City Harvest Appeal Decision Explained – Episode 2 (Sentencing)

Now in Episode 2, we will consider why the Majority, despite their affirmation of the Judge’s decision below on the “wrong use” of CHC’s funds, the appellants’ participation in the conspiracy and their respective dishonesty, reduced the sentences significantly. We will also examine the unique mitigating factors which the Majority had considered before arriving at the final reduced sentences. All of these will help us to understand why the sentences became lighter than what was initially given by the Judge.

A. PREVIOUSLY, IN EPISODE 1

For those who have not read Episode 1, it is well worth a read, in order to understand what had really happened, as well as the ruling of the Majority on the appeals against conviction.

Anyway, for the sake of those who prefer an even more summarized version, let me try to retell the entire story in a tinier nutshell. The capitalized terms below are as defined in Episode 1, while the numbers in square brackets are references to the relevant paragraph(s) in the 298-page City Harvest Church Appeal Decision.

A.1 The Early Years

In 2001 and 2002, CHC was using church funds to directly support the Crossover project, which was an evangelistic endeavour to spread the gospel through the secular music of Sun Ho. In 2003, Roland Poon asked questions. The CHC Board and Kong Hee denied using church funds for the Crossover – which was undoubtedly not true. Xtron was created to be the intermediate corporate vehicle to create distance between CHC and the Crossover. Xtron, which was in reality controlled by Kong Hee and others at all material times, started to manage Sun Ho’s secular music activities. In other words, Xtron was not an independent entity.

In 2006, Wyclef Jean was brought on board as a producer, and his participation, together with the expansion of the Crossover, led to a significant increase in the amount of funding that was necessary. More funds were needed.

A.2 The Sham Xtron Bonds

This led to the sham investments into the Xtron bonds under the 1st Xtron BSA, and S$13 million was transferred from the Building Fund from April 2007 to March 2008. These monies were used for the Crossover. However, (1) the returns (7% per annum) were poor compared to the high risks involved (especially seen in the light that a Hong Kong bank, Citic Ka Wah Bank Limited, had demanded an interest rate of 16% per annum on a smaller sum of S$9 million to lend to Xtron to fund the Crossover); (2) Xtron was a loss-making and insolvent company; (3) no due diligence or cash flow projection was properly done on CHC’s behalf before the investment, and; (4) it was the appellants, not Xtron the bond issuer, who bore the responsibility of ensuring that the bonds could be redeemed.

This became the subject of the first two sham investment charges. The Majority held that this was not in substance a genuine investment, and that the Xtron bonds were in effect a means through which funds could be taken out of the Building Fund to use on the Crossover. All the appellants (except Sharon, who was not charged on this) were convicted on these charges.

A.3 The Sham Firna Bonds

From June to July 2008, the auditors raised various concerns pertaining to Xtron (including whether it is a related party to CHC, whether the value of the Xtron bonds have to be written down, as well as to require disclosure of all transactions between Xtron and CHC given that Sun Ho was a “key player” in Xtron). The auditors were told that Xtron was an independent party (this was not true). More distance was needed.

Enter in 2 other companies, UA and Firna, both of whom are related to Wahju, a loyal member of CHC. Wahju owned 100% of UA and 80.4% of Firna. Sun Ho was transferred from Xtron to UA. Funds from CHC would be transferred to Firna (who would issue “bonds” to CHC), then Firna to UA, and then UA to the Crossover. In short, Xtron was replaced with Firna and UA, with the latter 2 entities becoming the new conduits for church funds to be transferred to the Crossover.

This led to the sham investments into the Firna bonds under the Firna BSA, and a further S$11 million was transferred from the Building Fund from October 2008 to June 2009. A secret letter was signed by John Lam on behalf of the CHC Board to assure Firna’s minority shareholder (Wahju’s father-in-law, who owned 19.6% of Firna) that even if CHC exercised its convertibility option, it would sell the Firna shares back to Wahju and his father-in-law for US$1. With this assurance, Wahju’s father-in-law went along with the plan and signed the Firna BSA. This secret undertaking effectively meant that CHC lost an additional security feature. CHC’s lawyers were never informed about, and were never asked to provide advice on, this secret letter.

Out of the S$11 million transferred over under the Firna BSA, about S$7.56 million was used for the Crossover and S$2.5 million was used by Wahju for his personal expenses (presumably to secure his cooperation). It is unclear what had happened to the remaining S$0.94 million.

