In this morning’s short session, Kong explained that there was nothing wrong in using drawdowns to repay loans as, ultimately, the sales of the album would have covered the bond principal and interest.
In court this morning, the prosecution sought to address the issue of round-tripping.
Pulling out an email that Serina Wee sent to Tan Ye Peng on Jul 5, 2008, deputy public prosecutor Christopher Ong said that there were plans to borrow more money from CHC to repay Xtron bond interest. The email showed that Wee had set aside $1m for Xtron to repay the bond interest. In her statements to the Commercial Affairs Department, Wee conceded that the email seemed to show that she made provision for repayment to be paid from the money which Xtron raised from the bond issuance. However, she explained that this was a case of scenario-planning and that this provision was made just in case Xtron did not have the money to pay. However, Xtron was receiving revenue from its other sources, such as services provided, and were able to pay for the expenses in the end.
In another 2008 email, Wee explained to Kong that Xtron needed to use further drawdowns of bonds to pay for $4m in bond interest. Kong explained that while this was the case, the album profit will have been sufficient to pay off all the principal sum and interest of the re-issued bonds by 2010. Ong continued to argue that the profit would only come in after the bonds matured, to which Kong replied he needed to see the budget spreadsheet to be sure.
Ong also took issue with the fact that Tan Ye Peng was allegedly tasked by Kong to find out how much of the $7m investment profit in the financial year of 2009 was “real” money outside of the bonds between CHC, Xtron and Firna. Ong alleged that Kong did not want to take the investment profits from the Xtron and Firna bonds into consideration because he knew that it was really just a case of church money being cycled through Xtron to pay the interest back to the church.
Kong disagreed explaining that Xtron was waiting for the US album to be launched, and the various projections showed that there would be a healthy profit. They had to borrow money to repay loans but he did not believe that was anything wrong with issuing more bonds to pay for the interest because ultimately, there was a real product, and the product was about to be launched. Moreover, Xtron could have paid the investment profit through various means: the bonds, legitimate services it provided to the church, rental incomes, and other income they had earned from projects outside of CHC.
Not accepting Kong’s explanation, Ong went on to revisit the issue of why there were people from the church, namely Kong, Tan Ye Peng and fund manager Chew Eng Han planning the repayment of bonds. Kong explained that they were partners working with the Xtron management within the scope approved by the Xtron directors. The Xtron management was not involved in financial issues because they did not have a financial department, and Wee helped with Xtron’s accounting with the support of Tan and Chew. The team could come up with plans and suggestions but ultimately, the Xtron directors would have had to look at the plans and give authorization, and the church board would have had to do the same on its end.
Ong then put it to Kong that the team was planning the repayment of bonds because they were the ones who created the problem by entering into sham bonds. He put it to Kong that the failure of Xtron to fulfill its obligations would lead to the discovery of what they had done.
Kong disagreed and maintained that there was every intention to repay the bonds, thus they were not sham bonds. He also said that the reason why everyone was working so hard to make sure that Xtron could fulfill its legal obligation was really because it was never a sham from the very beginning.
Court resumes tomorrow at 9.30am.
中文报道 – 城市丰收审讯：康希为使用债券偿还利息做辩护