Accountant wrong to flag S$1.2m as improper payments, says defence lawyer in AHTC lawsuit
Mr Owen Hawkes (background, left) of KPMG being questioned by Mr Chelva Retnam Rajah as WP MPs Sylvia Lim and Pritam Singh look on during the hearing.
SINGAPORE — The KPMG accountant who helped uncover 186 failures in governance by the Aljunied-Hougang Town Council (AHTC) made a number of mistakes in his claims, said the lawyer defending three Workers’ Party (WP) Members of Parliament (MPs) in a high-profile lawsuit.
Senior Counsel Chelva Rajah disputed at least S$1.2 million out of S$1.5 million in alleged improper payments by the WP-run AHTC, as he questioned audit firm KPMG's forensics partner Owen Hawkes on Monday (Oct 8).
Mr Hawkes deemed as many as 182 invoices issued to AHTC’s former managing agent, FM Solutions and Services (FMSS), to have been improperly parked under “project management services” — which drew an extra fee of 3.5 per cent of the value of projects managed.
The accountant stated in a report dated Oct 31, 2016, that they should have been categorised as managing agent services — referred to in court as “basic services” — as FMSS was already being paid S$438,506 a month in managing agent fees per contract.
But Mr Rajah said what his clients had done was similar to the practice when the town council was under the People’s Action Party (PAP).
Mr Rajah — who is representing former WP chief Low Thia Khiang, chairman Sylvia Lim, and current WP chief Pritam Singh — said the town council, when under the PAP, “did not consider (two contracts entered into in 2010, a year before WP took over) to be covered by the lump-sum fee for basic services”.
“The former town council and former managing agent considered that to be project management fees, but you (Mr Hawkes) — acting on advice — decided otherwise,” Mr Rajah said on the second day of the multi-million dollar lawsuit filed by an independent panel acting on behalf of AHTC, as well as Pasir Ris-Punggol Town Council.
“The successor town council and successor managing agent — people who dealt with the project on the ground — all considered (the invoices) as project management services but you, reviewing the documentation, reached a different conclusion.”
In the KPMG report, improper payments arising from wrongful classification were the two largest sums listed. They comprised S$608,911 charged by FMSS pertaining to repairs and redecoration works, which the report said ought to be recovered in full, and another S$611,786 which ought to be recovered in part since it was “partially misclassified”.
Mr Rajah said to Mr Hawkes: “I would suggest to you that… you are mistaken in your views that these payments were (wrongly classified)”.
An S$8 million project pertaining to the repair and redecoration of 80 housing blocks, for example, was said to be placed under the wrong category. The “scale of work involved” should mean such projects fell under project management services, Mr Rajah said.
Mr Hawkes disagreed and maintained that the services should be seen as basic, or basic in part, based on his interpretation of the FMSS contract. “Mere scale doesn’t determine if it falls under a certain category,” he said.
CPG AN UNWILLING HORSE?
On Monday, Mr Rajah also highlighted the political nature of town councils.
Mr Hawkes was “optimistic” to think that AHTC would get the same attention and service from its managing agent, CPG Facilities Management, after the ruling People's Action Party (PAP) lost Aljunied Group Representation Constituency (GRC) in the 2011 General Election, the lawyer said.
“(Town councils have) a strong political element to (them), in that political parties would be held to account for how they ran their constituencies — at least candidates for political parties would be held to account for how they ran it. If they ran it well, kudos to them. If not, then it might have ramifications at the next General Election,” he said.
The PAP had a track record of making “things difficult for opposition-run town councils”, Mr Rajah asserted.
“You know what they say about an unwilling horse? Don’t ride it,” Mr Rajah said.
Mr Hawkes agreed that it would be “quite wise to stay away” from an unwilling horse, but argued that CPG was “a corporate entity with legal obligations”.
Mr Rajah replied: “You mean that CPG (would be) just as happy, just as keen and committed to carry out (its duties) for WP as it was for PAP? Is that your thesis?”
Mr Hawkes replied: “No, but they are contractually obliged to (carry out duties).”
Mr Rajah said: “It is optimistic for you to think that AHTC would get the same attention and service as its predecessors.”
In his affidavit, Mr Low said he knew there was every likelihood that what happened to him after the 1991 General Election would happen when the WP won Aljunied GRC, Mr Rajah said. The difficulties included Hougang’s former managing agent, the Housing and Administration Department of the Housing and Development Board, pulling out, Mr Low said.
The formation of FMSS was, thus, to “facilitate preparation works”.
Mr Low’s concerns did come to pass, added Mr Rajah.
After the 2011 election, CPG did pull out and the town council management computer system that was used to run Aljunied Town Council was indeed removed by a PAP-owned company, Action Information Management, he said.
Mr Rajah’s cross-examination of Mr Hawkes — who spent 22 months looking at AHTC’s internal controls — continues on Tuesday.
Nonsense to suggest AHTC consisted of 'a bunch of puppets': FMSS’ lawyer
Contrary to what lawyer Davinder Singh, who represents Pasir Ris-Punggol Town Council (PRPTC), said about their political motivations for fighting the multi-million dollar lawsuits brought against them, the three Workers’ Party (WP) Members of Parliament and five other defendants simply want to refute gross allegations thrown at them.
This was what lawyer Leslie Netto, representing the former managing agent of Aljunied-Hougang Town Council (AHTC) and its owners, Ms How Weng Fan and the late Danny Loh, told the court on Monday (Oct 8).
Last Friday, Mr Singh said in his opening submissions that the defendants “have come ready to use the witness stand as a soapbox to score political points”, instead of using the occasion of the inquiry to “show remorse” for their lapses.
Mr Netto said it was “nonsense” for the suing parties — PRPTC and an independent panel acting on behalf of AHTC — to give the impression that AHTC and its chairman Sylvia Lim abdicated their responsibilities and authority in favour of Loh, Ms How and their company, FM Solutions and Services (FMSS).
“The impression given is that the (town) council consisted of a bunch of puppets,” Mr Netto wrote in his submissions.
“Both the (plaintiffs’ statement of claims) give the impression that the (town) council is easily misled; had no idea of accounts and what was happening to (the town council’s) money; had no idea whether services were being rendered to the residents; never examined accounts…The other members of the (town) council and sub-committees had no interest whatsoever for the residents. They were happy to let Mr Loh and Ms How lead them by their noses. This is nonsense,” said Mr Netto.
Another serious allegation was that Loh, who died in an accident in 2015, and Ms How had control of the payment process, said Mr Netto.
There were proper payment controls supervised by the town council, its sub-committees as well as Ms Lim, he said.
Ms How — who was AHTC’s deputy secretary between June 2011 and July 2015 and general manager in the overlapping period from August 2011 — will testify that AHTC, like many other town councils, did not have officers of its own, he said.
“The officers of the town council were all supplied by the managing agent under a contract for managing agent services,” said Mr Netto. The contract comes with a component for project management services, in which fees are based on a fixed percentage of the value of the projects the managing agent is required to manage.
This was the practice of most — if not all — town councils that engaged managing agents, he added.
Mr Netto said there was “no dishonesty” by Loh and Ms How. They acted in good faith, relied on instructions by the town council and kept in mind the interests of AHTC residents, he said.
Sign up for TODAY's WhatsApp service. Click here:
