Me thinks the contention should be on the relationship between CHC and Xtron, instead of whether the auditors were aware. After all, auditors only have after-the-fact info to audit the accounts prepared by the management board. This article looks at the relationship between CHC and Xtron.
Here's an article where a recording of a EGM was held on 28 March 2010. It's painful to listen to the entire recording of over 2 hours, so the transcription given by the person who posted on CHC Confessions page and summarize the key content is added below for reference:
1) How is Xtron's relationship with Sun?
According to Mr Choong Kar Weng (one of the Directors of Xtron) and an ex-Board Member of CHC (in 1:23:30 of the recording),
If Xtron is no longer Sun's agent with effect from 31st July 2008, how can the proceeds of Sun Ho's album sales after 1st August 2008 repay CHC's investment over 10 years, based on the restructured bonds with a 10-year redemption period as reported in CityNewsSG (source)?
2) Are the "Crossover" Personal Guarantees Suspicious?
Imagine this: Xena runs a CD shop but business was not doing well, and lost $6million over the past few years. Last year, Xena decided to start a business selling CDs online and goes to Charlie to obtain a loan for the business, promising 7% interest in return. Charlie agrees, since the returns of 7% is attractive, and lends Xena the money, in spite of Xena's failing business. Xena promises to return the money in 2 years but was unable to repay the debt fully because the police caught them selling pirated CDs and business was halted. Xena then negotiated with Charlie to restructure the debt and pay it off within 10 years, using proceeds from the CD sales. To convince Charlie that his investment is safe, Xena asked Charlie's best friend, Wilfred to help guarantee the loan - in case Xena fails to repay the debt, Wilfred will be responsible to repay Charlie. Now - does it make sense that Charlie now become a guarantor to Wilfred on it's own loan, such that in the event Xena and Wilfred fail to repay Charlie's loan, Charlie will come in to cover the loan for Wilfred's behalf?
The crossing over of personal guarantees is a major point of consideration in the validity of Xtron Bonds because in the event that Xtron cannot redeem it's bonds issued to CHC, then a personal guarantee that Wahyu Hanifi placed to indemnify Xtron against all loses it was to suffer for the Crossover Project will take effect (source). The interesting thing was that according to media reports, Pastor Kong Hee and Tan Ye Peng, Chew Eng Han and Koh Siow Ngea had also signed personal guarantee to indemnify Hanafi for any losses he might incur as a result of his indemnity.
3) Is Xtron a viable commercial business?
This part is a constant exchange of microphone to present Xtron and CHC sides by Pastor Aries Zulkernain and Choong Kar Weng respectively:
According to Mr Choong Kar Weng (one of the Directors of Xtron) and an ex-Board Member of CHC (in 1:07:56 of the recording) at the invitation of Pastor Kong,
"Xtron Productions was started in the year 2003 as a private business to engage the marketplace in the area of media and entertainment. It seeks to be a professional events management company that can be contracted for commercial professional concerts, conventions, and national events. The current directors of Xtron are me (Kar Weng) and Siow Ngea.... We have not taken any Directors fees or dividends and both of us do not intend to in the future".
Pastor Aries continues to explain the scope of Xtron - because the existing CHC staff are not skilled to run the events, hence CHC has to engage other parties like Chiap Seng Pte Ltd, Unusual Productions, etc to provide equipment and personnel support. Xtron also to provides CHC's full time AV staff who are dissatisfied with their career development prospects (i.e. doing the same thing week in and week out - plug in to equipment, plug out). Xtron provides an avenue for the full-time AV staff of CHC opportunities to expand their careers and gain more exposure to other productions etc .. and work with other industry professionals in Asia so they will not quit.
The mic was handed back to Choong Kar Weng - he explains that Xtron took part in many commercial projects (a list of them)... then he follows: "today, I'm happy to say that Xtron is one of the leading production companies in Singapore. Our team consists of some of the most respected sought after professionals in the media industry"
Pastor Aries took over to explain why they chose Xtron - because they are Christians and share the same values and work ethics as CHC. He added, "their (Xtron) prices are competitive compared to other companies" and they are dependable and willing to serve CHC (in terms of supporting them with last minute work request on 24/7 basis, etc)
Choong Kar Weng then added, " Xtron is a for-profit business that charges commercial rates for its services provided. When we work with CHC, we deal with the church (CHC) at arms length just like any other clients. We are grateful that CHC is our major client and we do want to have a long-term relationship with that's mutually beneficial"
Pastor Aries added that in 2005 when CHC is looking for their building, they wanted a stadium arena or conventional hall (a commercial property that can be rented out whenever CHC is not using it). This requires a fully privatized company to acquire and manage the use of the CHC commercial property. So when we went to Expo, we have to commit to a certain number of days which is more than what we require for CHC's services or events usage.
