Leaders 'acted on auditor's advice'

THE City Harvest Church leaders on trial merely acted on their auditor's instructions, defence counsel said yesterday, arguing that they had no criminal intent or knowledge.

The defence also tried to poke holes into the testimony of Baker Tilly managing partner Sim Guan Seng, and reiterated that the audit firm should have had full awareness of the church transactions.

Six people, including church founder Kong Hee, are on trial for various counts of criminal breach of trust and falsifying accounts by misappropriating $24 million in sham bond investments, and another $26.6 million to cover it up.

The court heard that City Harvest's board was following the advice of Mr Sim to "keep it simple" on matters regarding bond investments in two church-linked companies - music production firm Xtron and glass manufacturer Firna.

Mr Sim was lead auditor of the church for financial years 2008 and 2009, and Xtron in 2008.

Cross-examining Mr Sim, defence lawyer N. Sreenivasan said: "I am not insisting that (their) understanding was right or wrong. I am told that the understanding was that you wanted the Xtron and Firna bonds off (the church's books) as an asset because they were just creating too many problems."

Mr Sim agreed: "I think it is quite fair that the client would get the impression because I was asking a lot of questions about valuation, security and the risk of default."

The lawyers cited an e-mail sent by church finance manager Sharon Tan to deputy senior pastor Tan Ye Peng and former board member John Lam, where she reported what Mr Sim told her privately in a "conversation" after meeting the three of them.

She wrote: "He chose to stop asking just now because he knows that we will give some more stories which will trigger off more questions... He hopes to see this Xtron issue being solved in this financial year. As (to) how, we need to think through."

It is this impression that precipitated the early redemption of the bonds so that they would no longer appear on the books, argued lawyer Michael Khoo, representing Chew Eng Han, director of church investment manager AMAC Capital Partners.

Mr Sim said: "I did not tell the client that I want the bonds off the books... How can I insist someone redeem a $20 million bond? Money doesn't grow on trees."

Mr Sreenivasan said the church board cannot be faulted for thinking that the communications they had with Baker Tilly's then managing partner Foong Daw Ching would eventually be passed on to the firm's auditors working on the accounts.

Said Mr Sreenivasan: "I am the managing director of my own firm. When clients call me and tell me something, they can assume that they are talking to Straits Law because they think I am the boss."

Mr Sim said: "That is not how an audit firm works." The trial continues today.

Get a copy of The Straits Times or go to straitstimes.com for more stories.