How did alleged misconduct at CHC take place?

The Commissioner of Charities (COC) revealed on Tuesday what it found since the start of its inquiry into the City Harvest Church at the end of May 2010.

"Financial irregularities of at least $23 million from the Charity’s funds have been discovered," the COC said in a press statement, adding that the funds were allegedly used with the purported intention to finance the music career of Ho Yeow Sun, who is the wife of CHC founder Kong Hee.

Here are details of the alleged misconduct and mismanagement at the charity as stated in full by the COC on Tuesday, when Kong and other key members of the religious organisation were arrested in relation to the allegations.

(A) Misrepresentation on the Use of the Charity’s Funds

1 In 2002, the Charity’s founders, Kong Hee and Ho Yeow Sun (“Sun Ho”), embarked on a “Crossover Project” [“the Project”], with the purported intention to use Sun Ho’s secular music to connect with people and reach out to non-Christians.

2 In 2003, an individual alleged in the media that the Charity was funding Sun Ho’s music career. This attracted public attention. This individual eventually issued a public apology and retracted his allegations. During that period, the Charity had faced media scrutiny over the allegations. Subsequently, the Charity issued press statements and made several representations to its members to state that they had not funded Sun Ho’s music career.

3 Despite the representations made by the Charity and unknown to the Executive Members, the Charity’s funds were used to fund the Project. Over a period of 3 years (2007 to 2010), at least $23 million was used. However, during this period of time, the Executive members were not told of the actual purpose of the use of these funds.

(B) Use of the Charity’s Funds to Fund the Project

4 Between December 2007 and May 2010, the Charity’s funds were used to finance the Project under the guise of donations to its affiliated church in Kuala Lumpur, known as the City Harvest Church Kuala Lumpur [“CHCKL”]. The funds were then transmitted by CHCKL to support the Project in the United States. During this period, at least $2.1 million was transferred from the Charity to CHCKL to fund the Project. The Inquiry revealed that Kong Hee, Tan Ye Peng, Kelvin Teo Meng How, Tan Shao Yuen Sharon and Serina Wee Gek Yin were aware of the true purpose of the donations to CHCKL.

5 In addition, donations and tithes to the Charity were transferred into a private fund known as the Multi-Purpose Account [“MPA”], administered by Serina Wee Gek Yin (the Charity’s ex-Finance Manager and Executive member) and Tan Su Pheng Jacqueline (former Personal Assistant to Kong Hee, current contract staff and Executive member of the Charity). Monies in this account were used to fund the Project.

For the period April 2007 to March 2010, the funds were used for purported expenditures of Kong Hee and Sun Ho, amounting to approximately $600,000 and $3 million respectively. Selected donors were asked to transfer their contributions originally meant for the Charity’s “Arise and Build” campaign to the MPA.

Some members ceased or reduced their regular tithes to the Charity after they contributed funds to the MPA. Apart from this small group of members, the existence of the MPA was not made known to the Charity’s members. There was even an attempt to conceal the existence of this Account by closing the joint bank account and dealing only in cash transactions, which was kept in a safe at the Charity.

6 In or around April 2009, a plan was conceptualised by Tan Ye Peng, Chew Eng Han, Serina Wee Gek Yin and Tan Shao Yuen Sharon to transfer monies amounting to $600,000 donated by Wahju Hanafi to the Charity’s Building Fund via a “refund” of Building Fund donations into the MPA to meet some funding needs of the Project, which included US$100,000 to finance a media team from Singapore to publicise and write about Sun Ho’s music career in the United States.

Inquiry revealed that the Charity had drafted letters from Wahju Hanafi and one other person indicating that their donations to the Charity were intended for specific Pastors and employees of the Charity as love gifts.

It was then arranged for these said Pastors and employees to receive the “refund” as love gifts and immediately thereafter to deposit these love gifts into the MPA. The Inquiry further revealed evidence which strongly suggests that the “refund” letters were backdated, i.e. the letters were dated close to or on the date of the donations and one of the letters was dated before the date of the donations.

(C) Schemes to Avoid Disclosure on Related Party Transactions

7 Between 2006 and 2008, Kong Hee’s company sold over $3 million worth of merchandise to the Charity. The Inquiry also revealed that Kong Hee did not disclose his interests in these related party transactions in the Charity’s financial statements.

In 2008, Kong Hee “refunded” royalties to the Charity amounting to approximately $770,000 from the sale of his merchandise to the Charity from 2006 to 2008. The return of these royalties was ostensibly motivated by concerns that the Charity’s auditors would require Kong Hee’s royalties to be disclosed as related party transactions.

The amount “refunded” by Kong Hee was concealed as “sales discount” given to the Charity.

Subsequently, the purported refunds were reimbursed to Kong Hee from the MPA and from CHCKL. Kong Hee’s “refund” of royalties to the Charity was therefore cosmetic and he was instead never “out of pocket”.

The Inquiry revealed that the individuals who were aware of the above avoidance in disclosure were Kong Hee, Tan Ye Peng, Kelvin Teo Meng How, Tan Shao Yuen Sharon, Serina Wee Gek Yin and Tan Su Pheng Jacqueline.

(D) Governance and Control Issues

8 Evidence suggested that certain members of the Charity’s Board have been less than prudent in the discharge of their duties toward the Charity and its members. For example, the appointment of Investment Manager, Chew Eng Han’s investment company, was not properly tabled and discussed by the Charity’s Board.

9 The Inquiry further revealed that when Chew Eng Han suffered financial difficulties, the Charity refunded donations amounting to about $338,000 to him in two separate tranches, i.e. $240,000 and $98,000. However, in respect of the $98,000, the Charity’s Board only gave approval for the refund of donations to Chew Eng Han 9 months after the refunds were made.

10 The poor corporate governance in the Charity contributed, at least in part, to the fact that the Charity was able to maintain the above-mentioned activities for the past 3 years.