Saturday, November 14, 2015

GUILTY!! Howso The Judge Saith it .....

 



IN THE STATE COURTS OF THE REPUBLIC OF SINGAPORE
District Arrest Case 023145 of 2012 and others
Between
Public Prosecutor
And
(1) Lam Leng Hung
(2) Kong Hee
(3) Tan Shao Yuen Sharon
(4) Chew Eng Han
(5) Tan Ye Peng
(6) Serina Wee Gek Yin
ORAL JUDGMENT
PUBLIC PROSECUTOR
V
LAM LENG HUNG & 5 ORS
State Courts — District Arrest Case 023145 of 2012 and others
Presiding Judge See Kee Oon
21 Oct 2015 Judgment reserved.
Presiding Judge See Kee Oon:
Overview
1 This was a 140-day trial involving 43 charges against the 6 accused persons. They were tried primarily on charges of conspiring to commit criminal breach of trust (“CBT”) by dishonestly misappropriating funds belonging to City Harvest Church (“CHC”) that had been entrusted to one or more of them. There are two broad groups of charges involving CBT. The first group comprises the first to third charges and pertains to what have been referred to in the course of the trial as the “sham bond investments”. The second group comprises the fourth to sixth charges, pertaining to what has been termed “round-tripping”. A third group of charges, the seventh to tenth, concerns falsification of accounts in CHC’s books relating to the “round-tripping” transactions.
2 I do not propose to set out the evidence as it is lengthy and voluminous. It suffices to note that the main background facts are largely undisputed or uncontroversial. I will set out my findings in relation to the elements of the offence of CBT first, leaving aside the issue of the mens rea of dishonesty. I will then focus primarily on the extent of the accused persons’ knowledge and involvement in the plans to use funds belonging to CHC for the Crossover Project (“the Crossover”) and on whether their conduct in the circumstances shows that they had acted with dishonest intent.
Criminal breach of trust – elements
3 In relation to the elements of the offence of criminal breach of trust by an agent, leaving aside the mens rea element, I shall state my conclusions briefly. First, I am satisfied that Kong Hee, Tan Ye Peng (“Ye Peng”) and John Lam Leng Hung (“John Lam”) were, as members of CHC’s management board, each entrusted with dominion over CHC’s funds, whether in the Building Fund (“BF”) or the General Fund. Second, I am bound to hold that they were entrusted with such dominion in the way of their business as agents because, being board members, they were so entrusted in their capacities as agents of CHC. Third, I am satisfied that the various plans to use CHC’s funds amounted to putting these funds to unauthorised or wrong use.
“Wrong use” of CHC’s funds
4 The BF was a restricted fund that could be used only for building-related expenses or investments for financial return. I find that the Xtron and Firna bonds were not genuine investments but were a wrong use of the BF. I find also that Tranches 10 and 11 of the Special Opportunities Fund (“SOF”) were not genuine investments but were transactions designed to create the appearance that the Firna bonds had been redeemed. I find, finally, that the payment under the Advance Rental Licence Agreement (“ARLA”) was not abuilding-related expense but was a transaction designed to perpetuate the appearance that the Firna bonds had been redeemed. They were therefore all wrong uses of CHC’s funds.
5 I turn next to the accused persons’ involvement and knowledge in the various plans to use CHC’s funds.
Funding the Crossover – being discreet
6 The accused persons understood that Kong Hee’s preference to be discreet about the funding for the Crossover was for the sake of ensuring the success of the Crossover, but being discreet was also synonymous with non-disclosure and mis-statements. Kong Hee had explained that it was his preference to avoid disclosure of CHC’s involvement in Xtron to avoid any misconception that Sun Ho’s secular music career was “not real” and that CHC was (still) using its money to promote her career. But in relation to both aspects, the evidence shows that it was true that her perceived success was inflated from rather more modest levels and Xtron and the Crossover team had to rely heavily on sponsorship from CHC members or supporters to help prop up her album sales and promote her career. When these sources of financial support which did not directly flow from CHC were insufficient, they had to come up with other means.
Xtron bonds