This became the subject of the third sham investment charges. The Majority held that this was not in substance a genuine investment, and that the Firna bonds were devised as a means through which the appellants could extract monies from the Building Fund for the Crossover. In reality, it was not a commercial transaction into Firna, and Firna bore no personal responsibility to redeem these bonds and was merely a conduit for the transfer of church funds to the Crossover. Again, all the appellants (except Sharon, who was not charged on this) were convicted on these charges.

A.4 Round-Tripping Charges – Tranches 10 and 11 of the SOF     

After a meeting on 9 April 2009 with the auditors, Ye Peng, Sharon, Eng Han and Serina decided that the Xtron and Firna bonds had to be redeemed before the end of CHC’s financial year (i.e. 31 October 2009). The plan eventually devised was essentially to use CHC’s own monies to redeem such bonds (instead of Xtron and Firna using their own monies to do so).

AMAC (CHC’s fund manager, in which Eng Han was the sole director and 70% shareholder) gave the impression that the Church could make an investment into the SOF (i.e. Special Opportunities Fund) administered by AMAC. The Church invested two sums, S$5.8 million in early October 2009, and S$5.6 million in mid-October 2009, into Tranches 10 and 11 of the SOF respectively. The stated return rate was 5.05% per annum ([45)]). But these were not real investments. The monies were transferred to AMAC, then to UA, then to Firna, to put Firna into funds to redeem the Firna bonds, using CHC’s own monies, and giving the false impression that Firna had fulfilled its obligations. The monies went on a round-trip.

These were the subject of the first two round-tripping charges as well as the first two account falsification charges (i.e. falsely recording these transactions as “investments”, when they were not), and Ye Peng, Eng Han, Serina and Sharon were convicted on these charges.

But the Xtron bonds were yet to be redeemed. Similarly, the AMAC investments under Tranches 10 and 11 of the SOF were not redeemed. The next stage of the plan kicked into action.

A.5 Round-Tripping Charges – the ARLA

In mid-October 2009, CHC signed an Advance Rental License Agreement (i.e. the ARLA) with Xtron. Under the ARLA, CHC was to pay a total of S$53.27 million (consisting of S$46.27 million in advance rental, together with S$7 million as security deposit) to Xtron in exchange for the right to use and occupy the premises provided by Xtron for 8 years. This was recorded in the books as a building-related expense.

An entry was recorded in the books, setting off the advance rental against the redemption of the Xtron bonds totaling S$21.5 million (note: there was an amended bond subscription agreement (“ABSA”) in relation to the Xtron bonds, whereby the amount of funding made available to Xtron was increased from S$13 million to S$25 million, the stated interest decreased from 7% to 5%, and the maturity date of the bonds extended from 2 years to 10 years (see [38])). In short, the Xtron bonds were “redeemed” through this set-off.

But a set-off must be done against something of true value. In this regard, the Majority held that “the value of the advance rental under the ARLA was arbitrary” ([330]) and that “the sums payable by CHC to Xtron under the ARLA was falsely inflated” ([331]). This amounted in substance to CHC writing off the Xtron bonds from its books. As such, the entry which recorded that the Xtron bonds were redeemed was false ([331]). This was the subject of the third account falsification charge, and Ye Peng, Eng Han, Serina and Sharon were convicted on it.

Finally, the AMAC investments under Tranches 10 and 11 of the SOF also had to be redeemed. Apart from the above set-off recorded (to “redeem” the Xtron bonds), CHC still owed money (in the form of advance rental, security deposit, etc) to Xtron under the ARLA. Accordingly, on 6 November 2009, CHC transferred S$15.24 million to Xtron as “Advance rental to Xtron”, with S$12 million being part payment of the advance rental under the ARLA while the remaining sum of S$3.24 million was GST for the advance rental (i.e. 7% of S$46.27 million). The monies were again round-tripped, from Xtron, on to Firna, then to UA, and then to AMAC, to put AMAC into funds, using CHC’s own monies, to redeem Tranches 10 and 11 of the SOF.

These were the subject of the third round-tripping charges as well as the fourth account falsification charges (i.e. falsely recorded these transactions as building-related expenses, when they were not), and Ye Peng, Eng Han, Serina and Sharon were convicted on these charges.

