27 Dec 2005

Exorcising The Ghosts of NKF

From: (Mr) Law Sin Ling
27 December 2005
Exorcising The Ghosts of NKF

Sg_Review

Exorcising The Ghosts of NKF

It was perhaps a wild coincidence that the KPMG report was released to the public less than 5 days before a very busy festive season where most are expected to be preoccupied with gifts and vacation, thus diluting the impact from the shocking revelation.

It was perhaps an equally wild coincidence that the report was released to the public when the Prime Minister Lee Hsien Loong was away on holiday, and was hence not able to make a statement with regard to the sordid affair.

But it was indubitably NOT a coincidence that T.T. Durai and the ex-Board of NKF will become the public whipping boy fortheir "questionable practices" and for "not fulfilling their duties".

Failure to adequately prosecute the above mentioned will send a clear unambiguous signal to the public that monetary corruption through self-enrichment is espoused by the government, and that such an act will only at best draw rhetorical censure to pacify the mental rage tormenting the psyche of sensible people.

Putting Durai and the board under chains and leaving them to the talons of the legal eagles will be a breeze for a government used to employing the judiciary to advance their ambitions.

But even upon this apparent bald mountain of accountability drag chains bound to ghosts of undying grievances.

(1) The Ghost of Convenient Scapegoat

After Durai and his cohorts, the external auditor for NKF from 1988 to 2004, PricewaterhouseCoopers (PwC), became the choice quarry of the Health Minister.

"I appreciate the challenge of auditing an organization which we now know was completely dominated by its CEO. If he deliberately set out to mislead, it would take some efforts to uncover the truth. But it is not impossible and hence my disappointment with the former NKF auditors."

And to be sure his message to the Accounting and Corporate Regulatory Authority (ACRA) was not lost in transition, he added that,

"I'm sure their regulator will be looking at how they want to follow up from here."

ACRA wasted no time in responding that it "will look into the matter and take appropriate action if necessary".

Slaughtering PwC might seem like a logical option, though cooler heads should prevail.

Issues relating to corporate governance (salary, promotions, and purchases) had been broached from since 1999 right up to 2002 by Arthur Andersen without resolution. And the defunct auditing house, together with PwC, had both failed to present any evidence of contravention within NKF to the public.

And a frail effort by KPMG in 2004 had likewise fallen flat without success. Is it then fair to attribute PwC with a blame that seemingly afflicts its peers in the fraternity?

PwC had done a terrible job in so far as unearthing accounting irregularities were concerned. But PwC, unlike KPMG in 2005, did not have the far-reaching mandate the latter had to permit it to conduct its own invasive "Operation Crystal" where unlimited authority was given to seal offices and deny access of sensitive data in computers to the staff of NKF pending investigation.

The difference between PwC and KPMG 2005 is a comparison between routine arithmetic auditing and purposeful investigative auditing.

The integrity of the entire accounting fraternity now rests on the ability of the State to exercise justice on those whose failure had repercussed on the ability of the regulatory agencies (who depends in large part on auditors' report) to effectively discharge their duty to uphold the trust between the NKF, the government, and the public.

And the auditors are not the only ones implicated in the failure of PwC, for hindrance comes in many forms and at many State levels.

The NKF incident will not destroy PwC as clinically as Enron (US) had on Arthur Anderson. But this is an eventuality which is beyond the concern of the State. Public interest must always precede business priority. And this will present a stern test for a government accustomed to tooting about its world-admired discipline in exacting a high standard of corporate accountability and governance, but who had very few spectacular opportunities to convincingly vindicate the claim.

Passing off the chance will severely dent the public confidence in the ability of auditors in Singapore to effectively uncover and publicly open the book on financial chicanery in private (such as NKF) and public institutions (such as Temasek and CPF).

The government will have to be mindful of the message it would otherwise send. And focussing on PwC alone is a bad start.

(2) The Ghost of Cowering Redemption
The patron of NKF was Mdm Tan Choo Leng, better known in Singapore as the wife of ex-premier and current Senior Minister (SM) Goh Chok Tong. When the NKF scandal first came into official light in a high-profile defamation trial in July 2005, she defiled her up to then immaculate respectability with the immortalising denigration against the donating public that,"For a person who runs a million-dollar charitable organisation, $600,000 (in annual salary for Durai) is PEANUTS as it (NKF) has a few hundred millions in reserves." The furore over what is overwhelmingly acknowledged as a demonstration of indecent arrogance and insensitivity from a member of the high-society with a close relation to a high-ranking member of the ruling elite sustained at a simmer.

Mrs Goh was to bring the seething emotion to a second climax when she defended her ignorance (up to the trial in July) of Durai's remunerations, and that not being "a member of the NKF Board or its Executive Committee", she "no authority to endorse the salary paid to Mr Durai."

Her choice of words, more measured than the careless insult in July, was equally controversial.

