City Harvest Trial: Auditor: Various matters on Xtron deal create 'a lot of doubts'
Published on Jan 20, 2014 2:37 PM
The auditor who repeatedly sounded alarm bells about church monies going to beleaguered music production firm Xtron explained his concerns on the witness stand Monday.
It emerged that Mr Sim Guan Seng, managing partner of Baker Tilly, was kept unaware of other pertinent matters that he said "create a lot of doubts in my mind about the whole transaction".
Mr Sim was engagement partner, or the lead auditor responsible for signing off on audits, for the church from July 1, 2007 to Oct 31, 2009, and for Xtron from Jan 1, 2008 to Oct 31, 2008. During the period, Xtron entered an initial bond subscription agreement for $13 million with the church, which was subsequently amended for a total of up to $25 million.
He told the court that he was concerned about the rationale behind City Harvest lending a huge sum of money to Xtron, which will in turn buy a property to be leased back to the church. He said: "If I look at that from just a layman's perspective it doesn't make much sense."
The explanation given to him - which he called "a bit unusual" - was that Xtron would give a discount on rental rates to City Harvest. The rental payments will also help Xtron recover the income lost from buying the property.
He also raised a second concern that Xtron was "not exactly the most financially healthy company". But one of the explanations given to him was that a church could not dabble in commercial properties - which he "didn't quite buy" because he was "personally aware that churches do buy commercial properties".
Later, Deputy Public Prosecutor Christopher Ong cited documents and e-mails that Mr Sim said he had no prior awareness about, and that if he did, more questions would have been raised.
First, dates for the investment committee meetings and board meetings were apparently fudged to avoid auditor scrutiny into deals being purportedly rubber-stamped.
Mr Sim also found puzzling that four of the accused - senior pastor Kong Hee, deputy senior pastor Tan Ye Peng, and former treasurers Chew Eng Han and John Lam Leng Hung - had signed a counter-guarantee to long-time churchgoer Wahju Hanafi's guarantee to indemnify Xtron for any losses that might be incurred by the time bonds are redeemed.
He said: "If I'm aware that the giving of this bond is guaranteed by members of the church, I would really ask why do you need to do this, if it is really an investment. If you think is good, then why are you giving a guarantee? Why are you not disclosing that guarantee?"
He added that it struck him as dubious that Chew, a fund manager, was giving a guarantee when he recommended the investment to begin with.