Prosecution accuses Kong Hee and team of proceeding with $13m of Xtron bonds when projections of low music album sales meant that church would only recoup its investment in 10 years; Kong justifies that revised sales projection figures later on delivered a much more positive outlook.
The prosecution submitted a 2007 email this afternoon in which Kong had proposed having church members buy at least 13,000 copies of Sun Ho’s fourth Mandarin album,Embrace, in order to cover the album’s production costs.
“See if we can do 20,000,” he allegedly suggested. Asked to explained the evidence, Kong clarified that while church members were encouraged to support Ho, it was done on a freewill basis.
The prosecution sought to paint a picture of Xtron’s less than favorable financial performance this afternoon, as it zeroed in on its “sham” bond accusations against Kong Hee.
Deputy public prosecutor Christopher Ong charged that Kong and his team went ahead with the Xtron bond investments even though Xtron was making sizeable losses and there was “no reasonable prospect of return.”
The court saw in a spreadsheet that projected losses from Ho’s Asian albums and US singles was estimated at $10m, between 2003 and 2007.
The court then saw another spreadsheet sent by co-accused Serina Wee showing that Xtron could only repay the $13m bonds it had issued to the church in 10 years. Wee had based this 10-year bond redemption period on projected album sales of 200,000 units CDs of Ho’s US music album.
The DPP asked why Kong and his team went ahead with the Xtron bond investments if it would take the church 10 years to recoup its investments.
Kong replied that he was not aware of discussions going on among the other co-accused about sales projections based on such a low estimate of CD sales. What mattered was that eventual sales projections had been pegged at 1.5m units of album sales, Kong said, and this would have allowed Xtron very favorable prospects of return on investment. As such, it would not have required 10 years to redeem its bonds.
Ong pointed out that Kong’s lack of awareness about the 200,000 CD sales projection was inconsistent with the Commercial Affairs Department (CAD) statements of the other accused—Wee, Tan and Chew—that Kong would have known about the conservative 200,000 unit album sales projection.
Auditor Sim Guan Seng had testified that he was also not aware of this 200,000 unit album sales projection while he was on the stand earlier this year, Ong reminded the court.
Kong repeated that he was not aware of Wee’s reasons for projecting a sale of only 200,000 album units, which varied vastly from his eventual projection of 1.5m units; nevertheless, his state of mind prior to the signing of the Xtron bond agreement was that there would be reasonable prospects of return.
This he sought to show by pointing out that the last budgeting exercise he had conducted with Wee had been on the basis of 1.5m units sold. Kong then referred the court to the corresponding budget spreadsheet dated May 2007, before the Xtron bond agreement was signed.
He further stated that he left it to his team to iron out bond technicalities—if there was a problem that they could not solve, they would have approached him. The 200,000 unit album sales projection seemed to have been simply a worst case scenario planning conducted by Wee, posited Kong.
In any case, Xtron’s cashflow problem was eventually solved through Chew Eng Han’s proposal to extend the maturity date of the Xtron bonds, Kong stated, and that could have been why no red flags were raised to him.
Court resumes at 9:30am tomorrow.