Having offered her patronage to a high-profile organisation for a consecutive number of years, it is difficult to be convinced that she could not have an iota of knowledge or suspicion, through direct communication or through the benefits of the grapevine, of the outrage brewing within NKF.

As a distinguished lawyer, her job as a senior consultant in the property and real estate requires an extensive knowledge on matters of finance. It is not unreasonable to deduce that she would have acquired the professional curiosity to read the financial statements of NKF, and actively pursue information on any salient points pertaining to the financial activities of the organisation. Besides, if $600,000 is "peanuts" under her measurement, certainly even 5 times the amount would struggle to be mere `potato chips', and would not suffice to raise an alarm.

The lack of executive power does not equate to a moral inertia. A greater sin would have been committed if she had allowed herself to be convinced of the necessity of the obscene remuneration, and had then decided to condone it by virtue of its perceived relative numerical insignificance.

Therefore, knowing a problem and shutting an eye to it is a form of endorsement. And the patron will need to satisfy the public demand to answer crucial questions on the extent of her knowledge.

And her trouble does not stop there. The Health Minister defended her ostensible oversight with the self-applicable alibi that patrons are simply "supporting the cause by lending their patronage", and that the patrons "know (they) are being made use of as a symbol for people to support."

Mrs Goh's role as a patron surpassed the basic notion of a title conferred on a regular and generous donor to the charity. As the reputed figurehead at the bow of NKF, the confidence exuded performed a pivoting role in securing the continual faith of donors.

But a renowned public figure cannot jolly lend a name to a charity cause (be it NKF or some religious temples) without accepting both the glory and the grime as a complete package.

With the disclosure that the public money drawn from good faith had been unceremoniously drained into the coffer of thieves, the patron had been consequently transformed from an emblematic paragon to an instrument of mass deceit.

The patron had lent her image to NKF at the heights of the latter's popularity. The derived mutual benefits between the patron and NKF would have also allowed her spouse, the ex-Prime Minister Mr Goh Chok Tong, to bask in a certain degree of political aura.

Even at the height of the defamation trial, she had openly proclaimed her "complete trust in the NKF and Mr Durai".

Now, the patron must absorb the ignominious condemnation. She cannot rightfully be exculpated of any eventual lapse in judgement as she had had the moral responsibility to exercise as much (if not more) interest in the deeper nature of the beneficiary (NKF) as ordinary solicited members of the public should.

It is morally indefensible to absolve the patron at a time when the public trust so built up is broken with the misappropriation of millions in public fund.

In glory, she led the charge to gain donor confidence. In shame, she must take up the flag and once again lead the charge to recover the loot, regain public trust, and salvage the collateral damage done to the Senior Minister and to the other institutions to which she equally lends her person as a beacon of trust.

The attempt by the Health Minister to shoo her off into silent retreat away from further participation will merely serve to underscore once again the dishonourable habit of the government to stage a legal and moral Houdini on those who are most in need to step out.

(3) The Ghost of Governmental Houdini

And talking about legal and moral Houdini, one man and his fumbles cannot be permitted to slip into oblivion.

Mr Lim Hng Kiang was the Health Minister between June 1999 and August 2003. The period was also the most tumultuous years in the history of NKF prior to the exposé.

In 1999, the Ministry of Health (MOH) had smelled a rat over NKF's need to amass excessive funds for what was a rather conservative base of about 1500 patients.

By 2001, the regulator of charities the National Council of Social Service (NCSS) had joined in the fray with their explicit statement of deeper concerns over issues which were to be exposed by KPMG. And even the Commissioner of Charities was kept preoccupied.

Those portentous signals culminated in the drastic reduction in the period (from 5 years to 3 months) granted to NKF as an Institution of a Public Character (IPC) with an accorded right to collect tax-exempt donations. A subsequent dispute with NKF and Durai ended with the rescission of NKF's ability to even issue tax-exemption receipts to donors.

In a show of complete affront to logic and good-sense, MOH under Lim Hng Kiang granted NKF an IPC status of 3 years, a veritable licence to plunder.

Mr Khaw (Health Minster) explained that "The regulators collectively assessed and FOUND NOTHING WHICH WOULD LEAD TO THE CONCLUSION that the NKF's financial track record and fund management track record were less than satisfactory, and would justify the removal of its Institution of Public Character (IPC) status."

This is equivalent to stating that `The regulators found something but could not draw a satisfactory conclusion on any irregularities in NKF'.

KPMG stated that "The wasted opportunity to commence any investigation was most unfortunate since some of the matters dealt with in this report could perhaps have been either prevented or addressed some four years earlier."

A failure by an elected leader of the State to nip a visible problem at its nascent stage of development is a scandalous felony against the people and the State. And for Lim Hng Kiang, this was not an isolated oversight. He has amassed an impressive record for fumbling on problems like SARS, for ignoring the growing problems in hospitals, and regrettably NKF.

Good governance entails both the recognition of collective blame, and a keen comprehension that it is wiser to remove a persistently blemishing flaw than to allow the latter to do further harm in some other capacity to the effort of the collective whole.

