Previously on this blog, I conducted a post mortem of the 2011 general election because Alex Au had made several claims about groundwork and campaigning being essential in determining voting outcome.
I disproved Au's claims through available electoral data and statistical modelling and explained the GE2011 results in several GRC contests to show that the Workers Party had in fact underperformed relative to other opposition parties in contests in wards with highly unpopular ministers, that Aljunied was simply won because of the 6.6% average vote swing against the PAP, and that the average voter in 2011 was simply voting for or against the ruling party.
Although Alex Au has not quite acknowledged our corrections of his thought, his analysis of the Punggol East by-elections attempt to explain the Workers Party win over the People's Action Party, the Reform Party, and the Singapore Democratic Alliance by analysing the swing vote.
His conclusion? There was a 10.83% swing against the PAP since 2011.
A swing to the left, a swing to the right
We argue that Au mistakes the eventual result of the Punggol East by-election to comprise solely of a swing against the PAP. Again assuming the Punggol East voter is simplistically voting for or against the PAP like in 2011, we in addition propose a more sophisticated model of the Punggol by-election vote as an aggregate of two swings.
Aggregate swing = sex scandal + vote against PAP
Given the public uproar in the intervening months against the various sex and sex and corruption scandals, we posit that a sex scandal results in political costs for the incumbent. But how many votes does a sex scandal cost?
We look towards the Hougang by-election, where WP's Yaw Shin Leong resigned from his party and vacated his seat in parliament following a protracted sex scandal.
As it turned out, the WP won Hougang with a marginal change in vote share.
GE May 2011 Hougang SMC: PAP 35.2%%
May 2012 Hougang SMC: PAP 37.92%
For the moment, let's all be naive and simplistic. In an opposition ward of more than 20 years, highly insular and loyal Hougang voters in a by-election one year after a general election are unlikely to change their voting preferences and attitudes towards both the incumbent party and the ruling party. If so, the cost of a sex scandal leading to a by-election is merely 2.7%. This conclusion may be surprising but we note the relative absence of public outrage against the sex scandal in the run-up to the by-election.
Note however the public outrage against the prime minister's initial refusal to call for a by-election, the constitutional challenge that followed, and the positive reaction to Kenneth Jeyaratnam's call for donations online to defray the costs of the case. These factors in addition to the breakdowns in infrastructure since 2011 and the outbreak of the underaged sex scandal would have caused a small swing against the PAP, which would then offset the real cost of a sex which would be at say about 5%, causing an aggregate shift of 2.7%.
Two swings in the same direction
Let's now look at the Punggol East by-election.
Aggregate swing = cost of sex scandal for incumbent + 'national' vote swing against ruling party
GE May 2011 Punggol East SMC: PAP 54.54%
Jan 2013 Punggol East SMC: PAP 43.71%
Here, the incumbent is the ruling party so the final swing of 10.83% is an aggregate of two swings working in the same direction. Taking the projected real cost of a sex scandal as 5%, the actual vote swing against the PAP in Punggol East since 2011 is about 6%. This is our naive estimation.
Now if we take into account local issues that caused unhappiness in the ward - such as unfinished construction projects, inadequate and shoddy infrastructure works that make Sengkang feel more like a slum than Potong Pasir, and the high property prices in the ward - the actual vote swing against the PAP would be far less than 6%.
In other words, we're positing that in Punggol East,
aggregate swing = cost of sex scandal for incumbent + cost of local issues + 'national' vote swing against ruling party
And yes, we're saying that if you did the math before the by-election, you would have put good money to bet on a PAP loss.
Now, we're not saying Alex Au is politically illiterate. He's actually more aware and informed than the average Singaporean but it seems that again, the task has fallen to the priestess of Ise to correct Au's political mis-diagnosis!
28 January 2013
24 January 2013
The roads taken to a by-election
On the eve of cooling off day, I make no prediction on the by-election for the ward of Punggol East but instead offer everyone a platform for reflection for their words and actions, the paths they chose to take to herd public opinion and potential voters for the vote on Saturday.
We don't need opposition unity
Perhaps overcompensating for the loss of the multi-cornered presidential election last year, online commentators, bloggers, and alternate media groups were more than eager to declare the Workers Party the natural candidate to contest the People's Action Party in Punggol East.
Whatever the merits of this argument, which has just about as many holes in it as Singapore's take on the concept of meritocracy, online commentators, bloggers, and alternate media groups saw their role to cajole, intimidate, castigate, ridicule, and in essence bully the Singapore Democratic Party, the Reform Party, the Singapore Democratic Alliance, and their supporters into dropping out of the contest, in the interests of "opposition unity" and the apparent mandate of heaven for the Workers Party.
In the best of worlds, the blogosphere ought to be a vanguard of society. It may not be representative of the public (not to say the voting population of Punggol East), but it can lead public discussion, shape responses and criticisms to policies.
We at Illusio question the mobilisation of online resources to be unleashed as attack dogs on RP, SDP, and SDA. As a vanguard, the power of the blogosphere has been underestimated and misused. Long after the nominations were tendered and the by-election was under way with rallies held, my online colleagues continued to expend much effort attacking the RP and SDA. Now if these two parties are that obviously non-contenders, why did the attacks persist till 22 January?
I do not enjoy calling my fellow Singaporeans political illiterates. Yet many of the loudest voices of this fortnight seem to forget the political narrative: the PAP is on a long downhill slide in popularity and it is far more effective and economical for the political blogosphere to drive up the negatives of the PAP during this by-election instead of driving up the negatives of their non-preferred opposition parties.
They have forgotten their power as the vanguard to set the national issues for this election, their power to force agendas onto the political incumbents. Because of this curious blindness and muteness, the major national level issue of AIM-gate only surfaced, brought up half-heartedly at the WP rally last night - 3 days before the election.
Again, I do not enjoy calling my fellow Singaporeans political illiterates. What appears to be elite strategy to leave major issues of an election unexamined till the eve of the election is pure unadulterated utter stupidity. It is a strategy designed to not make major issues count in an election. Where the blogosphere could have pushed the agenda on both the PAP and WP, to accelerate the timeline so that this major issue has sufficient time to percolate into the considerations of voters, by and large it chose not to.