The Majority held that when considered as a whole, the round-tripping transactions were “nothing less than a perpetuation of a fraud” or at the very least a “devious scheme” to use church funds for unauthorised purposes ([161]), and was the “perpetuation of a charade” to use CHC’s own money to create the impression that other entities such as Firna, AMAC and Xtron had fulfilled their obligations to CHC.

A.6 Events in 2010    

In January 2010, CHC acquired a stake in Suntec City, and the ARLA was terminated on 31 March 2010. On 31 May 2010, the CAD investigated, and raids were conducted. On 1 August 2010, CHC convened an EGM with the Executive Members, seeking to ratify the above transactions. At this EGM, the true nature or substance of the transactions continued to be masked. On 4 October 2010, Xtron (having been put into funds through the obtaining of loans from various individuals) repaid monies to CHC, including the S$7 million security deposit.

A.7 Usage of the Monies Misappropriated

All in all, a total of S$50.64 million was misappropriated (this is the cumulative total of all the above sums in bold and underlined). In terms of usage, a total of S$20.56 million was used for the Crossover (i.e. S$13 million under the 1st Xtron BSA, and around S$7.56 million under the Firna BSA). However, under the Firna BSA, S$2.5 million went to Wahju, while it is unclear what had happened to the remaining S$0.94 million. In addition, S$3.24 million was a GST payment under the ARLA, another S$545,000 was left in Xtron ([157(c)], [405]), and the rest were round-tripped to redeem the various bond transactions / “investments” with Firna and AMAC, amongst other uses.

All the convictions were affirmed on appeal. But the charges were reduced by the Majority from a Section 409 charge to a less serious form of criminal breach of trust under Section 406 of the Penal Code (which was a question of law, not fact). To this, we now turn.

B. SECTION 409 OF THE PENAL CODE – PROFESSIONAL VS CASUAL AGENT?

B.1 The Majority’s View on Section 409

Let us start by setting out the relevant provisions of the Penal Code pertaining to criminal breach of trust.

Criminal breach of trust

405. Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person to do so, commits “criminal breach of trust”.

Punishment of criminal breach of trust

406. Whoever commits criminal breach of trust shall be punished with imprisonment for a term which may extend to 7 years, or with fine, or with both.

Criminal breach of trust by carrier, etc.

407. Whoever, being entrusted with property as a carrier, wharfinger or warehouse-keeper, commits criminal breach of trust in respect of such property, shall be punished with imprisonment for a term which may extend to 15 years, and shall also be liable to fine.

Criminal breach of trust by clerk or servant

408. Whoever, being a clerk or servant, or employed as a clerk or servant, and being in any manner entrusted in such capacity with property, or with any dominion over property, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for a term which may extend to 15 years, and shall also be liable to fine.

Criminal breach of trust by public servant, or by banker, merchant, or agent

409. Whoever, being in any manner entrusted with property, or with any dominion over property, in his capacity of a public servant, or in the way of his business as a banker, a merchant, a factor, a broker, an attorney or an agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment for a term which may extend to 20 years, and shall also be liable to fine.

The issue was whether John Lam, Ye Peng and Kong Hee, who were members of the CHC Board, were entrusted with the monies in the Building Fund and the General Fund “in the way of [their] business as … agent[s]” under Section 409 (see [88]). Notice that the word “director” does not appear in Section 409.

The starting point is the 40-year old Singapore High Court decision in Tay Choo Wah [1974-1976], where it was decided that directors who were entrusted with property in the course of their duties as directors would have been entrusted with the property in the way of their business as agents ([52]). In coming to its decision, the High Court in Tay Choo Wah adopted the position in an Indian Supreme Court decision (Dalmia [1962]) rather than a Privy Council case on appeal from Ceylon (Cooray [1953]).

The Majority disagreed with Tay Choo Wah, and held that the words “in the way of his business as … agent” under Section 409 must necessarily refer to a “professional agent”, i.e. one who professes to offer his agency services to the community at large and from which he makes his living, rather than “casual agents”, i.e. someone who does not offer his services as an agent to the community at large and from which he makes his living ([101]-[112]). According to the Majority, this is reflected both by the use of the word “business” as well as the words “a banker, a merchant, a factor, a broker, an attorney” preceding the words “or an agent” ([103]).

