Xtron and over the use of the Xtron and Firna bond proceeds. Hence they
were being tapped on to lend legitimacy rather than to truly scrutinise the bond
transactions to detect flaws or irregularities. Moreover Kong Hee knew that
Foong, Jimmy Yim and Christina were likely to be sympathetic to their cause,
from their previous dealings. Eng Han echoed this, stating that Foong believed
in the Crossover as well and trusted them, and thus “there’s no need for him to
meddle into all this”273.
316
Kong Hee had apparently professed to be conservative in his approach
towards the budgeting for the Crossover. But in this connection I note that he
was disingenuous. There was no hint whatsoever of being conservative at the
outset when he exhorted Justin to “be bold with your budgeting” in his email
of 15 June 2004274: In his subsequent email of 6 November 2004, he asked Tas
Steiner to “aim as high as possible and spare no expense”275. On 14 December
2004, he again urged Tas and Justin to “do whatever it takes to bring her to the
TOP”, stressing that “money is not a consideration from the Investors’ End”276.
He later went on to tell Justin to plan “as if the sky is the limit” and “shoot for
top-of-the-line type of planning in everything that we do for Sun”277. Money
was freely channelled to Justin by Kong Hee, with at least $1.3 million which
273
274
E-387.
275
E-864.
276
E-533.
277
E-87.
177
Ye Peng and Serina could not properly account for in 2006 278. These emails
are hardly consistent with a conservative budgeting mindset.
317
Kong Hee would eventually acknowledge that the Crossover was a
“very high risk” venture279. In choosing to take the risks that he did and
deciding to tap on CHC’s BF for an unauthorised purpose, I find that he had
done so in the vain hope that this would only involve a temporary or shortterm deprivation of CHC’s funds, and the money used for the Crossover
would perhaps be returned at some point in future but certainly with no real
expectation that the bonds would be likely to be redeemed within the
redemption period. He may have believed that he had always acted in CHC’s
best interests, but I find that he had acted consciously and dishonestly in
applying the BF for a wrong use.
Ye Peng
318
Ye Peng was Kong Hee’s second-in-command when it came to the
Crossover. He assisted in working out the budgets from the US; an example of
his doing so might be found in an e-mail from 5 March 2008, in which he
addressed matters pertaining to the Crossover budget such as whether
US$900,000 had been budgeted for April 2008 and what expenses the money
was meant for280. He also helped Xtron in its search for funds for the
Crossover, for instance, going with Eng Han to seek a loan from Citic Ka
Wah.
278
E-185.
279
E-14.
280
E-162.
178
The Xtron bonds
319
I have no doubt that Ye Peng knew that Xtron was not independent, in
that he knew that its directors were mere figureheads and its decisions were
made by Kong Hee and, on occasion, him. They maintained complete control
over Xtron but sought to conceal this fact. This can be clearly discerned from
various communications showing that Kong Hee and Ye Peng controlled when
Xtron drew down on the bonds, and in what amount. As noted earlier, the
Xtron directors were willing to sign on blank drawdown forms that could be
used in an “emergency”281, showing that they had no control over the cashflow
or timings of the drawdowns. In addition, there was also evidence that Kong
Hee would direct Ye Peng not to “sell any bonds yet” to ensure funds did not
flow unnecessarily to Justin282.
320
His knowledge of the Xtron directors’ lack of real executive authority
is shown in an e-mail exchange on 12 June 2009283 in which he and Serina
discussed a number of issues arising out of the Xtron audit. They decided that
there should be a meeting arranged with Foong and, in the course of
considering who should meet Foong, Serina said “Don’t think Siow Ngea will
know what to say” – as Siow Ngea was Xtron director at the time, this
indicates Ye Peng’s knowledge that Siow Ngea was not apprised of Xtron’s
affairs. In relation to the Crossover, he knew that Kong Hee was making
decisions unilaterally, and I need only refer to Ye Peng’s knowledge that
281
X-65.
282
E-98.
283
E-334.
179
Kong Hee had caused Xtron to make substantial payments in 2006 to Justin
without reference to the Xtron directors284.
321
I find that Ye Peng was, together with Serina, involved in drafting
minutes of supposed meetings between Xtron directors in order to create the
impression that Xtron’s decisions were being made by the directors. Some of
those meetings did not even take place, and Ye Peng acknowledged that some
of the decisions recorded therein as having been made by the Xtron directors
were in fact made by him285. Yet Serina would ask Ye Peng if he had anything
to add to the minutes, and the only inference I can draw from all this is that Ye
Peng knew that the decisions in the minutes had not truly been made by the
Xtron directors but were decisions that he and Serina thought should appear to
have been made by the directors.
322
I find also that Ye Peng was aware at the time of the execution of the
Xtron BSA that, realistically speaking, Xtron would not be able to redeem the
bonds when they matured in two years. Ye Peng himself doubted Xtron’s
capacity when he observed in his email to Eng Han of 19 August 2007 that
“Xtron has to be super profitable” to pay CHC 7% interest per annum on the
bonds286. I have already touched on the e-mails in July and September 2007
which showed a number of the accused persons, including Ye Peng, planning
Xtron’s cashflow on the basis of 200,000 albums sold. Ye Peng also said that
this was “worst case scenario planning” and did not reflect any serious belief
on his part as to the prospect of Xtron redeeming the bonds on maturity, but I
284
E-185.
285
286
180
am unable to accept that he did not take it seriously as that was after all the
only Xtron cashflow in existence around that period.
323
Moreover, I have no doubt that Ye Peng took on some responsibility
for ensuring that Xtron would have enough funds to redeem the bonds by
thinking of ways in which CHC could transfer money to Xtron under the guise
of legitimate transactions. I have already mentioned, in considering Kong
Hee’s situation, an e-mail in February 2008 in which Ye Peng proposed that
CHC could pay Xtron advance rental and other sums in order to improve
Xtron’s cashflow287. There are also e-mails from July 2008 which reveal this.
On 6 July 2008, Serina wrote to Ye Peng with certain plans to “set aside”
money in CHC for the purpose of transferring it to Xtron so that Xtron would
be able to redeem the bonds CHC had purchased; Ye Peng subsequently
conveyed this to Kong Hee288. Not long after, on 16 July 2008, Ye Peng
received an e-mail from Serina in which she wrote that Kong Hee had already
“made provision to set aside $2M CHC GF to give to Xtron via some
projects”289.
324
Ye Peng says that he believed that the Xtron bonds were dual-purpose
investments, but I have much difficulty accepting this. Given my findings that
(i) at the time of executing the Xtron BSA he did not think that the bonds
would be redeemed on maturity, and (ii) he knew that CHC might have to put
Xtron in funds in order that Xtron could pay CHC, I am unable to see how he
287
E-3.
288
E-13.
289
E-480.
181
could have believed that the Xtron bonds would bring CHC true financial
return.
325
This view is buttressed by Ye Peng’s significant participation in the
misleading of the auditors as regards the true relationship between CHC and
Xtron. Ye Peng testified that he was not aware that he was misleading the
auditors; he said that his understanding all along was that two corporate
entities would be considered to be related to each other only if they had
common directors. This was the understanding he had had since 3 August
2004 from an e-mail from Joseph Toh, the engagement partner then in charge
of CHC’s accounts. Hence, he says, when he told the auditors that CHC and
Xtron were not related, he thought that was truly the case since CHC and
Xtron did not have common directors. I am, however, unable to accept that
this was his state of mind. I consider that he was conscious that the auditors
should not learn how much control CHC had over Xtron, as can be seen in an
e-mail from 31 July 2008 in which he asked, “Are we allowed to say Xpl is
under CHC control?”290; in any case, any notion that common directorship was
the only basis for considering two parties related would have been dispelled
upon his receipt the following day of an e-mail from Serina in which she
mentioned that “full control will invite consolidation”291.
326
Moreover, it was not as if Ye Peng merely told the auditors that CHC
and Xtron were not related parties; he went further and told them that Xtron
was “independent” from CHC. Even if he subscribed to a narrow definition of
the technical term “related parties”, there is no suggestion that his
290
E-331.
291
E-325.
182
understanding of the word “independent” was similarly circumscribed, and so
when he described the Xtron directors as making independent decisions in the
paper that he sent to FDC on 21 July 2008, I can draw no other conclusion
than that he was trying to depict a state of affairs that he knew not to be true.
Ye Peng was also consulted by Serina on the prepared responses to possible
questions that Ernst & Young might ask, and so he too was privy to the
description therein of the Xtron directors as “separate and independent” from
the leadership of CHC.
327
I consider that Ye Peng’s state of mind in these respects is
indistinguishable from Kong Hee’s. He had the same knowledge that Kong
Hee did, including Xtron’s lack of independence, the likelihood that Xtron
would not be able to redeem the bonds under the BSA on maturity, and the
fact that CHC might have to provide Xtron with the funds to redeem the
bonds. Like Kong Hee, he also assisted in misleading the auditors. He could
not have believed that the Xtron bonds were genuine investments, and so I am
satisfied beyond a reasonable doubt that he participated in a conspiracy to
direct monies from the BF towards the Crossover under the guise of the Xtron
bonds, and that he did so dishonestly.
The Firna bonds
328
I have no doubt that Ye Peng knew from the outset that the purpose of
the Firna bonds was to fund the Crossover. He was one of the recipients of
Kong Hee’s e-mails on 28 and 29 July 2008 in which the plan was set out for
CHC to purchase Firna bonds in order that Wahju might support the
Crossover. He was aware that the plan was for the bond interest to be paid out
of the profits from the sales of Sun Ho’s album, and that repayment of the
principal would also be made using those profits. He was one of those tasked
183
by Kong Hee to think of a way to obtain sufficient funds to redeem the bonds
in the event that the Crossover was not as commercially successful as hoped.
In those circumstances he must have realised that there was no intention to
look towards Firna’s glass factory business for the funds needed to redeem the
bonds.
329
Ye Peng says that he believed that the Firna bonds were genuine
investments because of the strength of Firna’s business and the existence of
Wahju’s personal guarantee. I have found that no such personal guarantee
existed then, and as for Firna’s business, I have also found that there was
never any intention that the profits from its glass factory would be used to
redeem the bonds, and Ye Peng knew this full well given that he received the
e-mails from Kong Hee in which that was made clear. I am therefore unable to
accept the reasons that Ye Peng has given for his alleged belief that the Firna
bonds were a genuine investment.
330
Ye Peng also says that his understanding of the Firna bonds was that
Firna would use the bond proceeds for working capital, and it would then
return a shareholder’s loan to Wahju so that he could fund the Crossover using
his personal monies. On that basis, the Firna bonds were a genuine investment.
But I consider that much of the ground behind this assertion is cut away by his
knowledge that the financial return that CHC was supposed to enjoy would not
come from Firna’s glass factory business. Moreover, I find that this could not
have been his understanding of the bond transaction. I have referred to the emails from October 2008 to June 2009 in which Serina gave Wahju detailed
instructions on how to use the Firna bond proceeds; Ye Peng received all those
e-mails and he must have known that full control over the proceeds belonged
to Kong Hee and not Wahju.
184
331
I find that Ye Peng also participated in hiding material facts regarding
the Firna bonds. When he spoke to the EMs at the EGM of 1 August 2010, he
created the impression that the Firna bonds had gone to “help Firna’s
business” and that it was Wahju’s own independent decision to use the funds
to support the Crossover292. He also kept from the board knowledge that the
Firna bonds had gone towards the Crossover: in a discussion with Serina on
2 August 2008 as to what to tell the board at a meeting scheduled to take place
the following day, he suggested omitting the fact that, of the proposed
$22 million in Firna bonds to be purchased, $18 million was to be used “for
English album” while $4 million was to be used “as loan to Wahju”293. This
was subsequently forwarded to Kong Hee. Finally, he also gave the lawyers a
misleading picture when, on his own testimony, he told Jimmy Yim that
“Wahju will independently be taking over this Crossover Project”.
332
In all the circumstances, I am satisfied beyond a reasonable doubt that
Ye Peng did not believe that the Firna bonds were a genuine investment. He
knew, on the contrary, that it was no more than a contrivance to achieve the
true purpose of using money from the BF to fund the Crossover, and thus I
consider that he acted dishonestly.
333
On the same day of the 9 April 2009 meeting with Sim, Ye Peng
received an e-mail from Sharon in which she said that Sim remained of the
view that CHC and Xtron were related parties and that he hoped to see “this
292
CH-29, p 31.
293
E-205.
185
XPL issue being solved” by the end of the financial year 294. Sharon also
expressed her concern that Sim was not convinced of their “stories” as the
facts were obvious to him and he would probe further if more such “stories”
were offered. It is evident that this caused Ye Peng considerable concern –
when Eng Han told him in a Blackberry message on 10 April 2009 that he
thought there might be a way to “clear the bonds in firna and xtron”, his reply
was that he had told Kong Hee about “the need to clean up the situation”295.
This leaves me in no doubt that, from an early stage in April 2009, he was
conscious that the Xtron and Firna bonds were problematic and should be
removed from CHC’s books by the end of the financial year.
334
It is also clear that Ye Peng soon became involved in formulating plans
and proposals to remove the Xtron bonds from CHC’s books. On 25 April
2009, he received an e-mail from Sharon attaching a document which
contained two possible ways of redeeming the Xtron bonds, both of which
involved CHC giving Xtron advance rental for Riverwalk 296. In an e-mail sent
by Serina to Sharon on 2 May 2009, three possible plans were presented, and
the third of these was said to have been “what Pst Tan asked for”297. Two
months later, on 2 July 2009, he received an e-mail from Sharon explaining
the details of a plan that she and Serina had worked out298. This plan involved
redeeming the $21.5 million of Xtron bonds that CHC had purchased by a
combination of three methods: first, increasing the amount of rental CHC
294
E-68.
295
BB-62.
296
E-501.
297
E-59.
298
E-608.
186
would have to pay Xtron under the sub-lease of Expo premises; second, get
CHC to pre-pay six years’ worth of rental for the Expo premises; and third,
sell Riverwalk.
335
Although Ye Peng might not have been the one who initiated these
plans to redeem the Xtron bonds, he was certainly kept apprised of them and I
consider that he played a key supervisory role. This is buttressed by an e-mail
from Sharon to Serina and Eng Han on 25 September 2009 in which she told
them that Ye Peng wanted the three of them to “settle this within the next 1
week”, “this” being the “Whole XPL, Firna and CHC transaction”299. It is thus
apparent that, at this stage, Ye Peng remained concerned about the plans to
redeem the Xtron and Firna bonds and that he saw some real urgency in
dealing with them.
336
He was subsequently brought into an exchange of Blackberry
messages also involving Sharon, Eng Han and Serina, in which Eng Han set
out the series of transactions by which those bonds would be redeemed300:
(i) CHC would disburse $5.8 million into each of two tranches of the SOF,
(ii) AMAC would lend that money to UA, which would lend to Firna, which
would redeem the Firna bonds, (iii) CHC would then give “upfront rental” of
$11.6 million or more to Xtron, (iv) Xtron would buy Firna bonds, and
(v) Firna would return the loan UA had given it, and UA would return the loan
AMAC had given it, and AMAC would return the money to CHC. This was
the plan that was ultimately carried out, except for the relatively
299
E-69.
300
BB-89a, Images 61 to 65.
187
inconsequential detail that CHC would disburse $5.6 million and not
$5.8 million into the second of the two SOF tranches.
337
There is thus no question to my mind that Ye Peng knew the true
nature of Tranches 10 and 11 of the SOF as well as the advance rental paid to
Xtron under the ARLA: the disbursement of funds into the SOF was meant to
put Firna in funds to redeem the bonds that CHC had purchased, and the
advance rental paid to Xtron was meant to be channelled back to AMAC so
that it could return CHC the amounts that had been disbursed into the SOF. He
knew that the entities through which the funds would flow – UA and Firna
included – were all conduits, and that he, Eng Han, Serina and Sharon had
effective control over the entire series of transactions.
338
Ye Peng says that he thought Tranches 10 and 11 of the SOF were
genuine investments301, and that the advance rental paid under the ARLA was
meant to put Xtron in funds to acquire a property on CHC’s behalf 302. But
given what he knew of the transactions, I find it very difficult to believe him.
He knew that the payments into the SOF would have the net effect of
removing a debt owed to CHC – the Firna bonds – and substituting it with a
slightly larger debt owed to CHC by AMAC. He cannot possibly have
believed that CHC would enjoy financial return from this and so I see no
grounds whatsoever for a belief that it was a genuine investment. He also
knew that the advance rental paid under the ARLA would be channelled into
Firna bonds purchased by Xtron, and that this would ultimately return to CHC.