This particular argument applies to the SDP as well. Whatever merits its decision to pull out of the election, the SDP is not excused from continuing to speak out against the policy failures of the ruling party, and driving up its negatives.
We hope the blogosphere at large will reflect on their mis-steps in this by-election, get themselves a real political education, and do better by 2016.
We don't need opposition unity
Perhaps overcompensating for the loss of the multi-cornered presidential election last year, online commentators, bloggers, and alternate media groups were more than eager to declare the Workers Party the natural candidate to contest the People's Action Party in Punggol East.
Whatever the merits of this argument, which has just about as many holes in it as Singapore's take on the concept of meritocracy, online commentators, bloggers, and alternate media groups saw their role to cajole, intimidate, castigate, ridicule, and in essence bully the Singapore Democratic Party, the Reform Party, the Singapore Democratic Alliance, and their supporters into dropping out of the contest, in the interests of "opposition unity" and the apparent mandate of heaven for the Workers Party.
In the best of worlds, the blogosphere ought to be a vanguard of society. It may not be representative of the public (not to say the voting population of Punggol East), but it can lead public discussion, shape responses and criticisms to policies.
We at Illusio question the mobilisation of online resources to be unleashed as attack dogs on RP, SDP, and SDA. As a vanguard, the power of the blogosphere has been underestimated and misused. Long after the nominations were tendered and the by-election was under way with rallies held, my online colleagues continued to expend much effort attacking the RP and SDA. Now if these two parties are that obviously non-contenders, why did the attacks persist till 22 January?
I do not enjoy calling my fellow Singaporeans political illiterates. Yet many of the loudest voices of this fortnight seem to forget the political narrative: the PAP is on a long downhill slide in popularity and it is far more effective and economical for the political blogosphere to drive up the negatives of the PAP during this by-election instead of driving up the negatives of their non-preferred opposition parties.
They have forgotten their power as the vanguard to set the national issues for this election, their power to force agendas onto the political incumbents. Because of this curious blindness and muteness, the major national level issue of AIM-gate only surfaced, brought up half-heartedly at the WP rally last night - 3 days before the election.
Again, I do not enjoy calling my fellow Singaporeans political illiterates. What appears to be elite strategy to leave major issues of an election unexamined till the eve of the election is pure unadulterated utter stupidity. It is a strategy designed to not make major issues count in an election. Where the blogosphere could have pushed the agenda on both the PAP and WP, to accelerate the timeline so that this major issue has sufficient time to percolate into the considerations of voters, by and large it chose not to.
This particular argument applies to the SDP as well. Whatever merits its decision to pull out of the election, the SDP is not excused from continuing to speak out against the policy failures of the ruling party, and driving up its negatives.
We hope the blogosphere at large will reflect on their mis-steps in this by-election, get themselves a real political education, and do better by 2016.
18 January 2013
The PAP clown council political funding reform show
As the author of Illusio, I have only one operating principle: the priestess of Ise never opines or offers analysis proffered elsewhere. Weeks or months after the eruption of a cause celebre, find much to say that no-one has pointed out, or an angle from which no-one has approached. It is not to keep a dead issue alive but to examine if consensus has been manufactured, a status quo hurriedly agreed upon, a veil and a gag brought down to shutter the eyes, the ears, the mind of a public unaccustomed to inquiry.
Over the last 3 posts, we have offered a thorough (though not exhaustive) analysis of the PAP-AIM town council clown show. No other blogger so far has walked you, dear Reader, step-by-step through this tangled web. It is one thing to say there is a conflict of interests; it is yet another to show you where that conflict lies, which part of it is legally actionable and which part merely unseemly, and at which point in the procurement process that conflict arose.
From a legal and procedural analysis of the PAP clown council-AIM scandal in our previous 2 posts, we ascertain that:
1. It is not in fact illegal for the PAP to own, directly or indirectly, the company AIM. It is also not illegal for AIM to be 'owned' indirectly by a different entity.
2. Both AIM and the PAP are not legally obliged to indicate to the general public the status and details of ownership. (*AIM would have to disclose this to their appointed auditors, nonetheless.)
3. As it stands, the law is silent on whether the conflict of interest between AIM and the town councils should have been reflected.
Nevetheless, Minilee has called for the Ministry of National Development to investigate fully the clown counil-AIM deal to ensure that 'trust in the system' is maintained.
Decoding Minilee, it should be apparent to Singaporean observers that for all the legalistic posturing by Teo Ho-pin, whether the clown council-AIM deal was technically legal (arguably true) or whether international standards of corporate governance had been adhered to (arguably false, see our immediate previous post), the mere fact that the clown councils engaged AIM to be a middleman to deal with the previous contractor NCS is enough to compromise trust in the system.
Perhaps people will eventually find the eloquence for their supposed disquiet and ask: Why do our laws permit a political party to financially back companies so that these companies accrue political advantage in financial dealings?
Follow the money trail
Last post, we left off with the question: What happens to the money AIM earns from its contracts with the town councils? Will the Ministry of National Development even investigate that?
In a procurement audit involving potential conflict of interests, it is a general rule to ask where the money goes. While Teo Ho-Pin is not a shareholder or director of AIM and Chandra Das and his co-owners and directors at AIM are not officials or employees of the town council, it remains that all the parties involved in the procurement deal are members of the PAP.
We have argued that Dr Teo issued a tender for a contract that was financially unfeasible and did not make business sense, and that AIM was awarded the contract on the sole merit that it was a PAP-owned or PAP-backed company. In other words, AIM accrued business advantage from its political affiliation to the extent that it could be the sole bidder, be a dormant company that had no public track record, put in a late bid. Yet it won the contract because Dr Teo, unlike most other Singaporeans, knew the political affiliation of AIM, and said that was sufficient cause to award the contract to AIM.
But what happens to the money AIM earns from its contracts with the town councils? On his part, Das acclaims that he doesn't take a single cent as salary, share dividends, or directorship fees from his position in AIM. That is curious until we read PAP's party constitution, which states in Article X:
But where does the money go to then? Who does it belong to? Does it sit forever in Action Information Management in trust of the People's Action Party? Or does it go eventually to the People's Action Party?
