Prosecution disputes genuineness of church’s bond investment on the basis that there was never an intention for Xtron to make good its liability to CHC; Kong disagrees, stating that church would enforce legal obligations had it been necessary.
Evidence presented in court this afternoon by deputy public prosecutor Christopher Ong suggested that the terms of the Xtron bond agreement—its amount, interest rate and maturity period—were determined unilaterally by Kong and his team, without negotiating with Xtron’s directors.
Reiterating its position, the prosecution further put forth that the Xtron directors were merely rubber-stamping the decisions made by Kong, Serina Wee, Tan Ye Peng and Chew Eng Han—and that they, not the Xtron directors, controlled the drawdown of the bonds each time payment was requested from US music producer Justin Herz.
This was to ensure that City Harvest Church’s funds could be easily channeled when needed, said the DPP.
Ultimately, the Xtron bonds were “sham” because it was never intended that Xtron would be responsible for repaying the church, suggested Ong.
Kong disagreed, stating that the bonds could not be a sham investment because Xtron had every intention to fulfill its legal obligations to CHC.
“Was City Harvest prepared to sue Xtron to recover the $13m if Xtron was unable to repay?” Ong challenged.
“If Xtron was not able to fulfill its legal obligation, then the church would have to sue Xtron,” came Kong’s reply.
Kong also told to the court that an overall budget had been agreed on with the Xtron directors; in fact, accountant Serina Wee had met up with both Xtron directors at the time, Choong Kar Weng and Wahju Hanafi in early May 2007—before the Xtron bond agreement was signed—in order to go through the budget as well as album sales projections, which showed strong prospects of recoverability by Dec 2008.
Kong explained that it was only after that budget had been approved by the Xtron directors that Kong and his team were subsequently authorised to make drawdowns for individual expenses.
The prosecution then showed an email in which Tan conveyed to Kong possible ways for Xtron to repay the $13m bonds owed to the church, and asked why it was Tan’s responsibility to do so.
It was because the album launch had been delayed, replied Kong.
But why was Tan talking about a scenario that involved a 300,000-unit sales projection that was 1.2m units less than Kong’s own sales projection of 1.5m units sold?
“Your Honour, I think in the course of my days in the witness stand, I believe that there are documents to show that we always have a lot of scenario planning on a worst-case scenario, on a cataclysmic scenario and we just—that is just us. We like to plan a worst-case situation to see how are we going to solve a problem if something cataclysmic happened, rather than to wait for it to happen and then to be caught unprepared,” Kong replied.
This corresponded with a separate email the court saw yesterday, in which Wee had made projections based on 200,000 units of album sales. Ong had posed a similar question to Kong, taking issue with the “fluctuating” sales projections between Kong and other members of his team.
“I put it to you that it’s unbelievable that you would spend time working on a worst-case scenario that was 1.2 million away from what you say was your actual projection,” said the prosecutor.
Kong pointed out that this was, in fact, consistent with how he and his team conducted their scenario planning exercises; at the time of that particular email, projections from Herz were pegged at 1 million units of albums sold. Thus, Kong had told his team to work on a one-third revenue scenario.
Ong persisted. “I put it to you that what is reflected … is not just scenario planning for a worst-case outcome.”
Kong answered, “I disagree, in the presence of an abundance of budgets that prove otherwise.”
Court resumes at 9:30am tomorrow.
Prosecution Questions Nature Of “Intense Conversations” Between Kong Hee And Xtron Director Wahju Hanafi
In presenting its case today, the prosecution sought to show that the accused were controlling the drawdowns of the Xtron bonds instead of the Xtron directors; Kong told the court that the drawdowns were made only after an overall budget had been pre-agreed with the Xtron directors.
An Aug 2006 email, however, showed that Kong had agreed to pay US music producer Justin Herz a seemingly “ad-hoc” payment of $300,000, which was outside the scope of this pre-agreed budget.
Kong explained that this could well have been part of a subsequent phase of the Crossover Project; the Xtron directors would have been informed by Serina Wee of the payment later on, to ensure that they had “no problem that I had send the money earlier.” He stated that if they had a problem with it, he would have a “very intense conversation with Wahju Hanafi.”
DPP: Can you explain to us what you mean by you would have a very intense conversation with Wahju Hanafi?
Kong: Wahju would talk to me about it, and we did have a number of intense meetings, your Honour, and—so this is an unanticipated payment and eventually it was part of the phase 5 budget that was accepted by Wahju and Kar Weng.
DPP: Sorry, what do you mean by “intense conversation”?
Kong: In other words, he might scold me.
DPP: Scold you for doing what?
Kong: Overspending the money.
DPP: Was it his money you were spending?
Kong: It’s Xtron’s money.
DPP: Is Xtron’s money his money?
Kong: No, but he’s the director, your Honor.
DPP: So he has no problem with, for example, agreeing to $13m in bonds being committed to by Xtron as a liability, but he would scold you for sending $300,000? Although in this case.
Kong: He didn’t.
DPP: Do you recall him scolding you?
Kong: Not at all, your Honour.