Choong Kar Weng added - so in 2005 Xtron became the master lessee (we are the main tenant master tenant) of Singapore Expo Hall 8, and we sub-let the facility to CHC. Our role is also to actively seek other potential users of the expo hall when CHC is not using so they can earn more.
Pastor Aries addeded that they also adopt the same model for Suntec deal. Xtron signed the license agreement with Suntec, and sub-let to CHC. On those days CHC does not require space, Xtron will rent out the hall to
third parties to bring in additional revenue to defray the rental cost of CHC. This was explained and documented in the 10 Aug 2008 EOGM. "Management board has evaluated the rates of various service providers and found Xtron's charges to be reasonable and competitive" (he cited some examples such as manpower expenses and reliable services)
Who can reject such a "mutually beneficial partnership"? However, looking at what the auditors highlighted, Xtron actually recorded 4 consecutive year-on-year losses between Dec 2004 to Dec 2007 totaling $5,891,401. The accumulated losses up to Dec 2006 amounted to $3,444,908. Not quite the profile one who claims themselves to be one of the leading production companies in Singapore would have. Times are really bad me thinks! "Mutually beneficial"?
Yet in spite of the horrible financials, CHC proceeded to invest in Xtron's bonds issues, and subsequently took a restructuring offer and cross guaranteeing the guarantor's personal guarantee - in spite of the consecutive muitiple period running losses, and that their cash cow (Sun Ho) is no longer under their management from 31st July 2008. How did Xtron even stay on in business, with such losses over 4 years?
Without considering the auditors opinion, me thinks that any level headed individual will see something wrong in this money-lending relationship? Considering the fact that CHC and Xtron claims to be unrelated parties, this will be even more intriguing to see.
4) Are the Executive Members aware that CHC's Building Funds are used to fund Sun's Crossover Project?
Now that the court proceedings and CHC finally revealed that Xtron bonds were used to support Sun Ho's career using money from the CHC's Building Funds, the question is when were the Executive Members made aware of this "fact"? Was in before the bonds were purchased in 2007/2008, or was it during the same straw poll EGM meeting on 28 March 2010?
According to Dr Victor Lim Fei, then an Executive Member of CHC in 2010 and currently one of it's Board Members (1:39:30), "Pastor I just want to say as you already mentioned just now, Sun's embodiment of the Cultural Mandate is the collective vision of CHC - everyone of us here in this place. As such, I would like to perhaps recommend the full support of the church be excapaded to include whatever financial and manpower resources we can muster for the work that she's doing"
Still, as at 2010 there's no mention of the funding of Sun's Crossover project using church building funds - or rather, at least at the date of this clip implies, that the EMs were not even aware that church funding was even used until Dr Victor Lim recommended the full financial and manpower support. How much more the other members who have no access to the meetings? In fact, from as early as 2002/2003, the church were time and time again reminded that her singing career was not funded with a single cent of church funds!
Legally, it did not really matter regarding the bond issue, since as reported in the media, the auditors only recorded relevant entries - and since bond investments were accurately recorded that CHC building fund was invested in Xtron Bonds, it is now up to Xtron to use the money in whatever way it deems fit - such as to continue to fund Sun Ho's singing career (even when she is no longer under Xtron's management??)
Backdated Documents and Emails
Throughout the second and third tranche of the trial, the deputy public prosecutors also produced many records of emails suggesting that CHC staff is directing the flow of funds, and that the directors of Xtron do not always have answers as to when and why they signed certain documents. This just adds to the cloud of confusion between the relationship of CHC and Xtron.
Does CHC control Xtron? Let's leave it to the judge to decide, but me thinks the relationship between them is obviously clear. Next up, we will look at another company involved in the alleged sham bonds transaction - PT Firna Glass.
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