Note that if the earnings of AIM go back to the PAP, then it may be argued that it is Teo who has committed a legally actionable conflict of interest. By awarding the contract to AIM, which he knows to be PAP-backed, he has made it possible for AIM's income deriving from the contract to be transferred to the PAP (of which he, Das, and the AIM shareholders and directors are members), thereby awarding financial advantage from the deal ultimately to the PAP and its members.
Political financing reform drastically needed
A reading of the Political Donations Act affirms the extensive strictures limiting donations to political parties. There are limits to how much money a political party may receive from companies and other organisations, the nature of companies. Parties are required to account to minute detail the donations they receive each year.
Yet as the PAP clown council-AIM affair illustrates, there are sufficient loopholes in the laws of Singapore to allow political parties to 'own' private companies indirectly, and the incomes derived from these are, as a result of lacunae and silences in the law, not subject to scrutiny. Further, we now know that as written, the laws do not require political parties to declare even if they do indeed own indirectly private businesses, much less clarify on the legality of such arrangements.
To regain public trust in the system, a relook at political financing regulations needs to be performed. We believe that the Ministry of National Development does not possess the mandate and has not been tasked to examine this particular issue.
I suggest interested readers do their own research on the international legal norms concerning political ownership of private corporations.
The clown council-AIM affair is not a purely administrative matter; the conflict of interests ultimately rests on whether undue political advantage was accrued by AIM and whether undue financial advantage was accrued by the PAP. If this were illegal in the eyes of the law, it stands that there can be no damage to the people's trust in the system. The damage to the people's trust in the system stems from the possibility that such conflicts of interests are apparently not illegal as the law currently stands.
Hence, I call upon the president of Singapore to convene an independent board of inquiry chaired by the Auditor-general of Singapore and the Registrar of Societies to investigate the issue, and not the MND. Only these two regulators may request for a full and public account from the PAP of all private enterprises it directly owns or indirectly backs and the incomes derived thereof, and to ensure that these incomes are indeed reflected in the accounts of the PAP, and do comply with the Political Donations Act, (I)(3).
With the surprise revelation of AIM's ties to the PAP, the PAP's refusal to disclose whether it owns other companies, and AIM's refusal to disclose the details of other financial dealings it may have had in the past, it appears there is a legal loophole for a political party to own, however indirectly, private enterprises without traditional transparency and accountability mandated elsewhere in the law. Several lacunae in the law have coalesced such that these standards of transparency appear suspended when it comes to the very special case of political financing, where a party owns private enterprises.
Singapore's elected parliamentarians and other politicians must take this issue seriously and urge for a new Political Financing Bill that will clarify these blind spots currently existing in the law, and to harmonise Singapore's political financing regulations to internationally-accepted norms.
Over the last 3 posts, we have offered a thorough (though not exhaustive) analysis of the PAP-AIM town council clown show. No other blogger so far has walked you, dear Reader, step-by-step through this tangled web. It is one thing to say there is a conflict of interests; it is yet another to show you where that conflict lies, which part of it is legally actionable and which part merely unseemly, and at which point in the procurement process that conflict arose.
From a legal and procedural analysis of the PAP clown council-AIM scandal in our previous 2 posts, we ascertain that:
1. It is not in fact illegal for the PAP to own, directly or indirectly, the company AIM. It is also not illegal for AIM to be 'owned' indirectly by a different entity.
2. Both AIM and the PAP are not legally obliged to indicate to the general public the status and details of ownership. (*AIM would have to disclose this to their appointed auditors, nonetheless.)
3. As it stands, the law is silent on whether the conflict of interest between AIM and the town councils should have been reflected.
Nevetheless, Minilee has called for the Ministry of National Development to investigate fully the clown counil-AIM deal to ensure that 'trust in the system' is maintained.
Decoding Minilee, it should be apparent to Singaporean observers that for all the legalistic posturing by Teo Ho-pin, whether the clown council-AIM deal was technically legal (arguably true) or whether international standards of corporate governance had been adhered to (arguably false, see our immediate previous post), the mere fact that the clown councils engaged AIM to be a middleman to deal with the previous contractor NCS is enough to compromise trust in the system.
Perhaps people will eventually find the eloquence for their supposed disquiet and ask: Why do our laws permit a political party to financially back companies so that these companies accrue political advantage in financial dealings?
Follow the money trail
Last post, we left off with the question: What happens to the money AIM earns from its contracts with the town councils? Will the Ministry of National Development even investigate that?
In a procurement audit involving potential conflict of interests, it is a general rule to ask where the money goes. While Teo Ho-Pin is not a shareholder or director of AIM and Chandra Das and his co-owners and directors at AIM are not officials or employees of the town council, it remains that all the parties involved in the procurement deal are members of the PAP.
We have argued that Dr Teo issued a tender for a contract that was financially unfeasible and did not make business sense, and that AIM was awarded the contract on the sole merit that it was a PAP-owned or PAP-backed company. In other words, AIM accrued business advantage from its political affiliation to the extent that it could be the sole bidder, be a dormant company that had no public track record, put in a late bid. Yet it won the contract because Dr Teo, unlike most other Singaporeans, knew the political affiliation of AIM, and said that was sufficient cause to award the contract to AIM.
But what happens to the money AIM earns from its contracts with the town councils? On his part, Das acclaims that he doesn't take a single cent as salary, share dividends, or directorship fees from his position in AIM. That is curious until we read PAP's party constitution, which states in Article X:
No member shall except for professional services rendered at the request of the Central Executive Committee, receive any profit, salary or emolument from the funds or transactions of the Party.We hypothesise that as party members who are shareholders and directors of a company backed by a letter of guarantee by the PAP, Das and his party colleagues, former and present shareholders and directors likewise, are subject to this stipulation.
But where does the money go to then? Who does it belong to? Does it sit forever in Action Information Management in trust of the People's Action Party? Or does it go eventually to the People's Action Party?
