National Kidney Foundation Singapore scandal

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The National Kidney Foundation Singapore scandal, also known as the NKF saga, NKF scandal, or NKF controversy, was a July 2005 scandal involving National Kidney Foundation Singapore following the collapse of a defamation trial which it brought against Susan Long and Singapore Press Holdings (SPH). This caused a massive backlash and fallout of donors to the charity, and subsequently resulted in the resignation of Chief Executive Officer T.T Durai and its board of directors.

Allegations surrounding the scandal included the false declarations on how long NKF's reserves could last, its number of patients, installation of a golden tap in Durai's private office suite, his salary, use of company cars and first-class air travel. Former NKF patron Tan Choo Leng, wife of Senior Minister Goh Chok Tong, sparked further outrage when she remarked that T.T Durai's pay of "S$600,000 a year is peanuts".

President of the National Council of Social Services, Gerard Ee, has since been appointed as interim chairman of the organisation. A full independent audit on its finances was conducted by KPMG, and a 442-page report released on 19 December 2005 revealed several malpractices by the former NKF board and management. Durai was arrested on 17 April 2006 and charged under the Prevention of Corruptions Act by the Police. A S$12 million civil suit to recover funds by the new NKF board against Durai and four other former board members began on 8 January 2007.

Contents 1 Early accusations 2 NKF v. SPH 2.1 Allegations in article 2.2 The proceedings 2.3 Case dropped 3 Aftermath 3.1 Public backlash 3.2 Mrs Goh's remarks 3.3 Interim board 3.4 Government response 3.5 Independent investigation 3.6 Arrests and subsequent lawsuits 3.7 Long-term effects 4 New NKF v. Old NKF 5 The revelations 6 References 7 See also 8 External links

[edit] Early accusations

Singapore in 2005 edit

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In August 1997 and December 1998, NKF volunteer Archie Ong and aero-modelling instructor Piragasam Singaravelu respectively were hauled to court separately for defamation when both said that T.T. Durai had been flying first class. The former mentioned in April 1997 that the NKF "squandered monies" in a casual conversation with former chairman of NKF's finance committee Alwyn Lim,^[1] while the latter has claimed that he had personally seen Mr Durai in Singapore Airlines' first-class cabin. Both paid an undisclosed amount of damages to the NKF, and apologised. ^[2] News of the suit affected Ong's cancer-suffering father, who eventually died in hospital. Shortly after the 2005 scandal broke, Ong mentioned to the press that he felt "fully vindicated now. I had more than a hundred calls today to wish me well."^[3]

In 1999, NKF tracked down and again took legal action against Tan Kiat Noi, who allegedly circulated an e-mail from her company e-mail on 5 April, claiming that "the NKF did not help the poor and needy, paid its staff unrealistically high bonuses"^[4] and discouraged members of the public from donating. She later published a public apology on local broadsheets The Straits Times and Lianhe Zaobao, and paid a total of S$50,000 in damages.^[5] 48 additional workers who forwarded the same e-mail were also sued by the organisation, but the suit was later dropped in consideration that they would face possible financial hardships.^[6] Days since the 2007 civil suit began, there have been calls by the public to redress the grievances of the three abovementioned whistle-blowers.^[7]

In 2001, the National Council of Social Services refused to renew the NKF's "Institution of Public Character" status (which allows it to collect tax-free donations), citing that subsidy figures had been inflated, staff costs had increased by 30% and a "disproportionate" amount of money was spent on fundraising.^[8] However, the Health Ministry intervened and reinstated the NKF's IPC status for a full three years.

[edit] NKF v. SPH

[edit] Allegations in article

The Straits Times published an editorial "NKF: Controversially ahead of its time?" on 19 April 2004, written by senior correspondent Susan Long. This article became the subject of the dispute, and eventually the lawsuit that led to the scandal. Durai and NKF challenged the first six lines of the article, which claimed that a retired contractor (who declined to be named, for fear of being sued) had 'lost it' when he was asked to install "a glass-panelled shower, a pricey German toilet bowl and a (S$1,000) gold-plated tap" in Durai's office.^[6][9] The tap was said to have been replaced later with a different material.

