City Harvest auditor queried over slew of documents

CITY Harvest Church's senior figures appeared to describe earnings outside of alleged sham bond investments it made in church-linked companies as "real money", it emerged yesterday.

"Pastor Kong Hee wants to know of the $7 million investment profit we have in the last financial year, how much of it was real money earned outside of bonds between City Harvest-(music production firm) Xtron-(glass manufacturer) Firna," deputy senior pastor Tan Ye Peng wrote in a 2010 BlackBerry message to finance manager Sharon Tan.

"Meaning, actual money in from the 'world'," he added. The reply: "Pastor, the 'real' income is $2.1 million."

Kong, the two Tans and three others are on trial in a district court for various counts of criminal breach of trust and falsifying accounts for allegedly misappropriating $24 million through sham bonds, and then using $26.6 million to cover it up.

Mr Sim Guan Seng, managing partner of auditing firm Baker Tilly, when asked for his opinions about the message, to which he was not privy, said: "The classification is decided by church management and the board. We have no reason to separate the bonds from the other investments."

The prosecution spent the whole of yesterday afternoon presenting Mr Sim, who presided over City Harvest's audit for financial years ending 2008 and 2009, and Xtron's for 2008, with one document after another that he said he had no clue about.

This is contrary to defence counsel N. Sreenivasan's comments last Thursday when he said: "It is our position that Baker Tilly, as a body, and as auditors, knew everything."

Among Mr Sim's responses to the documents were comments such as "it doesn't make sense at all", "it would raise a lot of red flags" and "it would create a lot of doubts in my mind about the whole transaction".

One of these was a July 2007 e-mail sent by Serina Wee, who provided accounting services for Xtron, to deputy senior pastor Tan and Chew Eng Han, who was then vice-president of the City Harvest management board.

Wee had projected English album sales of Kong's pop star wife, Ms Ho Yeow Sun, whom Xtron was managing, to be 200,000 copies, yielding a revenue of $2.17 million. The album was never released.

This was far short of the $13 million bond agreement with a maturity of two years that the church would enter the following month with Xtron.

"Why would the church, with this knowledge, want to subscribe to a $13 million bond for this project? This is on top of why Xtron was discussing this with members of the church board at this point of time," Mr Sim asked.

Even for some things he already knew about during the audit process, Mr Sim had found it puzzling.

He told the court he was concerned about the rationale behind the church lending a huge sum of money to Xtron to 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."

He also said that Xtron was "not exactly the most financially healthy company".

The explanation given to him - which he said was "a bit unusual" - was that Xtron would give a discount on rental rates to City Harvest. The rental payments will then help Xtron recover the income from buying the property.

Mr Sim continues on the stand today.

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