7 Xtron was CHC’s special purpose vehicle for the Crossover, and for this purpose Xtron was clearly under CHC’s control and not independent. The plan formulated in 2007 was that CHC’s funds, specifically funds from the BF, would be channelled through Xtron to be used for the Crossover, and the use of the funds was controlled entirely by Kong Hee and his team. In truth, this was analogous to an elaborate extension of a pattern of financial assistance via “sponsorship”, lending or prepayment to Xtron that had already either been taking place or been contemplated prior to 2007. These were seen as short-term measures to put Xtron in funds and support the Crossover. The mindset was thus that the Xtron bond issues were only yet another “temporary plan” albeit one which involved borrowing from CHC’s BF, and hoping that the funds would somehow find their way back to CHC at some unspecified future point.
8 Kong Hee, Ye Peng, Chew Eng Han (“Eng Han”) and Serina Wee (“Serina”) each clearly played a substantial role in conceiving and executing this plan to channel CHC’s BF through Xtron for the Crossover. John Lam’s role was evidently less substantial, but I am satisfied that he had his own part to play as a board member and investment committee member. All of them knew that the BF was a restricted fund to be used only for specific purposes. They claim that they believed the Xtron bonds were genuine investments. They believed the Xtron bonds would bring CHC financial return. But on my evaluation of the evidence I consider that the prosecution has proved beyond a reasonable doubt that they did not hold that belief.
9 I find that the accused persons were planning on the basis of Sun Ho’s planned US Crossover album being realistically capable of generating sales of only 200,000 units, and although their projections showed that the bonds could not be redeemed by the maturity date, they were unconcerned since Eng Han assured them that the maturity date for the bonds could always be extended or fresh bonds could be issued. I am unconvinced that they could have had a genuine belief in Sun Ho’s prospects of success for the US Crossover given their consciousness that much of her earlier success was contrived and contributed to by CHC itself. Serina readily conceded that Sun Ho’s Asian Crossover albums all made losses and Xtron had thus incurred substantial accumulated net losses. Kong Hee, Ye Peng, Eng Han and John Lam also knew that CHC was involved in propping up her Mandarin album sales. I am unable to see how there can be any genuine or honest grounds for their claims that they expected far higher sales for her planned US album well in excess of the projection of 200,000 units. This was no more than an optimistic hope. It was definitely not a realistic expectation. All this strongly militates against their claims that the Xtron bonds were motivated by the realistic prospect of financial return and were genuine investments.
10 Further, the accused persons were all involved in making plans to put Xtron in funds to redeem the bonds. They knew that these plans would involve CHC paying money to Xtron under the guise of legitimate transactions, when in fact the real concern was Xtron’s cashflow difficulties and the purported transactions were mere excuses for CHC to channel money to Xtron. Thus they knew that there was a strong possibility that the apparent financial return under the Xtron bonds would come from CHC itself. This knowledge further undermines their claim that they believed the Xtron bonds were a genuine investment.
11 In addition, the accused persons hid or obscured material information from others. Eng Han and John Lam kept the truth about the Xtron bonds from Charlie Lay. All of them 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 without reference to the Xtron directors, who were mere figureheads. The auditors were not told that Xtron was in fact controlled by Kong Hee and Ye Peng and that they together with their co-accused would exercise control over the use of the bond proceeds. There is no doubt that they knew that they had something to hide.
12 In all the circumstances, I am satisfied that the accused persons knew that the Xtron bonds were conceived first and foremost to support the Crossover and not for financial return. The prospect of any financial return was a secondary consideration at best and even then I do not accept that they genuinely believed that the sale of Sun Ho’s music albums would generate sufficient profit for CHC to enjoy financial return. They knew that any financial return to CHC might be illusory in the sense that it was CHC’s own money that might need to be channelled to Xtron to redeem the bonds. Given their knowledge, I cannot accept their claims that they believed the Xtron bonds were a genuine investment. Accordingly, they caused CHC to subscribe to $13 million in Xtron bonds knowing that they were not legally entitled to do so. Thus they acted dishonestly, and I find that the first and second charges have been made out against John Lam, Kong Hee, Eng Han, Ye Peng and Serina.

