Judge: CHC leaders contrived to cover up unlawful conduct

There was no conspiracy, no dishonesty, they claimed.

But State Courts Presiding Judge See Kee Oon found the six accused to be anything but truthful.

Yesterday, they were convicted of varying charges of criminal breach of trust and falsification of accounts.

City Harvest Church (CHC) founder and senior pastor Kong Hee, 51, and former finance committee member John Lam, 47, were each found guilty of three charges of criminal breach of trust.

Deputy senior pastor Tan Ye Peng, 42, former fund manager Chew Eng Han, 55, and former finance manager Serina Wee, 38, were each convicted of six charges of criminal breach of trust and four charges of falsifying accounts.

Another former finance manager, Sharon Tan, 40, was found guilty of three charges of criminal breach of trust and four charges of falsifying accounts.

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Delivering his grounds of decision in court, Judge See said: "They chose to engage in covert operations and conspiratorial cover-ups. They contrived to create cover stories and clever round-trips concealing their unlawful conduct.

"They chose to participate in the conspiracy to misuse CHC's funds, which included siphoning off large amounts from the building fund for Sun Ho's music career and eventually for the round-tripping transactions to enable the bond redemptions.

"They chose to defraud the auditors with falsified accounts suggesting a series of genuine transactions for the redemption of bonds and advance rental.

"The evidence points overwhelmingly to a finding that they had all acted dishonestly and in breach of the trust reposed in them and they played their respective roles in a conspiracy with intent to cause wrongful loss to CHC and to defraud the auditors."

As the judge spoke, the defendants wore grim expressions, a stark contrast to the smiles and chatter before the hearing began.

Wee and Sharon Tan, whose husbands had earlier given them reassuring shoulder squeezes, teared at the verdict.

Kong kept his head down, seemingly preoccupied with his mobile phone.

All six are out on bail on amounts ranging from $750,000 to $1 million, pending sentencing.

Oral submissions on the sentence have been set for Nov 20.

Criminal breach of trust is punishable with a life sentence, or up to 20 years in prison and a fine. Falsifying accounts carries a penalty of up to 10 years in jail, a fine or both.

In his oral judgment, Judge See explained why the prosecution had proven beyond reasonable doubt the guilt of the accused.

1 WRONG USE OF FUNDS

The use of the church's building fund was restricted to building-related expenses or investments for financial returns.

Yet, millions from it were poured into music production company Xtron's and glass factory Firna's sham bonds.

The money was eventually channelled to support the Crossover Project, which aimed to evangelise through the secular pop music of Kong Hee's wife, Ms Ho Yeow Sun.

At the heart of the charges of criminal breach of trust is whether the project was an "investment", as Chew had claimed, therefore making it okay to use the building fund.

Disagreeing, Judge See said: "It was not an investment since by their own characterisation, it was meant to serve a 'missions' purpose all along. I am not convinced that there was any 'mixed motive', 'dual purpose' or 'hybrid' intent behind the use of the building fund.

"These are creative labels tacked on in an attempt to strain and stretch the plain meaning of the word 'investment'.

"They were plainly fabricated in an attempt to justify their past conduct and misuse of the building fund."

He concluded that the accused were "inextricably entangled" in the conspiracies to misuse the fund - through using its money for the Crossover Project and then creating sham bonds to defraud the auditors.

"Each of them participated and functioned in their own way as crucial cogs in the machinery. Although there are distinctions in their respective levels of knowledge and participation, I am unable to discern any rational basis to exclude any of them from being implicated and characterised as conspirators," he said.

2 XTRON WAS UNDER CHC'S CONTROL

On the surface, Xtron was an independent company managing Ms Ho and her secular music career.

But unknown to many, it was also a "special purpose vehicle" for the Crossover Project. The plan, formulated in 2007, was to channel part of the building fund to the project through Xtron.

The funds were entirely controlled by Kong and his team, who painted a different picture to the auditors, Judge See said.

"The accused persons, at various times, gave the auditors the impression that CHC and Xtron were independent of each other when they knew that Kong Hee, in fact, made all decisions on Xtron's behalf in relation to the Crossover (Project) without reference to the Xtron directors, who were mere figureheads.

"There is no doubt that they knew that they had something to hide," he said.

This method of funding Ms Ho's music career was akin to an "elaborate extension of a pattern of financial assistance via 'sponsorship, lending or prepayment to Xtron'" that had either been taking place or planned prior to 2007, the judge added.

3 SHAM FIRNA BONDS

The accused knew the primary purpose of the sham Firna bonds was to channel money from CHC's building fund to the Crossover Project.

Yet, they told lawyers and auditors that Firna owner Wahju Hanafi was somehow "independently" supporting the Crossover Project using his own money.

Judge See found that Kong, Tan Ye Peng, Chew and Wee were the ones controlling the Firna bond proceeds and deciding how the proceeds should be applied to the Crossover Project, instead of Mr Wahju.

The role of Firna was simply of a conduit used to pass money from the building fund to bankroll Ms Ho's career, Chief Prosecutor Mavis Chionh said during the trial.

With the knowledge that the financial return for the Firna bonds depended entirely on the success of the Crossover Project and not Firna's glass factory business, Judge See concluded that the accused could not have believed the Firna bonds were a genuine investment.

4 ROUND-TRIPPING AND DEFRAUDING

The court earlier heard that in 2009, auditor Sim Guan Seng wanted the bonds to be taken off the church's books.

To address Mr Sim's concerns, the church resorted to "round-tripping" - removing more money from the building fund and also the general fund under the pretext of making further investments and rental agreements.

"They were not genuine transactions because the accused persons controlled these transactions every step of the way, and the substance of it was that CHC was channelling money through various conduits in order to pay itself," said Judge See.

He also noted the accused's attempts to disguise the rental agreements and further investments as genuine transactions.

"In relation to the ninth charge (of falsifying accounts), the accounting entry recording a redemption of Xtron bonds in the form of a set-off against advance rental was false, because it was not a case of CHC and Xtron making independent decisions to pay advance rental on one hand and redeem bonds on the other.

"I find that the accused persons knew that false accounting entries would have to be made pursuant to their plan to create the appearance of redemption of bonds, and hence I find that they each had intent to defraud," Judge See said.

5 'OVERCONFIDENT' AND 'DISHONEST'

The elaborate patchwork of e-mails, phone messages, documents and numerous other documented exchanges revealed during the trial went a long way in proving the accused's "subjectively guilty knowledge", the judge said.

"In my view, insofar as much of it was incriminating, it is more suggestive of a mindset of presumptuousness or boldness, demonstrating that the accused persons were overconfident in their belief that they could replace the funds in time before suspicions were aroused," he said.

He added that the tenor and language in the exchanges "strongly pointed" to their dishonest intent.

"If it can be shown that (the accused) genuinely, honestly and reasonably held the view that what they were doing was legitimate in the sense that they were legally entitled to do it, and they went ahead to act in good faith as a result, I think there may well be room for doubt as to whether they had acted dishonestly.

"The weight of the evidence, however, points to a finding that they knew they were acting dishonestly and I am unable to conclude otherwise," Judge See said.

He added that he took into consideration that Lam, Chew, Wee, Sharon Tan and Tan Ye Peng had acted as instructed as they trusted their leader, Kong.

"But no matter how pure the motive or how ingrained the trust in one's leaders, regardless of the context in which that trust operates, these do not exonerate an accused person from criminal liability if all the elements of an offence are made out," he said.