Today, Tan Ye Peng explained how the idea of the Xtron bonds evolved and how the connection to church cost Xtron two bids for different properties, among other issues.
Revisiting the planning process of the first Xtron bonds, the amended Xtron bonds, the Firna bonds and the Advance Rental Licensing Agreement this morning, senior counsel N Sreenivasan, defense lawyer for Tan Ye Peng sought to establish that in the whole planning process, Tan and his team never had the intention to cause wrongful loss to the church. On the contrary, they were constantly seeking to do things the right way by constantly consulting their auditor Foong Daw Ching and lawyer Christina Ng.
Tan told the court this morning that the first Xtron bonds came about when the Crossover Project moved into the US and the budget increased significantly. Tan and Chew Eng Han first tried to secure a bank loan from Citic Ka Wah Bank, but the Xtron directors felt that an interest of 16 percent was too high, hence the loan was not taken.
Tan then asked Chew if it made sense for Xtron to borrow from the church’s building fund, with Xtron offering an interest rate one percent higher than commercial banks.
While that loan didn’t happen in the end because the church had already factored in the $2.5m needed for Sun Ho’s outreach during the 2008 Special Olympics and Summer Olympics, Chew later proposed for City Harvest Church to invest its building fund into Xtron bonds for the Crossover Project.
Tan told the court that in his mind, the bonds were always an investment because Chew had factored in a seven percent interest. Tan was also assured by Chew’s explanation that for bonds, the principal amount had to be repaid to the church.
At that point in time, the church had $20m in its building fund. Tan told the court that this amount was not sufficient to bid for any property, plus construction costs were high during that period. He explained that he wanted to grow the building fund, and that subscribing to Xtron’s bonds was, to him, a good investment for the church and a win-win situation for both CHC and Xtron. When asked by his lawyer if there was any intention to cause wrongful loss to CHC, Tan replied no.
Sreenivasan also noted that Chew suggested the investment into Xtron on Jun 16, 2007, and they met with Foong on Jun 25. Foong told them to set out an investment policy that allowed AMAC to invest into Xtron using the church’s building fund. However, the period for the charges for conspiring to commit criminal breach of trust was between Jan 18, 2007 to Aug 23, 2007 when the bond subscription agreement was signed. Tan confirmed that no event relating to the BSA took place on Jan 18, 2007.
Sreenivasan reiterated that the auditors had in fact created a document specifying the use of the bond proceeds for investments, and Tan said that as Teo Foong Wong LCL audited both CHC and Xtron, the auditors knew that the church building fund money went to Xtron for the Crossover Project.
“Other than valuation issues, did they tell you that this is a wrongful investment or wrongful use of the Building Fund?” asked Sreenivasan.
“No, your Honour,” Tan replied.
Bringing Tan through the events leading up to each transaction, the senior counsel also sought to clarify suggestions put to the other defendants by the prosecution when they were on the stand.
The prosecution had suggested to the other defendants that the “200K projection” done by Serina Wee had showed that the album sales would not be enough to redeem the bonds when it matured in two years. The prosecutors suggested this was evidence that the team had no intention for the bonds to be redeemed and therefore the bonds were sham.
Sreenivasan proceeded to show the court through email evidence that Tan and Chew had planned for a two-year bond period from the outset, and that they discussed the re-issue of bonds after two years if more funding was needed.
“So there was no such thing as bluffing the whole world that ‘We can pay back in two years”, with a secret plan to extend it to ten?'” the senior counsel queried.
“No, your Honour,” replied Tan.
Tan also explained that creating various scenarios and projections was the way the church worked. Wee was not a decision-maker, she would often work out projections and provide the senior leadership with a number of scenarios.
The prosecution had also taken issue with board meeting minutes not recording all that happened verbatim. Tan explained that the minutes were not typed out during the meeting itself but after the meeting. Also, the board, being made up of fellow church members, did not always meet formally–they discussed many things outside the agenda which would not be recorded as they were not board matters. Some of the things they discussed were things to be done in the future and so would not be captured in the earlier minutes.
Tan was responding to his lawyer’s question about why was it not recorded in the meeting that the board was told that the building fund would be invested into Xtron to fund the Crossover Project. Tan explained that after the Annual General Meeting, where they gave AMAC the mandate to manage CHC’s funds, the investments made were all in the investment schedules given to the board members regularly. As the board members could see the Xtron bonds on the schedule, there was nothing to hide.
The court also heard today that Tan had concerns about auditor Sim Guan Seng’s push to consolidate CHC and Xtron because of the church’s property search. Tan told the court that Xtron and Eng Wah had entered into a joint venture to bid for a piece of land in the Bugis area, and they were the highest bidder.
“But just… moments later, we got news that we lost the bid and this property was then given to another property developer… we heard from some grapevine that it’s because the URA know that behind this is the church. That happened in 2005. So from that moment onward, it has always been in our heart, in our mind, to try our best not to — you know, to kind of distance Xtron from the church when it comes to property, acquiring a commercial property.”
Tan also told the court how a similar situation occurred with the first bid for Suntec. Ultimately, the church negotiated with the owners it had lost the first bid to, and became a shareholder of Suntec.
Court will resume tomorrow at 11am.
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