Note that if the earnings of AIM go back to the PAP, then it may be argued that it is Teo who has committed a legally actionable conflict of interest. By awarding the contract to AIM, which he knows to be PAP-backed, he has made it possible for AIM's income deriving from the contract to be transferred to the PAP (of which he, Das, and the AIM shareholders and directors are members), thereby awarding financial advantage from the deal ultimately to the PAP and its members.
Political financing reform drastically needed
A reading of the Political Donations Act affirms the extensive strictures limiting donations to political parties. There are limits to how much money a political party may receive from companies and other organisations, the nature of companies. Parties are required to account to minute detail the donations they receive each year.
Yet as the PAP clown council-AIM affair illustrates, there are sufficient loopholes in the laws of Singapore to allow political parties to 'own' private companies indirectly, and the incomes derived from these are, as a result of lacunae and silences in the law, not subject to scrutiny. Further, we now know that as written, the laws do not require political parties to declare even if they do indeed own indirectly private businesses, much less clarify on the legality of such arrangements.
To regain public trust in the system, a relook at political financing regulations needs to be performed. We believe that the Ministry of National Development does not possess the mandate and has not been tasked to examine this particular issue.
I suggest interested readers do their own research on the international legal norms concerning political ownership of private corporations.
The clown council-AIM affair is not a purely administrative matter; the conflict of interests ultimately rests on whether undue political advantage was accrued by AIM and whether undue financial advantage was accrued by the PAP. If this were illegal in the eyes of the law, it stands that there can be no damage to the people's trust in the system. The damage to the people's trust in the system stems from the possibility that such conflicts of interests are apparently not illegal as the law currently stands.
Hence, I call upon the president of Singapore to convene an independent board of inquiry chaired by the Auditor-general of Singapore and the Registrar of Societies to investigate the issue, and not the MND. Only these two regulators may request for a full and public account from the PAP of all private enterprises it directly owns or indirectly backs and the incomes derived thereof, and to ensure that these incomes are indeed reflected in the accounts of the PAP, and do comply with the Political Donations Act, (I)(3).
With the surprise revelation of AIM's ties to the PAP, the PAP's refusal to disclose whether it owns other companies, and AIM's refusal to disclose the details of other financial dealings it may have had in the past, it appears there is a legal loophole for a political party to own, however indirectly, private enterprises without traditional transparency and accountability mandated elsewhere in the law. Several lacunae in the law have coalesced such that these standards of transparency appear suspended when it comes to the very special case of political financing, where a party owns private enterprises.
Singapore's elected parliamentarians and other politicians must take this issue seriously and urge for a new Political Financing Bill that will clarify these blind spots currently existing in the law, and to harmonise Singapore's political financing regulations to internationally-accepted norms.
12 January 2013
The PAP Clown Council procedural show
Like experts on corporate governance who weighed in officially on the issue after Minilee's decree for an investigation into the clown council by the Ministry of National Development gave them the much-needed spine, we at Illusio are convinced that there is a pressing and obvious question of conflict of interests, non-transparency, and inappropriate procedures surrounding Teo Ho Pin's sale, as 'coordinating chairman', of municipal-level management software of 14 town councils to Action Information Management Pte Ltd.
In our last post, we established that very strictly speaking, the questions of conflict of interests, non-transparency, and inappropriate procedures do not lie on Chandra Das and the other directors of AIM. In addition, we proposed that the conflict of interests involved in this case are not legally actionable but fall under the wider issue of the ethics of corporate governance and also, appropriate procedures and full disclosure.
From the point of view of process auditing, at the very minimum, these two questions should be asked in any subsequent investigation by any appointed authorities and regulators as an automatic trigger for the conflict of interests issues surrounding the town council sale.
1. Was the conflict of interest disclosed by AIM to the town council during the bidding process? Note this is despite the fact that legally speaking, AIM Is not legally bound to disclose its PAP-ownership to the public via its accounts or company statements. Legal requirements are not the same as auditing or corporate governance requirements.
2. Was the conflict of interest disclosed by the town councils in their annual reports submitted to the Ministry of National Development and the Auditor-General of Singapore?
In many cases of conflicts of interest that are non-actionable by law, the issue is of an issuer and issuee who are affiliated entering a contract. That is to say, the issuer or issuer are not shareholders, directors, or employees of each other but possess other corporate, social, political, or personal affiliations. For example, both parties could be separate subsidiaries of the same conglomerate, or have known each other for 20 years as members of the local Toastmasters, or are related by marriage or blood.
Yes, it's not legally actionable. But no, that doesn't mean the conflict of interest doesn't exist. What it means is you're supposed to, for the sake of your auditors and the regulatory body, declare this conflict of interests during the process as well as the audit, to say, "Yes, we are both affiliated but the contract was awarded due to the bidder's superior offer, track record, etc." Failure to do so? Not illegal per se but just plain ugly.
Unlike certain conspiracy theories, we therefore do not predict that the MND investigation will lay the blame on the auditors; they simply didn't know and wouldn't know there's a conflict of interest since AIM's political ownership structure is still legally non-transparent and an object of speculation, even ours.
Next, the regulators or investigators will need to consider the following:
3. Was the contract one which was economically, financially, operationally justifiable? Was AIM's PAP affiliation a necessary and sufficient factor for its winning the contract?
It stands that if there are no takers for the contract Teo Ho Pin offered, then from the market point of view, the work entailed in the contract for the sum offered did not make financial, operational, or economic sense. Note that The New Paper has canvassed procurement and software experts who have said just as much.
Now, we consider Teo Ho Pin's statement on 2 January 2013. We note his statement that having considered AIM's sole bid to indicate that the town council offer was reasonable and made market sense, "...we were confident that AIM, backed by the PAP, would honour its commitments."
We suggest that if procurement and software experts may still be found to testify to the Ministry of National Development's investigation (and that the MND would field the question in the first place) that the town councils' contract was not one that any profit-making software company would enter into, then it might follow that AIM was mistakenly awarded the contract by Teo Ho Pin purely out of the fact that he knew it was PAP-backed. If the contract is not economically or financially justifiable, then it is impossible to win it on any merits.
