The fourth day of the AHTC trial saw KPMG executive director Owen Hawkes being cross-examined by Senior Counsel Chelva Rajah and Leslie Netto, lawyers for the defence.

KPMG had disputed the standard operating procedure (SOP) set in place by Workers’ Party (WP) MP Low Thia Khiang on December 2011 to manage the alleged conflict of interest, according to The Straits Times, with Hawkes calling it "just decisions made by the town council and communicated by the chairman for adoption."

The Straits Times also reported that KPMG had calculated that the change of managing agents from CPG to FM Services & Solutions (FMSS), for the first contract from 2011 to 2012, incurred an additional cost of over $515,700 for AHTC.

But Rajah, who represents the WP Members of Parliament and town councillors, argued that the WP town council had much more to the SOP in ensuring that FMSS was accountable to the town council.

While Netto, who represents defendant How Weng Fan and FMSS, contended that KPMG's calculations were "highly speculative."

Estate visits and inspections

As reported by The Straits Times, the established SOP was to have a complaint brought up to the relevant person in having the matters resolved.

However, Rajah added, reading from Low's affidavit, that accountability was also enforced through the MP's estate visits where they would look out for cleanliness, the condition of buildings, walls and ceilings. The horticulture and landscape of the estate was also checked to ensure that control of pests and dog poop was sufficient.

There were also teams of property officers who did checks. These property officers reported in turn to property managers who subsequently reported to the town council. At times, joint inspections would also be conducted with the MPs.

Email exchange

Rajah also referenced the exchange of emails between FMSS and AHTC in rebutting Hawkes' claim that the SOP was inadequate.

Here, Rajah brought up how the AHTC refused to certain approve works by FMSS and how then-AHTC Chairman Sylvia Lim also did not sign several FMSS documents until they were further clarified.

Rajah also highlighted how Lim further asked about the classification of several projects.

In response, Hawkes stated that Lim was simply turning down items that were not applicable. Hawkes added that the exchange Rajah had highlighted was in June 2015, after the Auditor-General's Office (AGO) report on lapses had emerged.

"So maybe there's more sensitivity to the issue at this point".

Termination of IT services

Subsequently, Hawkes was cross-examined by Netto.

Netto pointed out that IT firm Action Information Management (AIM) had terminated its services for the town council management system of AHTC.

Therefore, when FMSS took over, they had to upgrade the computer system themselves, resulting in the high cost.

Netto said that it was "speculative" that CPG could have done the same thing at a lower cost, if AIM had terminated their services. Said Netto:

"CPG is tied with AIM. Once AIM has terminated the computer contract, surely CPG would have great difficulty operating without a computer system."

Hawkes replied that while he agreed that any organisation would have difficulty operating without a computer system, it was KPMG's understanding that CPG would be obliged to accept the same rate, based on the extant contract.

The human element

Netto then discussed the impact of the merger of Hougang and Aljunied Town Councils after the 2011 general election.

He pointed out that FMSS's contract included the cost of retaining the staff from Hougang Town Council, following the merger.

This incurred a cost of $1.1 million for a year.

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However, KPMG calculated the cost of taking over Hougang division at a lower rate of $687,660, if CPG had done it.

Hawke explained that KPMG derived that figure by taking the number of units in the Hougang system and multiplying them by the fee in CPG's contract.

Netto replied that this would have resulted in the town council retrenching several staff members, a situation which the Workers' Party wanted to avoid. Said Netto:

"So you have ignored altogether the human element?"

In response, Hawke quipped:

"Well, I am an accountant."

He explained that while he understood that employees might need to be replaced during a merger, and that a loss of jobs would be "regrettable", KPMG's task was to account for the monetary cost of AHTC taking on either CPG or FMSS.

Not a rubber stamp

Netto continued his cross-examination by addressing the process of payments.

He said that AHTC's process included the rule that all payments to FMSS, irrespective of the amount, must be signed by the Chairman or Co-Chairman.

Netto said there was a breakdown of the managing agent's fees to show how they were ascertained, before being brought to then-AHTC Chairman Sylvia Lim for her perusal.

Quoting How's affidavit, Netto said:

"It has been suggested that Madam Sylvia Lim was merely a rubber stamp. This is not true."

In reply, Hawkes said that KPMG's understanding of the payment process was built up after discussions with the staff of AHTC.

He said that AHTC's staff did not raise any challenges, and also asked for copies of the flowcharts done by KPMG to assist in their management of the town council. Said Hawkes:

"So I don’t believe that we misunderstood the payment process."

The trial is expected to continue tomorrow, Oct. 11.

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Top image by Sulaiman Daud.