This morning in court, the senior pastor of City Harvest Church was grilled further by prosecution on the Xtron budgeting. Prosecutor alleges that Wahju Hanafi’s personal guarantee never existed.
While Kong Hee asked Sun Ho’s music producers to plan for her progress as though the sky was the limit, he budgeted according to several scenarios, sought to challenge budgeting figures and to push down costs.
Did Kong Hee have a conservative mindset when it came to budgeting for Sun Ho’s music album in the US? Deputy public prosecutor Christopher Ong dwelled on this topic for the first half of the morning. Kong was the US liaison of the Crossover Project, working with the US music producers and marketing managers.
Ong noted that Xtron, the artist management company for Ho, was operating on money that came in from the Crossover Project donors, as well as revenue from services provided to City Harvest Church. As the project was not self-financing at that point, eventually the idea came about to fund the music album through bonds proceeds.
“THE SKY IS THE LIMIT”: DID KONG CARE ABOUT THE BUDGETING?
The DPP charged that Kong had given no consideration to Xtron’s liability concerning the bonds, throwing up emails between Kong and music producer Justin Herz, in which Kong had told Herz to present a budgeting proposal and to “please be bold with your budgeting.”
In another email between Kong and stylist Tas Steiner, Kong had said, “Aim as high as possible and spare no expense” in getting Ho to hit number one with her single “Without Love”. Kong told Steiner to do whatever it took to bring Ho to the top and that money was “not a consideration” on the investor’s end, this investor being Indonesian businessman Hanafi. Hanafi was a director of Xtron and a long time church member. In another email between Kong and Herz discussing the budget, Kong told Herz that “the sky is the limit” and that he should “shoot for top of the line type of planning.”
To this charge, Kong told the court that when it came to budgeting, he would lay out the maximum expense and the outer parameters before the Xtron directors, to prepare them for a worst case scenario in terms of expenses. Thereafter, he said, he would adjust according to what they are agreeable to. Kong said phrases that he had used, such as “the sky is the limit” and “spare no expense” were hyperbole, or figures of speech for the sake of emphasis.
In reality, said Kong, he had done extensive budget planning exercises with actual spreadsheets shown in court over the course of the trial. In discussions shown, Kong asserted that he had challenged the figures given by the Americans and pushed for more reasonable expenses.
In a new email exhibit, the DPP sought to show that Kong was not aware of the two-year maturity date of the first Xtron bonds subscription. The email showed that after the $13m bonds had been drawn down, it would take six years to recoup $12.45m.
How then did Kong plan to redeem the bonds within two years, asked Ong. Kong replied that in an email that the court had seen yesterday, based on his 2007 budget with projected sales of 1.5m copies of the album, the bonds would have been paid in full within two years. Subsequently, the court heard that Chew Eng Han had proposed a solution: to extend the bond maturity date. In the 2008 budget put up by Herz, it was shown in five years, the net profit of the music album would have yielded US$32.9 million, more than sufficient to cover the bonds with interest.
CLARIFYING CONTRADICTION REGARDING ALBUM SALES FORECAST
On that note, Kong clarified details regarding an email showing that Serina Wee, Chew Eng Han and Tan Ye Peng had planned for a total album sales of only 200,000 units, which contradicted his budget of 1.5m units.
Kong noted that there was an attachment in the email brought up by Ong yesterday, but Ong had not taken the court into the contents of the attachment. Showing it to the court, Kong suggested that this showed that Wee had been conservative when she planned for the forecast of 200,000 units of albums to be sold. The attachment was an excel file with several tabs below, one of which was a forecast of 1.5 million units of album sales, guaranteeing recoverability of the bonds.
WAHJU HANAFI’S PERSONAL GUARANTEE
DPP Ong broached the topic of Hanafi’s personal guarantee, submitting that it was a sham and that the accused did not rely on it when they entered into the Xtron bonds. He also put it to Kong that the accused persons never had any intention for Xtron to repay the bond subscription. Kong disagreed, pointing out the fact that the budget spreadsheets for the US Crossover showed that there was every intention for the US album to recoup its cost, allowing Xtron to repay the bonds.
Ong pointed out that the personal guarantee was only signed in 2010. The DPP also took issue with the fact that in the 2003 video statement given by a spokesperson from the Hanafi family to declare their support for the Crossover Project, the spokesperson only mentioned that they made seven donations mounting to S$1.27m; she did not say that the Hanafi family would continue giving to the Crossover.
Kong replied that this statement could be read two ways: the Hanafis were only giving S$1.27m, or as he sees it, this amount was a “firstfruit” of the rest of the donations that were to come. In any case, Hanafi’s pledge of sponsorship would already be make known to the board by this time in 2003.
Ong also brought up the fact that Hanafi was in a financial crunch in the period between 2006 and 2007. The DPP asked Kong if he relied on Hanafi’s personal guarantee despite knowing that he had cashflow issues at that time. Kong explained that while Hanafi was tight on cash, he had several properties in Singapore and Indonesia; it would not be an issue for him to make good his personal guarantee.
The DPP also brought up an email where Chew Eng Han had told Hanafi that “it will be us that will repay the (Firna) bonds when it matures” to show that it was never Hanafi’s responsibility to repay the Firna bonds. Kong said he was not privy to the email but suggested that the “us” referred to the people working on the Crossover Project. When the money came in from the sales of the album, it would go to repaying the Firna bonds, according to the budget.
Court resumed at 2.30pm.
中文报道 – 城市丰收审讯：康希为预算和何清伟支付跨界的担保作答辩