301
Transcript 14 April 2015, p 47.
302
188
I fail to see how, knowing this, he could possibly have thought that the money
would go towards acquiring a building instead.
339
Ye Peng has also said that he considered the series of transactions a
“restructuring” or redemption plan that had been brought to the attention of the
CHC board and approved by them. However, he also maintained his belief that
they were genuine investments. In my view, these two disparate lines of
defence are logically irreconcilable. They must be treated as mutually
exclusive and alternative defences. They are inherently inconsistent, and this
to my mind creates serious doubt as to the veracity and bona fides of his
defence. I will make the same observation in due course in relation to Eng Han
and Sharon as they adopted a similar approach in their defence.
340
I am compelled to arrive at this conclusion because if Ye Peng
believed that these transactions were a form of “restructuring”, it must follow
that he knew that the whole purpose of disbursing money into Tranches 10 and
11 of the SOF was to put Firna in funds to redeem the bonds CHC had
purchased, which would, in my view, be inimical to a belief that those SOF
tranches were investments. In other words, if he truly believed that the whole
point of those series of transactions was to substitute a debt owed by one entity
to CHC with a slightly larger debt owed by another entity to CHC, it is
difficult to see how he could sensibly and reasonably have believed at the
same time that this was an outlay of money with the expectation of financial
return. In the same way, if he knew that advance rental was paid under the
ARLA for the purpose of enabling AMAC to give CHC its purported return
under Tranches 10 and 11 of the SOF, I am unable to see how he could truly
have believed that the advance rental would go towards increasing the funds
available to Xtron to purchase a property.
189
341
I do not think this was merely a matter of semantics and that the
purported “restructuring” can also be extended such that it can interchangeably
be termed an “investment”; if the argument is that CHC did get back returns
with interest eventually, then this is open to the criticism that it betrays a
hindsight bias, conveniently reasoning backwards to deduce that it was both
“restructuring” as well as an “investment”. That all this was an afterthought
and ex post facto rationalisation is in fact made amply clear by Eng Han’s
email of 3 February 2013 insisting that from that point onwards, to avoid the
accused persons appearing to rely on inconsistent defences and being on a
“different page”, they should term the SOF transactions “restructuring”303. This
was nearly three years after the CAD investigations had commenced, and
almost one year after they had been charged in court.
342
I have found that it is likely that Ye Peng did indeed present early
versions of the round-tripping plans to the CHC board on 18 July 2009 and 12
September 2009. But that by itself does not exonerate him; the question still is
whether he believed that he was legally entitled to cause CHC’s funds to be
transferred out in order to create the appearance that the Firna bonds had been
redeemed. Since his own evidence was that he believed that Tranches 10 and
11 of the SOF were genuine investments and that the advance rental under the
ARLA was a building-related expense, and I have found that he did not
actually hold that belief, I am satisfied beyond a reasonable doubt that he acted
dishonestly notwithstanding the fact that he had obtained board approval. I
would add that, in my view, Ye Peng knew that he was misleading the board
into giving such approval by telling them that the auditors had given their
303
E-831.
190
blessing to the plan, when he knew that the auditors were unaware of the full
details of the plan.
Summary – Ye Peng
343
Ye Peng maintained his belief that the Xtron and Firna bonds were
legitimate investments. In particular he relied on the fact that the lawyers and
auditors were consulted and had helped ensure that everything was above
board. He trusted Kong Hee’s vision and judgment and relied on Eng Han’s
expertise and advice. He believed the Crossover had a legitimate purpose and
the BF was used with a mixed motive or dual purpose in mind. All the money
was returned with interest and this reflected the intent that they were
investments.
344
There is no doubt that on a number of different occasions Ye Peng
gave inconsistent explanations for Xtron’s incorporation. In that regard, I
reject categorically his claim that when Xtron was incorporated in 2003, there
was a “long-term view” which evolved through the years although there were
no concrete plans at the time. He maintained that Xtron was set up for three
different reasons in 2003: events management, to own a commercial building
and for Sun Ho’s music career. But in his memo to Foong of 21 July 2008, he
only mentioned that Xtron was started in 2003 to manage CHC’s future
buildings304. He had no answer when the prosecution pointedly asked him what
was so difficult in setting out all three reasons in that memo if this was the
truth.
304
E-269.
191
345
I am also unable to accept that he could claim to rely on the
professional advice of the auditors and lawyers. All of Ye Peng’s claims that
they had been open in providing relevant information to the auditors and
lawyers ring hollow when it is apparent that they were careful and selective
about what information to provide. This can be discerned from his answers in
cross-examination, where he made it clear that they decided what the auditors
needed to know about Xtron or the bonds305 or how much they needed to tell
them306. In his own words, “whatever we thought were important and relevant
info, we gave to the professionals”307. This was the same approach they
adopted in sharing information with the EMs: “we told them all the
information that we wanted to tell them for this EGM308. He admitted that this
meant that they only told them what they wanted them to know.
346
A familiar pattern of Ye Peng’s that emerged during cross-examination
was to concede that he “did not know how to answer” the question or that he
“wasn’t thinking so much about this”, “didn’t focus”, “didn’t think so deeply”,
“didn’t think very much”309. In my view, these were candid responses to
questions posed to him relating to what he knew or understood of various
matters. They reflected the reality that he was not aware of the full range of
details but also showed the extent of his deference to Kong Hee and Eng Han
and his unquestioning trust of his fellow CHC members within the inner
circle.
305
Transcript 2 April 2015, pp 138, 141
306
307
308
309
Transcript 2, 6 and 7 April 2015.
192
347
Nevertheless Ye Peng’s ostensible ignorance is hardly a defence to the
charges. He chose to support Kong Hee’s vision and went about to help find
the required solutions to funding problems for the Crossover. He may have
believed he was acting in CHC’s best interests as Kong Hee professed to have
done, but I find that he had acted consciously and dishonestly in applying the
BF for a wrong use. He did so as part of a conspiracy to channel BF monies to
the Crossover and did not believe that the bond transactions were genuine
investments. I should reiterate that his portrayal of the use of the BF as being a
“win-win” situation for CHC and Xtron, thus supporting the claim that the
bonds being legitimate investments, is wholly unconvincing. He knew that
Xtron would not be in a position to redeem the bonds on maturity and that the
bonds were never intended to be genuine investments. They were only the
means to the end which was to fund the Crossover using the BF.
Eng Han
348
Eng Han was primarily the Crossover’s financial specialist. He assisted
in the financing of the Crossover, in particular, generating solutions to
cashflow problems resulting from the unanticipated lack of revenue from Sun
Ho’s music activities. He also took charge when it came to structuring the
various transactions. In addition, he assisted with audit queries.
349
I found Eng Han to be generally a forthright and truthful witness in a
number of respects. He left CHC in 2013. He did not shy away from
acknowledging that Xtron was in substance controlled by the CHC board and
especially Kong Hee and Ye Peng, nor did he seek to diminish his role in
structuring the various financial transactions designed to enable BF monies to
be committed towards the Crossover. Notwithstanding this, I consider that Eng
Han’s testimony had to be treated with considerable circumspection so far as it
193
pertained to his state of mind at the time of these transactions, even though his
evidence as to his state of mind was delivered in the same confident and
assured manner in which he gave all his other testimony relating to more
objective matters. I am conscious of the possibility that, out of a presently-held
conviction that he had done no wrong, he might have sought justifications for
his conduct that do not truly reflect his thinking at the time of the transactions,
and resolutely persuaded himself that that was in fact his state of mind then.
350
The thrust of Eng Han’s defence, as I understand it, is that the
qualifying criterion for an investment is nothing more than whether there is
“expectation for returns”. How exactly the transaction is structured has no
bearing on its underlying nature; hence, an interest-bearing loan may also be
considered an investment. As for the question of whether there is expectation
of financial returns, Eng Han says that this can be broken down into two
components: the first is the “perceived ability to repay” and the second is
“whether there existed the legal obligation to repay”. His case must therefore
be that, in relation to the Xtron and Firna bonds as well as Tranches 10 and 11
of the SOF, he believed that there was an expectation of financial returns
every time money moved out of CHC pursuant to those transactions.
The Xtron bonds
351
As did all his co-accused, Eng Han knew that the BF was a restricted
fund. He acknowledged that much in his testimony310, and it can be seen that
he knew this as early as July 2003 when he said in an e-mail “we aren’t
310
194
supposed to touch BF for any other purpose anyway”311. He therefore
understood that the money in the BF could be used only for building-related
expenses or for investments, and as to the latter, it meant that there had to be
an expectation of financial returns. When it came to expenditure on missions
or evangelical work, Eng Han distinguished between missions work that
would not be revenue-generating and missions work that would be revenuegenerating, an example of the latter, he says, being the Crossover. He said that
missions work that did not generate revenue would have to be funded using
the General Fund, but revenue-generating missions work could be funded
using money from the BF312.
352
Eng Han expressed the view that the substance of the Xtron and Firna
bonds was an investment into the Crossover. He said that, if CHC had invested
directly in Justin’s company in the US for the purpose of funding the
Crossover, that would doubtless have been an investment and an authorised
use of the BF. He claimed that, to his understanding, a difference in the
structure, ie, routing the money through Xtron and Firna, and UA, could not
alter the substance or character of the transaction as an investment.
353
In considering Eng Han’s state of mind at the time of the transactions I
think it is useful to consider his involvement in Xtron’s search for funds
towards the end of 2006 and the first half of 2007. On 4 December 2006, Eng
Han put forward for the consideration of Kong Hee and Ye Peng a proposal
for CHC to pre-pay Xtron two years’ worth of rental for the Expo premises, so
that Xtron “can use the money for the crossover first”. In response to a
311
E-670.
312
Transcript 3 February 2015, pp 173 and 174.
195
subsequent query from Kong Hee, Eng Han explained that, if more money was
needed for the Crossover at a later stage, it was possible to “revert to the
original plan of borrowing from an investor using the church to place funds to
get a loan from the investor for Xtron”313. They eventually proceeded to
embark on this plan. In May 2007, Eng Han then became involved in efforts to
obtain loans from Citic Ka Wah and UBS on Xtron’s behalf for the purpose of
funding the Crossover. In the result, these efforts proved to be abortive.
354
Thus Eng Han had been thinking of ways to fund the Crossover which
included having CHC extend advance rental to Xtron as a form of interim
loan. When Eng Han came up with the idea of using the Xtron bonds to
finance the Crossover, the primary consideration in his mind was the need to
fund the Crossover, with the prospect of any financial return to CHC being at
best a secondary consideration. After all, the conception of the Xtron bonds
took place on the back of unsuccessful efforts to obtain bank loans for Xtron,
which were transactions that would not bring CHC any financial return – as
late as May 2009, therefore, there was no apparent concern about wanting to
ensure financial return to CHC. This tends to suggest to me that the element of
financial return to CHC under the Xtron bonds was an afterthought, that is,
something put in mainly for the purpose of lending an appearance of
legitimacy to the transaction. That, in turn, casts doubt on Eng Han’s
testimony that he believed that the Xtron bonds would generate financial
return for CHC.
313
E-189.
196
355
As I have noted, Eng Han was entirely frank in testifying that the CHC
leadership and in particular Kong Hee and Ye Peng controlled Xtron, and that
he had known that all along. It must follow, in my view, that he knew that the
prospect of financial return on the Xtron bonds depended entirely on these
persons who were controlling Xtron. He knew that, realistically speaking,
there were just two major sources of potential income for Xtron: one was the
revenue from the sales of Sun Ho’s albums, and the other was CHC itself.
356
In my judgment, Eng Han knew at the time of the execution of the
Xtron BSA that a realistic assessment of the Crossover was that the album
sales would not bring in sufficient revenue for the redemption of the bonds
when they matured in two years. I say this because he received Serina’s e-mail
on 3 July 2007 in which she told him and Ye Peng that she had based her
projections on 200,000 albums sold, which would be “hardly enough to pay
off the $13M”314. Eng Han testified that he did not take Serina’s e-mail
seriously and that he believed that Sun Ho would be more successful than that,
and he maintained his belief that it was merely a matter of time before Xtron
recouped enough money to redeem the bonds. That is why, he says, he felt that
the maturity date of the bonds could simply be pushed back if Xtron did not
have enough cash at that time to redeem the bonds. I find this difficult to
accept. In one of his responses to Serina’s initial e-mail, he said, “Hopefully in
2 to 3 years time, I am able to get funds from elsewhere to buy the bonds”315.
This suggests to me two connected things, both of which militate against a
belief on his part that the bonds were a genuine investment. The first is that he
314
E-1.
315
E-197.
197
recognised as a realistic prospect that Xtron might have to be bailed out, so to
speak, by “funds from elsewhere”, and this suggests a consciousness that it
was a realistic possibility that the Crossover would not generate enough
revenue to redeem the bonds. The second is that he had no firm idea of where
CHC’s supposed financial return would come from, and this makes it less
likely that he believed that there would be an expectation of financial return
for CHC in purchasing the Xtron bonds.
357
Given that he knew that it was a realistic prospect that the Crossover
would not generate enough revenue for Xtron to redeem the bonds, I consider
that he must have known that, for Xtron to be able to meet its cashflow needs,
CHC would have to transfer money to Xtron. I accept that, for the most part,
Eng Han was not involved in plans to transfer money from CHC to Xtron in
order to make up Xtron’s cash shortfalls. But he did participate in such plans
from time to time. On 9 July 2008, he proposed to Kong Hee and Ye Peng “a
way to transfer GF to Xtron” by having Xtron purchase Riverwalk and collect
rental from CHC316, and on 16 July 2008 he and Ye Peng received an e-mail
from Serina in which she informed them of the schedule for the drawdown of
$9 million of Xtron bonds until April 2009 and asked, on a separate note, “We
still need to think of a reason for XPL to legitimately earn this US$2M surplus
every year. Any ideas?”317. His only response was “Ok”, but this suggests to
me knowledge on his part that CHC might have to pay Xtron so that Xtron
could pay CHC. It is difficult for me to accept that, with that knowledge, he
could have believed that the Xtron bonds would bring CHC financial return
316
E-100.
317
E-16.
198
that would not comprise, at least in large part, money that originated from
CHC itself. This, in turn, suggests to me that he did not truly believe that there
was an expectation of financial return for CHC.
358
Eng Han argues that the fact that he was prepared to seek bank loans
on Xtron’s behalf for the Crossover demonstrates his belief that the project
was a financially viable one. But it is equally likely that when he sought those
loans he was indifferent to the likelihood of financial return and thought that
the problem of repaying the loan could be dealt with further down the road. It
seems to me from his response to Serina’s e-mail on 3 July 2007, when he
expressed the hope that he might one day find “funds from elsewhere” to buy
the Xtron bonds from CHC, that Eng Han’s attitude was to act first in order to
fund the Crossover, and worry later about how to obtain the money needed to
return what had been borrowed. Indeed, Eng Han seemed unperturbed almost
to the point of insouciance. In August 2007, he had told Serina that, if Xtron
was short of money as a result of the sales of Sun Ho’s albums not coming in,
one solution might be to “scrap (sic) something together from individuals to
help in the wordst (sic) case” in order to enable Xtron to meet its interest
payment obligations under the BSA318.
359
Eng Han also argues that he could not have believed that there was
anything unlawful in the Xtron bonds because, when Ye Peng proposed on
15 June 2007 a similar plan for Xtron to borrow temporarily from CHC’s BF
to fund the Crossover until they could find more funds for Xtron, he said it
was “ok”319. He says that, just as he saw nothing wrong then about an interest-
318
E-199.
319
E-90.
199
bearing loan being extended to Xtron by CHC, so he could not have seen
anything wrong with
the Xtron bonds,
which in substance
was
indistinguishable from an interest-bearing loan and just as much of an
investment as it was. But in my view Eng Han’s response to Ye Peng’s
proposal is neither here nor there; the mere fact that he said “ok” does not
suggest that he believed that it was something they were legally entitled to do.
It is equally possible that he believed it was something they were not legally
entitled to do, but was nonetheless in favour of the idea because the most
important thing to him was to fund the Crossover by whatever means. He may
also have thought it was a risk worth taking in any event since it was intended
to be a temporary solution.
