PARLIAMENT

Come clean, Shanmugam tells WP MPs

He calls for transparency on conflicts of interest in running of town council

Law Minister K. Shanmugam yesterday asked Workers' Party (WP) MPs to "come clean" about conflicts of interest in the running of their town council.

In a 45-minute speech to the House, Mr Shanmugam accused the MPs of unlawfully setting up a structure that saw millions in public money collected from residents of areas run by Aljunied-Hougang-Punggol East Town Council (AHPETC) being channelled to "friends" in managing agent FMSS and contractor FMSI.

He was taking the WP to task over lapses found by the Auditor-General's Office (AGO) in its year-long audit of AHPETC's financial statements for the financial year 2012/2013.

The AGO had cited these conflicts of interest as a key problem, saying that unless the lapses were addressed, there was no assurance that public funds were properly spent, accounted for and managed.

AHPETC chairman Sylvia Lim told the House that the WP had not withheld information about this conflict of interest, and there was no loss of money.

But Mr Shanmugam rejected this claim, saying AHPETC had overpaid its managing agent.

"Maybe there was no one taking money through the back door in the dark of the night, there was no need because the money was taken from the front door in broad daylight through all this overcharging," he said.

He noted that the facts that have emerged raise major questions about the conduct of the AHPETC town councillors, and what they did with the money of their residents.

One of his charges was that AHPETC had overpaid FMSS, which is owned by husband-and-wife pair Danny Loh and How Weng Fan, as well as Mr Yeo Soon Fei.

Mr Shanmugam noted that FMSS was set up by the couple on May 15, 2011, seven days after the WP won Aljunied GRC in the General Election.

He noted that the town council gave FMSS the contract to be its managing agent in 2011, and three more contracts, worth about $27 million altogether.

Ms How became general manager of AHPETC, Mr Loh its secretary and Mr Yeo, the deputy general manager. "Why set up FMSS? It was a convenient vehicle to which millions of dollars went from the town council," Mr Shanmugam said.

FMSS' fees are higher than those of managing agents in other town councils, he added. He calculated that the annual difference was $1.6 million, amounting to $6.4 million over four years.

These higher fees were another way in which AHPETC "was run for the benefit of FMSS", he said.

He also noted the conflict of interest in how senior town council officers with ownership interest in FMSS signed off on payments.

"The payments they were verifying and approving on behalf of the town council were going directly into their pockets," he said, citing $6.6 million in payments the FMSS owners had endorsed.

By allowing these payments of "millions of dollars" to a related party, the town councillors were in breach of their "fiduciary duties", or responsibility to properly manage residents' monies.

Civil action could be taken as a result, he added.

Another front on which Mr Shanmugam attacked the WP was their lack of full disclosure of these ownership interests, and the lack of recorded discussion of the subject - as required by financial reporting standards. "The behaviour of a party which claims to champion transparency and accountability is shocking," he said.

He also said that, contrary to what AHPETC has asserted, the town councillors could not maintain no public money had been lost due to its payments to FMSS.

Besides the alleged overpayment of fees, the lack of "any adequate check or control" could have resulted in other losses, he added.

Taking the individual WP MPs to account, and pressing them to state their positions on the issue, Mr Shanmugam said: "Any honest town councillor will admit that all this is unacceptable and will want to set right what has gone wrong."

This, he added, meant coming clean on the facts, relooking all contracts and payments and recovering overpayments, and taking legal action where necessary.

"Will the town councillors do that?" he asked.

janiceh@sph.com.sg