Conflict of interest related to managing director of ATC’s PAP-appointed managing agent present; KPMG’s comparison of managing agent costs between CPG and FMSS disputed by defence

A conflict of interest concerning the managing director of CPG Facilities Management Mr Jeffrey Chua was highlighted by the defence in the Aljunied-Hougang Town Council (AHTC) trial on Tuesday (9 Oct).

Mr Chua, who was also secretary of Aljunied Town Council (ATC), was a stakeholder in CPG’s holding company, according to Senior Counsel Chelva Retnam Rajah.

Prior to the Workers’ Party (WP)’s takeover of the Aljunied Group Representative Constituency (GRC) after the 2011 General Election, CPG acted as ATC’s managing agent under the People’s Action Party (PAP). ATC later on merged with Hougang Town Council to form AHTC.

The defence claimed that CPG no longer wished to be bound by the managing agent contract with AHTC, as it did not want to serve “PAP town councils as well as a town council run by the opposition party,” seeing how “it would be bad for CPG’s business.”

SC Rajah said: “CPG was and still is managing Ang Mo Kio Town Council, the prime minister’s ward.”

However, the plaintiffs counter-argued that it was the WP Members of Parliament (MPs) — Ms Sylvia Lim and Mr Low Thia Khiang — who had decided to replace CPG with FM Solutions and Services (FMSS) despite CPG having two more years left in the contract.

KPMG unaware of conflict of interest involving Mr Chua, but pinpointed that of Ms How and Mr Loh

Executive director of auditing firm KPMG Owen Hawkes revealed during a cross-examination with SC Rajah on Tuesday (9 Oct) that he was not aware of the conflict of interest involving Mr Chua.

“Without knowledge of what proportion of the shares this equates to, it’s difficult to determine degree of conflict of interest,” Mr Hawkes elaborated in his testimony as the plaintiff’s first witness, in response to SC Rajah’s query.

The defence, however, countered Mr Hawkes’ statement, saying that “Large or small, it would give him a profit motive,” to which Mr Hawkes concurred.

Mr Hawkes stressed in his response to SC Rajah that conflicts of interest are inevitable “in practically every area of business,” and that “The question is not whether there is a conflict of interest,” but “how severe is it and what are the steps taken to manage it.”

When asked to define what encompasses a conflict of interest, Mr Hawkes in his reply to SC Rajah explained that a conflict of interest cannot be limited to “a binary,” as “there is a spectrum between not having a conflict (on one end) to the final end where you may have conflicts that are so severe that no controls can manage the conflicts of interest involved.”

Besides Mr Chua’s potential conflict of interest, one of the defendants in the present case, Ms How Weng Fan — along with her late husband Mr Danny Loh and AHTC’s former managing agent FM Solutions and Services (FMSS) — was pinpointed by the KPMG report in Oct 2016.

Ms How was AHTC’s deputy secretary and a stakeholder in FMSS at the same time, while her late husband was AHTC’s secretary and the owner of both FMSS and its service provider FM Solutions and Integrated Services (FMIS) at the time.

Mr Hawkes cited the case of Ms How and Mr Loh, saying that “If Mr Loh owned 100 per cent of FMSS and (Ms How) was his wife, then as a single family unit, the money that goes to him … also goes to her.”

“If you are a direct shareholder in a company, you are slightly further on the spectrum than the spouse of a shareholder,” he added.

The KPMG report alleged “an unacceptably high degree of abdication of control to the conflicted persons” in AHTC, which included, according to KPMG, “an absence of meaningful oversight by the town councillors over FMSS’ running of the town council’s management function,” which had “exposed public funds to the risk of improper use and application,” in reference to Ms How and Mr Loh’s roles at the time.