Next, while the Majority held that there is no dispute that a director may be an agent of the company or organisation in relation to certain acts that he does on behalf of the company or organisation, this is an internal relationship with the company, and not an external one like those of a banker, merchant, factor, broker or attorney. Therefore, a director who has been entrusted with the property of the company or organisation by virtue of his capacity as a director does not fall within Section 409 (see [110]). Such directors are not professional agents.

The Majority acknowledged that it was “intuitively unsatisfactory” that a director would only be liable for CBT simpliciter under Section 406 whilst a clerk, servant, carrier or warehouse keeper would be liable for an aggravated offence under either Section 407 or 408, but they felt that they could not ignore the wording of the section, and that the task of rewriting the section should be left to Parliament ([112]).

As such, the charges were reduced to the offence of CBT simpliciter under Section 406 ([122]). This in turn led to a much lower starting point for the purposes of sentencing. As the Majority recognized ([363]):

“This reduction in charge has a significant impact on the sentences that may be meted out on the appellants because the maximum punishments of the two provisions are markedly different.” [Emphasis in bold added]

The maximum punishment under Section 409 was 20 years’ imprisonment (and which was 10 years before the 2008 amendment of the Penal Code) in contrast with the maximum punishment under Section 406, which was 7 years’ imprisonment (and which was 3 years before the 2008 amendment). As such, the Majority approached the sentences for the CBT Charges afresh, while taking in account the Judge’s findings and the parties’ submissions on the aggravating and mitigating factors, amongst other factors ([364]). See Section C below for a discussion on the Majority’s view on some of the key mitigating factors.

As can be seen, this was one of the main reasons why the appellants’ sentences were significantly reduced on appeal. It was due to an issue of law, rather than fact.

B.2 The Minority’s View on Section 409

The Minority disagreed with the Majority on the Section 409 point ([444]-[474]).

The Minority held that when directors act for and on behalf of the company, they act as agents, and hold a formal position in the course of which they receive or hold property on someone else’s behalf (and therefore cannot be said to be casually entrusted with such property). See the relevant parts of [465]-[466] as follows:

“It is trite that whilst a company is a separate legal person, it can only act through the medium of human beings. When directors act for and on behalf of the company, they act as agents of the company…

… It is, to my mind, unarguable that when directors are entrusted with the property of their company or organisation in their role as directors, they are entrusted with the property in accordance with that role and office. I do not see how it can be said that a director’s dealings with the property of his company or organisation in his role as an office-holder may be said to be casual in the same way the accused persons in R v Kane and R v Portugal were said to be casual agents vis-à-vis the accused’s acquaintance and the firm of railway contractors respectively. Rather, I find that directors, like bankers, merchants, factors, brokers and attorneys, hold a formal position in which they, in the usual course of that position, undertake to act on someone else’s behalf, and in the course of doing so, receive or hold property on that person’s behalf. The directorship of a company or organisation facilitates the course of commercial dealings, inter alia, between the public and the company or organisation, making the fictional legal entity of a company possible as a practical reality. Directors are subject to onerous fiduciary and directors’ duties, and are in a position of trust as much as (or even more so than) bankers, merchants, factors, brokers and attorneys are vis-à-vis their principals or clients.” [Emphasis in bold added, while the underlined portions were emphasized in italics by the Minority]

As such, the Minority agreed with the position laid down in the 40-year old case of Tay Choo Wah, i.e. that the directors of a company or an organisation fall within the class of persons contemplated under Section 409 of the Penal Code ([467]). This applies equally to directors who sit on the board of registered societies, which, like companies, are recognised as possessing separate legal personality ([467]).

Importantly, the Minority pointed out the “anomalous situation” and “highly unsatisfactory state of affairs” which would result if Section 409 did not cover a director ([470]):

“Importantly, the interpretation which I have adopted is also in line with the framework of the Penal Code, which provides for an increase in the scale of punishment according to the degree of trust reposed. If I had adopted the appellants’ interpretation, an anomalous situation would result wherein a director who committed the offence of CBT of the property of his company or organisation would only be caught by s 406 of the Penal Code which would attract a maximum punishment of seven years’ imprisonment in the 2008 revised edition, whereas a clerk or servant who misappropriates the property of the company could be liable to a much heavier sentence of up to 15 years’ imprisonment under s 408 of the same edition of the Penal Code. This would result in a highly unsatisfactory state of affairs, as directors in their positions of leadership are regarded as being reposed with greater power, trust and responsibility than clerks or servants. The interpretation which I have adopted avoids this incongruity, and, in my judgment, is to be preferred as it is well-established that the court generally avoids interpreting statutes in a manner that produces absurd results …” [Emphasis in bold added]

