Defence lawyers in AHTC trial slam the way KPMG compared managing agent costs

Defence lawyers in AHTC trial slam the way KPMG compared managing agent costs

KPMG’s report, which forms the basis of part of the civil lawsuits against the defendants, notes that AHTC’s decision to appoint a new managing agent instead of retaining its predecessor resulted in additional costs of more than S$515,000.

Defence lawyers representing managing agent FM Solutions and Services (FMSS) slammed the way auditors KPMG had compared the costs incurred by the Aljunied-Hougang Town Council in employing the company, compared to if it had stuck to its predecessor CPG Facilities Management, as “inaccurate” and “highly speculative”, as the trial entered its fourth day on Wednesday (Oct 10). Deborah Wong with the latest. 

SINGAPORE: Defence lawyers representing managing agent FM Solutions and Services (FMSS) slammed the way auditors KPMG had compared the costs incurred by the Aljunied-Hougang Town Council in employing the company, compared to if it had stuck to its predecessor CPG Facilities Management, as “inaccurate” and “highly speculative”, as the trial entered its fourth day on Wednesday (Oct 10).

Three Workers’ Party Members of Parliament - Mr Low Thia Khiang, Ms Sylvia Lim and Mr Pritam Singh - as well as AHTC town councillors are involved in two multimillion-dollar civil lawsuits over alleged improper payments. 

The second set of defendants named in the suit are AHTC former deputy secretary How Weng Fan, who is also a director and shareholder of FMSS, Ms How’s late husband Danny Loh, who owned FMSS, and FMSS itself.

In his cross-examination of KPMG executive director Owen Hawkes, defence lawyer Leslie Netto, who represents the second set of defendants, disputed some of the calculations made in KPMG’s report about the price difference between the two managing agents.

The report forms part of the basis for the civil lawsuits against the eight defendants.

AHTC trial KPMG Owen Hawkes defence counsel Leslie Netto Justice Kannan Ramesh
Defence counsel Leslie Netto cross-examines KPMG executive director Owen Hawkes on Wednesday (Oct 10), with Justice Kannan Ramesh observing the proceedings. (Illustration: Lydia Lam)

READ: MND had 'no difficulty' accepting AHTC's waiver of tender for managing agent, says defence

According to the KPMG report, AHTC’s decision to appoint FMSS as the managing agent for its first contract, which ran from July 2011 to July 2012, resulted in additional costs of more than S$515,000. This is in comparison to if it had kept CPG, which was the incumbent managing agent of Aljunied Town Council (ATC).

These costs include the difference for the takeover of Hougang division for the first year. According to the report, FMSS charged a flat fee of about S$1.1 million, while CPG’s managing agent fees for Hougang had been calculated to be about S$687,000.

But Mr Netto charged that it was “highly speculative” that CPG would have taken over the management of Hougang division at the same rate, pointing to the termination of AHTC’s access to the town council management computer system (TCMS)

In response to Mr Netto’s questions, Mr Hawkes repeatedly responded that CPG was “contractually obligated” to do so.

Further pressing the point, Mr Netto asked if CPG’s price would have remained the same even if Hougang Town Council (HTC) had not provided a computer system. “Surely CPG would’ve had great difficulty operating without a proper computer system?” he asked Mr Hawkes.

To that, Mr Hawkes responded that it is “highly speculative” to suggest that HTC would not implement any sort of computer system. “I don’t think you can run any business without a computer system,” he said.

Mr Netto also pointed out that if CPG had taken over HTC, it could have resulted in the loss of jobs for some employees, but Mr Hawkes said that KPMG was not trying to calculate the social cost of changing the managing agent.

Mr Netto then asked: “So you have ignored altogether the human element?”

To that, Mr Hawkes responded: “I am an accountant. So while I do understand these are employees of an organisation and there is a potential they would lose their jobs ... What we’ve been asked to do is to account for the cost of AHTC in taking on one of two managing agents.”

He added that if the “human element” was a consideration in AHTC’s decision to appoint FMSS, he would have expected to see it referenced in the terms of FMSS and the waiver decision. “It doesn’t appear that it does,” he said.

SYLVIA LIM A RUBBER STAMP?

Mr Netto also rebutted a "suggestion that Ms Sylvia Lim was merely a rubber stamp" signing off on documents.

According to Ms How, he said, this was not true. Ms Lim was "meticulous, very careful, and she very often brought the documents home".

Mr Netto again raised a point that had been previously discussed in the trial - that AHTC had introduced an additional step by requiring its vice-chairman or chairman to sign off on cheques to be made to FMSS.

However, while Mr Hawkes agreed that this was true, he stood firm on his view that it was not "a sufficient control in the circumstances".

He added that the difference in the relationship between CPG and ATC and the one between FMSS and AHTC was that Mr Loh held 50 per cent of FMSS’ shares.

"That adds a significant layer of conflict, for which you would expect to have a layer of control," said Mr Hawkes.

He had explained a day earlier that "there are conflicts of interest in practically every area of business", but said that what was important was the steps taken to manage them.

In his view, merely requiring the vice-chairman or chairman to sign off on cheques was not a sufficient step.

The trial continues on Thursday (Oct 11), with Mr Netto expected to conclude his cross-examination of Mr Hawkes.

Source: CNA/lc(ra)

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