"Collective responsibility" (advocated by the government of Lee Hsien Loong) is only meaningful if majority in the government was aware of the growing trouble but chose to sit on its hand and look away. However, it is more likely that the members of the government had acted in accordance with what was reported by Lim Hng Kiang on the situation then, and had acted under his discretion.

A convenient explanation from the current Health Minister is that Lim Hng Kiang, like himself and the public, was "misled". But Mr Khaw risk having his credibility grated.

By the time the MOH had had to decide on the IPC status for NKF, the needle was palpitating at the red warning scale.

In 1998, a former aero-modelling instructor Piragasam Singaravelu was sued for libel for implicating Durai of abuse of public funds (Durai flew first-class on Singapore Airlines). The year before, a former NKF volunteer Archie Ong was likewise sued for making a similar remark on how "NKF squandered monies" and that Durai "jets here and there in first class."

And throughout the period from 1997 to 2001, words from numerous sources had travelled far and wide, finally igniting the attention of NCSS.

It is not an exaggeration to conclude that Lim Hng Kiang could have either seriously downplayed the situation, or cover up the affair all together. At any rate, the ex-Health Minister would have been guilty of dishonesty to the government, undermining the government of the people, and disloyalty to the people he had been elected to service.

To continue to shield his individual responsibility behind the thicket of "collective responsibility" is to court distrust and scorn from the public and the international community. And that does not augur well for a country dependent on foreign investments built on trust and confidence.

Not acting judicially will harm the moral integrity of the people of the Nation by throwing it into disrepute. And this smearing of the good name of Singaporeans through governmental misrule is by no means an accorded mandate from the people.

And rotating the guilty Minister out of public sight and thought is tantamount to an insincere betrayal of the ethics of accountability which is one of the pillars of any good and honest government.

But if no one will stand out and step down, then the entire body of men in the government is implicated. It is hard to justify killing an entire body to remedy a tumour on the arm. Not for a man who up to 2004 held the steadfast conviction as Second Minister of Finance that with 56 per cent of its money on beneficiaries (which we know is untrue), NKF is on "quite a sound record."

(Conclusion) The Ghost of Future Foreboding

The final examination come back to the Health Minister Mr Khaw's delicate position that just about everyone has been a victim "misled" by circumstances which escaped even authorities with keener senses. As "silly" as he might admit he was, he should refrain from further duping the public with aesthetic words lest the words bite the tongue which utters them.

"Misled" has in this context a common synonym called "deceived". And deceiving the government and the public at such a huge magnitude comes very close to an act of deliberate betrayal (of trust). And that is treason.

It is also silly to claim to be "misled" if one has at his disposal the authority to summon a network of State resources to act upon rapidly surfacing signs of misdeeds involving massive misuse of public funds and a potentially damaging breach of government-endorsed trust.

And it is criminal to quote "misled" as an umbrella for certain individuals to evade just accountability.

The warning from Mr Khaw, ironically,

"We now know that we have been misled. Perhaps, we were coloured by our deeply-held and positive view of the original NKF under Prof Khoo Oon Teck (founder in 1969)", contains a stark warning that infatuation with the nostalgic glories and achievements of a perpetual institution can blind man to the corroding rot eating away the founding core of virtues.

Contrary to what PM Lee Hsien Loong said in July that NKF should "start from scratch" and urged Singaporeans to "look ahead", it is about time that the nation understands that rebuilding cannot be achieved on ruins beneath which skeletons of the unresolved past remained buried.


(Mr) Law Sin Ling

5 comments:

Anonymous said...

NKF shows that it is impossible to let go; PAP's tight control is proved right again

similar experience came from some of the GLC managers awarding themselves generous salaries and bonuses by positive presentation of company results

the real issue is how PAP can find larger nos. of genuinely dedicated people for important positions, who would not exploit the opportunities for excessive personal gain; the record so far has not been perfect

lee hsien tau said...

I remembered Mrs Goh refering to something about being peanuts in open court. She's a big-time lawyer who either couldn't keep her trap shut or else your faith in the PAP's 'tight control' is very much misplaced. If the top-elite private personal opinion is very much in line with what Durai was doing, what meaningful control can there be? There must formost be an admission and then a change in mindset....

lee hsien tau said...

Anyway, I did advise that Durai consider parking his sorry ass somewhere else on the planet some months back (if he assesses his conduct to be in breach) in a comment some months back.

tessa said...

A good article, but i had the impression that you were deliberately using bombastic words to impress, when simple words would've been sufficient. Your main goal is to communicate your message to the masses, and not to show off your command of the English language, yes? After all, it's much harder coming up with a piece of writing that everybody understands .. than it is to mask simple ideas with unnecessarily bombastic words.

lee hsien tau said...

Do you have any info linking Lim Hng Kiang with Koh Chong Huat (ex-Head, HDB, Bukit Merah Branch) and Koh Chong Joo (General Manager, ESMARCO)? I'd like to know.