NKF shortly issued a letter of demand for an apology, retraction, and payment of damages from the paper's publisher, Singapore Press Holdings (SPH), within 24 hours. Four days after the article's publication, NKF and Durai served a writ on Long and SPH for defamation, demanding S$3.24 million in damages.^[9] They claimed that the six paragraphs in the article implied the mismanagement of donors' funds, that the installations were scaled down only due to the contractor's protests, and that it had avoided providing further details on that matter.

[edit] The proceedings

The trial began on 11 July 2005, with Long and SPH represented by Senior Counsel and MP Davinder Singh, while NKF and Durai were represented by Senior Counsel Michael Khoo. Under cross-examination, it was revealed that Durai collected a monthly salary of $25,000 and collected a 10-month bonus in 2002 and a 12-month bonus in both 2003 and 2004, for a total of $1.8 million over three years. He had access to a fleet of eight chauffeured cars and the NKF paid the taxes and maintenance costs of his personal Mercedes-Benz. ^[10]

[edit] Case dropped

The case was dropped by Durai on 5 PM on the second day of the trial.

[edit] Aftermath

The Ministry of Health demanded the NKF to pay for damages.

[edit] Public backlash

The focus of the scandal turned to the revelation of Durai's S$600,000 pay, which caused widespread feelings of outrage, anger, and betrayal among the public. 3,800 regular donors cancelled their contributions the day after the trial, and NKF's headquarters was vandalized with graffiti.

[edit] Mrs Goh's remarks

Following questions about Durai's pay, wife of Senior Minister Goh Chok Tong and patron of the NKF Tan Choo Leng defended Durai, commenting that "for a person who runs a big million-dollar charitable organisation, with a few hundred million in reserves, S$600,000 a year is peanuts."^[11][12], much to the indignation of Singaporeans. The statement was taken as an insult by many, who earn much less a year or even struggle for a living.

Blogs and online message boards were quickly flooded with angry comments, and a second online petition requesting Mrs Goh to apologise was started.^[13] Jokes on the issue were later circulated, in particular, local satirical and humour website TalkingCock.com published a post featuring a parody 1 peanut bill with a value equivalent to S$600,000.^[14]

On 16 July 2005, SM Goh said that Mrs Goh regretted the statement. He also said to have explained and shown her several e-mails and letters he had received after the remark was made. In what SM Goh claims to be a separate matter, Mrs Goh has also resigned as patron of the NKF^[15], despite an earlier announcement to remain on the board.^[11]

[edit] Interim board

On 14 July 2005 TT Durai and the NKF board resigned en masse. Health Minister Khaw Boon Wan appointed Gerard Ee as interim chairman and CEO.

[edit] Government response

[edit] Independent investigation

In July 2005, KPMG was commissioned by the new NKF board to study past practices. KPMG published its report [2] in December 2005, with key findings including:

• The Board delegated its authority to the Executive Committee, and the Executive Committee delegated its authority to Durai.
• In 2003, only ten cents out of every dollar raised were used for dialysis costs. In its 2004 annual report, NKF had claimed that 52 cents out of every dollar went to its beneficiaries.
• NKF awarded contracts worth $3 million to Forte Systems and $4 million to Protonweb, both run by Pharis Aboobacker, a close friend of Durai. Neither project was successfully completed, but no action was taken against the companies. In KPMG's judgment, the terms of the contracts were "unusual" and the ExCo's disregard of the lack of performance was "extraordinary".

[edit] Arrests and subsequent lawsuits

Durai was arrested on 17 April 2006. He was out on bail, but will stand for trial with other members of the old National Kidney Foundation Board of Directors.