The Minority also disagreed with the argument that Section 409 covers only “professional agents” (in the sense that they carry on a livelihood of being an agent). Neither the case authorities nor the principles of statutory interpretation require that the section be interpreted in such a manner. The Minority went on as follows ([471]):

“Instead, as I have stated above, what is crucial is that the accused in question is entrusted with property or dominion over property when acting in the course of a certain trusted trade, profession, office or occupation held by the accused wherein he in the ordinary course acts as an agent.”

Applying the above principles, the Minority held that the entrustment of dominion over CHC’s property to the relevant appellants was in the way of their business as agents of CHC under Section 409 of the Penal Code, and was accordingly of the view that all the appellants were properly found guilty of, and convicted for, offences under Section 409 read with Section 109 of the Penal Code (i.e. abetment by engaging in a conspiracy to commit CBT) ([473]-[474]).

B.3 An “Intuitively Unsatisfactory” Situation

Notwithstanding their differences on the Section 409 point, both the Majority and the Minority were somewhat in agreement on one thing, i.e. if a director is not covered by this section, it produces an intuitively unsatisfactory situation whereby various persons (e.g. clerks or servants) who misappropriate property are potentially liable for a higher punishment than directors who are reposed with greater power, trust and responsibility. In describing this situation, the Majority used the words “intuitively unsatisfactory” ([112]), while the Minority described it as an “anomalous situation” and a “highly unsatisfactory state of affairs” [470]).

In this regard, the AGC has filed a criminal reference on a question of law of public interest. This application is scheduled to be heard by the Court of Appeal in August 2017 before a panel of five judges. Their decision will be final.

If the Court of Appeal takes the view that Section 409 covers directors (i.e. the position taken in Tay Choo Wah, as well as by the Minority and the Prosecution), then the Prosecution will request for a reinstatement of the original convictions of the appellants, and for necessary and consequential orders to be made in relation to the sentences given.

C. MAJORITY’S VIEW ON MITIGATING FACTORS

C.1 Four Main Mitigating Factors

The Majority held that this case was sui generis and without direct precedent ([370]). Although the sums involved are indeed substantial, there are a number of “exceptional mitigating factors in the present case” for which the Majority allowed a significant discount on the sentences ([370], [377]). There are 4 main mitigating factors.

No Personal Gain: First, this was a situation which, “as accepted by the Prosecution, involved no personal gain on the appellants’ part” ([370]). As the Judge said below, “it is not the [P]rosecution’s case that even Kong Hee had enjoyed any wrongful gain” ([374] quoting [21] of the Judge’s sentencing grounds of decision (“Judge’s Sentencing GD”)). In this regard, the Majority also noted that ([375]):

“On a related though separate issue, we note that the Prosecution had not focused on any gain to third parties for its case on conviction and sentence, even though this may have been suggested in the charges (especially the sham investment charges). While the Prosecution did, in its oral submissions before us, attempt to make the point that a benefit had accrued to Sun Ho, this point was not raised in its written submissions for the appeal and was also not raised before the Judge. In the circumstances, we approach the sentencing in this case as one without any element of wrongful gain or personal financial benefit, either direct or indirect.” [Emphasis in bold added]

In short, the Judge below as well as the Majority did not take into account any benefit or wrongful gain to any party, as a factor in sentencing. This was an assumed position, rather than one that was proved.

The Minority disagreed with this point. He held that it was very clear from the evidence before the court that Sun Ho had obtained a direct benefit (both financial and non-financial), Kong Hee had obtained an indirect benefit (both financial and non-financial), and that a third party Wahju had obtained a direct financial benefit (S$2.5 million) (see [502]-[512]). This will be discussed further in the upcoming Episode 3.

Acting in Best Interests: Second, the Majority agreed with the Judge that the appellants “acted in what they considered to be the best interests of CHC”, in that “they believed that their acts, especially where the sham investment charges are concerned, would ultimately have advanced the interests of CHC by allowing them to evangelise through the Crossover” ([370]). It is interesting to note that the Majority also mentioned the following ([377]):

“But, at the same time, the appellants’ various non-disclosures take on a different character when underscored by the overarching theme that they were acting in what they genuinely believed to be in CHC’s interests. Whether this may in fact be so is a matter open for debate, but what is crucial is that this was their belief.” [Emphasis in bold added, while the underlined portions were emphasized in italics by the Majority]

Indeed, this matter remains open for debate.

