The testimony of finance manager Sharon Tan this afternoon revealed new insight into the reason—and urgency—for the creation of the Advance Rental License Agreement (ARLA), which the prosecution has labeled “sham.”
The period was May 2009. Time was running out for City Harvest Church to find a new worship location. On one hand, its lease at Singapore Expo was coming to an end but the church leadership was undecided about renewing the lease because “at the back of the board’s mind, there will also be a date whereby … the church need to vacate from Expo,” the court heard from finance manager Sharon Tan this afternoon.
On the other hand, the church had previously considered 20 properties, all of which were unsuitable. Finding a new venue—and fast—was thus of paramount importance to the church leadership at that point in time.
Tan herself was not a decision-maker with regards to the church’s financial transactions, yet her testimony this afternoon revealed new insight into the circumstances leading to the creation of the ARLA between CHC and Xtron.
The prosecution believes that the ARLA was “sham,” and that Tan was among the accused who falsified CHC’s accounts to create a “false” appearance that the church had recouped its money from the Xtron bonds, by setting off the Xtron bonds against $21.5m advance rental under the ARLA.
Under questioning by her lawyer, senior counsel Kannan Ramesh, the court heard from Tan that the church had ramped up efforts to acquire shares in “Palm Oil”—a code name for a particular piece of property—from late 2008.
The court then heard that two unsuccessful bids were made to acquire shares in “Palm Oil” between May and June 2009. On Jul 18, 2009, a board meeting was convened. While “Palm Oil” was still on the table, alternative properties and land sites were vigorously explored and discussed by the board members as back-up. Among these were the former Capitol Building and the Sports Hub.
“No time to lose,” Kong Hee had told the board members. With the Expo lease coming to an end, Kong reminded them of the need for a building site to be secured within the following three weeks.
But with Xtron fronting the church’s property search as the court had previously heard, how was Xtron going to pay for the acquisition of the new property, which would undoubtedly involve hundreds of millions of dollars? Kannan asked his client.
Tan answered that the funding would have to come from the church, in the form of advance rental—a plan that CHC board members had previously approved of.
The court next saw evidence in the form of a hand-drawn flowchart allegedly presented by investment manager Chew Eng Han to the board at that Jul 18 meeting. Tan, who was responsible for taking the meeting minutes, explained that the primary objective of Chew’s proposal as shown in the flowchart was for CHC to redeem both the Xtron and Firna bonds, in order to “not jeopardise our building project,” explained Tan. Chew had been the main man tasked for the project.
Earlier this morning, the court had heard evidence that the church’s audit engagement partner at the time, Sim Guan Seng, had been uncomfortable with the church’s bond investments. Sim had told several of the accused parties to look into the relationships between CHC and Xtron because the two companies were “obviously related.”
For that reason, he wanted the church to get rid of the bonds, failing which, CHC would have to disclose its relationship with Xtron in the next financial year, testified Tan. However, the urgent need to to find a commercial property meant that Xtron had to maintain its secular identity. Disclosure of its relationship with the church was thus not an option, and so the bonds needed to be redeemed and taken off CHC’s books.
Guiding the court through the details of the flowchart, Tan explained that the church would make an upfront payment to Xtron through a 15-year advanced rental of $65m (under an agreement later formalized as the ARLA). Part of this lump sum would be used to set off the Xtron bonds, by then worth $21m under the amended bond agreement.
Another sum would be used to pay for shares in “Palm Oil,” and the rest to kickstart a chain of transactions to effect the Firna bond redemption.
This plan to use the advance rental to redeem the bonds had also been previously approved by CHC’s board, the court heard. The redemption of the bonds was effectively a reclassification of debt owed to the church—from bond investments to prepayment. As such, even though no cash was exchanged, Xtron was still liable to pay what it owed to CHC.
“What was so great about Palm Oil?” asked Kannan.
Tan explained, “Your Honour, Palm Oil is Suntec, and it’s situated in the city of Singapore, and … the board has seen that with the infrastructure of the whole place, it will definitely serve the members well.”
Subsequent email documents then showed Serina Wee highlighting the need to run through the redemption plan with Sim, the church’s audit engagement partner.
Court resumes at 9:30am tomorrow.
中文报道 – 城市丰收审讯：为“棕油”刻不容缓