360
I find that Eng Han also participated in hiding information relevant to
the Xtron bonds from other persons. He misled Charlie Lay, a member of the
investment committee – formerly known as the finance committee – and not
once but twice. The first time this occurred was on 4 May 2007320. Serina
wrote to the CHC board and the finance committee proposing that CHC place
$9 million in fixed deposits with Citic Ka Wah. What Eng Han knew, but
Charlie Lay evidently did not know, was that this proposal was meant to assist
Xtron in securing a loan from Citic Ka Wah. When Charlie replied with
doubts as to whether it was prudent to invest in the New Zealand dollar, Eng
Han defended the decision to invest in that currency as if it was a decision
being made for no purpose other than to obtain the best possible return for
CHC. He did not defend the decision on the basis that it was needed to help
320
E-143.
200
Xtron secure a loan, and that, in my view, shows that Eng Han did not want
Charlie Lay to know about Xtron’s efforts to obtain funding.
361
The second time that Eng Han misled Charlie Lay was when he
decided together with John Lam in October 2007 that Charlie should not be
shown a copy of a Deutsche Bank report because the report mentioned the
Xtron bonds. Eng Han’s explanation for this was that he felt Charlie was “not
exactly 100 pct with CHC leadership” and did not want Charlie to say “all
kinds of baseless things”321 should he turn away from CHC one day. He
argues that his reference to “baseless things” demonstrates his belief that any
allegation of wrongdoing would have been baseless and therefore his belief
that there was nothing untoward or unlawful about the Xtron bonds. But I do
not find his argument convincing. His reference to “baseless things” may have
been to such allegations as that CHC was worshipping Sun Ho, an allegation
that Roland Poon had made, and when I consider that Eng Han must have
intended to keep from Charlie knowledge of the specific fact that CHC had
purchased Xtron bonds, it is difficult to think of an explanation other than that
he knew that the bond purchase was a questionable one.
362
I find, moreover, that Eng Han participated in conveying to the
auditors the impression that CHC and Xtron were independent, an impression
that he knew was not true. In his e-mail to Kong Hee and Ye Peng on
4 December 2006 proposing the payment of advance rental from CHC to
Xtron to fund the Crossover, he recognised the need for all transactions
between CHC and Xtron “to look real and legitimate and arms-length
321
E-322.
201
commercial transactions” lest they “get scrutinised for independence” when
audited322. This demonstrates Eng Han’s awareness that the auditors should
view the relationship between CHC and Xtron in a certain way and not have
grounds to suspect that Xtron was being controlled by CHC when the reality
was otherwise. Also, in an e-mail to Ye Peng and Serina on 31 July 2008, Eng
Han recognised the need to “find a balance” between what the EMs of CHC
were told on one hand and what the auditors were told on the other about the
CHC-Xtron relationship – the reason in relation to the auditors being that “we
don’t want them to think we control xtron”323. This, I find, is compelling
evidence that Eng Han intended that the auditors should be misled on that
point.
363
In the course of his testimony Eng Han said that he did not tell the
lawyer Christina that CHC had full control over Xtron because he did not
himself know whether that was the case324. But I am not convinced by this
given the e-mails I have just discussed, which strongly suggest to me that he
did know the extent of the control that CHC enjoyed over Xtron, and was
seeking to obscure that fact from others,including Christina.
364
Finally, Eng Han says that there is nothing particularly sinister about
keeping from the auditors knowledge of CHC’s control over Xtron. That, he
says, is but a minor issue related to consolidation of CHC’s and Xtron’s
accounts, and an intention to mislead on that issue hardly leads to the
inference that he knew that he and his co-accused were not legally entitled to
322
E-189.
323
E-331.
324
202
cause CHC to purchase Xtron bonds. But in my view the lack of candour on
this front cannot be dismissed so easily and must be considered in the entire
context of their conduct. The question that arises naturally is why the accused
persons, including Eng Han, were so keen on ensuring that CHC’s and Xtron’s
accounts were not consolidated, and as I had explained earlier in relation to
Kong Hee and Ye Peng, I am not prepared to believe that it was just because
they did not want it to be known that Sun Ho was being supported by the
church financially lest she be perceived as a gospel singer, or lest it become
openly known that CHC’s funds were used to support the Crossover.
365
Taking all the circumstances in the round, including Eng Han’s
knowledge of the control that Kong Hee had over Xtron and his appreciation
that it was a realistic prospect that the Crossover revenue might be insufficient
for Xtron to redeem the bonds within the maturity period, I consider that his
hiding of material information is further basis for the inference that he knew
that the Xtron bonds were not genuine investments. I am satisfied beyond a
reasonable doubt that he knew that, and accordingly I find that he acted
dishonestly.
The Firna bonds
366
Since Eng Han’s position in relation to the Firna bonds is likewise that
he believed it was a genuine investment, he argues that he also expected that
CHC would enjoy financial return on these bonds. He says that he believed
that the money from CHC’s BF transferred to Firna under the BSA would
replace a loan that Wahju had extended to Firna for purposes of working
capital, and that Wahju would then use the money returned to him – that is,
203
Wahju’s personal monies – to fund the Crossover325. He says that he believed
that the Firna bonds would bring CHC financial profit because Firna was a
successful business with good earnings potential.
367
I am, however, unable to accept that this was Eng Han’s genuine belief
as to the Firna bonds. He knew that the Firna bond proceeds were controlled
entirely by Kong Hee, Ye Peng, Serina and him, such knowledge being
evident from his participation in the e-mails in which Serina gave Wahju
instructions on how to use the money. Thus, like the other three accused, he
was aware that Wahju was not using his “personal monies”, and that the
common understanding between them and Wahju was that the money
belonged to them and that, for so long as it was in Wahju’s possession, it was
a debt that he owed them. He knew, moreover, from Kong Hee’s e-mails on
28 and 29 July 2008 that there was no intention to look towards Firna’s glass
factory business in redeeming the bonds. Whatever profits the business might
make, the intention was never that those profits would be used to redeem the
bonds; the funds to redeem the bonds would, instead, come from the
Crossover revenue, and in the worst case, Eng Han, Ye Peng and Serina were
to think of a solution to make up the shortfall. Indeed, on 14 August 2008 Eng
Han put forward a proposal that involved getting Xtron to pump money into
Firna.
368
It is thus abundantly clear that, however strong Firna’s business was,
Eng Han understood that the prospect of financial return under the Xtron
bonds depended entirely on the success of the Crossover. Given my finding
325
204
that he knew around August 2007 that there was a realistic chance that the
Crossover would not generate sufficient revenue to redeem the Xtron bonds,
and given that even greater expenditure was being contemplated under the
auspices of the Firna bonds, I find it very difficult to believe that Eng Han
could have thought that the Crossover was likely to produce financial profit.
Indeed, the fact that he was making plans for putting Firna in funds in the
event that it was short of $10 million due to poor album sales suggests that he
thought that this was not a remote possibility.
369
I would add, finally, that Eng Han appears to have kept the truth from
Christina. On his own evidence, he told her that Wahju would be using his
“personal monies” to fund the Crossover after withdrawing the shareholder’s
loan he had previously extended to Firna. This, in my view, was meant to give
Christina the misleading impression that Wahju controlled the sums that were
to be expended on the Crossover, when the true situation was that those sums
were within the control of Kong Hee and the other co-accused and Wahju (and
Firna) were merely “instruments” to facilitate the transfer of funds. It was also
meant to convey the misleading impression that, whatever Wahju did with his
“personal monies”, CHC could count on the financial strength of Firna for
financial return.
370
Eng Han’s partial disclosure of the nature of the Firna bonds to
Christina serves only to buttress my view that he knew that the bonds were not
a genuine investment. I am therefore satisfied beyond a reasonable doubt that
he acted dishonestly in causing CHC to enter into the Firna BSA.
205
371
Although Eng Han did not attend the 9 April 2009 meeting with Sim, it
is clear that he was apprised of the matters that had been raised by Sim within
a day. This is apparent from the fact that, the following day, 10 April 2009, he
sent a Blackberry message to Ye Peng opining that it was possible to “clear
the bonds in firna and xtron”326. He testified that, unlike some of his other coaccused, he was not particularly concerned about clearing the bonds off
CHC’s books as he thought Sim a meddlesome interloper whose opinions
scarcely merited any attention. It does appear that he did not play a very
substantial role from April to early July 2009 in making plan to redeem the
Xtron and Firna bonds, but the important point is that he did become heavily
involved from the middle of July 2009.
372
I am satisfied that he was the one who came up with the plans
involving Pacific Radiance that were presented to the CHC board on 18 July
2009 and 12 September 2009 – that much is clear from the Blackberry
messages that he exchanged with Sharon327. It is also apparent from those
messages that the plan that was eventually carried out, which involved
Tranches 10 and 11 of the SOF, was initiated by him. Hence, even though he
might not initially have thought it an important matter to clear the Xtron and
Firna bonds off CHC’s books, there is no doubt that he subsequently became
involved in the plans to do so in a very significant way.
326
BB-62.
327
BB-89a.
206
373
There is no question that Eng Han was fully aware of the entire series
of transactions that made up the plan to redeem the Xtron and Firna bonds. He
knew that, when CHC disbursed funds into the SOF, AMAC would pass the
money on to UA, which would pass it on to Firna, which would then redeem
the bonds that CHC had purchased. He likewise knew that, when CHC paid
advance rental to Xtron pursuant to the ARLA, Xtron would purchase Firna
bonds, and Firna would pass the proceeds on to UA, which would pass it on to
AMAC, which would then return to CHC the money that had been put in the
SOF. He knew that he and his co-accused controlled every stage of the
transactions and that all the entities involved were but conduits or
“instruments” through which the funds would flow from CHC back to CHC.
374
Eng Han argues that he nevertheless believed that Tranches 10 and 11
of the SOF were genuine investments simply because there was a fixed return
to CHC. But I find it very difficult to accept that he could possibly have
believed this, given that he knew that the so-called fixed return was in effect
coming from CHC. It could not have escaped his notice that the substance of
the transaction was that the debt owed to CHC by Firna would be replaced by
a slightly larger debt owed to CHC by AMAC. Indeed, I find that his
alternative and belated characterisation of the transactions as a “restructuring”
exercise reveals his consciousness that those transactions could not plausibly
be construed as investments.
375
Moreover, I have no doubt that Eng Han intended to hide from the
auditors the true nature of Tranches 10 and 11 of the SOF. In his Blackberry
messages with Sharon, when she expressed concern that Sim might wish to
see details concerning those SOF tranches, he coolly assured her that Sim
“won’t question details” because the SOF tranches would be redeemed by
207
November 2009, thus demonstrating a shared concern that Sim should not
become cognisant of the fact that the SOF payments were going to be routed
back to CHC. Also, in an e-mail to Sharon on 30 December 2009 a day before
a meeting that John Lam and Sharon were supposed to have with Sim, he told
her to ensure that the discussion with Sim “steer[ed] away from the topic of
what [the SOF] invests in”, the reason being that the “$11.4m outstanding was
all to UA” and they did not “want that to surface”328.
376
As for the payment of advance rental from CHC to Xtron under the
ARLA, Eng Han’s position appears to be that this was a building-related
payment because Xtron was to use this money either to acquire a property for
CHC’s benefit or to pay rent to the landlord of the Expo premises in order that
it might be sub-leased to CHC. But I am unable to see how he could possibly
have believed that when he knew that the money would be used to purchase
Firna bonds in order that it might be returned to CHC.
377
For good measure I would add that Eng Han sought to obscure the
truth about this advance rental payment from the auditors. On 28 April 2010,
when Serina asked him, Ye Peng and Sharon what to tell the auditors in
response to their query as to how Xtron’s purchase of the Firna bonds had
been funded, Eng Han replied, “Tell them the whole story why the advance
rental was done, and then since xtron had no immediate need for all the funds,
it was parked in bonds. Let them know the bonds can be redeemed when xtron
needs the funds”329. This was, in my view, a half-truth calculated to keep away
the fact that the entire reason for CHC’s payment of advance rental was so that
328
E-326.
329
E-32.
208
Xtron would purchase the Firna bonds and ultimately enable AMAC to
redeem Tranches 10 and 11 of the SOF. When he used the phrase “tell them
the whole story”, it is more likely that he meant that she should regurgitate
some rehearsed storyline about the bond purchase, not that she was to come
clean with the whole truth. And the problem with a half-truth is that it is still a
whole lie.
378
Therefore I am satisfied beyond a reasonable doubt that Eng Han did
not believe that Tranches 10 and 11 of the SOF were genuine investments, and
did not believe that the advance rental paid under the ARLA was a propertyor building-related expense. Hence I find that he knew that he and his coaccused were not legally entitled to cause CHC to enter into those
transactions, meaning that he acted dishonestly in doing so.
Summary – Eng Han
379
Eng Han came across on the witness stand as a disillusioned and
disappointed ex-CHC member. This stems from what he termed the
“discovery” period after the CAD raid in 2010 to January 2013 when he came
to understand that he had been deceived by Kong Hee about the success of the
Crossover. He felt that with the benefit of knowledge and on hindsight, his
trust in Kong Hee had been misplaced since Sun Ho’s success was
manufactured and “not real”. Moreover he had come to realise that CHC funds
were in fact used to fund her music career prior to 2003 contrary to what the
EMs had been told.
380
He maintained that he acted only under instructions and structured the
bond transactions, the SOF and ARLA as solutions to help solve cashflow
needs for the Crossover. He was only an advisor and facilitator and he did not
209
make the decisions for CHC. He had no concerns with legality as he believed
they were legitimate investments or transactions. He relied on his own
knowledge and experience in investment transactions. He felt that the
Crossover had a legitimate purpose and the full support and backing of CHC
since “no one complained” about it and members gave their support.
381
According to Eng Han, the bonds were intended as investments all
along. The investment plans only went wrong because the album sales were
delayed and he as fund manager should not be penalised and be accused of
being involved in sham bond transactions and trying to cover up by roundtripping CHC funds. In any event they were designed as “mixed motive” or
“hybrid” or “dual purpose” investments for both financial and spiritual return.
382
Eng Han asserted that he was a “man of substance” who did not
believe in appearances. But his defence centred on the rhetoric of justification
and rationalisation. For instance, he questioned why he would have bothered
to structure bond transactions, the SOF and ARLA if there was a conspiracy
and it was all a sham. In my view the obvious answer is that it is equally likely
that this was to make it appear as if it was not a sham and make it all that
much harder to detect and unravel. He maintained that there were commercial
justifications for their conduct and mere risk-taking is not indicative of
dishonesty. But his words and conduct betrayed his brashness and
overconfidence. He said there was no motivation for him to enter into a project
where losses are expected from the outset but he explained nonetheless that he
wanted CHC’s vision to come to pass330. He was clearly committed and
330
210
determined to ensure that the funding needs of the Crossover were met and
that was the overriding objective.
383
In my view, Eng Han’s forceful personality coupled with his
determination and drive to achieve his objectives was recognised and
exploited by Kong Hee. In this regard, they were kindred spirits and they
tapped on and fuelled each other’s drive, one as a spiritual leader and the other
as a finance expert. The difficulty came when moral and ethical lines became
ambiguous and subjective, in the name of having to be discreet to avoid
disclosure of CHC’s funding for the Crossover. In Eng Han’s words, “I think
most of us didn’t know where that line exactly was”331. Notwitstanding that,
Eng Han chose to cross the line with Kong Hee and Ye Peng leading the way.
384
In seeking now to blame Kong Hee for deceiving him about the true
measure of Sun Ho’s popularity and success, Eng Han conveniently glosses
over the fact that he himself had contributed as an Xtron director to buying
back some of Sun Ho’s albums332, claiming that he thought Sun Ho’s albums
were selling well so he “didn’t pay attention to it” because of his trust in Kong
Hee, Ye Peng and Sun Ho. He had been privy to information showing that
Xtron would need massive funding to support the US Crossover. He knew that
Xtron was constantly needing money through sponsorships in 2004 to 2006
and the logical conclusion was that Xtron was not profitable. But he would
only say that “maybe subconsciously during that time I would already have
known Xtron was not making money”333.
331
332
E-128.
333
Transcript 2 February 2015, pp 84, 85.
211
385
Relying on his unqualified and absolute trust of Kong Hee, he asserted
that “no one does due diligence on his own spiritual father, the senior
pastor”334. But he had to concede that he should have doubted whether they
were on the right track by the time the amounts expended on the Crossover
had blown up to $24 million. He explained nevertheless that it was “with the
experience I had with Kong Hee and Sun and the spiritual authority and
relationship and the trust that I had developed in him, I think that was more
overwhelming than my own natural mind -- that if the budget is originally
supposed to be $13 million and it goes up by another 11, I think a normal fund
manager would start to ask questions. But, yes, I didn't.”
