Channel NewsAsia
Updated: 08/28/2014 19:20 | By Channel NewsAsia

Xtron was 'shell company' controlled by Kong: Prosecutors

Xtron was 'shell company' controlled by Kong: Prosecutors


Xtron was 'shell company' controlled by Kong: Prosecutors

SINGAPORE: In the ongoing City Harvest Church trial, the prosecution has alleged that founder Kong Hee and his deputies manipulated transactions between the church and Xtron Productions, to ensure Xtron was able to meet its financial obligations.

It is the prosecution's case that Xtron was a shell company controlled by Kong, used to channel church monies in the form of sham bonds to finance the secular music career of Kong's wife, Sun Ho. Xtron was the artiste management firm for Ms Ho.

SOLVING XTRON'S CASHFLOW DEFICITS

The prosecution said the accused discussed how to move money "from the right hand to the left hand" to solve Xtron's cashflow deficits. For example, upping retainer fees the church paid to Xtron when it suffered a loss of income in another area.

The church had proposed upping the retainer fees it paid to Xtron, to "cover up" a decrease in the rental income Xtron would earn from the church on its Riverwalk property. "Doesn't it suggest that whatever savings were being made from the reduced Riverwalk rental were actually being put back into Xtron by way of the increased retainer?" asked Deputy Public Prosecutor (DPP) Christopher Ong. But Kong denied this, saying that even with the increased retainer, the fees charged by Xtron were "still within the bounds of reason" and "commercially justifiable".

It also produced emails to show how some of the accused had devised ways to inject funds into Xtron. One example was using money from the drawdown of the bonds to help pay the S$4 million in bond interest owed to the church.

"So Xtron was going to borrow more money from CHC, to pay CHC interest, according to this plan," said DPP Ong. Kong said this was proposed with the view that Ms Ho's album would yield profits when launched. "Ultimately the album profit will be sufficient to pay off all the principal and interest of the bonds," he added.

XTRON'S FINANCIAL PROPOSALS NEEDED HIS APPROVAL, ADMITS KONG

The prosecutor questioned Kong as to why it was his team members planning how Xtron would repay the bond interest, to which Kong replied: "I think we've established from Day One that myself, the leader of the Crossover Project, Pastor Tan (Ye Peng), and Serina Wee, we were partners working with Xtron's management ... and we work together in partnership with them for the Crossover Project, especially the US album production."

Kong emphasised that the church worked as "partners" within the scope of what the Xtron directors knew and allowed. But he admitted that proposals for how Xtron would meet its financial obligations would not "start to move ahead" without his approval.

Kong said his team would run plans past him, as he was the senior pastor and leader of the church. But he qualified that the plans would have to "ultimately" pass muster with professionals like lawyers and auditors, and then be finally approved by the relevant boards or directors.

The prosecution said that the reason Kong's deputies kept him updated on plans for how the bonds and the interest would be repaid was because this was a problem they had created by entering into the sham transactions in the first place."

- CNA/by

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