Firna bonds
13 In respect of the Firna bonds, the accused persons all knew that the primary purpose of the bonds was also to channel money from CHC’s BF to the Crossover. Kong Hee, Ye Peng, Eng Han and Serina knew that they, and not Wahju, were the ones controlling the Firna bond proceeds and deciding how the proceeds should be applied towards the Crossover. Yet they took the inaccurate position that Wahju was somehow “independently” supporting the Crossover using his “personal monies”, and this was what they told the auditors and lawyers. They knew that the financial return under the Firna bonds would not come from the profits of Firna’s glass factory business but depended entirely on the success of the Crossover. If the revenue from Sun Ho’s albums was not adequate, they would find alternative sources of funds for Firna, and that might include channelling CHC’s own money into Firna through various means. Given this knowledge, I do not think Kong Hee, Eng Han, Ye Peng and Serina could have believed that the Firna bonds would generate financial return for CHC, and so they could not have believed that the bonds were a genuine investment.

14 John Lam was further removed from the Firna bonds than the other accused persons. But he signed the “secret letter” that secured the signature of Wahju’s father-in-law on the Firna BSA. I am satisfied that he knew that the prospect of financial return for CHC did not depend on the success of Firna’s glass factory business. He knew that it was a very real possibility that the Crossover would not be profitable. Thus I find that he too did not believe that the Firna bonds would generate financial return for CHC, meaning that he did not think the bonds were a genuine investment.

15 Therefore, in causing CHC to subscribe to $11 million in Firna bonds, the accused persons knew that they were not legally entitled to do so. They thus acted dishonestly. As such, I find that the third charge has been made out against John Lam, Kong Hee, Eng Han, Ye Peng and Serina.

16 At the centre of the first to third charges is how the BF came to be applied for the Crossover when it was a restricted fund for specific purposes – either for building or investment. In my judgment, the Crossover was not one of these purposes. 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 BF. 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 BF. I do not see how they can be said to have acted in good faith in relation to the charges they face.

17 The accused persons have of course pointed to the fact that the money did come back to CHC with interest. However, this is patently due to their efforts to put Xtron, Firna and AMAC in funds to facilitate these repayments through the round-tripping transactions. It does not confirm that there was any actual intention at the outset to invest for the purpose of maximising returns. What is more telling is that it was consistently represented to CHC’s Executive Members that investing the BF in this fashion was meant to maximise returns. There was no mention at all that the investment was in the Crossover, let alone that it was for “spiritual returns” or for both spiritual and financial return from the Crossover. The failure to mention those facts buttresses my conclusion that the accused persons knew that they were not legally entitled to cause CHC to enter into the Xtron and Firna bonds.

Round-tripping and falsification of accounts
18 As revealed by the evidence adduced at trial, there was never any financial “return” derived from any of Xtron’s and Firna’s Crossover-related activities. Instead, when the time came to deal with the auditors’ queries and to address Sim Guan Seng’s concerns, they resorted to removing more funds from the BF and also the General Fund under the pretext of making further “investments” into Tranches 10 and 11 of the SOF and purportedly for a building purchase by Xtron through the ARLA. The round-tripping transactions were crafted to create the appearance that these were genuine transactions involving the redemption of bonds when they were not. 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.

19 Given that Ye Peng, Eng Han, Serina and Sharon Tan (“Sharon”) were fully aware of the whole series of transactions, they could not have believed that Tranches 10 and 11 of the SOF were genuine investments, or that the payment under ARLA was a building-related expense. They say that they viewed all this as “restructuring”, but that to my mind is fundamentally inconsistent with a belief that the transactions were genuine investments or building-related expenses, and this inability to provide a coherent explanation for their conduct strongly suggests that they knew they were not legally entitled to cause CHC to enter into these transactions. They may have apprised the CHC board of an earlier version of the transactions, but they kept that knowledge from the lawyers and the auditors. Taking into account all the circumstances, I am satisfied beyond reasonable doubt that the fourth to sixth charges have been made out against them.

20 I am also satisfied that there was falsification of CHC’s accounts following from the attempts to disguise the SOF and ARLA transactions as genuine transactions. In relation to the ninth charge, 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. I am therefore satisfied that the seventh to tenth charges have been made out against Ye Peng, Eng Han, Serina and Sharon.