Next. Depending on the investigator, a case might even be made that AIM accrued political benefits from its affiliation in this contract.
4. When and how did Teo Ho Pin know about the PAP affiliation of AIM?
As noted by too many other commentators, there is no publicly available information to corroborate Teo's assertion that AIM is "PAP-backed" or Chandra Das's claim that AIM is PAP-owned.
We at Illusio look forward to the Ministry of National Development to investigate just when and how Dr Teo knew about AIM's nature. It could very well turn out that not only did Teo mistakenly award the town council contract to AIM solely because of its PAP affiliation but also that he made the decision while being privy to its secret ownership. This would be properly speaking, a prime example of improper procedure in corporate governance where the issuee awards the contract for reasons only available to the issuee and not the general public, not even the regulatory body.
Now if our previously-mentioned investigator has taken to inquire if AIM had accrued political benefits from its affiliation, backing, or ownership by the PAP, this investigator may well be swayed by the fact that Dr Teo, being a PAP member having very specialised and restricted knowledge of AIM's affiliation with the PAP, did not in fact declare this to the town council and excuse himself from the awarding of the contract - but instead used it as a prime reason for awarding the contract when the tender should have been called off.
5. So will the investigation by the Ministry of National Development investigate where the money AIM earns from these town council contracts end up? Is this line of inquiry mandated by Minilee's assumption of the investigation committee?
In our last post, we established that very strictly speaking, the questions of conflict of interests, non-transparency, and inappropriate procedures do not lie on Chandra Das and the other directors of AIM. In addition, we proposed that the conflict of interests involved in this case are not legally actionable but fall under the wider issue of the ethics of corporate governance and also, appropriate procedures and full disclosure.
From the point of view of process auditing, at the very minimum, these two questions should be asked in any subsequent investigation by any appointed authorities and regulators as an automatic trigger for the conflict of interests issues surrounding the town council sale.
1. Was the conflict of interest disclosed by AIM to the town council during the bidding process? Note this is despite the fact that legally speaking, AIM Is not legally bound to disclose its PAP-ownership to the public via its accounts or company statements. Legal requirements are not the same as auditing or corporate governance requirements.
2. Was the conflict of interest disclosed by the town councils in their annual reports submitted to the Ministry of National Development and the Auditor-General of Singapore?
In many cases of conflicts of interest that are non-actionable by law, the issue is of an issuer and issuee who are affiliated entering a contract. That is to say, the issuer or issuer are not shareholders, directors, or employees of each other but possess other corporate, social, political, or personal affiliations. For example, both parties could be separate subsidiaries of the same conglomerate, or have known each other for 20 years as members of the local Toastmasters, or are related by marriage or blood.
Yes, it's not legally actionable. But no, that doesn't mean the conflict of interest doesn't exist. What it means is you're supposed to, for the sake of your auditors and the regulatory body, declare this conflict of interests during the process as well as the audit, to say, "Yes, we are both affiliated but the contract was awarded due to the bidder's superior offer, track record, etc." Failure to do so? Not illegal per se but just plain ugly.
Unlike certain conspiracy theories, we therefore do not predict that the MND investigation will lay the blame on the auditors; they simply didn't know and wouldn't know there's a conflict of interest since AIM's political ownership structure is still legally non-transparent and an object of speculation, even ours.
Next, the regulators or investigators will need to consider the following:
3. Was the contract one which was economically, financially, operationally justifiable? Was AIM's PAP affiliation a necessary and sufficient factor for its winning the contract?
It stands that if there are no takers for the contract Teo Ho Pin offered, then from the market point of view, the work entailed in the contract for the sum offered did not make financial, operational, or economic sense. Note that The New Paper has canvassed procurement and software experts who have said just as much.
Now, we consider Teo Ho Pin's statement on 2 January 2013. We note his statement that having considered AIM's sole bid to indicate that the town council offer was reasonable and made market sense, "...we were confident that AIM, backed by the PAP, would honour its commitments."
We suggest that if procurement and software experts may still be found to testify to the Ministry of National Development's investigation (and that the MND would field the question in the first place) that the town councils' contract was not one that any profit-making software company would enter into, then it might follow that AIM was mistakenly awarded the contract by Teo Ho Pin purely out of the fact that he knew it was PAP-backed. If the contract is not economically or financially justifiable, then it is impossible to win it on any merits.
Next. Depending on the investigator, a case might even be made that AIM accrued political benefits from its affiliation in this contract.
4. When and how did Teo Ho Pin know about the PAP affiliation of AIM?
As noted by too many other commentators, there is no publicly available information to corroborate Teo's assertion that AIM is "PAP-backed" or Chandra Das's claim that AIM is PAP-owned.
We at Illusio look forward to the Ministry of National Development to investigate just when and how Dr Teo knew about AIM's nature. It could very well turn out that not only did Teo mistakenly award the town council contract to AIM solely because of its PAP affiliation but also that he made the decision while being privy to its secret ownership. This would be properly speaking, a prime example of improper procedure in corporate governance where the issuee awards the contract for reasons only available to the issuee and not the general public, not even the regulatory body.
Now if our previously-mentioned investigator has taken to inquire if AIM had accrued political benefits from its affiliation, backing, or ownership by the PAP, this investigator may well be swayed by the fact that Dr Teo, being a PAP member having very specialised and restricted knowledge of AIM's affiliation with the PAP, did not in fact declare this to the town council and excuse himself from the awarding of the contract - but instead used it as a prime reason for awarding the contract when the tender should have been called off.
5. So will the investigation by the Ministry of National Development investigate where the money AIM earns from these town council contracts end up? Is this line of inquiry mandated by Minilee's assumption of the investigation committee?
11 January 2013
The PAP Clown Council conflict of interests show
In my previous analysis of the PAP town council affair, we established that the real issues surrounding Teo Ho Pin's awarding, as "coordinating chairman of 14 PAP town councils", of a contract to Action Information Management Pte Ltd (AIM), were conflict of interests, non-transparency, and inappropriate procedures. All questions and analyses of municipal management issues of a similar nature will eventually ask a final question - was there sufficient evidence of procurement corruption, whether intentional or non-intentional?