386
In my view, Eng Han thought that using the BF to fund the Crossover
was a risk worth taking in any event since it was intended to be a temporary
solution. The difficulty is that it is acting dishonestly to intend to cause even
temporary loss. He “dealt with problems as they came and as they were posed”
to him, and he came up with solutions which he thought were proper and
legal335. In doing so, he trusted his own instincts and his “own thinking” about
the propriety and legality of the transactions. He saw no need to rely on
lawyers for legal advice336. He did not disguise his displeasure with Sim who
he saw as meddlesome and ignorant. He would also maintain that there was no
expectation of any losses because “everything in City Harvest that was done
succeeded”. That is surely a bold and sweeping exaggeration that gives the lie
to the extravagant overconfidence that characterised his conduct and mindset.
He was thus emboldened to conceive of various dishonest and expedient
334
335
336
212
means to an end, knowing that the BF would be used for an unauthorised
purpose.
Serina
387
A large part of what needs to be said about Serina has already been
said in relation to her other co-accused. Where I traverse the same ground I
will not elaborate in great detail.
The Xtron bonds
388
Serina was the administrator of the Crossover, and in that role she
prepared cashflow statements and projections which kept track of the expenses
and anticipated revenue from Sun Ho’s planned albums. She also handled
Xtron’s cashflow and, on Kong Hee’s instructions, would work out when
Xtron would have shortfalls in cash in order that Kong Hee, Ye Peng and Eng
Han might come up with solutions to those shortfalls. She had intimate
knowledge of the state of the Crossover finances and cashflow, and she
continued to be kept in the loop even after the point when Advante was
formed to handle Xtron’s accounts, as Sharon would still consult her.
389
There is no question that she knew that Xtron was not independent in
that its directors did not make decisions for it; in relation to the Crossover, I
am satisfied that she knew full well that Kong Hee was the one controlling
Xtron and making all decisions on Xtron’s behalf without reference to the
directors. I have referred to Kong Hee’s transfers of more than US$1 million
in 2006 without reference to the Xtron directors337, something which Serina
337
E-185.
213
was aware of. Also, together with Ye Peng, Serina was involved in drafting
minutes of supposed meetings of the Xtron directors; she testified that, in
drafting at least some of these minutes, what she did was that she listed down
all the transactions that she thought required the approval of the Xtron board,
whether or not the Xtron directors had in fact approved those transactions338.
Furthermore, it is telling that, on 5 April 2010, Serina wrote to Angie telling
her that, from that point on, the approval of the Xtron directors should be
obtained before Xtron entered into any major transactions339. The obvious
implication of this is that Serina knew that, prior to this, the approval of the
Xtron directors had not actually been required or obtained for Xtron decisions.
390
Serina testified that her understanding of an investment was “the
placing of funds somewhere to get a return”, whether or not that placement of
funds also had some other purpose340. But I find it difficult to accept that, on
that understanding of an investment, she could have believed that the Xtron
bonds were genuine investments. One reason is that, around the time the Xtron
BSA was executed, she – like Kong Hee, Ye Peng and Eng Han – knew that it
was a realistic prospect that Xtron would not be able to redeem the bonds on
maturity. The other reason is that she knew that CHC might have to provide
Xtron with the funds needed to redeem the bonds, meaning that she knew that
there might be no real financial return since it would effectively mean that
CHC would be paying itself.
338
Transcript 4 May 2015, pp 44 and 45.
339
E-310.
340
214
391
More to the point, Serina was aware that the reason for CHC making
these payments to Xtron was not the provision of genuine services to CHC by
Xtron, but simply the fact that Xtron needed money and would continue to
need even more as the Crossover plans became increasingly ambitious. She
was tracking the budgets required for the Crossover and had full knowledge
that Xtron was consistently in the red. She had intimate knowledge of the poor
sales of Sun Ho’s Mandarin albums and the various arrangements to buy back
or “sponsor” the purchase of her CDs over the years341. She herself had made
references to the “trouble” they were about to face in relation to Xtron’s
finances342 and the difficulty she had solving Xtron’s cashflow deficit343.
392
In two e-mails from her to Ye Peng towards the end of 2006, she told
him that Xtron required more money from CHC in order to meet its cashflow
needs and proposed that certain things be done in order that it might appear
that CHC had valid reason to transfer the money to Xtron. Thus she suggested
getting CHC’s editorial and graphics department to move to Xtron and to
provide services to CHC so that they would be able to “justify” a $50,000
increase in the retainer paid by CHC to Xtron344, and she also told him that
CHC would have to transfer about $157,000 to Xtron, and the precise reason
for this transfer would be worked out later – it would be classed either as
payment for the production of seven DVDs, or as pre-payment for unspecified
projects in the following year345. Similarly, in an e-mail from her to Ye Peng
341
E.g. E-115, E-116, E-960; E-127; E-337.
342
E.g. E-444, E-445; E-449; E-187
343
E-449.
344
E-187.
345
E-600.
215
and Eng Han in July 2008, she informed them that they had all to think of a
reason for Xtron “to legitimately earn” a sum of US$2 million from CHC each
year346, and in an e-mail to Kong Hee the same month, she suggested, with a
view to solving Xtron’s cashflow difficulties, “transferring some other noncore CHC [departments] over to [Xtron]” in order that Xtron could “charge
CHC for the services” provided by those departments347.
393
More so than Kong Hee, Ye Peng or Eng Han, Serina knew very well
at the time of the execution of the Xtron BSA that a realistic assessment of the
Crossover was that Sun Ho’s album sales would not bring in sufficient
revenue for the redemption of the bonds when they matured in two years. She
was the author of the e-mail of 3 July 2007 in which she told Eng Han and Ye
Peng that she had based her sales projections on 200,000 albums sold, being
the indicative number furnished by Kong Hee and Ye Peng to her, and she
knew this would be “hardly enough to pay off the $13M” 348. I have already
explained earlier why I accept that the 200,000 sales projection rather than the
other more optimistic figures such as 1.5 million sales reflected the true state
of the accused persons’ expectations at the time and I will not repeat my
reasons here as they apply equally to Serina.
394
Serina had also asked Foong if he thought there was “an issue of CHC
investing heavily in Xtron” even though Xtron had been “an insolvent
company for the past few years” while paying CHC “very high interest” 349. On
346
E-16.
347
E-571.
348
E-1.
349
E-346.
216
top of all that, I find that she participated in misleading the auditors as to the
true nature of the relationship between CHC and Xtron. She prepared the first
draft of the paper which Ye Peng eventually sent to Foong on 21 July 2008,
which contained language calculated to convey the impression that CHC and
Xtron were independent entities350.
395
She also drafted the minutes of Xtron directors’ meetings to create the
appearance of executive decision-making on the directors’ part when in fact
there was none. She conceded that some of these purported meetings never
took place at all but she did not see any problem with that since the Xtron
directors went ahead to sign the minutes for the meetings she had prepared
anyway. For Xtron’s 2006 minutes, she admitted that she prepared the entire
year’s set of six minutes at one go in January 2007 and backdated them as she
was “busy with other things”351. To her understanding, generally backdating
was acceptable.
396
I am satisfied beyond a reasonable doubt that Serina could not have
believed that the Xtron bonds were genuine investments. Even on her
understanding of what an “investment” was, I consider that she could not
possibly have believed that the Xtron bonds were investments. She played an
active part in enabling Xtron to use the BF monies for the Crossover and I
consider that she did so dishonestly, knowing that this was an unauthorised
purpose for the BF.
350
E-269.
351
E-310, Transcript 16 April 2015, p 129.
217
The Firna bonds
397
Serina knew from the start that the purpose of the Firna bonds was to
fund the Crossover. She received Kong Hee’s e-mails on 28 and 29 July 2008
in which the plan was set out for CHC to purchase Firna bonds in order that
Wahju might support the Crossover. She was aware that the plan was for the
bond interest to be paid out of the profits from the sales of Sun Ho’s album,
and that repayment of the principal would also be made using those profits.
She was one of those tasked by Kong Hee to think of a way to obtain
sufficient funds to redeem the bonds in the event that the Crossover was not as
commercially successful as hoped. In those circumstances she could not have
failed to realise that there was no intention to look towards Firna’s glass
factory business for the funds needed to redeem the bonds.
398
She knew, furthermore, that the bond proceeds were within Kong
Hee’s control. I am unable to accept her claims that she understood from Kong
Hee’s 28 and 29 July 2008 e-mails that Wahju would be supporting the
Crossover “independently” – given the various e-mails from October 2008 to
June 2009 in which she gave instructions to Wahju as to how to apply the
Firna bond proceeds, I take the view that she could not possibly have failed to
realise that Kong Hee, Ye Peng and Eng Han were treating the bond proceeds
as their money and not Wahju’s. On 5 November 2009, after the Firna bonds
had purportedly been redeemed, she sent Eng Han and Ye Peng an e-mail
setting out “what Wahju owes us” – she was referring to money that had been
transferred to Wahju pursuant to the Firna bonds – and, having pointed out
that Wahju had made trades using this money, asked if the profits from these
trades should be treated as “belonging to us” because “technically he is using
our money”. When Eng Han opined that those profits should belong to Wahju,
and that Wahju should not be charged interest, she replied, “Just that he used
218
our money to trade”. In my view, Serina’s references to the Firna bond
proceeds as “our” money, belonging to “us”, demonstrates unequivocally that
she never viewed the proceeds as being Wahju’s money.
399
Returning to Serina’s understanding of an investment as “the placing
of funds somewhere to get a return”, in my judgment she could not have
believed that the Firna bonds fit within that understanding. She knew that the
prospect of return had nothing to do with the profitability of Firna’s business.
She knew that the bond proceeds were meant for the Crossover, and she was
aware from an early stage that there was a realistic possibility that the revenue
from the album sales would not be sufficient to allow Firna to redeem the
bonds, which was why Kong Hee assigned to her, Eng Han and Ye Peng the
task of coming up with a “method of raising the $10M to put into Firna so that
Firna can redeem the bonds”352 – a task which she took seriously. I am
satisfied beyond a reasonable doubt that she did not believe the Firna bonds
were genuine investments, and that by causing CHC to transfer money to
Firna pursuant to the BSA she was acting dishonestly.
400
I accept that Serina might have been somewhat more removed from the
round-tripping transactions than her co-accused, in the sense that she had
never met Sim in the course of her work and, in particular, was not at the
meeting on 9 April 2009 at which Sharon got the impression that Sim wanted
the Xtron bonds off CHC’s books. She was also not the person from whom
most of the plans and proposals for redeeming the bonds originated.
352
E-206.
219
401
But it is clear that, from May to July 2009, Serina played some part in
making plans for the redemption of the Xtron bonds by the end of the financial
year. On 2 May 2009, she sent an e-mail to Sharon with three such possible
plans; all these plans involved the payment of advance rental by CHC to
Xtron353. On 21 and 22 May 2009, she was involved in a discussion with
Sharon and Eng Han as to whether they ought to continue drawing down on
the Firna bonds in view of the desire to clear them off CHC’s books by
31 October 2009; in the course of this discussion Serina opined that an
alternative suggested by Eng Han, that of changing the end of the financial
year in order to buy them more time to clear the bonds, was not feasible. It is
also evident from an e-mail that Sharon sent to Ye Peng on 2 July 2009 that
she and Sharon had been working on ways of redeeming the Xtron bonds by
the end of the financial year354.
402
In the event, sometime after 29 September 2009 she was brought into
the exchange of Blackberry messages that had hitherto been between Eng Han
and Sharon only, and in these messages she was apprised by Eng Han of the
plan to redeem the Firna bonds355. This was to take place in two phases, the
first phase comprising the disbursement of CHC’s funds into two tranches of
the SOF so that this money could be transferred to Firna via AMAC and UA
in order that Firna might redeem the bonds, and the second phase consisting of
the payment by CHC of advance rental to Xtron so that the money might be
transferred to AMAC via Firna and UA in order that AMAC might return
CHC the funds that had been disbursed into the two SOF tranches. That she
353
E-59.
354
E-608.
355
BB-89a.
220
understood and went along with the entire plan is apparent from the fact that
she subsequently edited a spreadsheet Sharon had prepared setting out the
schedule according to which all these transactions had to be effected356.
403
It is therefore abundantly clear that Serina participated in the plan to
redeem the Firna bonds by transferring money out of CHC in order that it
might return to CHC, and then to cover up those earlier transfers by
transferring another sum of money out of CHC for the purpose of routing it
back to CHC. She knew the full extent of the plan, and she knew that the
movement of funds was entirely under her control and that of her co-accused.
404
Serina testified that she understood the entire series of round-tripping
transactions to be an initiative of CHC to resolve audit issues that the auditors
had raised in relation to the Xtron and Firna bonds. Against that background,
she understood Tranches 10 and 11 of the SOF to be genuine investments that
would also help CHC resolve an audit issue; they were genuine investments
because they would give CHC financial return, and what AMAC did with the
money did not change that. I accept that, in a Blackberry message to Eng Han,
she asked him whether the SOF tranches would “give CHC returns”, but I do
not agree with her characterisation of the concern evinced in that message –
she says that it shows a genuine preoccupation with the question of whether
CHC would enjoy financial return, which shows in turn her belief that CHC
was making a genuine investment, but I consider it shows only a concern that
there should be the appearance of financial return enjoyed by CHC. For she
knew that the apparent financial return was coming from CHC’s own pocket;
356
E-34.
221
with her knowledge of the entire series of transactions she could not have
failed to realise that. I am also unimpressed by the argument that AMAC’s use
of the money did not change the character of Tranches 10 and 11 of the SOF
as a genuine investment, and the reason is simply that she knew that AMAC,
and for that matter all the entities through which the funds were to flow, was
controlled entirely by her co-accused.
405
As for the payment of advance rental under ARLA, Serina testified that
her understanding was that Xtron would use the money to acquire a property
on CHC’s behalf357. But it is evident to me that, with her knowledge of the
entire series of transactions, she must have known that Xtron would use the
money instead to purchase Firna bonds in order that it might eventually return
to CHC. In these premises I am unable to accept that she truly held the
understanding that she says she held.
406
The extent of the knowledge that she had compels me to the view that
she knew that Tranches 10 and 11 of the SOF were not genuine investments,
and the advance rental paid under the ARLA was not a property- or buildingrelated expense. I consider that she must therefore have known that she and
her co-accused were not legally entitled to cause CHC to enter into those
transactions, and that she acted dishonestly in doing so. I am not persuaded by
her purported belief that the auditors would have given the transactions their
blessing. I find, from her participation in the exchange of Blackberry messages
in which Sharon expressed concerns as to whether Sim would ask questions
about the transactions, that she was fully aware that the auditors were not to be
357
222
shown the entire picture that the transactions added up to, and were to be kept
informed only in relation to discrete parts of that picture.
407
In the circumstances, I am satisfied beyond a reasonable doubt that she
participated in the plans to redeem the Xtron and Firna bonds knowing that
she was not legally entitled to use CHC’s funds to create the appearance of
redemption of bonds. I therefore find that she had acted dishonestly in relation
to all three round-tripping charges.
Summary - Serina
408
Serina professed that her love for CHC would mean she would not act
in any way contrary to the interests of the church. She disputed that she had
acted dishonestly and asserted her belief that the bond transactions and the
round-tripping transactions were legitimate and genuine transactions. She also
maintains that they had consulted the professionals and were therefore legally
entitled to act as they did.
409
In my judgment, Serina cannot claim to be ignorant or unaware of the
Crossover’s financing needs that culminated in the bond transactions. She was
a key member of the “Crossover team”, being the one tasked with monitoring
Xtron’s finances and alerting Kong Hee and Ye Peng about upcoming
requirements, cashflow deficits, shortfalls or “valley points”. She was heavily
and inextricably embroiled in the cashflow planning and projection process
and was no unwitting accomplice. Her attempts to portray her motives as
laudable do not detract from her guilty knowledge.
410
I do not doubt her commitment to CHC’s vision for the Crossover and
her love for CHC but this did not ipso facto mean that she was thus incapable
223
of criminal conduct. I am of the view that her knowledge and involvement was
extensive and I do not accept that she honestly believed that she was legally
entitled to use the BF to fund the Crossover.
