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.

1 comment:

MadisonChua said...

Great job! Please keep up the fantastic work.