I never quite answered that question, much less broached it last week. Instead, I ended with a series of questions that weren't even directed at Chandra Das, Teo Ho Pin, or even the PAP. Those questions, dear readers, were for you to mull over, to appreciate the wider implications (beyond conflict of interests, etc) raised by this issue, and to prepare yourselves to handle the response by Minilee as well as Aljunied-Hougang Town Council (AHTC). And hopefully you have thought over them and are ready for me today.
There is conflict of interests, and then there is conflict of interests
Here were my first 3 questions from Sunday, which we will now take on together.
1. How does a company registered under the names of 3 former PAP MPs become a PAP-backed company (according to MP Dr Teo), a PAP-OWNED company (according to former MP Chandra Das)?
2. Is there any reflection in ACRA records that AIM is a PAP-owned company?
3. Do Chandra Das and his other 2 directors have a legal duty to declare that AIM is a PAP-owned company in its official records?
You will note in The Straits Times report on Minilee's call for an investigation into the town council matter, that it is not even a matter of debate whether there is a conflict of interests or not. The overwhelming consensus of corporate governance experts, as reported by ST, is there were obvious conflict of interests, non-transparency, and procedural issues with Teo Ho Pin's sale of software rights and award of contract to AIM.
But on a finer scale, there are conflict of interests that are legally actionable and conflict of interests that are merely questionable in a corporate governance framework. Our conjecture is Teo Ho Pin's defense of his decision as fully legal and within the boundaries of corporate governance frameworks comes from a narrow, legalist interpretation of what constitutes conflict of interests.
What type of conflict of interests are legally actionable? It turns out in this case, only when Teo Ho Pin is also a director, shareholder, or employee of AIM, or when Chandra Das or his fellow shareholders and directors are also directors, employees, or shareholders of any of the 14 PAP town councils of which Teo was a "coordinating chairman".
Now, we will turn to our trio. It is quite possible for the PAP to "own" AIM via several legal instruments with ACRA still reflecting correctly that the firm belongs to Das et al. We suggest a letter of guarantee where the PAP underwrites AIM and its operations to the tune of say, $1 million. Or say, a sum of $999,998. We offer these two figures due to the fact that AIM was supposed to have a paid up capitalisation of $1 million in its incorporation, and the $2 eventually capital that the company was set up with. In other words, PAP "owns" AIM via holding its "debt".
As a private limited company, AIM is indeed not required to open its books to the public or divulge its true ownership. Auditing and accounting-wise, there is nothing illegal about this arrangement.
From the point of view of the companies act and modern auditing and accounting standards, the questions of (legal) conflict of interests and (legal) non-transparency are not for AIM or Chandra Das to answer, but for Dr Teo Ho Pin and the People's action party to clarify.
And now for something completely different: AHTC Clown Show
We turn now to the Aljunied Hougang Town Council Clown Show. Again, we will use the legal definition of conflict of interests vs corporate governance definition.
If you need a refresher of the AHTC Clown Show, please read here. We'd like to point your attention to the fact that of the 4 new directors found their way into FMSS, a certain How Weng Fan also happens to be a former secretary of HTC, the direct precursor of AHTC.
Recall our earlier statement on legally actionable conflict of interests: it is when the town council has awarded a contract to a company whose shareholders are its former employees and managers.
But when did How Weng Fan stop being a secretary of HTC? Was that before or after the formation of FMSS? How many other directors of FMSS have rendered services for HTC in the past? How many of them have rendered exclusive services for HTC?
It is sad to see that unlike Teo Ho Pin, Chandra Das, and the PAP, it is the Workers Party, AHTC, and FMSS that have far less wriggle room.
I never quite answered that question, much less broached it last week. Instead, I ended with a series of questions that weren't even directed at Chandra Das, Teo Ho Pin, or even the PAP. Those questions, dear readers, were for you to mull over, to appreciate the wider implications (beyond conflict of interests, etc) raised by this issue, and to prepare yourselves to handle the response by Minilee as well as Aljunied-Hougang Town Council (AHTC). And hopefully you have thought over them and are ready for me today.
There is conflict of interests, and then there is conflict of interests
Here were my first 3 questions from Sunday, which we will now take on together.
1. How does a company registered under the names of 3 former PAP MPs become a PAP-backed company (according to MP Dr Teo), a PAP-OWNED company (according to former MP Chandra Das)?
2. Is there any reflection in ACRA records that AIM is a PAP-owned company?
3. Do Chandra Das and his other 2 directors have a legal duty to declare that AIM is a PAP-owned company in its official records?
You will note in The Straits Times report on Minilee's call for an investigation into the town council matter, that it is not even a matter of debate whether there is a conflict of interests or not. The overwhelming consensus of corporate governance experts, as reported by ST, is there were obvious conflict of interests, non-transparency, and procedural issues with Teo Ho Pin's sale of software rights and award of contract to AIM.
But on a finer scale, there are conflict of interests that are legally actionable and conflict of interests that are merely questionable in a corporate governance framework. Our conjecture is Teo Ho Pin's defense of his decision as fully legal and within the boundaries of corporate governance frameworks comes from a narrow, legalist interpretation of what constitutes conflict of interests.
What type of conflict of interests are legally actionable? It turns out in this case, only when Teo Ho Pin is also a director, shareholder, or employee of AIM, or when Chandra Das or his fellow shareholders and directors are also directors, employees, or shareholders of any of the 14 PAP town councils of which Teo was a "coordinating chairman".
Now, we will turn to our trio. It is quite possible for the PAP to "own" AIM via several legal instruments with ACRA still reflecting correctly that the firm belongs to Das et al. We suggest a letter of guarantee where the PAP underwrites AIM and its operations to the tune of say, $1 million. Or say, a sum of $999,998. We offer these two figures due to the fact that AIM was supposed to have a paid up capitalisation of $1 million in its incorporation, and the $2 eventually capital that the company was set up with. In other words, PAP "owns" AIM via holding its "debt".
As a private limited company, AIM is indeed not required to open its books to the public or divulge its true ownership. Auditing and accounting-wise, there is nothing illegal about this arrangement.
