Former church fund manager defends the legality of his structuring of the “sham” bond investments and ARLA transaction.
Chew Eng Han spent much of the morning testifying that while the Xtron bonds were not “purely” an investment, they were legitimate investments and the non-disclosure of the investment was not to defraud the auditors.
The former fund manager of City Harvest Church and his co-defendants are accused of using sham Xtron and Firna bonds for the purpose of using church funds for the Crossover Project and trying to defraud the auditors by not disclosing certain information.
Producing his statements to the Commercial Affairs Department, Chew told the court that while he had told the investigating officer that the Xtron bonds were not “actual investments”, he had meant they were not purely investments. He explained that the investments had a missions component to it and the returns were not purely financial. Prior to making this point, Chew read from the guidelines set out by the UK Commissioner of Charity on what trustees of charities can and cannot do in an investment. The commissioner recognized that for charities, the returns may be in cash or in kind such as a provision of service. He then told the court that because CHC was a charity, apart from making money, the church also wanted to do good. Having gone to Sun Ho’s concerts, he witnessed thousands of people responding to the altar call at the end of the concert. This, he felt, was “doing good”.
One of the things that the prosecution has taken issue with was the non-disclosure of the Xtron and Firna bonds. Repeating what Kong Hee had testified in court earlier in this trial, Chew explained that he and his co-defendants chose not to disclose the investments because they did not want to jeopardize the Crossover Project. He also said that he had taken the cue from Kong and had understood why the funding of the Crossover Project had to be kept discreet after former church member Roland Poon made the public accusation that church funds were used to promote Ho’s singing career.
Chew also emphasized that the non-disclosure was only towards the members of the church and not the lawyers and auditors. Referring to an email where Serina Wee took notes of a meeting with auditor Foong Daw Ching, Chew said that Foong did indeed give such advice even though he had denied doing so while on the witness stand.
Among other things, Wee had noted that Foong advised the team to not to paint the picture that CHC had full control over Xtron, but only partial control. According to Wee’s records, Foong also said that the team could talk about Xtron in the Annual General Meeting, but they should not minute everything down.
Chew said that Foong had been informed of their plans for the Crossover Project since 2003 and he understood the need to keep it discreet. Foong even gave them advice on several occasions on what to do to keep within the boundaries of corporate governance. Since all the information had been shared with Foong, then the managing partner of Baker Tilly, it cannot be that they were trying to defraud the auditors, Chew said.
In an attempt to establish that he had no intention to keep discreet about Xtron’s dealings, Chew produced emails to show that he had “no problem” telling the trustees of the church about the loan Xtron had taken for the Riverwalk, and he had “no problem” telling the COC about the Xtron bonds.
This afternoon, Chew proceeded to rebut the charges against him for falsification of accounts. The charges pertain to the redemption of the Xtron and Firna bonds by the conversion of these investments into the Advance Rental License Agreement.
Chew had been reluctant to redeem the bonds prematurely because “money doesn’t grow on trees”, he reasoned. An early redemption meant lower returns.
However, the audit partner for that year, Sim Guan Seng apparently wanted the bonds to be cleared from CHC’s books. Hence, the court heard, Chew’s financial market experience was called upon to structure an audit solution. He devised the conversion of the bonds into the ARLA, and asked finance manager Sharon Tan to run it by Sim, who had no issue with it.
Chew explained to the court that he orchestrated the redemption to comply with the auditor’s wishes, and not because he was anxious to cover up any wrongdoing, as the prosecution has charged.
There were other factors which contributed to the redemption of the bonds, the court heard. Chew recalled the difficulties he faced when trying to secure a property for the church, which included zoning limitations and disclosure requirements, all of which culminated in the execution of the bond redemption and subsequent creation of the ARLA, in order to secure the Suntec Convention property.
Chew sought to show, in detail, the consistency of his actions in his three areas of responsibilities—sourcing for a new property for the church, finding the financing for the Crossover Project and managing CHC’s portfolio investments.
As far as he was concerned, what he did was in line with market practices, Chew told the court today. This included limiting the disclosure of financial investment details. This was the way the church operated, Chew claimed—the church leadership had all along preferred to keep things as discreet as possible. CHC’s executive members trusted the leadership to make the right decisions and understood that there were things they were not told about.
He also addressed the backward calculation of interest rates for the church’s investments, which the prosecution has underscored as proof that the investments are sham. Chew told the court that when monies are transferred from one entity to another, the exact interest rate could only have been deduced at the end of the whole series of transactions. Chew added that the act working backwards to obtain interest rates was also common market practice. There was really nothing sinister about it, he said.
Court resumes tomorrow at 9.30am.