The court heard that legal documents were signed at the inception of Xtron bonds; extension of bond maturity dates was not due to absence of genuine legal obligations but the delay of album launch.
Today, the prosecution suggested that Chew, along with the other accused, kept extending the maturity date of the Xtron bonds for as long as possible because it was never intended to be a genuine liability with binding legal obligations.
In supporting its case, the prosecution pointed out that the second Xtron bond, otherwise known as the ABSA (amended bond subscription agreement) resulted in the extension of the maturity date for the first Xtron bond, from two years to 10 years.
Chew disagreed, stating that the maturity date was extended because of unanticipated delays with the album launch in 2008 and 2009. Xtron had signed legal documents binding it to its obligation to pay; the only question was who would be the one helping it fulfill its obligation to the church.
Among the prosecution’s puts this afternoon included Chew hiding from the board members that the Xtron bonds would not be redeemable upon maturity.
The prosecution also said that the Xtron bonds, being unquoted bonds, were far less liquid than quoted bonds. This contradicted with the CHC investment policy, which stated flexibility or liquidity as one of the requirements for the investments. Should the property search yield a suitable purchase option, the church would not be able to recoup its money in time to buy the land, the prosecutor propounded.
Chew explained that it would not come to this, because he did not factor in the album sales—which were too uncertain—as part of the cash on hand for the church’s building project. Furthermore, the process of purchasing the land could take anything from six months to a year, with construction taking another year to begin. By then, the on-going building fund campaigns would have accumulated more funds to make payments for the building project, he said.
The prosecution suggested that Chew entered into the investment despite its non-compliance with the church investment policy; this would suggest that the transaction was not for the purposes of investment, hence the investment was not genuine.
Chew retorted that it was a big leap for the prosecution to make. He explaining that when a custodian bank notices the investment a fund manager makes on behalf of the owner of the funds in not in line with the investment policy, the bank would notify the owner for further action. It does not mean the investment is sham.
In this morning’s proceedings, Chew said that it was reasonable for City Harvest Church to pay Xtron what they would have paid a third party for its services to the church.
Chew was disagreeing with the prosecution’s suggestion that he and his co-defendants were happy to adjust the earnings of Xtron to ensure that it could repay the interest of the Xtron bonds. The prosecution had produced an email that showed Chew suggesting ways to increase Xtron’s income to repay the Xtron bond interest in the event there is zero sales from the album. Chew explained that if they were to find a property for the church, they would need Xtron to manage the property, to do renovation and to put in the sound and video system—all these were services that Xtron were already doing for CHC at its rented worship location at the time. Xtron could then charge CHC a consultancy fee, but this was a necessary role. Chew was also planning for Xtron to be the marketing agent to rent the property out during the weekdays, when CHC is not holding its services. This would also allow Xtron to earn some profit, he explained.
But since Xtron was CHC’s vehicle, it could charge the church at its cost price instead of making a profit, right? the prosecution asked. Chew replied that it could, but the amount that he suggested was what CHC would have to pay a third party to do the job. The prosecution pressed on and pointed out that Chew had said in his testimony that he wanted profits made by Xtron to eventually go back to the church, but now Xtron is getting a profit from CHC to repay the interest. Chew explained that he meant that the profit from the album sales should eventually go back to the church; the suggestions in this email was a contingency plan for zero album sales, it would be “crazy” to expect a profit from Xtron in this scenario, he said.
Chew maintained that all increases in income for Xtron he suggested were necessary and not just for paying interest. He pointed out that it does not say anywhere in the email that it was to pay off interest.
The prosecution will continue its cross-examination of Chew Eng Han on 16 March 2015.
中文报道 – CHC审讯：周：思创需履行真实的法律责任