From the point of view of the companies act and modern auditing and accounting standards, the questions of (legal) conflict of interests and (legal) non-transparency are not for AIM or Chandra Das to answer, but for Dr Teo Ho Pin and the People's action party to clarify.
And now for something completely different: AHTC Clown Show
We turn now to the Aljunied Hougang Town Council Clown Show. Again, we will use the legal definition of conflict of interests vs corporate governance definition.
If you need a refresher of the AHTC Clown Show, please read here. We'd like to point your attention to the fact that of the 4 new directors found their way into FMSS, a certain How Weng Fan also happens to be a former secretary of HTC, the direct precursor of AHTC.
Recall our earlier statement on legally actionable conflict of interests: it is when the town council has awarded a contract to a company whose shareholders are its former employees and managers.
But when did How Weng Fan stop being a secretary of HTC? Was that before or after the formation of FMSS? How many other directors of FMSS have rendered services for HTC in the past? How many of them have rendered exclusive services for HTC?
It is sad to see that unlike Teo Ho Pin, Chandra Das, and the PAP, it is the Workers Party, AHTC, and FMSS that have far less wriggle room.
06 January 2013
The PAP clown show continues! (Town council edition)
"Hegel remarks somewhere that
all great world-historic facts and personages appear, so to speak, twice. He
forgot to add: the first time as tragedy, the second time as farce."
-- Marx's introduction in The 18th Brumaire of Louis Bonaparte
Almost two years ago, half-hearted reports in the mainstream media hemmed and hawed over Aljunied-Hougang Town Council (AHTC) and its award of a contract to a firm which was registered barely on the eve of the elections.
Thanks to my sources, I sought to provide a fuller picture of just what was unsettling about the AHTC case, namely non-transparency, less than proper procedures in the tender process, a clear conflict of interests in the firm that won the contract. Whether or not there was any intention or whether this was simply a matter of non-standard or even slipshod management, it did lead my source and others familiar with town council procurement procedures to question if there was any procurement corruption - intentional or accidental.
Almost two years later, Marx's quip about history repeating itself holds true. We wouldn't say there has been a scandal but at the very least, there has been widespread concern over the blogosphere and media, again composed of half-hearted hemming and hawing, over how 14 PAP-run town councils outsourced their management software solution to a company called AIM.
Like before, as the priestess of Ise, I am bound by duty and obligation to point out the farce that lies before us - even though I fully expect the mainstream media now, as it did before two years ago, to leave the matter hanging while the balls are up in the air, out of sheer cowardice and fear of inquiring after what people need to know and want to know.
The real issue, as before, is conflict of interest
To a process auditor, the fact that (Action Information Management Pte Ltd) AIM is a company with $2 paid-up capital is immaterial.
The real cause for concern is the fact that a firm registered to former PAP MPs was awarded a contract for 14 PAP-held town councils by Teo Ho Pin, who was a sitting MP at that time and now names himself the "coordinating chairman" of these town councils, after being the sole bidder for the tender, and submitting the tender way past the deadline.
The fact of the case is there has been a conflict of interest, just as there was a clear conflict of interest in the AHTC case 2 years ago. AHTC awarded a contract to a firm set up by its former employees and managers. Now, it is revealed that Teo Ho Pin awarded a contract to a firm set up by his former parliamentary colleagues.
But a conflict of interest or a preferential awarding of contracts doesn't necessarily imply that there is any criminal or otherwise illegal behaviour, much less political corruption or procurement corruption.
A hypothetical professional auditor may query MP Dr Teo Ho Pin and former MP Chandra Das thus: Was the conflict of interest disclosed by AIM during the bidding process?
The auditor-general of Singapore, whose purview is checking the books of town councils, may query MP Dr Teo Ho Pin and former MP Chandra Das thus: Was the conflict of interest disclosed by the town councils in their annual reports submitted to him?
If the answer to both questions (both easily verifiable) is no, then according to some process auditors there might be a case for an investigation by the relevant regulatory authority.
Love me tender (as a farce)
We refer to the report in The New Paper, dated 5 January 2013 on page 6. As Lucky Tan points out: "For the tender process to work successfully and fairly, companies have
to be provided sufficient information to put in a bid. In this case, the
tender involves the purchase a custom software and specifications have
to be sufficiently detailed so that companies can value the system and
put in a competitive bid."
Instead, Hutcabb Consulting believes that the tender was a non-transparent one, with insufficient information provided about the nature of the work to be contracted. We infer from what the IT procurement experts canvassed by TNP said, that the contract made no business sense, the work had no financial benefit; hence "companies would ordinarily not bid for such contracts." You can find other software experts saying the same thing elsewhere.
And like the AHTC saga from 2 years ago, we come to the same questions of whether the tender process and the terms and scope of the contract was preferential in the sense that no other firm aside from the one awarded would have put in a bid for it. An auditor will ask if the tender process and terms of the contract make no business sense to bid for the contract unless that one firm was connected to the town council or the PAP.
Nothing illegal or corrupt yet but the non-transparency stinks anyway
I admit that even if this were a case of preferential contracts, this is not a smoking gun for political corruption.
What makes this entire affair a clown show and a farce is how Dr Teo Ho Pin and Mr Chandra Das proceed day by day to whittle down their vast reserves of citizen goodwill, reasonable doubt over the rightness of the tender and award process, as well as the general trust in the transparency of Singapore's only ruling party since independence.
We can only say it's nothing short of flabbergasting the elan that possesses Teo when he says that during the time of him awarding the contract to AIM, he already knew that AIM was backed by the PAP. And that's not as farcical as the further admission from Chandra Das himself that AIM is PAP-owned. And perhaps not as mindblowingly hilarious that Das follows that up with a refusal to state how much assets and business his PAP-owned company has.
But let's look at the other real issue of transparency here:
1. How does a company registered under the names of 3 former PAP MPs become a PAP-backed company (according to MP Dr Teo), a PAP-OWNED company (according to former MP Chandra Das)?
2. Is there any reflection in ACRA records that AIM is a PAP-owned company?
3. Do Chandra Das and his other 2 directors have a legal duty to declare that AIM is a PAP-owned company in its official records?