Objective evidence and inferences
21 I note that there was an extensive record which comprised an elaborate patchwork of emails, Blackberry messages, phone SMSs, hard copy documents and numerous other documented exchanges in some form or other. The fact that there was a mass of available evidence which when woven together amounted to a paper trail is not necessarily indicative of innocence. 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.

22 The case against the accused persons depended heavily on inferences to be drawn from the objective evidence. Much of these inferences can be readily drawn as the tenor and language in the communications adduced at trial strongly point to their dishonest intent. In short, the documentary evidence goes a long way in demonstrating their subjectively guilty knowledge. I am not convinced that they have raised any reasonable doubt in this regard.

23 I find that the accused persons were variously inextricably entangled in two conspiracies to misuse CHC’s funds. One conspiracy consisted of misusing BF monies for the Crossover, and the other involved misusing CHC’s funds, a substantial portion of which comprised BF monies, to create the appearance of bond redemptions and to defraud the auditors via falsified accounts through the various roles they played. 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.

Beliefs, motives and mindsets
24 Much of the defence centred on the beliefs and motivations of the accused persons. If it can be shown that they 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.

25 Where professional advice was sought, this was really mainly an attempt to seek out self-supporting confirmatory advice based on selectively-disclosed information. They omitted mention of the crucial fact that CHC remained in control of Xtron and would correspondingly control the use of the funds. They provided leading questions for belief confirmation and support from only those advisors whom they trusted to support the Crossover vision and were quick to reject or filter out any disconfirming information.

26 The accused persons chose to support the Crossover vision and to act and participate in acts in support of it. The Crossover became a comprehensive logic for justifying their beliefs and actions, and for doing whatever was expedient for its advancement. The pervasive mindset seemed to be one of short-term expediency; the use of means involving dubious methods was worth the risk to them if there was some hope of longer-term gain.

Conclusion
27 In their defence, all the accused persons testified largely to the same effect: they love CHC and would not have wished to do harm to CHC. They never intended to cause loss to CHC. They consulted and cleared their proposals with their lawyers, the auditors and the CHC Board. They were motivated by CHC’s cultural mandate and they believed in the Crossover vision. They pointed to pure motives and a justifiable purpose in the use of CHC’s funds. Ultimately the funds which were removed were for Church purposes and were returned to CHC.

28 The crux of their defence was that there was no conspiracy and no dishonesty. All six would never intend to cause harm or loss to CHC and the ultimate objectives were in furtherance of the Great Commission. It may be arguable that all of them thought they were not acting dishonestly to cause wrongful loss since no permanent loss was intended, but this was premised on their unquestioning trust and belief in Kong Hee and their confidence that the Crossover would succeed. Thus they convinced themselves that it was both morally and legally permissible to temporarily use the money from CHC’s funds when they knew it was not.

29 The accused persons 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 BF 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.

30 I am therefore satisfied beyond a reasonable doubt that the six accused persons are guilty of all the charges that have been brought against them. I note that all of them believed that they had acted in what they considered to be the best interests of CHC. There is no evidence of any wrongful gain – that was never the prosecution’s case in any event as the charges were premised on wrongful loss caused to CHC through the misappropriation of CHC’s funds.

31 I consider that John Lam, Eng Han, Serina and Sharon were all acting in accordance with the instructions of people they considered to be their spiritual leaders deserving of their trust and deference, and Ye Peng, although a leader in his own right, similarly trusted completely the leadership of Kong Hee. 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. In my judgment all the elements of the relevant offences have indeed been made out. Accordingly, the accused persons stand convicted as follows:
(a) John Lam is convicted on the first to third charges;
(b) Kong Hee is convicted on the first to third charges;
(c) Sharon is convicted on the fourth to tenth charges;
(d) Eng Han is convicted on the first to tenth charges;
(e) Ye Peng is convicted on the first to tenth charges; and
(f) Serina is convicted on the first to tenth charges.
By : at
Labels: , , , , , , , , , , , , , ,

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)