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Leslie Netto cross-examining KPMG executive director Owen Hawkes (Illustration - Terry Xu)

KPMG comparison between CPG and FMSS regarding costs incurred by AHTC “inaccurate” and ‘highly speculative”: Defence

Taking over from Senior Counsel Chelva Retnam Rajah, Mr Leslie Netto – representing Ms How and FMSS – argued that some of the calculations cited in the KPMG report in relation to the price difference between CPG and FMSS' managing agent fees in his cross-examination of Mr Hawkes on Wednesday (10 Oct).

AHTC’s appointment of FMSS as the managing agent (MA) for its first contract – starting Jul 2011 to Jul the following year – resulted in additional costs of more than S$515,000 in comparison to that of CPG, including those for FMSS' takeover of the Hougang division in its first year, according to calculations made by KPMG.

The report added that FMSS charged a flat rate of about S$1.1 million, in contrast to CPG’s managing agent fees for Hougang, which, according to KPMG, were around S$687,000.

However, Mr Netto argued against the calculations, stating that it was "highly speculative," while highlighting the revocation of AHTC's access to the town council management computer system (TCMS), to which Mr Hawkes reiterated that CPG had a contractual obligation to terminate AHTC's access to the TCMS.

CPG assumed to be cheaper because KPMG took the advice that CPG is obliged to charge based on contract rates

Mr Netto then probed Mr Hawkes on why KPMG had concluded that the cost to the AHTC would have been cheaper had CPG been engaged instead of FMSS, to which Mr Hawkes replied by saying that KPMG had used the contract rates to calculate the additional units from Hougang.

Mr Netto asked if he believed that CPG would have wanted to take up the units at the same rate in the contract, to which Mr Hawkes responded that CPG was obliged to take up the units, according to the advice given to the managing agent (MA).

However, Mr Netto pointed Mr Hawkes to two provisions in the managing agent contract, which stated that if the deviation of price is above 10%, a mutual agreement between the TC and MA.

Looking at the contract handed to him, Mr Hawkes said that another clause excluded units absorbed by the estate, and reiterated that he was advised by lawyers that CPG had an obligation to take up the additional units at the same cost.

Audit firm did not take other factors into account in comparison of cost

Besides pointing out that KMPG's report is "highly speculative," Mr Netto also said that the company did not take into various factors into their cost comparison between FMSS and CPG.

Mr Netto asked if Mr Hawkes had considered the "human aspect" of the matter, that is, the small likelihood of CPG in keeping any of the staff from Hougang Town Council.

Stating that he is an accountant, Mr Hawkes defended his decision not to include social factors into cost consideration.

Mr Netto also asked if Mr Hawkes had considered that there was a cost saving of $451k to the town council, as it was the amount charged for the town council management system owned by AIM.

As FMSS was willing to operate without the aid of the TCMS, it can be considered a cost-saving move for the town council.

While agreeing with what Mr Netto said, Mr Hawkes said that the figure mentioned by Mr Netto was not highlighted to KPMG, and that it was not brought up by the tender committee in their deliberation.

Ms Sylvia Lim was not "merely a rubber stamp"; she was "meticulous": Mr Netto

In his cross-examination, Mr Netto rejected the allegation that Ms Lim "was merely a rubber stamp" in approving documents and was thus negligent in her duties as a part of AHTC.

Citing Ms How's account of Ms Lim's handling of the documents, he said that she was "meticulous" and "very careful," and that she had even "often brought the documents home."

Mr Netto also rehashed the point regarding AHTC's additional requirement in ensuring stringent controls over the town council's finances – that is, its chairperson or vice-chairperson is ultimately required to sign off on cheques being issued to FMSS.

Mr Hawkes, in turn, disputed this, stating that while he did not entirely disagree with the defence lawyer's point, he insisted that such a requirement was not "a sufficient control in the circumstances," adding that there was a more "significant layer of conflict" of interest in Mr Loh's holding of 50 per cent of FMSS’ shares at the time.

Mr Netto's cross-examination of Mr Hawkes is expected to end today (11 Oct).