Impairment of the Xtron bonds was already in the previous year’s audit report, Serina Wee points out to the court today, refuting the prosecution’s suggestion that the accused were trying to avoid scrutiny from the auditors.
The redemption of bonds came into the limelight this morning as the prosecution entered its ninth day of cross-examination of Serina Wee. The co-defendants’ position was that the church did an early redemption of both the Xtron and Firna bonds to address audit issues raised by auditor Sim Guan Seng. Serina Wee confirmed with the prosecution this morning that the plans to redeem the Xtron bonds was to solve issues that Sim raised: bonds were unquoted and had a convertibility feature which led to valuation issues.
The court saw an email exchange in which church finance manager Sharon Tan mentioned that if they were to continue with the Firna bonds, they would likely have to answer Sim’s questions on valuation and disclosure. Wee testified that she did not understand Tan’s concern on disclosure because she did not see any mention of related party transactions in that year’s financial report. Since there was no change in relationship between the church and Xtron, it followed that there would not be any disclosure issues in the following year.
It was then put to Wee that she and her co-defendants were trying to clear the bonds because questions raised by Sim would lead to impairment issues and further scrutiny of the Xtron bonds by the auditors. The prosecutor’s theory is that this scrutiny of the bonds would eventually lead to the discovery of the sham nature of bonds. Wee disagreed, stating that she was only doing what the church board wanted to do to in order to address the audit issues. She added that the financial report of the current year already showed an impairment on the bonds. The auditors knew about this so there was no scrutiny of the bonds to be concerned over.
The prosecution then claimed that the real motivation for the Special Opportunities Fund (SOF) was to allow church funds to be passed through AMAC, Ultimate Assets and Firna so that Firna could use the funds to redeem the Firna bonds.
The DPP further painted the picture that the entire series of bond redemption transactions, which involved Xtron, Firna, Ultimate Assets, AMAC and the church, was designed to “hide the trail of funds” and “obscure” the fact that it was really the church’s own money that had been used to repay itself.
The SOF was an investment, maintained Wee.
When the DPP suggested that the church board, Xtron and Firna directors were not informed of the entire round-tripping plan, Wee disagreed, pointing out that it had been her understanding all along that it was the church board that had wanted the bonds to be redeemed. Additionally, approval from Xtron’s directors was required before any funds could be transferred, so it was clear the Xtron directors were aware of the plan.
Cross-examination resumes tomorrow at 9.30am.