Sharon
411
The main elements of Sharon’s defence are as follows. She was not a
decision-maker in CHC but only an employee although various appointments
were held. She had no say in the overall direction of CHC or in initiating any
proposals or investment decisions. Essentially, she only followed orders and
took directions from the CHC leadership. She placed her absolute trust in
them, especially Ye Peng and Eng Han and she relied on Serina’s technical
advice since she was not technically strong in accounting. On her part, she was
a mere “facilitator” of the bond drawdowns and updates of investment
schedules.
412
Sharon’s two key arguments are that, first, she was not aware that the
Xtron and Firna bonds were anything other than genuine investments and
hence she would not have any motive to conspire to commit CBT; and second,
she understood that the round-tripping transactions constituted a redemption or
“restructuring” plan that had been approved by the CHC board. At the same
time, she takes the position that she honestly believed that Tranches 10 and 11
of the SOF were genuine investments that also had the purpose of giving Firna
“bridging finance” in order that Firna might redeem the bonds CHC had
purchased, and that the payment of advance rental under the ARLA had the
purpose of putting Xtron in funds to purchase a building on CHC’s behalf.
413
Before I turn to consider Sharon’s involvement in the round-tripping
transactions, I should say that I find it logically and intuitively very difficult to
224
reconcile her claim, on one hand, that she believed that these transactions were
all part of a “restructuring” plan, and on the other, that she believed that
Tranches 10 and 11 of the SOF were genuine investments and the advance
rental under the ARLA was a building-related payment. I have made the same
observations earlier as Ye Peng and Eng Han had made similar submissions.
As I have explained earlier in relation to both Ye Peng and Eng Han, the two
positions are fundamentally irreconcilable. I reiterate my reasoning set out
earlier. An objective evaluation must lead one to conclude that the two
positions are mutually exclusive and inherently inconsistent, and hence cast
serious doubt on the bona fides of Sharon’s defence.
414
In relation to Sharon’s first key argument, I find it difficult to accept
without question that she believed that the Xtron and Firna bonds were
genuine investments. As the prosecution has pointed out, there is evidence that
she knew at least that Kong Hee, Ye Peng, Eng Han and Serina controlled the
drawdowns under the Xtron bonds – in an e-mail exchange in February 2008,
Serina told her the tentative schedule of drawdowns until March 2009, and
said that it was tentative because Kong Hee and Ye Peng were still working on
the budget projections for the Crossover358. There is similar evidence that she
knew that those persons also controlled the Firna bond drawdowns – in an email from Serina in September 2008, she was shown a schedule of drawdowns
under the Firna bonds until June 2009. That knowledge is not easily reconciled
with the understanding of the Xtron and Firna bonds that she claims she had.
358
E-147.
225
But in any event the prosecution has said that it is not seeking to prove that
Sharon knew that the Xtron and Firna bonds were not genuine investments.
415
In my view, the prosecution is correct to say that the round-tripping
charges against Sharon do not depend on proof that she knew the Xtron and
Firna bonds were not genuine investments. All that has to be shown is that she
knew that there was no legal entitlement to disburse CHC’s funds to Tranches
10 and 11 of the SOF and to cause CHC to pay advance rental to Xtron under
the ARLA. That knowledge would suffice to constitute an intention to cause
wrongful loss and, thus, be proof of dishonesty.
416
It is not disputed that there was a meeting with Sim on 9 April 2009
which was the genesis of the plan to redeem the Xtron and Firna bonds.
Sharon’s testimony was that Sim expressed a number of views at this meeting:
(i) CHC should keep its books simple and not invest in unquoted bonds,
(ii) the convertibility feature in the Xtron ABSA meant that CHC could end up
owning shares in Xtron, which would lead to consolidation of both entities’
accounts, (iii) CHC and Xtron were obviously related, and when it was
explained to him that Xtron was CHC’s vehicle to hold a property, he raised
the possibility that their accounts would have to be consolidated, (iv) CHC
should clear the Xtron bonds off its books, and (v) there was no need for CHC
to obtain an independent valuation of the Firna bonds for the financial year
ended 31 October 2008 because the total bond drawdowns as at the end of the
financial year were not large, but if the amount drawn down under the Firna
bonds increased the following year, there would have to be valuation of those
bonds. I am prepared to accept Sharon’s testimony in this regard.
417
Sharon further testified that, to her understanding, consolidation of
CHC’s and Xtron’s accounts was not desirable as it would compromise the
226
plan for Xtron to be CHC’s vehicle for the property purchase – if it were
known that CHC and Xtron were related, the vendors of potential properties
would be likely to treat Xtron with the same antipathy that they showed
religious organisations like CHC. She says that she believed that the auditors
would continue asking questions about valuation and disclosure of the Xtron
bonds if CHC was unable to clear those bonds by 31 October 2008, and she
thought that the CHC management should similarly look at clearing the Firna
bonds because those were also unquoted.
418
After this meeting of 9 April 2009 with Sim, Sharon became involved
in formulating and discussing proposals for Xtron to redeem the bonds that
CHC had purchased. The broad idea behind these proposals to redeem the
Xtron bonds was that Xtron would obtain the money to do so in two main
ways: first, by receiving a lump sum payment from CHC in connection with
some form of rental arrangement between CHC and Xtron, and second, by
selling Riverwalk. On 25 April 2009, Sharon sent Ye Peng and Jacqueline an
e-mail attaching a document which contained two possible ways of redeeming
the Xtron bonds. Both plans involved CHC giving Xtron advance rental for
Riverwalk; one of the plans led to the conclusion that it was not feasible, while
the other plan involved taking $13 million in loans from “external parties”359.
419
About a week later, on 1 May 2009, Sharon sent an e-mail to John Lam
and Serina to tell them about a “new plan” that Eng Han had come up with to
redeem not only the Xtron bonds but also the Firna bonds. This plan involved
CHC paying “upfront rental” to Xtron, which Xtron would use to buy shares
359
E-501.
227
in a joint venture that would purchase a property, and Xtron would then take a
lease on that property and sub-lease it to CHC in order to fulfil its obligations
attaching to its receipt of the “upfront rental”. There would be excess money
from this “upfront rental” which Xtron would use to redeem the bonds
partially, and the remainder of the bonds would be redeemed by the proceeds
from selling Riverwalk. The plan also contemplated using the “upfront rental
to clear Firna bonds too”, by getting Xtron to buy back the rights over Sun Ho
from UA, so that UA could pay back Firna and Firna could then use this to
redeem bonds360. The following day, on 2 May 2009, Serina sent an e-mail to
Sharon with three possible plans; two of these plans were identical to the two
plans in Sharon’s e-mail to Ye Peng and Jacqueline of 25 April 2009. The
third plan involved CHC giving Xtron advance rental for Riverwalk and Expo,
selling Riverwalk at a later time, and taking loans from individuals361.
420
Later that month, Serina sent Sharon and Eng Han an e-mail on
20 May 2009 in which she said that Ye Peng had “just talked to Justin” and
there was an urgent need to draw down $2 million under the Firna bonds – I
would add in passing that this would at least have alerted Sharon to the fact
that the Firna bonds were intended to meet the Crossover’s pressing financial
needs. Sharon eventually asked Eng Han if she should proceed with the
drawdown, saying: “I thought we want to clear away this bonds issue? If not,
we will need to prepare ourselves for the valuation and disclosure issue again
for this year’s audit”. Eng Han’s reply was that the plan was to continue
funding the Crossover using the Firna bonds until the intended purchase of
360
E-502.
361
E-59.
228
Suntec, at which time the Xtron and Firna bonds would all be cleared from
CHC’s books at once. Sharon, however, claimed that she did not understand
how the purchase of Suntec would help in redeeming the Firna bonds362.
421
On 2 July 2009, Sharon sent Ye Peng an e-mail explaining the details
of a plan that she and Serina had worked out363. This plan involved redeeming
the $21.5 million of Xtron bonds that CHC had purchased by a combination of
three methods: first, increasing the amount of rental CHC would have to pay
Xtron under the sub-lease of Expo premises; second, getting CHC to pre-pay
six years’ worth of rental for the Expo premises; and third, selling Riverwalk.
422
It is clear from the foregoing narrative that, from May to early July
2009, Sharon was very much involved in plans to redeem the Xtron bonds,
and some of those plans also dealt with the Firna bonds. Even though it does
not appear that Sharon initiated the proposals put forward, there is no doubt
that she was aware of the plans and had participated in discussing and refining
them.
423
By 18 July 2009, the plan to redeem the Xtron and Firna bonds had
taken the following shape. CHC would pay Xtron $65 million in advance
rental, and Xtron would set off against that the $21 million that it owed CHC
for the redemption of bonds. Meanwhile, Pacific Radiance would invest
$17 million in AMAC, which would in turn lend or invest that sum to Firna,
which would use it to redeem the Firna bonds that CHC had purchased.
Thereafter, Xtron would lend $17 million to Firna, which would then return
362
E-58.
363
E-608.
229
AMAC that sum, and AMAC would finally return that to Pacific Radiance. As
I have found, this plan was presented to the CHC board.
424
Between 22 July and 29 September 2009, Sharon and Eng Han had
discussions by way of Blackberry messages regarding the plans to redeem the
Xtron and Firna bonds. At some point during this period, Eng Han informed
Sharon that he had thought of a way to remove the Xtron and Firna bonds
from CHC’s books regardless of whether a property had been identified for
purchase by then364. This plan involved CHC paying a lump sum to Xtron as
pre-payment under a rental agreement, and from this lump sum Xtron would
buy over Sun Ho’s rights from UA for $17 million. On being told this plan,
Sharon cautioned that there might be a problem because the “same Mr Sim”
was doing the Xtron accounts and would “know where the money goes to”;
she added that her concern was that Sim would know that the money given by
CHC to Xtron was “used to buy Firna contract”. But Eng Han assured her that,
as Xtron would be purchasing the rights from UA, Sim would not know that
the money had gone to Firna as he would not “know the link between firna
and UA”. This assuaged Sharon’s concerns. It is plain that Sharon did not
want Sim to be able to see that CHC’s money had gone to Firna.
425
On 12 September 2009, the plans to redeem the Xtron and Firna bonds
were again presented to the CHC board. Ye Peng was the one presenting – he
described the plan as one to “clear” the bonds, and he said that the lawyers and
auditors had said they were “ok” with the plan. This plan was largely the same
as that which had been presented at the 18 July 2009 meeting; the substance of
364
BB-89a, Image 29.
230
it was that Pacific Radiance would provide bridging finance to Firna for the
purpose of redeeming the Firna bonds that CHC had purchased.
426
Sharon and Eng Han continued to discuss the plans by way of
Blackberry messages, and at some point after 29 September 2009, Eng Han
suggested a revised proposal that did not call for the involvement of Pacific
Radiance. Under this proposal, CHC would invest in the SOF offered by
AMAC, and the money would flow from AMAC to UA to Firna and finally to
CHC. Sharon responded by repeatedly expressing concern about the
possibility that Sim might want to “see details” of these SOF investments. Eng
Han assured her that he would not ask to see such details because the SOF
investments would be returned by November 2009, and Sharon did not express
further concerns.
427
By 3 October 2009, the plan had taken more or less its final form. In an
e-mail sent to Sharon and Eng Han, Serina attached a spreadsheet showing the
series of transactions365: (i) CHC and Xtron would into a license agreement
worth about $46 million, and CHC would pay Xtron advance rental, which
Xtron would use to redeem the bonds, (ii) CHC would invest $5.8 million in
one tranche of the AMAC SOF, which AMAC would use to invest in UA,
which UA would lend to Firna, and which Firna would use to redeem the
bonds partially, and CHC would then invest $5.6 million in another tranche of
the AMAC SOF, and this sum would flow from UA to Firna and back to
CHC, and (iii) CHC would pay Xtron further advance rental in the sum of
$11.5 million, which Xtron would use to purchase Firna bonds, which Firna
365
E-34, amended in E-35.
231
would use to return a shareholder’s loan to UA, which UA would use to return
AMAC’s investment in it, and which AMAC would use to return to CHC the
$11.4 million it had invested in the two tranches of the AMAC SOF with
interest. It is not disputed that this plan was eventually carried out and it
constitutes the broad framework for the round-tripping charges in question.
428
In my judgment, it is beyond question that Sharon had full knowledge
of all the transactions by which the Xtron and Firna bonds were redeemed.
The overall plan was the culmination of months of effort coming up with
proposals to redeem the bonds. She knew that she, Eng Han, Ye Peng and
Serina were in full control of the money from the instant it left CHC to the
instant it returned. In the circumstances, I find it impossible to believe that she
could have genuinely thought that Tranches 10 and 11 of the SOF were
investments and the advance rental paid under the ARLA was meant to allow
Xtron to purchase a building, when she was wholly aware that the monies
disbursed were meant all along to go back to CHC in order to make it appear
as if Firna had redeemed the bonds. This was the essence and true intent of the
“round-tripping”.
429
I consider that, by virtue of the presentations to the CHC board on
18 July 2009 and 12 September 2009, Sharon did believe that the board had
approved a plan by which the Xtron and Firna bonds would be redeemed. I
accept that, even though this plan changed in that Pacific Radiance was
ultimately not involved, it would have been plausible and reasonable for
Sharon to believe that the board had nevertheless approved the substance of
the plan that was eventually carried out. But it does not follow from such
board approval that Sharon must also necessarily be assumed to have thought
that she and her co-accused were legally entitled to use CHC’s funds in the
232
way they did, viz, to assist other entities financially to redeem bonds that CHC
had purchased.
430
I am satisfied that Sharon intended to hide from Sim the fact that
CHC’s money was being round-tripped. It does not exonerate her that she
thought she was merely acting on directions or preferences she understood
Sim to have expressed on 9 April 2009; her desire for non-disclosure leads to
an inescapable inference that she had a consciousness of wrongdoing. This is
bolstered by my finding that she could not have believed that the transactions
in question were what they were said to be – that is, investments or buildingrelated expenses.
431
Sharon maintained that she had no concerns about the transactions as
she was routinely told that they were legitimate investments. She professed to
be unfamiliar with investments as she was only the finance manager. In her
counsel’s words, hers was not the world of finance and bonds and returns on
investment, and she was not a “smooth operator or sophisticated wheelerdealer”. She claimed not to understand what Eng Han explained to her “half
the time” in respect of the advance rental idea in E-502366 She was also not
always kept in the loop for all the detailed discussions relating to the
investment plans. She was therefore entitled to place reliance on Eng Han and
Ye Peng, as well as the lawyers and auditors who advised them. But I am not
convinced that all this is sufficient to exonerate her. Not understanding, not
questioning and merely carrying out the instructions of others presupposes that
she acted mindlessly, which she plainly did not. I say that she plainly did not
366
Transcript 16 September 2014 p 117.
233
act mindlessly because in the various e-mails and Blackberry messages I have
discussed above, she is shown to understand the nature and extent of the plans
being made and to be cognisant of the need to maintain secrecy vis-à-vis Sim.
I am therefore not persuaded that Sharon can rely on her argument that she
was just following through to carry out the instructions of others.
432
Sharon’s conduct belies her claims to have acted almost as an
automaton or a mindless minion. She maintained she did not minute down
CHC board discussions in full and this was as per past practice handed down
to her by her predecessors Foong Ming and Serina. She raised this point
whenever minutes she had recorded were shown to be incomplete or
inaccurate. In my judgment, this was but a convenient excuse for what appears
to have been a fair number of deliberate omissions and misrepresentations.
Serina had advised Sharon in her email of 16 July 2008 that “things that were
shared can be written down in detail unless they are too sensitive”367. Sharon
understood this to mean that for matters pertaining to the relationship between
CHC and Xtron and for investments, these were “very sensitive” and therefore
“we would try not to minute down as much as we can”368. This was reinforced
on 5 August 2008 when Serina observed that “CHC cannot minute down
anything about XP’s bank loan as they are not supposed to be aware of
this”’369.
433
It is deeply troubling that the practice of highly-discretionary and
selective secretarial recordkeeping had been taking place at CHC’s meetings
367
E-900.
368
Transcript 15 September 2014 p 66.
369
E-95
234
and discussions over the years, resulting in an accumulation of unreliable and
incomplete records. Sharon’s explanation for doing so repeats the motive for
the general approach towards non-disclosure. She suggests that there were no
sinister motives beyond wanting to be discreet about the Crossover and not
wanting the relationship between CHC and Xtron to be disclosed. Yet it is
equally if not more plausible that the practice came about more insidiously,
because CHC simply had too much that they needed to hide. Frequent
backdating of minutes, routine purported “oversights” and irregularities are
not likely to be wholly innocuous when they are systemic.