The Minority had strong views on this issue. He did not accept that the appellants acted with CHC’s best interests at heart or had no intention of causing CHC to suffer financial loss as a result of the various transactions ([513]-[531]). More of this will be discussed in the upcoming Episode 3.

No Permanent Financial Loss: Third, the Majority approached the sentencing for the CBT Charges on the basis that CHC had in fact not suffered any permanent financial loss, save for the GST component which was eventually paid back ([376]):

“… we note that the Prosecution’s case is that, apart from the sum of $3.2m that was paid as GST under the ARLA, no permanent financial loss would be caused to CHC as a result of the round-tripping charges which allowed for the redemption of the Firna bonds. Given this, we accept that the position on which the sentences for the CBT Charges should be meted out ought to be on the basis that the appellants would ensure that CHC would not have suffered, and had in fact not suffered, any permanent financial loss (save for the sum of $3.2m that was paid as GST, though we note that this sum was eventually also returned to CHC when the ARLA was rescinded).” [Emphasis in bold added]

The Minority also disagreed with this point, and held that it was entirely likely that CHC suffered permanent financial loss (pertaining to the Xtron and Firna bonds), and had also suffered actual and permanent financial loss pertaining to the ARLA ([532]-[537]). Again, more of this will be discussed in the upcoming Episode 3.

Support: Fourth, the Majority accepted that the Crossover was generally endorsed by the body of CHC ([370]). This is discussed further in Section C.2 below.

Overall Approach of the Majority in Sentencing: Having regard to the above context, the Majority went on to make the following comments at [377]:

“In our judgment, the present case should not be viewed as a sinister and malicious attempt on the appellants’ part to strip the church of funds for their own purposes. We accept that because the appellants wanted to keep the use of the BF for the Crossover confidential, and feared questions being asked thereon, they resorted to deceit and lies. This included inflating Sun Ho’s success, keeping the true nature of the various transactions from the auditors, lawyers, the CHC Board and CHC’s members and presenting a misleading picture to CHC’s members even after the CAD had commenced its investigations. Such prevarication is undoubtedly an aggravating factor and should not be condoned, especially since most of the funds in question were from the [Building Fund], which were funds donated to CHC for a specific and restricted purpose. But, at the same time, the appellants’ various non-disclosures take on a different character when underscored by the overarching theme that they were acting in what they genuinely believed to be in CHC’s interests. Whether this may in fact be so is a matter open for debate, but what is crucial is that this was their belief. Thus, despite the fact that a large amount of funds from CHC was misappropriated, which would ordinarily have attracted a sentence at the higher end of the sentencing spectrum, we would allow for a significant discount given the exceptional mitigating factors in the present case. None of the appellants, particularly Eng Han, Ye Peng, John Lam, Serina and Sharon, could be said to have gained anything from what they did other than pursuing the objects of CHC. Their fault lies in adopting the wrong means.” [The underlined portions were emphasized in italics by the Majority]

C.2 Support / Endorsement of the Crossover

As one of the mitigating factors, the Majority accepted that the Crossover was generally endorsed by the body of CHC ([370]):

“In this regard, we also accept that the Crossover was generally endorsed by the body of CHC. Although it is clear that not 100% of CHC was in support of the Crossover, and that in some instances, the support of the church was obtained without full disclosure of the facts (for example, the members were falsely led to believe after the Roland Poon incident that CHC had never funded the Crossover directly), it is also equally clear and telling that a substantial proportion of CHC’s membership continued to support the mission of the Crossover even after the full facts surrounding the CBT Charges were brought to light (see also the Sentencing GD at [23]).” [Emphasis in bold added, while the underlined portions were emphasized in italics by the Majority]

There are, with respect, several difficulties in accepting this as a mitigating factor. In making these points, references will be made to the Judge’s Sentencing GD, which may be downloaded here. This is because it appears that there was no discussion by the Majority on the support point, other than what was quoted above (and at [350], where the Majority summarized [23] of the Judge’s Sentencing GD).

