The prosecution asks who made the ultimate decision when it came to financing of the Crossover Project. Kong replies that he carried out the legwork, strategizing, execution and budgeting, but the final decision was for the Xtron directors to make.
As a pastor and a shepherd, he would want to take responsibility for a whole host of things, Kong Hee said this morning, but there was a “division of labour” among the team members and he was not responsible for the structuring of the bonds. This was in reply to the prosecution’s question on whether he would be responsible if the financing done by Tan Ye Peng and Chew Eng Han had been illegal.
Kong added, “I did the best I could.”
Deputy public prosecutor Christopher Ong reiterated this morning that Kong has taken the position that he played no role in the financing aspect of the Crossover. Attempting to paint Kong into a corner, he asked the senior pastor whose fault it would be if the financing of the Crossover had been done illegally. Kong replied that it was not up to him to give a speculative answer to a hypothetical question and that he would leave it to the court to decide if he was responsible or not.
Kong added that as a pastor and a shepherd, he would want to take responsibility for many things. He explained that the team had a division of labor and while the financing aspect had been tasked to co-defendants Tan Ye Peng and Chew Eng Han, they had constantly sought advice from lawyers and auditors regarding the financing matters and no red flags had been raised. Kong added that he was not well-versed with things like loans and investing in financial instruments.
Kong told the court that his area of focus—budgeting—took up a lot of time, and that he would not have done it if there had been someone else to handle it. He also explained that the Xtron directors had tasked him to handle the budgeting, hence it was his responsibility.
CHURCH MANAGEMENT BOARD POST-APPROVED SIGNED CONTRACTS?
The prosecution put forth that around 2001 when the Crossover Project was in its the early days, Kong had signed contracts without formal authorization from the church board. He asked Kong if he did so because in his position as the founder and leader of the church, he could do whatever he wanted, confident that the board would go along with his vision.
Kong conceded that while no formal authorization had been sought, he had the agreement of the board, having made church members and the board aware of the contracts offered to his wife Sun Ho by Sony Music and Decca Records. He said board members had not objected and the directors of City Harvest Private Limited, which managed Ho at that time, gave approval. Kong replied that as such, in his state of mind at that time, there was no reason to think that the board would not approve. Subsequently, in 2002, the management board ratified the previous contracts and empowered Kong to sign contracts relating to the music album.
BUDGETING TOOK PLACE WHILE FINANCING WAS BEING WORKED OUT
The DPP accused Kong of being evasive and continued to question him regarding the relationship between the budgeting and the financing aspects of the Crossover. How could one budget without knowing if there was the finances to afford it? asked the DPP. Ong gave an analogy of buying a car, that one would first figure out the cost of a car before deciding to buy it.
Kong replied that if he knew of a good car after having done his research and spoken to the car dealers, he would find out the cost, and go back to check if he could get a bank loan or some form of financing to see if he could afford to pay for the car.
Kong told the court that he would update Wahju Hanafi regarding the Crossover budget, and if the budgeting was within reason and doable, Hanafi, as a director of Xtron, would give the go-ahead. Hanafi had also given a personal guarantee that he would underwrite any losses incurred. Subsequently in 2010, Hanafi was asked to make good on the Crossover expenses and he did so.
KONG’S INVOLVEMENT IN THE BONDS
The prosecution also questioned Kong’s knowledge of the details of the Xtron and Firna bonds. Kong said that while he was not involved in the structuring of the Firna bonds, he had a general knowledge of it. Chew and Tan had also told him that the proceeds of the Firna bonds would be used for the Crossover. Kong told the court it was the church board that made the final decision on the Xtron bonds.
Ong asked Kong if he gave instructions on when to draw down the proceeds of the bond. Kong replied that he would only give Ultimate Assets, Sun’s artist manager, the budget for the US album; once they agreed to the budget, his role was to ensure that they honored it, especially when it came to the payment.
WHO HAD THE FINAL SAY ON CROSSOVER PROJECT?
Going through statements that the defendants had given to the Commercial Affairs Department, the prosecution also questioned Kong on his level of authority on the decision-making for the Crossover budget.
Kong’s evidence was that he would, with co-accused Tan and accountant Serina Wee, discuss and decide on the final budget; it would then be submitted to the Xtron directors for approval. Ong took issue with the fact that Tan’s, Wee’s and Chew’s statements said nothing about seeking approval from the directors. Tan had told the CAD that they would only meet the directors after the decision to produce an album had been made, and Chew had said that the directors were not actively involved in the Crossover. Kong explained that the directors had tasked him and the team to work on the Crossover as they were not familiar with the music industry; however, they were business people and would know how to perform their duties as directors. He maintained that the Xtron directors had the authority to make the final decision.
Court resumed at 2.30pm.
The $1m Ferrari Question
This morning in court, the prosecution drew an analogy between the budgeting of the Crossover and buying a Ferrari.
Prosecution: You would not start your search for a car by deciding,”I want to buy a Ferrari”, then you go to the Ferrari dealership, you talk to the salesman, you agree a price for the Ferrari — and, really, I have no idea how much a Ferrari is, I think it’s about $1 million. You tell him all the extras you want, special spoilers, things like that, then you go and check you have your bank account and find you have $100,000 and can’t afford a Ferrari. You wouldn’t do it that way, correct?
Kong Hee: Your Honour, if I want to buy a car and, let’s say I know it’s a very good car and I went and do my background research, went to the car showroom, talked to the car dealer, and then I realise that it costs this amount of money, then I go back and check how much I have in the bank. Then I want to find out could I get a bank financing for it, and then I want to find out can I support the bank — I mean, can I support the payment. If I can’t, I won’t go ahead with it.
I think it’s pretty much like that for the US Crossover. We had no track record of doing this before. I didn’t know — none of us on the team in Xtron — how much the US album would be. So we did the budgeting, also a means to find out how much it would cost. Then we would bring it back to the Xtron directors, see if they are comfortable with it, see if we could get bank financing, see if we’re able to get some form of financing. If we’re able to support it, we go ahead with it. If we can’t, then we won’t.
Prosecution: Mr Kong, your response was that you would go to the car showroom, you talk to the car dealer, you find out how much it costs, then you go to the bank and try to find financing. So if you really want the car, you will try to get the funds for it. That’s what you are saying, right?
Kong Hee: I would try, if it’s reasonable.
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