434
A CHC Investment Committee meeting was called on 1 August 2008
and the meeting itself was held on 5 August 2008. Yet the minutes record the
meeting as having taken place on 29 July 2008 to reflect Siow Ngea’s
resignation as having purportedly taken place before 1 August 2008 370 so that
he could be appointed to Xtron’s board. Serina confirmed that the minutes
were backdated and further that Appendix 1 ( Xtron’s “Ability to Pay Yearly
Bond Interests and Redeem Bonds by August 2018”) was not reviewed on 29
July or even 5 August as it was only prepared on 8 August 2008371. Yet
Appendix 1 is found attached to the minutes, and there is no “detailed report
of Firna Glassware” attached, contrary to what is reflected in para 4.1 of the
minutes. This shows their readiness to manipulate the records to suit their
needs, just as Sharon had taken down handwritten notes in respect of CH-49a
and CH-50b for the CHC Board meetings and yet the actual minutes reflect far
less than her contemporaneous notes.
370
A-113
371
As reflected in E-253.
235
435
In another instance, Sharon claimed that the issue of Firna bonds was
discussed at a CHC Board Meeting on 3 August 2008 but the discussion was
not minuted372. It was suggested to her under cross-examination that it was
incredible that the CHC Board could give approval of a huge $24.5m
investment of BF without any detailed report furnished on Firna and not have
it minuted. Sharon’s response was merely to say that “this is how the Board
works” and they had trusted in Eng Han especially when this also involved
Wahju’s company373.
436
When the objective statements from various streams of correspondence
are evaluated, they invite clear inferences of Sharon’s complicity and
dishonesty. This is particularly evident from her involvement in planning for
the SOF Tranches 10 and 11 and the ARLA with Eng Han via their Blackberry
message exchanges374. The general tenor of her messages (as well as Eng
Han’s) is unabashedly conspiratorial; there can be no other reasonable
inference. They communicate and share plans in conniving tones about how to
ensure the auditors do not find out what they are doing with the round-tripping
scheme. They exchange knowing comments with almost perceptibly smug
self-satisfaction, like when Eng Han confidently assures Sharon at Image 67 of
BB-89a that Sim “won’t question details because in Nov it will be
redeemed!”. She also claimed that since the SOF investments were “only a
bridging loan and it will be redeemed in a short time”, she thought that there
was nothing illegitimate about the transaction375. This characterisation of the
372
A-58.
373
374
BB-89a.
375
Transcript 22 September 2014 pp 177, 178
236
SOF payments as a “bridging loan” plainly contradicts her professed belief
that these were genuine investments all along.
437
Her dishonesty is also manifestly clear when one examines her email
to Eng Han of 23 November 2009 informing him of the interest that needed to
be paid in relation to SOF Tranches 10 and 11376. In ordinary bond
transactions, an interest rate is stipulated at the outset and the amount of
interest payable to the bond subscriber is calculated by taking that rate and
multiplying it by the length of time between the purchase of the bonds and
their redemption. But that was not the way Sharon operated here. She had
“worked backwards” from the interest amount of $76,676.99 to derive an
interest rate that “seems to be around 5.05% p.a”. She explained that she was
“working backwards to ensure that nothing is left in Firna accounts”. In crossexamination, she sought to explain that there should be no surplus left in Firna
because the investment had come from CHC and CHC should get back the
returns. This again contradicts her reference to the transactions as being part of
“restructuring” or “only a bridging loan”. More critically, it suggests that she
knew that CHC had to pay out sums which eventually went to Firna in order to
get back its own “investment” in the SOF.
438
The idea of the SOF being a “bridging loan” appears to have been
planted by Eng Han in the course of email communications with Wahju
between 5 to10 October 2009 over the flow of funds from UA to Firna377. Eng
Han had then informed Wahju: “just tell them it is funds for a short term loan
to firna? That is a valid transaction’. This was one of Eng Han’s expedient
376
E-40.
377
E-274.
237
measures to misrepresent to the transacting banks the true nature of the funds
to avoid further scrutiny and Sharon went along with his idea. She also agreed
with Eng Han that John Lam should “steer away from the topic of what asof
invests in” when they discussed audit issues with Sim, since “the $11.4m
outstanding was all to UA and we don’t want that to surface ok”378. Sharon’s
simple reply was: “Got it! :)”. These instances of agreement did not seem to be
mere blind compliance; in my view they were more indicative of active
participation, complicity and dishonest intent.
439
In the circumstances, I am satisfied beyond a reasonable doubt that she
participated in the plans to redeem the Xtron and Firna bonds knowing that
she was not legally entitled to use CHC’s funds to create the appearance of
redemption of bonds. I therefore find that Sharon acted dishonestly in relation
to all three round-tripping charges.
Summary - Sharon
440
Sharon says that she believed that Kong Hee “loves the church a lot
and will never do anything to harm the church”. Even if this belief was fully
justified, some questions fall to be addressed: whether such a belief should
have been held by Sharon uncritically and unconditionally, and if not, whether
she was deliberately ignoring facts which did not fit her idea of reality.
441
Her defence is that she was an ignorant and unwitting accomplice,
drawn into the tangled web only because of her commitment to CHC’s vision
for the Crossover. Like the other accused persons who professed their love for
378
E-326.
238
CHC and support for the Crossover vision, I do not doubt Sharon’s evidence
in this regard. I am of the view however that Sharon’s knowledge and
involvement went far beyond that of a mere employee who was dutifully
carrying out instructions. She supported Kong Hee’s vision and had chosen to
help facilitate the round-tripping transactions, and it can hardly be said that
she honestly believed that they were legally entitled to do so.
442
Sharon was referred to her CAD statement where she had responded
that “I know it is wrong” to engage in creative accounting and she had
conceded that CHC had done so379. But on looking back, she claimed to have
realised there was no dishonest intent or motive. I should reiterate that there is
a distinction in law: the element of dishonesty is premised on the intention of
an accused, and that is distinct from his motive. As I have noted earlier,
viewed objectively, her conduct and her statements from various streams of
correspondence are not consistent with innocence but are more indicative of
her complicity and dishonesty.
The accounts falsification charges
443
The accounts falsification charges relate to the offence under s 477A of
the Penal Code, which reads:
Falsification of accounts
477A.
Whoever, being a clerk, officer or servant, or
employed or acting in the capacity of clerk, officer or servant,
wilfully and with intent to defraud destroys, alters, conceals,
mutilates or falsifies any book, electronic record, paper,
writing, valuable security or account which belongs to or is in
the possession of his employer, or wilfully and with intent to
379
P-3 Q251.
239
defraud makes or abets the making of any false entry in, or
omits or alters or abets the omission or alteration of any
material particular from or in any such book, electronic
record, paper, writing, valuable security or account, shall be
punished with imprisonment for a term which may extend to
10 years, or with fine, or with both.
444
The accounts falsification charges are said to stand or fall with the
round-tripping charges. For the round-tripping charges to be made out, it has
to be shown that (i) Tranches 10 and 11 of the SOF were not genuine
investments and (ii) the payment to Xtron pursuant to the ARLA was not a
genuine payment of advance rental. Once that is shown, it will have to follow,
at least in relation to the seventh, eighth and tenth charges, that the accounting
entries associated with those transactions were false. Furthermore, the roundtripping charges require that the accused persons acted dishonestly, and if that
is established, it must follow that they participated in the making of the false
entries despite the awareness that those entries were false, and that would
mean that they possessed the “intent to defraud”.
445
I should first say that it is not in doubt that Ye Peng and Sharon were
either officers or servants of CHC. It is also not in doubt that certain
accounting entries were made by Lai Baoting in connection with the
transactions that form the subject-matter of the round-tripping charges. I
accept that she made those entries on Sharon’s instigation in the sense that
Baoting obtained her understanding of those transactions from Sharon. Thus
three questions remain: first, whether the entries were false; second, whether
each of the accused persons engaged in a conspiracy for the doing of a thing
that amounted to making a false entry in CHC’s accounts; and third, whether
each of the accused acted with intent to defraud.
240
446
I should also mention that an intent to defraud does not require that
there be an intention to defraud any particular persons: see the Court of
Appeal decision of Public Prosecutor v Li Weiming and others [2014] 2 SLR
393 at [85]. Hence, I accept that the prosecution does not need to prove that
there was an intent to defraud Sim or his firm specifically.
The seventh, eighth and tenth charges
447
The seventh and eighth charges concern the recording of Tranches 10
and 11 of the SOF as “investments” into the “Special Opportunity Fund” in
CHC’s books, and the tenth charge concerns the recording of the payment
under the ARLA as “Advance Rental with Xtron”. In my judgment, given my
findings that (i) Tranches 10 and 11 of the SOF were not genuine investments
and (ii) the payment under the ARLA was not truly advance rental, I consider
it follows that the three accounting entries were false. In my view, a truthful
entry in relation to Tranches 10 and 11 of the SOF would have reflected the
fact that the whole purpose of those payments was to enable Firna to redeem
the bonds that CHC had purchased, and a truthful entry in relation to the
ARLA payment would have reflected the fact that the whole purpose of that
payment was to enable AMAC to return CHC the money that had been
disbursed into Tranches 10 and 11 of the SOF.
448
The next question is whether all the accused persons engaged in a
conspiracy for the doing of a thing that amounted to making a false entry in
CHC’s accounts. I accept that not all of them would have turned their minds to
the question of how the various round-tripping transactions would be entered
in CHC’s books. But I agree with the prosecution that, since I have found that
all of them had engaged in a conspiracy for the doing of a thing that amounted
to using CHC’s funds to create the false appearance that the Firna bonds had
241
been redeemed, and since an essential part of doing such a thing would be the
creation of accounting entries in CHC’s books that perpetuated the illusion, it
must follow that the accused persons engaged in a conspiracy for the doing of
a thing that amounted to making a false entry in CHC’s accounts. To put it in
more general terms, I accept that if some persons conspire to do X, and doing
X necessarily involves doing Y, it would follow that they had conspired also
to do Y even if they did not turn their minds to the question of whether Y
would be done.
449
The third and final question is whether each of the accused persons
acted with intent to defraud. I have already found that all of them knew that
Tranches 10 and 11 of the SOF were not genuine investments and the ARLA
payment was not a true payment of advance rental, since they knew that the
whole purpose of the transactions was to ensure that CHC’s money would
flow back to itself. It follows that each of them engaged in a conspiracy to
create false accounting entries in CHC’s books knowing that those entries
were false, and that is sufficient, in my judgment, to constitute an intent to
defraud.
450
Therefore, having found Ye Peng, Eng Han, Serina and Sharon guilty
on the round-tripping charges, I consider that I must also find them guilty on
the seventh, eighth and tenth charges.
The ninth charge
451
The ninth charge, however, is a matter of greater difficulty. The
accounting entry that forms the subject-matter of this charge concerns the
purported set-off of advance rental from CHC to Xtron against the
$21.5 million that Xtron owed CHC under the Xtron bond arrangements.
242
452
I should first say that I am satisfied that this accounting entry was
false. The reason is that a true redemption of Xtron bonds would have
involved Xtron using its own money to redeem the bonds, rather than using
money that had been given to it by the bond subscriber, CHC, for the sole
purpose of purportedly redeeming the bonds. In my view, what was actually
happening here was the creation of a false appearance that the Xtron bonds
had been redeemed. The accounting entry serves to perpetuate that appearance
and accordingly I am of the opinion that it was false even if it may not be
possible to identify what the “true” entry would be.
453
As for the question of whether the accused persons engaged in a
conspiracy for the doing of a thing that amounted to making a false entry in
CHC’s accounts, I am satisfied beyond a reasonable doubt that this was what
Ye Peng, Eng Han, Serina and Sharon did. All four of them were involved to
varying degrees in making plans for the redemption of the Xtron bonds since
April 2009. The essence of the plan had not changed by 25 September 2009,
which was when Sharon told Eng Han and Serina that Ye Peng wanted them
to “settle” within a week the “[w]hole XPL, Firna and CHC transaction” 380; it
is evident that their common design then was to remove the Xtron bonds from
CHC’s books. They knew that it was not an independent decision that Xtron
was making to redeem the bonds, but one that they were making on its behalf.
They knew also that Xtron did not have sufficient funds to redeem the bonds,
and that CHC needed to give it the money to do so. In an e-mail from Eng Han
to Sharon, Serina and Ye Peng on 16 November 2009, he said that, any time
Xtron needed an injection of money from CHC, they could simply increase the
380
E-69.
243
amount of advance rental to be paid under the ARLA by extending the term of
the lease in respect of which rental was being advanced; I find on this basis
that the common understanding between the four of them was that the ARLA
was little more than an excuse to transfer money from CHC to Xtron
depending on Xtron’s financial requirements.
454
In the circumstances, when these four accused persons carried out their
plan to set off the Xtron bonds against $21.5 million in advance rental under
the ARLA, I have no doubt that they knew that this was a false appearance of
redemption in the sense that it was nothing more than CHC paying itself
money. They knew it was not a case of CHC paying advance rental in its
commercial interests and Xtron deciding independently to use that money to
redeem the bonds; they knew that it was instead a case of CHC paying
$21.5 million in advance rental entirely for the purpose of taking the Xtron
bonds off its books, and they deciding on Xtron’s behalf to use that amount to
redeem the bonds. I therefore find that they engaged in a conspiracy for the
doing of a thing that amounted to making a false entry in CHC’s accounts.
455
The final question is whether the accused persons had an intent to
defraud. The defence argues that they could not have had such an intent
because, at a meeting that John Lam, Sharon and others had with Sim on
22 September 2009, Sim was told that CHC would be paying Xtron advance
rental and Xtron would be redeeming the bonds by way of set-off, and Sim
had no difficulties with that. They had told Sim exactly what they were going
to do, and this means that they could not possibly have had any intent to
defraud.
456
In my view, however, there was a key fact hidden from Sim which
made all the difference. This fact was that it was the accused persons who
244
were planning this transaction from start to finish since Xtron was not at all an
independent entity. I have found that Ye Peng, Eng Han and Serina all knew
that Xtron was controlled by CHC, and that they knew the auditors did not
know that. As for Sharon, I consider it beyond doubt that she knew that Xtron
was not independent of CHC, for she would not otherwise have been making
plans to redeem the Xtron bonds without reference at all to the Xtron directors.
I am also satisfied that she knew that the auditors believed that CHC and
Xtron were independent – she was at the 9 April 2009 meeting where,
according to the minutes381, John Lam told Sim that CHC and Xtron had
“different management” notwithstanding their “common interest” and
“common objective”, and wanted to “maintain it with arm length (sic) view”,
and she was also at the 31 December 2009 meeting at which, according to the
minutes taken by Lai Baoting382, Sim repeatedly enquired whether CHC and
Xtron were not in substance related parties. Sim was recorded as having
observed that “standards are looking at substance and the concern is what kind
of disclosures shall be made.” She could not have failed to notice that Sim had
been told all along that CHC and Xtron were independent, and that he
accepted this grudgingly.
457
What this means is that the accused persons cannot rely on their
disclosure to Sim to prove that they had no intent to defraud. I should mention
that Ye Peng testified that, on 27 April 2009, he and Eng Han met Foong, and
he told Foong at this meeting about the plan to give Xtron advance rental
when there was a building, and to redeem the bonds at the same time. I have
381
CH-3.
382
E-287.
245
already found that Foong too was under the impression that CHC and Xtron
were independent, and so I am likewise of the view that this disclosure to
Foong cannot avail the accused persons.
458
Given that they knew that they were creating the false appearance that
the Xtron bonds were being redeemed, and given their knowledge that the
auditors would be under the erroneous impression that this was a true
redemption in the sense that CHC and Xtron had independently decided to set
off advance rental against the redemption of bonds, I am satisfied beyond a
reasonable doubt that Ye Peng, Eng Han, Serina and Sharon all had the intent
to defraud. I therefore find them guilty on the ninth charge.
The involvement in a conspiracy – analysis of the context
459
In addressing the accused persons’ culpability on an individual basis, I
have focused primarily on the extent of their knowledge and involvement in
the plans to use CHC’s funds for the Crossover and on whether their conduct
in the circumstances shows that they had acted with dishonest intent. The
turning point for CHC appears to be the Roland Poon incident in January 2003
and the consequential assertions that “no church funds were ever used”; “not a
single cent”, according to Kong Hee383. Kong Hee now concedes that CHC
funds were directly used to fund Sun Ho’s music production in 2002384. It
stands to reason that all those who were on the Board then would also have
been aware but may have conveniently chosen to downplay or overlook this
fact.