[edit] Long-term effects

The scandal has raised questions about the level of transparency in other institutions in Singapore. Opposition politicians, notably Chee Soon Juan, have noted that the issues at NKF would probably not have been revealed if T.T Durai had not sued the Straits Times. Four people linked to the Singapore Democratic Party held a silent demonstration outside the Central Provident Fund (CPF) headquarters in July 2005, wearing T-shirts emblazoned with "GIC HDB NKF CPF Transparency now!", thus demanding greater transparency from the Government Investment Corporation (GIC), the Housing Development Board (HDB) and the CPF. ^[16] The protesters were arrested but later dismissed without charges, with their own countersuit for unlawful detention dismissed with costs.

On 21 April 2006, Chee Soon Juan and 12 other defendants were sued for defamation for questioning the government's handling of the NKF scandal in the Singapore Democratic Party's newsletter The New Democrat.

[edit] New NKF v. Old NKF

The civil trial against former CEO TT Durai on how he controlled the charity as well as four other former members alleged breach of duty and causing damage and loss to the organization began on January 8, 2007. The other four were former chairman Richard Yong, former treasurer Loo Say San, board member Maltilda Chua and Durai's business associate, Pharis Aboobacker. The new management hopes to claim S$12 million from the five. Durai was the focus of the proceedings as NKF's lawyer Senior Counsel K Shanmugam raised examples how the old management ran the charity to his advantage. Senior Counsel K. Shanmugam added that since the NKF is a charity, Durai should be subjected to a higher and more rigorous standard of care as a CEO. Another act of deception was to have an executive committee with his own supporters. During the first day of trial, Durai hardly had any reaction and emotions. The other four defendants were also present in court on the first day. About twenty witnesses are expected to testify against the defendants. ^[17]

The third day of the trial saw a shocking decision by TT Durai as he has accepted all liabilities to all claims against him. It was supposed to start with opening statements by defense lawyers and witnesses brought in to testify, including one who saw Durai destroying documents. Durai did not appear in court on the third day with him calling Senior Counsel Chelva Rajah by a mobile phone. Durai's lawyer, Rajah, has refused to divulge anything on why he decided not to fight the lawsuit that his former organization has brought upon him. The only public statement by Rajah was to confirm that his client had dropped out of the matter. Later that day around 1700 (SST), NKF's lawyer, Shanmugam, confirmed to reporters that Durai conceded. This decision means that the new NKF board has won the case & the amount of damages to be paid to the NKF will be decided later. The new NKF wants the return of some S$12 million which arose, and argued that Durai and his inner circle breached their duties to both the organization and the public. However, given that he took three days to concede, the legal costs Durai has been told to pay has been reduced. Shanmugam had spent the first two days dwelling the length on his business connections which he did not disclose to the NKF. NKF chairman Gerard Ee said that they are pleased that their claim had been accepted by Durai after two days in a statement on the third night of the trial. The law firm for NKF, Allen and Gledhill was given to the firm in May 2006 with K Shanmugam taking the job and all fees will be donated to the organization. However, the case against the other defendants, Loo Say San, Matilda Chua, Durai's business associate Pharis Aboobacker and third parties, Alwyn Lim, Lawrence Chia, Kweh Soon Han and Chow Kok Fong continue on 12 January provided they continued the battle. The decision by Richard Yong and Loo to battle on will have implications to four people who are third parties, namely Alwyn Lim, Lawrence Chia, Kweh Soon Han, Chow Kok Fong are also equally liable directors. The result of Durai conceding will make the trial shorter rather than an expected eight week trial. ^[18]

[edit] The revelations

[edit] References

[edit] See also

• Chilling effect
• Corporate abuse
• Corporate scandals
• Accounting scandals
• National Kidney Foundation Singapore

[edit] External links

• The full chronology of events
• ChannelNewsAsia's coverage on the NKF scandal
• KPMG's independent audit report into old NKFS (PDF document, 4.4MB)