Personal Financial Support: First, while the mission of the Crossover was generally endorsed by the body of CHC, it is not the same as saying that these members supported it in the sense that they would have agreed for their own donated monies to be used to fund the project. For support to be a mitigating factor, such support cannot merely be in the moral and spiritual sense, but rather, it must extend to support in the personal financial sense.

The question may be framed as the sentence in bold below (taken from [24] of the Judge’s Sentencing GD):

“In particular, it cannot be overemphasised that the BF was an accumulation of donations received through CHC’s “Arise & Build” campaigns by donors who specifically contributed over the years for the building effort. There is no evidence that each of these donors to the BF would have agreed to the diversion of such funds for the Crossover. One way of appreciating the significance of this point might be to ask: would $24 million have been raised in under two years if CHC members had been asked to contribute to a “Crossover fund” in 2007? And if the $24 million was exhausted by 2009 and needed to be replaced for some reason by 2010, would a similar amount or more have been raised from CHC members within the first half of 2010? One can speculate that all this might have been achieved; but the point is probably moot since CHC members were never asked to make such contributions and had been given the impression all along that the necessary financing for the Crossover was not drawn from church funds.” [Emphasis in bold added]

In other words, would the body of CHC have supported the Crossover in the sense of donating S$24 million of their own money to be used towards that project? In the absence of such evidence, it would be unsafe to rely on support in a generic moral and spiritual sense as a mitigating factor.

Full Knowledge and Understanding: Second, for support to be a mitigating factor, it must be given with full knowledge and understanding of the facts. As the Judge pointed out at [15]-[16] of the Judge’s Sentencing GD:

“In the light of the totality of the evidence adduced at trial, the pattern of fraudulent and deceptive conduct displayed by each of the accused persons, Eng Han included, was unmistakably clear. Their conduct was not merely reflective of flawed corporate governance or imprudent handling of finances. There was extensive evidence of manipulation, deception, and concealment, all carried out in support of planned and premeditated fraudulent schemes to systematically misuse CHC’s funds…

… The short point is that it took a long time to expose the fraud because of their active concealment to cover their tracks, their fabrication of misleading cover stories and the careful cultivation of a climate of unquestioning trust within CHC itself. One may also question how much reliance can be placed on the level of trust and support for CHC’s leaders and the Crossover if their own leaders had seen no need for transparency with CHC’s members and had actively concealed facts and misled them with false pretences and half-truths at various points.” [Emphasis in bold added]

As such, any support given by any of the members of CHC before the full facts have been brought to light, cannot constitute true support at all, let alone constitute a mitigating factor.

Post-Disclosure Support: Third, even with respect to support given after the full facts have been brought to light, such “support” must be closely scrutinized.

In this regard, the Judge said, “I accept that a number of CHC’s members may have continued to express their support even after the full facts have been brought to light” ([23] of the Judge’s Sentencing GD), while the Majority said “it is also equally clear and telling that a substantial proportion of CHC’s membership continued to support the mission of the Crossover even after the full facts surrounding the CBT Charges were brought to light” ([370]).

It is unclear what evidence was relied on the Judge and the Majority to arrive at the above comments (although this may presumably have been a letter of appeal dated 13 November 2015, which is discussed below). In any event, to constitute a mitigating factor, there must be cogent and reliable evidence that each and every post-disclosure supporter in fact had full knowledge and understanding of the very complex facts, and that their support is in the personal financial sense.

Actual Donors’ Views: Fourth, in the final analysis, it is critical that the support (in order to constitute a mitigating factor) be given by the actual donors themselves, given that they are the true victims.

The Judge alluded to the concept of fluctuating membership ([14] of the Judge’s Sentencing GD):

“Did all of CHC’s members and donors continue to trust their leaders and give unwavering support to the Crossover from its inception to the present? CHC would have undergone changes in membership over time and correspondingly the degree of trust and support can wax and wane.”

The Judge added in footnote 15 (which immediately followed the statement quoted above) that “[t]his is implicitly acknowledged by the 173 [Executive Members] who signed a letter of appeal on behalf of the accused persons dated 13 November 2015, incorporated into Kong Hee’s mitigation plea and adopted by the other accused persons.” The Judge also mentioned Roland Poon, Charlie Lay and Eng Han as persons who were not or may not have been supportive throughout.