383
CH-20b p 27.
384
246
460
The accused persons explained that the reason for this was not sinister.
They understood that Kong Hee’s preference to be discreet about the funding
for the Crossover was for the sake of ensuring the success of the Crossover,
but being discreet was also synonymous with non-disclosure and misstatements. Kong Hee had explained that it was his preference to avoid
disclosure of CHC’s involvement in Xtron to avoid any misconception that
Sun Ho’s secular music career was “not real” and that CHC was (still) using
its money to promote her career385. But in relation to both aspects, as I have
outlined above, the evidence shows that it was true that her perceived success
was inflated from rather more modest levels and Xtron and the Crossover team
had to rely heavily on sponsorship from CHC members or supporters to help
prop up her album sales and promote her career. When these sources of
financial support which did not directly flow from CHC were insufficient, they
had to come up with other means.
461
The post-Roland Poon climate in CHC was one of paranoia and fear of
exposure to criticism from people who might say “all kinds of baseless
things”, in Eng Han’s words386. Kong Hee’s response to the Roland Poon
incident revealed both his personal dominance and deep insecurity. He
capitalised on CHC’s collective fear to galvanise support for the Crossover.
He rallied them around the big idea that they (ie. CHC’s leaders and by
extension the entire church) were being maligned and under attack, and hence
had to be discreet. That way, all of CHC could become united under a
common front. He convinced them that if CHC’s leaders believed they had to
385
386
E-322.
247
be discreet in order for the Crossover to succeed, then they ought to simply
trust them and not question their motives or reasons.
462
The Crossover thus supposedly went “undercover” with Xtron as
CHC’s special purpose vehicle, and for this purpose Xtron was clearly under
CHC’s control and not independent. AMAC and Advante would also
eventually play their respective roles to facilitate the use of CHC’s funds for
the Crossover, which were controlled entirely by Kong Hee and his team. All
this was known and clearly understood by the accused persons, the possible
exception being Sharon. Xtron was to function as the “independent” company
through which the BF monies would be channelled to fund the Crossover. In
truth, this was analogous to an elaborate extension of a pattern of financial
assistance via “sponsorship”, lending or prepayment to Xtron that had already
either been taking place or been contemplated prior to 2007. These were seen
as short-term measures to put Xtron in funds and support the Crossover.
463
It appears that Kong Hee, Ye Peng and Serina first conceived of
various plans to use CHC’s funds for the Crossover because of cashflow
issues. Serina had pointed out that from May 2006 onwards, there would be
major cashflow problems as Xtron was unable to pay its debts to Unusual
Development Pte Ltd. The plan then was for CHC to prepay or loan Xtron first
and Xtron was to return the money to CHC at the end of the year387. In other
words, being temporary loans, these were not meant to permanently deprive
CHC of the funds as it was contemplated that the funds would find their way
back to CHC at some point in future. Exactly how this was to be done appears
387
E-445; E-449.
248
to have been left unclear. But there are various hints of possible means they
might resort to should they need more funds, including trying to “scrap (sic)
something from individuals”388 source for other loans or more sponsorship
amounts389 or solicit donations if necessary in support of more “Arise & Build”
campaigns390. It would seem that CHC had no real concerns about having to
source for more funds or loans if it came to that, at least for short-term
purposes.
464
Eventually Kong Hee endorsed and approved the plan to use the BF for
the Xtron and subsequently also the Firna bonds. The plan drew its inspiration
in part from Ye Peng’s idea of a “temporary plan” from 15 June 2007391 to
ease Xtron’s cashflow by transferring part of the General Fund into BF and for
CHC to lend Xtron $2.5 million from the BF. He said that was meant to be an
investment to grow the BF and it would solve the problem of Xtron’s funding
requirements. With the mindset that the bond issues were only yet another
“temporary plan” albeit one which involved borrowing from CHC’s BF, and
hoping that the funds would somehow find their way back to CHC at some
unspecified future point, they sought to convince themselves that their conduct
was not dishonest despite knowing full well that this was an unauthorised use
of the BF which was a restricted fund to be used only for specific purposes.
465
Facilitation of the use of the BF for bonds began with the drafting of an
investment policy by John Lam, with Eng Han and others assisting him with
388
E-199.
389
E-197.
390
E-520.
391
E-90; E-196.
249
input. To pave the way for the use of the BF for the purported bond
investments, AMAC was used so that Eng Han could function as CHC’s fund
manager. Kong Hee then informed the EMs at an EGM on 7 July 2007 of the
need to invest the BF to “maximise our returns”392. Nothing was said about the
Crossover even though the bonds were conceived by Eng Han as the means
through which BF monies could be channelled to Xtron for use on the
Crossover. Even if, at the time the bonds were entered into, they had the
intention to make sure that CHC would not lose money in the end, by
representing to the auditors, the EMs, and the board that these were pure
investments to maximise returns, this betrays the accused persons’ knowledge
that the BF was a restricted fund that could not be used to finance Sun Ho’s
music career, and that what they were doing was an unauthorised usage of the
BF.
466
I have found that they were planning on the basis of the US album
being realistically capable of generating sales of 200,000 units, and although
their projections showed that the bonds could not be redeemed by the maturity
date, they were unconcerned since Eng Han assured them that the maturity
date for the bonds could always be extended or fresh bonds could be issued. I
am unconvinced that they could have had a genuine belief in Sun Ho’s
prospects of success for the US Crossover given their consciousness that much
of her earlier success was contrived and contributed to by CHC itself. Serina
readily conceded that Sun Ho’s Asian Crossover albums all made losses and
Xtron had thus incurred substantial accumulated net losses. Kong Hee, Ye
Peng, Eng Han and John Lam also knew that CHC was involved in propping
392
A-15.
250
up her Mandarin album sales. Based on her dubious commercial track record, I
am unable to see how there can be any genuine or honest grounds for their
claims that they expected far higher sales for her planned US album well in
excess of the projection of 200,000. As I have said earlier, this was no more
than an optimistic hope. It was definitely not a realistic expectation. All this
strongly militates against their claims that the Xtron bonds were motivated by
the realistic prospect of financial return and were genuine investments. In the
circumstances, I am satisfied that the Xtron and Firna bonds were sham
transactions in the sense that they were not genuine investments, even if they
were not “sham” within the strict definition in Snook.
467
The accused persons have of course pointed to the fact that the money
did come back to CHC with interest. However, this is patently due to their
efforts to put Xtron, Firna and AMAC in funds to facilitate these repayments
through the round-tripping transactions. It does not confirm that there was any
actual intention at the outset to invest for the purpose of maximising returns.
What is more telling is that it was consistently represented to the EMs that
investing the BF in this fashion was to maximise returns, “to partially hedge
against rising building and land prices”393; “to maximise our building fund
return on investment … Because we got so much money on building fund …
So we asked [AMAC] to … get the maximum return for us”394. There was no
mention at all that the investment was in the Crossover, let alone that it was
for “spiritual return” or both spiritual and financial return from the Crossover.
The failure to mention those facts buttresses my conclusion that the accused
393
CH-28.
394
CH-25.
251
persons knew that they were not legally entitled to cause CHC to enter into the
Xtron and Firna bonds.
468
As revealed by the evidence adduced at trial, there was never any
financial return derived from any of Xtron’s and Firna’s Crossover-related
activities. Instead, when the time came to deal with the auditors’ queries and
to address Sim’s concerns, they resorted to removing more funds from the BF
and also the General Fund under the pretext of making further “investments”
into the SOF Tranches 10 and 11 and for a building purchase by Xtron through
the ARLA. The evidence plainly reveals that the true purpose of the funds
used in the round-tripping transactions was to enable the “redemption” of the
Xtron and Firna bonds CHC had purchased. The round-tripping transactions
were crafted to create the appearance that these were genuine transactions
involving the redemption of bonds when they were not. They were not
genuine transactions because the accused persons controlled these transactions
every step of the way, and the substance of it was that CHC was channelling
money through various conduits in order to pay itself.
469
Given that Ye Peng, Eng Han, Serina and Sharon were fully aware of
the whole series of transactions, they could not have believed that Tranches 10
and 11 of the SOF were genuine investments, or that the payment under
ARLA was a building-related expense. They say that they viewed all this as
“restructuring”, but that to my mind is fundamentally inconsistent with a belief
that the transactions were genuine investments or building-related expenses,
and this inability to provide a coherent explanation for their conduct strongly
suggests that they knew they were not legally entitled to cause CHC to enter
into these transactions. They may have apprised the CHC board of an earlier
version of the transactions, but they kept that knowledge from the lawyers and
252
the auditors. Taking into account all the circumstances, I am satisfied beyond
reasonable doubt that the fourth to sixth charges have been made out against
them.
470
I am also satisfied that there was falsification of CHC’s accounts
following from the attempts to disguise the SOF and ARLA transactions as
genuine transactions. In relation to the ninth charge, the accounting entry
recording a redemption of Xtron bonds in the form of a set-off against advance
rental was false, because it was not a case of CHC and Xtron making
independent decisions to pay advance rental on one hand and redeem bonds on
the other. I find that the accused persons knew that false accounting entries
would have to be made pursuant to their plan to create the appearance of
redemption of bonds, and hence I find that they each had intent to defraud. I
am therefore satisfied that the seventh to tenth charges have been made out
against Ye Peng, Eng Han, Serina and Sharon.
471
As for when a conspiracy first took shape in relation to the charges
alleging that 18 January 2007 was the start date of the conspiracy among the
five accused (excluding Sharon), only Serina and Ye Peng appear to be
involved in an email communication on 18 January 2007. Nevertheless, Eng
Han and John Lam were also in the loop as Board members from 18 January395
due to Serina’s email about CHC paying Xtron marked-up rental as a
commercial justification or pretext to make Xtron look independent by
charging a “markup” rate, for “only then will it be deemed an arms length
transaction”. This idea was initiated by CHC and not Xtron, further
395
E-457.
253
demonstrating Xtron’s lack of independence and CHC’s complete control over
Xtron. Serina had also prepared a spreadsheet showing album losses and the
$11.24 million loan needed by Xtron396 and by January 2007 it was clear thar
there was an urgent need for funding for Xtron and the US Crossover plans.
Others were roped in to participate more fully along the way eg. Eng Han and
John Lam but all of them were aware of and aligned to the end game which
was to put Xtron in funds for the US Crossover. After the attempt to secure a
loan from Citic Ka Wah was aborted, it was eventually decided that this would
be achieved through the use of CHC’s BF.
472
By 9 May 2007, Serina informed Kong Hee that the budget had
increased and the loan Xtron needed to do another album” would be raised
from $6.95m to $10m or $10.5m397. Since the loan from Citic Ka Wah was not
practicable, they decided it was ultimately easier to simply take available
funds from CHC’s own coffers. The temptation to use a sizeable and ready
source of funds was probably too much to resist especially when it was
becoming harder to continue to sustain the Crossover like before based on
individual pledged amounts and when there were burgeoning financial
demands from the US producers. Thus the Xtron and Firna bonds came into
being as devices designed for expediency and convenience: to allow BF funds
to be used to support Sun Ho’s music career under the guise of investments for
financial return.
473
When Sim raised his concerns about impairment and related party
issues during the meeting of 9 April 2009, this provided the impetus for the
396
E-191.
397
E-537.
254
conspiracy in relation to the round-tripping charges. They conspired to enable
the “redemption” of the Xtron and Firna bonds using CHC’s own monies to
avoid further queries and scrutiny from Sim, as he was not convinced by their
“stories” and would only probe deeper if more such “stories” were put forth398.
Finally, the conspiracy in relation to falsification of the accounts was to create
false appearances that the funds involved in the round-tripping were
channelled for legitimate and genuine transactions.
474
Given this context, I find that the accused persons were variously
inextricably entangled in conspiracies to misuse CHC’s funds. One conspiracy
consisted of misusing BF monies for the Crossover, and the other involved
misusing CHC’s funds, a substantial portion of which comprised BF monies,
to create the appearance of bond redemptions and to defraud the auditors via
falsified accounts through the various roles they played. Each of them
participated and functioned in their own way as crucial cogs in the machinery
and although there are distinctions in their respective levels of knowledge and
participation, I am unable to discern any rational basis to exclude any of them
from being implicated and characterised as conspirators. The evidence points
ineluctably to the existence of an agreement or “meeting of minds” crucial to
prove a conspiracy, even if there was no actual physical “meeting” where such
an agreement can be said to have been obtained. Logically therefore all the
accused persons should be considered part of the conspiracy in relation to their
respective charges.
398
E-68.
255
Observations on the accused persons’ beliefs, motives and mindset
475
I note that there was an extensive record which comprised an elaborate
patchwork of emails, Blackberry messages, phone SMSs, hard copy
documents and numerous other documented exchanges in some form or other.
I would not wish to speculate on the existence of other communications or
documents which may now no longer be retrievable but the possibility of there
being such other material in existence earlier cannot be ruled out. The fact that
there was however a mass of available evidence which when woven together
amounted to a paper trail is not necessarily indicative of innocence. In my
view insofar as much of it was incriminating, it is more suggestive of a
mindset of presumptuousness or boldness, demonstrating that the accused
persons were overconfident in their belief that they could somehow replace the
funds in time before suspicions were aroused.
476
The case against the accused persons depended heavily on inferences
to be drawn from the objective evidence. Much of these inferences can be
readily drawn as the tenor and language in the communications adduced at
trial strongly point to their dishonest intent. In short, the documentary
evidence goes a long way in demonstrating their subjectively guilty
knowledge. I am not convinced that they have raised any reasonable doubt in
this regard.
477
Much of the defence centred on the beliefs and motivations of the
accused persons. It may seem unlikely and even counter-intuitive that the
leaders and senior members of a church who were motivated by a desire to
spread the Christian faith would have consciously chosen to act dishonestly.
Indeed, if it can be shown that they genuinely, honestly and reasonably held
the view that what they were doing was legitimate in the sense that they were
256
legally entitled to do it, and they went ahead to act in good faith as a result, I
think there may well be room for doubt as to whether they had acted
dishonestly. The weight of the evidence however points to a finding that they
knew they were acting dishonestly and I am unable to conclude otherwise.
478
At the centre of the first to third charges is how the BF came to be
applied for the Crossover when it was a restricted fund for specific purposes –
either for building or investment. In my judgment, the Crossover was not one
of these purposes. It was not an investment since by their own
characterisation, it was meant to serve a “missions” purpose all along. Eng
Han had wondered out loud “why they all took so long to come back to the
original stand that what we are doing is missions”399. I am not convinced that
there was any “mixed motive”, “dual purpose” or “hybrid” intent behind the
use of the BF. These are creative labels tacked on in an attempt to strain and
stretch the plain meaning of the word “investment”. They were plainly
fabricated in an attempt to justify their past conduct and misuse of the BF.
479
The accused persons were aware from the start that the Crossover was
intended to serve a missions purpose. It appears that it was only upon Eng
Han’s insistence that they chose to hedge their bets and rely on the strained
“dual purpose”, “mixed motive” or “hybrid” investment defence and also
attempt to redefine the SOF transactions as “restructuring”. In my view, Eng
Han’s efforts at revisionism amply showed the lack of bona fides in their
defence. He expressed his concern in February 2013, well after CAD
investigations commenced in May 2010 and they were charged in court in
399
BB-90.
257
2012, that their defences were “substantially not on the same page”400.
Genuinely innocent conduct would not require nearly three years for a
coherent defence to crystallise; the defence would have been a simple and
earnest plea where the truth rings out loud and clear because it is
straightforward, candid and consistent. But regrettably, the six accused had
operated for so long under a cloud of insecurity and a fear of being open and
transparent due to their self-imposed vow to be discreet, ostensibly to avoid
another Roland Poon incident, that it would perhaps not have been easy to be
straightforward, candid or consistent.
480
Kong Hee had to admit that funding of the Crossover through whatever
means they employed could only be termed an “investment” in a very loose
sense401. When cross-examined by Eng Han, he initially mentioned that he did
not consider the Crossover itself to be a financial investment but he primarily
only had an expectation of “spiritual return” when the Mandarin albums were
launched. He subsequently agreed with Eng Han that the Xtron and Firna bond
investments had two purposes: missions and financial return, and both were
“equally important”402. But his evidence shifted later when he stated that the
Xtron and Firna bonds were investments “first and foremost to maximise
returns”, with a “secondary purpose of achieving the missions of the
church”403. He later went on to say that the bonds were “first and foremost a
genuine investment that brings the church good returns” with a different
“secondary purpose” of capitalising Xtron and Firna for their use for the
400
E-831.