4. Is it legal for the PAP as a political party with donation and funding limitations to 'own' companies registered in the names of private individuals?
5. Does the PAP operate any other businesses that are registered in the names of private individuals, as Das and his other 2 directors were?
6. As a political party, has the PAP furnished the Registrar of Societies, whose purview is in part the management and disciplining of political parties in Singapore, a full list of companies officially PAP-owned and unofficially held in trust for PAP by private individuals, their assets, and their business returns?
As the priestess of Ise retires for the night, we leave these questions hanging in the air for a day or two, or a week or two, as fruit for your thought.
Our thoughts? What a clown show!
-- Marx's introduction in The 18th Brumaire of Louis Bonaparte
Almost two years ago, half-hearted reports in the mainstream media hemmed and hawed over Aljunied-Hougang Town Council (AHTC) and its award of a contract to a firm which was registered barely on the eve of the elections.
Thanks to my sources, I sought to provide a fuller picture of just what was unsettling about the AHTC case, namely non-transparency, less than proper procedures in the tender process, a clear conflict of interests in the firm that won the contract. Whether or not there was any intention or whether this was simply a matter of non-standard or even slipshod management, it did lead my source and others familiar with town council procurement procedures to question if there was any procurement corruption - intentional or accidental.
Almost two years later, Marx's quip about history repeating itself holds true. We wouldn't say there has been a scandal but at the very least, there has been widespread concern over the blogosphere and media, again composed of half-hearted hemming and hawing, over how 14 PAP-run town councils outsourced their management software solution to a company called AIM.
Like before, as the priestess of Ise, I am bound by duty and obligation to point out the farce that lies before us - even though I fully expect the mainstream media now, as it did before two years ago, to leave the matter hanging while the balls are up in the air, out of sheer cowardice and fear of inquiring after what people need to know and want to know.
The real issue, as before, is conflict of interest
To a process auditor, the fact that (Action Information Management Pte Ltd) AIM is a company with $2 paid-up capital is immaterial.
The real cause for concern is the fact that a firm registered to former PAP MPs was awarded a contract for 14 PAP-held town councils by Teo Ho Pin, who was a sitting MP at that time and now names himself the "coordinating chairman" of these town councils, after being the sole bidder for the tender, and submitting the tender way past the deadline.
The fact of the case is there has been a conflict of interest, just as there was a clear conflict of interest in the AHTC case 2 years ago. AHTC awarded a contract to a firm set up by its former employees and managers. Now, it is revealed that Teo Ho Pin awarded a contract to a firm set up by his former parliamentary colleagues.
But a conflict of interest or a preferential awarding of contracts doesn't necessarily imply that there is any criminal or otherwise illegal behaviour, much less political corruption or procurement corruption.
A hypothetical professional auditor may query MP Dr Teo Ho Pin and former MP Chandra Das thus: Was the conflict of interest disclosed by AIM during the bidding process?
The auditor-general of Singapore, whose purview is checking the books of town councils, may query MP Dr Teo Ho Pin and former MP Chandra Das thus: Was the conflict of interest disclosed by the town councils in their annual reports submitted to him?
If the answer to both questions (both easily verifiable) is no, then according to some process auditors there might be a case for an investigation by the relevant regulatory authority.
Love me tender (as a farce)
We refer to the report in The New Paper, dated 5 January 2013 on page 6. As Lucky Tan points out: "For the tender process to work successfully and fairly, companies have
to be provided sufficient information to put in a bid. In this case, the
tender involves the purchase a custom software and specifications have
to be sufficiently detailed so that companies can value the system and
put in a competitive bid."Instead, Hutcabb Consulting believes that the tender was a non-transparent one, with insufficient information provided about the nature of the work to be contracted. We infer from what the IT procurement experts canvassed by TNP said, that the contract made no business sense, the work had no financial benefit; hence "companies would ordinarily not bid for such contracts." You can find other software experts saying the same thing elsewhere.
And like the AHTC saga from 2 years ago, we come to the same questions of whether the tender process and the terms and scope of the contract was preferential in the sense that no other firm aside from the one awarded would have put in a bid for it. An auditor will ask if the tender process and terms of the contract make no business sense to bid for the contract unless that one firm was connected to the town council or the PAP.
Nothing illegal or corrupt yet but the non-transparency stinks anyway
I admit that even if this were a case of preferential contracts, this is not a smoking gun for political corruption.
What makes this entire affair a clown show and a farce is how Dr Teo Ho Pin and Mr Chandra Das proceed day by day to whittle down their vast reserves of citizen goodwill, reasonable doubt over the rightness of the tender and award process, as well as the general trust in the transparency of Singapore's only ruling party since independence.
We can only say it's nothing short of flabbergasting the elan that possesses Teo when he says that during the time of him awarding the contract to AIM, he already knew that AIM was backed by the PAP. And that's not as farcical as the further admission from Chandra Das himself that AIM is PAP-owned. And perhaps not as mindblowingly hilarious that Das follows that up with a refusal to state how much assets and business his PAP-owned company has.
But let's look at the other real issue of transparency here:
1. How does a company registered under the names of 3 former PAP MPs become a PAP-backed company (according to MP Dr Teo), a PAP-OWNED company (according to former MP Chandra Das)?
2. Is there any reflection in ACRA records that AIM is a PAP-owned company?
3. Do Chandra Das and his other 2 directors have a legal duty to declare that AIM is a PAP-owned company in its official records?
4. Is it legal for the PAP as a political party with donation and funding limitations to 'own' companies registered in the names of private individuals?
5. Does the PAP operate any other businesses that are registered in the names of private individuals, as Das and his other 2 directors were?
6. As a political party, has the PAP furnished the Registrar of Societies, whose purview is in part the management and disciplining of political parties in Singapore, a full list of companies officially PAP-owned and unofficially held in trust for PAP by private individuals, their assets, and their business returns?
As the priestess of Ise retires for the night, we leave these questions hanging in the air for a day or two, or a week or two, as fruit for your thought.
Our thoughts? What a clown show!
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