The dual purpose of the Xtron and Firna bonds, which the prosecution has charged are not genuine investments, were in line with what the church was told by the COC, defense lawyer Edwin Tong seeks to show.
New evidence dated May 2008 presented in court this afternoon showed that the church had been informed by the Commissioner of Charities that it cannot make investments solely for profit.
Instead, being a charity organisation, the church is “constitutionally bound” to also invest for the purposes of meeting its objectives; and any profit made is to be channeled back to the church.
The evidence comprised part of the COC’s written reply to the church, when it was seeking approval to amend CHC’S constitution in anticipation of the church’s desire to obtain a commercial property in future.
In the continuation of his re-examination, Kong Hee’s lawyer, Edwin Tong, sought to show that the dual purpose of the Xtron and Firna bond investments–to obtain good financial returns while advancing the church’s mission of evangelism through the Crossover Project, was consistent with COC’s instructions.
The prosecution claims that the bond investments were not genuine investments, and were merely a disguise to channel church funds to the Crossover Project.
Emphasizing his client’s position that all the church’s financial transactions were made in accordance to legal expertise, the earlier part of the afternoon saw Tong questioning his client again about the role of the church’s auditors in ensuring the legitimacy of the investments.
Kong testified that among other things, disclosure regarding the ARLA and retainer agreements between City Harvest Church and Xtron to Baker Tilly auditor Foong Daw Ching meant that the accused had sought his advice to ensure that Xtron was not being wrongfully capitalized.
While Kong and his team tried to avoid “rampant disclosure” with regards to the financing of the Crossover Project in its EGMs and AGMs, full disclosure was made to the professionals–namely, the lawyers and auditors, the court heard.
This was done so that they would be able to guide the church on how it should do things legally and legitimately. “They are our protection,” Kong told the court.
He added that there was no intention to hide things from church members; a “discreet” approach had to be taken to prevent sensitive information from getting into a public domain that will “distract” members from the church’s missions.
Kong added that even though Baker Tilly’s fees were higher than that of other audit firms, the church followed Foong’s suggestion to have the same auditor audit the accounts of both Xtron and CHC so that there would be greater transparency.
Throughout the afternoon, the refrain from the stand was that the advice from Foong, an “experienced and respected accountant,” had given Kong and his team “great comfort” that the church’s transactions were proper and above board.
And Foong was not the only one “alive” to the sensitivities the accused were concerned with, Tong sought to show.
An internal email between engagement partner and audit manager Tiang Yii and Foong Ai Fang showed that the auditors directly responsible for CHC’s and Xtron’s accounts were very much aware of pertinent matters regarding the church’s bond investments, including the recoverability of the Xtron bonds and Xtron’s fair value. Even unanticipated payments to US music producer Justin Herz had been accounted for and acknowledged by Xtron’s directors and the auditors, as suggested by paper evidence shown to the court.
There was also the matter of the bank loan Xtron had taken to finance the purchase of the Riverwalk property.
The prosecution has charged that the accused did not tell CHC’s board members and executive members about the loan, in order to paint the picture that all $18mil of the bond proceeds (under the amended Xtron bond agreement) was to go toward the purchase of Riverwalk–when in fact $13mil had been spent on the Crossover Project.
Questioned by his lawyer, Kong said that if someone had informed him of the necessity to disclose the loan, he would have done it.
In addition, the management representation letter that was given to the auditors had stated unequivocally that there were no related party transactions in CHC’s books.
If there were related party transactions, disclosure would have been made; Kong highlighted again that he had indeed preferred disclosure to be kept to a minimal, but within the bounds of legality.
The court also heard that the letter was drafted by Baker Tilly and signed off by the church’s management.
A management representation letter conveys to an audit firm that the information it receives from a company’s management is true and accurate.
Court resumes at 9:30am tomorrow.
中文报道 – 城市丰收审讯：教会投资与慈善总监指示吻合