401
402
403
258
Crossover404. These are all subtle but telling shifts that reflect Kong Hee’s
inability or unwillingness to come to terms with what the use of the BF was
really motivated by from the outset. The same can be said of the other accused
persons as well as they took their cue from Kong Hee and Eng Han.
481
Section 52 of the Penal Code requires that acting in good faith means
that a person claiming to have done so must have acted with due care and
attention. This is helpful in framing the parameters for the enquiry, for if the
accused persons did not exercise due care and attention, ie, they were reckless
or even grossly negligent, they would prima facie not have acted bona fide.
This permits a strong inference that they were dishonest. Proof of dishonesty
in the present context requires positive knowledge that their conduct was
illegal and a lack of bona fides is one of the indicia of dishonesty. I do not see
how they can be said to have acted in good faith in relation to the charges they
face. As set out in the preceding paragraphs, I am satisfied that each of the
accused persons had acted dishonestly.
482
The evidence also shows that where professional advice was sought,
this was really mainly an attempt to seek out self-supporting confirmatory
advice based on selectively-disclosed information. They omitted mention of
the crucial fact that CHC remained in control of Xtron and would
correspondingly control the use of the funds. They provided leading questions
for belief confirmation and support from only those advisors whom they
trusted to support the Crossover vision and were quick to reject or filter out
any disconfirming information. Their interactions with Foong and the lawyers
404
259
would seem to suggest so. On the other hand, especially when dealing with
auditors other than Foong, in particular Sim, they sought to suppress other
relevant information and unilaterally decided what the auditors needed to
know.
483
In his closing submissions on behalf of Ye Peng, counsel emphasised
that the prosecution’s case smacked of a “very odd conspiracy” where the
conspirators were “almost living in a fantasy world of communicating with
each other as if what they are doing is honest and sincere”. Without reading
too much into the rhetoric employed for an oral submission, I think it is
helpful to step back and ask two questions: first, whether there was truly open,
honest and sincere communication among themselves and second, why there
may have been an appearance of a “fantasy world”.
484
I do agree with the point that this was a “very odd conspiracy”. In this
regard when one examines the first question, as I had explained in relation to
John Lam’s defence, the picture that emerged during the trial was that there
was, rather ironically, a lack of open, honest and sincere communication even
among themselves. None of them was aware of all the details, including Kong
Hee. Eng Han suggested there was miscommunication in his exchanges with
Serina. Ye Peng and Serina did not know what Justin was being paid more
than $1.3 million for in 2006. Perhaps this was because there were far too
many moving parts in their plan for the US Crossover which grew increasingly
ambitious over time. But this may have also been the inevitable consequence
of CHC’s election to carry out its affairs and operations relating to the funding
of the Crossover in a discreet fashion. This was merely a euphemism for a
culture of insecurity mired in secrecy and opaqueness where asking difficult or
awkward questions was taboo. Thus the short answer to the second question is
260
that if there was an appearance of a “fantasy world”, it was one which the
accused persons had contrived to create for themselves – but more importantly
for others outside CHC as well.
485
Theirs was a world where, in Kong Hee’s words, “reality is a
limiter”405, where boundless confidence, hope and optimism will prevail. Ye
Peng said that “for us, it makes sense” but conceded that “outsiders may not
understand”406 CHC’s workings, “the way we talk or the lingo” because of the
separation between the church and the world. Eng Han even described Xtron
as being “out of this world” and a “different creature” in terms of how it was
run407. It may not even have been easy for “insiders” to understand CHC’s
workings – I recall Kong Hee’s undisguised frustration that “our members
don’t get it” when Sun Ho’s CD sales did not meet his targets 408. The
“separation” that Ye Peng spoke of was ambiguous in more ways than one.
Was Sun Ho a secular pop singer or an evangelist (or both) or was the
Crossover itself a secular project or evangelical (or both)? Kong Hee’s vision
was that there could be a happy union of both concepts and there was no doubt
some support for this but evidently not everyone within CHC bought into his
vision.
486
The accused persons knowingly participated and facilitated the bond
investments and the round-tripping transactions, as well as the falsification of
the accounts to defraud the auditors as a necessary consequence. They were
405
CH-25 p 15.
406
407
Transcript 3 February 2015, pp 8, 12.
408
E-863.
261
trusting of Kong Hee, and both willing and eager to be led by Kong Hee’s
vision for CHC. They trusted and relied on Eng Han’s experience and
expertise in financial matters. Eng Han maintained CHC’s members were not
misled simply because they did not have full knowledge, but explained that
this was in deference to the “wisdom” of their leaders409. In choosing to
participate and facilitate the transactions, however, they had abetted each other
in a conspiracy. They operated on the premise that this was justified by the
vision and mission of CHC which they supported. But the claim to be not
conscious of illegality or dishonesty is not persuasive in the face of obvious
evidence showing otherwise.
487
Why they chose to support the Crossover vision goes to their motives
for acting as they did but the primary focus in determining whether there is
dishonesty is intent, not motive. Intent should be framed in terms of what the
purpose or objective was ie. to misappropriate and use BF for the unauthorised
purpose of funding the Crossover and yet making it look as if genuine bond
transactions had been entered into with Xtron and Firna. In relation to the
round-tripping charges, the intent is similarly to dress up the SOF and ARLA
transactions to look as if they were genuine transactions when they were really
meant to enable the “redemption” of the Xtron and Firna bonds using CHC’s
own funds.
488
During the EGM on 10 August 2008, Kong Hee had enjoined the CHC
members thus: “don’t ask, don’t tell”410. Ironically, John Lam had described
the way CHC organised its corporate affairs through its associated companies
409
410
CH-25 pp 27, 28.
262
and various committees in his email of 13 September 2006 in this manner:
“Wow, this is the Matrix … only the Chosen One can break the riddle” 411.
While knowing there was increasing complexity and ambiguity surrounding
their activities, the comforting thought was that choosing not to ask questions
is easier. It certainly takes less effort to trust and believe than to doubt, hence
biases towards trust and belief are quick and easy. This was indeed a “very
odd” conspiracy since they possessed different degrees of knowledge and had
participated to different extents, content not to ask too many questions but to
trust and believe. But this does not detract from the fact that a conspiracy
nonetheless existed as averred in the various charges.
489
All the accused persons chose to fall back on their biases, their beliefs
and the people they trusted. In surrendering to the authority of the larger
purpose so persuasively articulated and communicated by Kong Hee, the other
five accused persons became responsible to it. They wanted to ensure that
their conduct and their choices lived up to Kong Hee’s expectations. In doing
so, they blinded themselves to both the alternatives to obedience and to moral
responsibility for their actions. Under such circumstances, there are few if any
concerns about ethical boundaries. A striking illustration is when Serina tried
during cross-examination to explain away obvious misleading statements in a
“Company Profile of Xtron” which she prepared for Kong Hee and Ye Peng
on 24 May 2010 by claiming thus: “it’s not that they were not told the whole
truth; it’s just a choice of words”412. Her explanation underscores the point that
their choice of words, whether in terms of what to disclose as well as what not
411
E-673.
412
E-870, Transcript 18 May 2015, p 12.
263
to disclose, was not merely sometimes careless or sloppy; more often the
intent was to create false and misleading impressions.
490
The more committed the five accused persons (other than Kong Hee)
became to the Crossover vision, the more obedient they became. They fell
within the “circle of trust” which enjoins those who are trusted and trusting to
commit themselves unquestioningly to support the cause. But when they go
further to convince themselves that the end justifies the means and consciously
choose to support both the means and the end, and play an active role in
executing those means, their conduct can only be characterised not merely as
being misguided but dishonest.
491
Leaving Kong Hee aside, all the remaining five accused persons had
failed to question their own claims of trust and belief in Kong Hee’s vision
and the wisdom of his chosen path to the end goal. Each of them may well
claim that he or she was merely doing his duty, and if guilty of anything it was
failing to question Kong Hee as their spiritual leader. The evidence however
shows that they acted with full awareness of the consequences. They
consciously chose to go ahead with enthusiasm, resourcefulness and not a
small measure of guile. This was not a case where they had acted unthinkingly
and without reflection even though they appear to have willingly surrendered
their moral judgment and critical thought to the situation in which they found
themselves. They were not acting mindlessly as automatons would. They
chose to support the Crossover vision and to act and participate in acts in
support of it.
492
Trust and belief were the key underpinnings for their motives and
conduct. The accused persons’ beliefs became in effect rules for action.
Trusting in Kong Hee’s vision about the Crossover’s potential, they were so
264
emotionally invested in their beliefs that they were unwilling to recognise
them as anything but the inviolable and unassailable truth. The Crossover
therefore became a comprehensive logic for justifying their beliefs and
actions, and for doing whatever was expedient for its advancement. The
pervasive mindset seemed to be one of short-term expediency; the use of
means involving dubious methods was worth the risk to them if there was
some hope of longer-term gain. Choosing not to question those surreptitious
and convoluted methods does not however make the methods any less
questionable.
493
Throughout the trial, all the accused persons maintained their
innocence and insisted under oath that they have done no wrong if their
motives are pure. Eng Han maintained that he “always believed that the
Crossover was a work of God. It couldn’t turn into a conspiracy” 413 and
whatever he did, it was “with a frame of mind that this is a project from
God”414. But Eng Han also recognised that “God is not going to do a miracle
when the foundation is not real”415. More so when the foundation for all they
had done was clearly tainted and knowingly premised on false pretences and
bogus appearances as well as half-truths, which as I have earlier said, are still
whole lies.
413
414
415
265
Conclusion
494
In their defence, all six accused persons testified largely to the same
effect: they love CHC and would not have wished to do harm to CHC. They
never intended to cause loss to CHC. They consulted and cleared their
proposals with their lawyers, the auditors and the CHC Board. They were
motivated by CHC’s cultural mandate and they believed in the Crossover
vision. They pointed to pure motives and a justifiable purpose in the use of
CHC’s funds. Ultimately the funds which were removed were for Church
purposes and were returned to CHC.
495
The crux of their defence was that there was no conspiracy and no
dishonesty. All six would never intend to cause harm or loss to CHC and the
ultimate objectives were in furtherance of the Great Commission. It may be
arguable that all of them thought they were not acting dishonestly to cause
wrongful loss since no permanent loss was intended, but this was premised on
their unquestioning trust and belief in Kong Hee and their confidence that the
Crossover would succeed. Thus they convinced themselves that it was both
morally and legally permissible to temporarily use the money from CHC’s
funds when they knew it was not.
496
When the lines of ethical behaviour are blurred, it is easy to cross the
lines. In Eng Han’s pithy words, “most of us didn’t know where that line
exactly was” – but the accused persons chose to blithely ignore the boundaries
and elected to convince themselves that their actions were justified by a pure
motive and noble purpose. They blindsided themselves to their own caution to
always look to substance over form. Even accepting hypothetically that there
was any lack of individual consciousness of wrongdoing, this was really also a
vivid illustration of wilful blindness.
266
497
Their committed zeal for the Crossover vision may have clouded their
objectivity and judgment and obscured the need to safeguard money which
was not theirs to use as they wished. In particular, the BF came from donors
who had given their funds to CHC for a specified and restricted purpose. John
Lam, Ye Peng, Eng Han, Serina and Sharon were not just blind followers; they
are the leaders and/or part of the most trusted inner circle of CHC. They were
both trusted and trusting. Kong Hee would not have been able to act alone and
could not orchestrate, monitor and manage every move. Collective
responsibility goes beyond the moral and ethical aspects; actively engaging in
illegality must entail individual criminal responsibility for consequences as
well and they must therefore all be held to account if they have crossed the
line.
498
As far back as 1913, Louis Brandeis (later Justice of the US Supreme
Court) reminded us that sunlight is the best disinfectant. Echoing this wellknown adage, it has been said that the truth is the best weapon against any
misinformation or in CHC’s context, any potential allegations of “all kinds of
baseless things” which had caused them so much concern416. Instead, the
accused persons chose to engage in covert operations and conspiratorial coverups. They contrived to create cover stories and clever round-trips concealing
their unlawful conduct. The allure of power that can be exercised in secrecy is
difficult to resist. When shrouded under a cloak of invisibility, much like the
mythical ring of Gyges, persons in such positions of power have no fear of
accountability and tend to become their own worst enemies. It has thus been
wisely said that the real tragedy is when men are afraid of the light, and if they
416
E-322
267
choose not to come into the light they do so for fear that their deeds will be
exposed, as they surely will in time.
499
Eng Han believed that no one in CHC felt misled and no one
complained about the Crossover. This assertion was cast in absolute terms, but
Kong Hee concedes that it would not be right to claim that everyone in CHC
was 100% in support of the Crossover. But if indeed no one among the six
accused was misled, it was because they willingly chose to be thus led. They
chose to participate in the conspiracy to misuse CHC’s funds, which included
siphoning off large amounts from the BF for Sun Ho’s music career and
eventually for the round-tripping transactions to enable the bond redemptions.
They chose to defraud the auditors with falsified accounts suggesting a series
of genuine transactions for redemption of bonds and advance rental. The
evidence points overwhelmingly to a finding that they had all acted
dishonestly and in breach of the trust reposed in them and they played their
respective roles in a conspiracy with intent to cause wrongful loss to CHC and
to defraud the auditors.
500
I am therefore satisfied beyond a reasonable doubt that the six accused
persons are guilty of all the charges that have been brought against them. I
note that all of them believed that they had acted in what they considered to be
the best interests of CHC. There is no evidence of any wrongful gain – that
was never the prosecution’s case in any event as the charges were premised on
wrongful loss caused to CHC through the misappropriation of CHC’s funds.
501
I consider that John Lam, Eng Han, Serina and Sharon were all acting
in accordance with the instructions of people they considered to be their
spiritual leaders deserving of their trust and deference, and Ye Peng, although
a leader in his own right, similarly trusted completely the leadership of Kong
268
Hee. But no matter how pure the motive or how ingrained the trust in one’s
leaders, regardless of the context in which that trust operates, these do not
exonerate an accused person from criminal liability if all the elements of an
offence are made out. In my judgment all the elements of the relevant offences
have indeed been made out. Accordingly, the accused persons stand convicted
as follows:
(a)
John Lam is convicted on the first to third charges;
(b)
Kong Hee is convicted on the first to third charges;
(c)
Sharon is convicted on the fourth to tenth charges;
(d)
Eng Han is convicted on the first to tenth charges;
(e)
Ye Peng is convicted on the first to tenth charges; and
(f)
Serina is convicted on the first to tenth charges.
See Kee Oon
Presiding Judge
Mavis Chionh Sze Chyi SC, Tan Kiat Pheng, Christopher Ong Siu
Jin, Grace Goh Chioa Wei, Joel Chen Zhi’en, Jeremy Yeo
Shenglong, Tan Zhongshan and Eugene Sng Yi Zhi (AttorneyGeneral’s Chambers) for the prosecution;
Kenneth Tan SC and Soh Wei Chi (Kenneth Tan Partnership) and
Nicholas Narayanan (Nicholas & Tan Partnership LLP) for the first
accused John Lam Leng Hung;
Edwin Tong SC, Aaron Lee, Jason Chan, Lee Bik Wei, Kelvin Kek,
269
Lee May Ling and Jasmine Tham (Allen & Gledhill LLP) for the
second accused Kong Hee;
Paul Seah, Calvin Liang, Ho Xin Ling, Cheryl Nah and Tan Jie Xuan
(Tan Kok Quan Partnership) for the third accused Tan Shao Yuen
Sharon;
The fourth accused Chew Eng Han in person;
N Sreenivasan SC and S Balamurugan (Straits Law Practice), Chelva
Rajah SC, Burton Chen, Chen Chee Yen, Megan Chia and Lee Ping
(Tan Rajah & Cheah) for the fifth accused Tan Ye Peng;
Andre Maniam SC, Liang Hanting and Russell Pereira
(WongPartnership LLP) for the sixth accused Serina Wee Gek Yin.
270

judgment - State Courts

Transcription

Similar documents

Current Newsletter - Christadelphian Heritage College

April 2014 - Crafton Hills College

October 2014 - Crafton Hills College

October 24 - The Medical Center

Ndwedwe CHC newsletter : September

Tupperware Children Helping Children

Chiropractic Healing Center News