It is unclear what was stated in this letter of appeal. In any event, the support of these 173 Executive Members (even if given with full knowledge and understanding of the complex facts, and is in the personal financial sense) cannot be equated with the views of the actual donors themselves, who may or may not have remained with the Church.

Regardless of whether this was the only piece of evidence which amounted to post-disclosure support, it is clear that “[t]here is no evidence that each of these donors to the [Building Fund] would have agreed to the diversion of such funds for the Crossover” ([24] of the Judge’s Sentencing GD).

The true victims have not spoken.

Unanimous Support: Finally, the support, to constitute a mitigating factor, must be unanimous. It is not sufficient for a “number” or a “substantial proportion” of members to give post-disclosure support, even if their support accurately represents the actual donors’ support, is given with full knowledge and understanding of the complex facts, and is in the personal financial sense (there is no evidence as such).

The need to protect the true victims, even if they are in the minority, outweighs any potentially mitigating effect of the majority’s support. Every donation involves a certain degree of sacrifice on the part of the donor, and often such sacrifices are significant. As such, public interest demands the highest integrity and transparency with respect to the management of donated funds, as well as the faithful and unerring adherence to and observance of the donor’s expressed wishes. There is no room for discretion or deviation, even where it is for an alternative cause supported in hindsight by an unascertainable majority.

One widow whose mite is misused against her wishes, is one widow too many.

Summary: In summary, for support to constitute a mitigating factor, it must be in the personal financial sense, given after full knowledge and understanding of all the facts, be given by the actual donors themselves unanimously, and proved by cogent and reliable evidence.

Importantly, out of the S$24 million transferred out of CHC’s Building Fund under the Xtron and Firna sham bonds, S$2.5 million was used by Wahju for his personal expenses. That has no relationship to the Crossover whatsoever. Surely, no reasonable donor would have supported this usage, even with the benefit of hindsight and full disclosure.

Similarly, there is no evidence that the actual donors would have supported the extraction of over S$26 million church funds under the round-tripping transactions, which were again not used towards the Crossover, but were instead used to “redeem” or to cover up past sham transactions, as well as for false building-related expenses under the ARLA. Out of these amounts, S$3.24 million was paid as GST (though returned eventually) and another S$545,000 left in Xtron – again, these were not used towards the Crossover, and there is no evidence that the actual donors would have supported such usage, even after full disclosure has been given.

In the circumstances, for the sake of the public interest, it is respectfully argued that it is unsafe to treat support for the Crossover (whether pre or post full disclosure) as a mitigating factor.

D. CONCLUSION ON APPEALS AGAINST SENTENCING

Having regard to all of the above factors, the sentences were significantly reduced:

  • Kong Hee (8 years down to 3 years 6 months);
  • John Lam (3 years down to 1 year 6 months);
  • Eng Han (6 years down to 3 years 4 months);
  • Ye Peng (5 years 6 months down to 3 years 2 months);
  • Serina (5 years down to 2 years 6 months);
  • Sharon (21 months down to 7 months).

Overall, the reductions in sentences were around 50%. See [360], [421], [424], [428], [430], [431] and [434]. See p.298 for a summary of the reduced sentences.

It is hoped that having read this article, you are now better able to appreciate why the sentences were reduced significantly despite the Majority’s affirmation of the convictions. It was mainly due to a legal point (i.e. whether Section 409 cover directors), as well as mitigating factors which were largely assumed as true for the purposes of sentencing (e.g. no personal gain, no permanent financial loss), or which remain open for debate (i.e. whether the appellants had in fact acted in CHC’s best interests, though it was accepted that they had believed so), or for which the Minority has expressed a strong dissent (all of the above points). In addition, it is respectfully argued that it is doubtful whether the Majority should have accepted support for the Crossover as a mitigating factor (as explained above).

Next, in Episode 3, we will consider in detail the illuminating views of the Minority, in particular the evidence considered and the reasons he gave for disagreeing with the Majority on the various mitigating factors, amongst other things.

The usual disclaimer: All opinions expressed on www.singaporelitigationlawyer.com are entirely my own. Importantly, my opinions do not constitute legal advice and you should definitely formally engage a lawyer to confirm, vary or refute my views.

To Sue or Not to SueDemystifying Litigation in Singapore@www.singaporelitigationlawyer.com © Dominic Chan, a Singapore litigation lawyer. All rights reserved.

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