AHTC lawsuits

Counsel for WP says payments under scrutiny also made by past town council

KPMG executive director Owen Hawkes was cross-examined yesterday on the second day of the AHTC case.
KPMG executive director Owen Hawkes was cross-examined yesterday on the second day of the AHTC case.

The lawyer representing the Workers' Party (WP) yesterday sought to show that payments under scrutiny, made to a managing agent, had also been made by the town council which was previously run by the People's Action Party (PAP).

This was among the reasons Senior Counsel Chelva Rajah laid out yesterday and which he said led to the more than $1.2 million that Aljunied-Hougang Town Council (AHTC) made to its managing agent, FM Solutions & Services (FMSS), being classified wrongly as "improper".

He was cross-examining KPMG executive director Owen Hawkes in the second half of Day 2 of a multimillion-dollar civil suit over improper payments involving three WP MPs, including former chief Low Thia Khiang.

Mr Rajah is representing five WP town councillors, including the three MPs.

Mr Hawkes' firm was appointed to look into AHTC's books after the Auditor-General's Office (AGO) found significant governance lapses in a special audit.

At issue during yesterday's cross-examination was whether FMSS had received more than $1.2 million in extra payments, through the form of a 3.5 per cent management fee levied on projects totalling more than $34 million.

KPMG believed many of the projects, including the repair and redecoration of Housing Board flats, were basic services which should have been covered by a lump-sum fee.

 
 
 
 

But Mr Rajah questioned how Mr Hawkes arrived at this conclusion, because he admitted he had never gone down in person to evaluate the complexity of the projects, but relied on the wordings in the contracts.

More importantly, said Mr Rajah, the town council's predecessor, the PAP town council, was also charged similar fees for such works by its managing agent, CPG.

"Not only did the previous town council and managing agent, but also the successive council and managing agent - the four people who dealt with the project on the ground all considered (these) project management services. But you reviewing the project documentation thought otherwise?" he asked.

Mr Hawkes replied: "That is correct, and it wouldn't be the first case (where a client has disagreed with an accountant's definitions)... Our view was that this fell under basic services, at least in part."

At one point during the cross-examination, Mr Rajah also questioned if the auditors had come into the special audit with a pre-conceived view. He asked Mr Hawkes: "What is your approach: Guilty until proven innocent or innocent until proven guilty?"

Mr Hawkes replied that this was a civil case, and hence there was no issue of innocence or guilt.

Mr Rajah also sought to establish that AHTC was warranted in paying these fees, especially as some of the projects were complex enough to cost $8 million each.

Both men were locked in a back-and-forth over whether the total bill size was a fair indicator of the complexity of a project.

Mr Hawkes said the "mere scale" of the project was not sufficient, and that it depended on the "nature of what's being done".

Mr Rajah shot back: "So size means nothing?"

He also quizzed Mr Hawkes on another KPMG finding in its October 2016 report - that AHTC had overpaid FMSS $8,990 for overtime claims and Central Provident Fund contributions, for general overtime and inspections during the Chinese New Year.

KPMG had said these services should have been considered part of the standard management fees payable by the town council, but Mr Rajah argued that the inspections were required during the festive period so that waste could be cleared expeditiously.

He added that the town council was going through an "intensive and rigorous" audit by the AGO then, requiring staff to go "over and above" their duties.

Mr Hawkes countered that there was a distinction to be drawn as to whether FMSS' finance staff should be reimbursed for the extra hours by their employer, and whether FMSS is entitled to recover all the overtime from AHTC.

The question is the degree of the "extensive liaison" with the AGO, he added.

The civil trial continues today.

 
A version of this article appeared in the print edition of The Straits Times on October 09, 2018, with the headline 'Counsel for WP says payments under scrutiny also made by past town council'. Print Edition | Subscribe