City Harvest Church and Xtron were “related” in their common vision and objective, but finance manager spells out that CHC did not control Xtron.
What CHC finance manager Sharon Tan spelled out as “a very good working relationship between a vendor and a client” was painted by the deputy public prosecutor to be two companies that channeled funds “from one pocket to another” in this afternoon’s court session.
The DPP presented emails which contained proposals for the retainer fees for Xtron to be lowered because of budget issues on CHC’s side, as well as proposals for CHC to give interest discounts to Xtron to allow for an extension of bond repayment period, in order to sustain Xtron’s cash flow.
The finance manager explained that some of these proposals were “scenario planning” between a vendor and a client that share a common vision.
Another email showed Sharon Tan discussing with several of the other defendants to “pump in additional funds” into cash-strapped Xtron via more advance rental payments, despite a recent $15m prepayment from the church. This led the DPP to put forth that CHC was able to control and manipulate Xtron’s cashflow.
Sharon Tan replied that the church board had the understanding that when the time came to pay for expenses related to the building project, CHC was able to top up its lease tenure by paying more advance rental fees to Xtron. The court had earlier saw that Xtron had extended friendlier rates to the church when CHC itself faced a budget crunch.
Chionh then returned to Sharon Tan’s statement to the Commercial Affairs Department. When the CAD asked her if the management of the accounts was not right and lawful, she had replied that there should have been a consolidation of accounts, to fulfill the disclosure obligations. But this was not done “because of the media.” The court had heard earlier in the trial that CHC and Xtron had to be kept separate to protect Xtron’s search for a new building for the church.
Sharon Tan explained that she was looking from the angle that Xtron, being the vehicle to hold the building, might have be seen as a related party. “And if we were to consolidate, your Honour, like what I said in my EIC, then the viewers of this account will be able to see that no money has been siphoned away.”
She further emphasized that “if there is a strong indication or a strong line drawn that Xtron and CHC are indeed related and must be consolidated,then, your Honour, Mr Sim would have done so. But because, your Honour, Xtron has its own business and … it is not controlled by any CHC personnel.”
The DPP went on to press her for her position: were CHC and Xtron related or not?
The finance manager replied, “Your Honour, it is not related in the sense that there is no full control. But it is related in the sense that we have common vision and common objective.”
To support the prosecution’s allegation that the accused parties deceived the church’s auditors, the DPP also revisited the backdated minutes of that investment committee meeting prepared by Sharon Tan, and charged that she gave a false impression about the investment committee members having deliberated over the recoverability of the Xtron bonds.
Tan disagreed, telling the court that it was precisely because the recoverability had not been discussed that the investment committee meeting was convened. She said, “So this investment committee meeting was not set up for the sake of just to show a positive recoverability, your Honour. There was seriousness in considering the recoverability of these bonds.”
The prosecutor said to Sharon Tan that since the auditors were not the church’s financial advisors and dependent on documents provided by the church and by Xtron, “therefore, when you say that you would have expected the auditors to tell you if they thought the bonds were not recoverable, that cannot be correct, because the auditors’ role is circumscribed in the way that I’ve just described. Correct?”
Citing the example of the Research University on Leadership (RUL), another investment by the church, Sharon Tan replied, “Your Honour, that is incorrect, because in my interaction with the auditor, for example, with Mr Sim, when he looked at the investment that we have placed with RUL and he saw the books of RUL and he suggested a full impairment, because he said that it will be pretty hard for you to recover, so a full impairment would be recommended… Same for Xtron bonds, your Honour. He has full overview of the Xtron accounts and the assessment was done. And if the assessment is not reasonable, they will have to do an impairment, your Honour, and that would — means that they have given us their opinion on the recoverability of it.”
Court resumes at 9:30am tomorrow.