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Kong Hee says about CHC, Phil Pringle and the C3 Church Movement,

“You can’t talk about City Harvest Church without talking about C3. Or Christian City Church. You know Pastor Phil has been there for me; praying with me; encouraging me; discipling me; telling me how to do the work of the ministry; taught me how to collect an offering; how to give an altar call; how to build a church; build a team. So Pastor Phil, from the depth of my heart, for Sun and myself, we wouldn’t be where we are today without you and Pastor Chris. Let’s give Pastor Phil and Pastor Chris a big clap.” – Kong Hee, Session 8: (00:24), Presence Conference 2010.

The above quote is something to think about while reading the below article by Marc Ronez. Before reading this third article, make sure you have read his earlier articles:

An Insightful Analysis To The CHC System (Part 1)

Here is Ronez’s third article analysing the CHC situation:

City Harvest Case part 3 – The Opportunity Makes the Thief

Social scientists, psychologists and criminologists generally agree that human behavior is the product of a complex interaction among a wide range of factors. Some of those factors are personal to the individual and others are related to the environment in which the individual evolves. The Fraud Triangle Risk Assessment model that I have been using for this analysis of the CHC case categorize these factors into 3 groups: Pressure, Opportunity and Rationalization. In my previous post, City Harvest Case part 2: If there is a Fraud what would be the Motives?, I focussed on the PRESSURE factors and we were able to identify the incentives and the pressures that could have MOTIVATED the prosecuted CHC leaders to commit the unethical or even the fraudulent actions that they are accused of. Now it is time in this post, to shift our attention to the OPPORTUNITY, i.e. environmental/contextual factors and I would start by referring to an old saying:

“The OPPORTUNITY makes the thief”

This saying seems to imply that OPPORTUNITY factors are possibly the most important among the 3 groups of factors of the Fraud Triangle, as indeed the saying says: they ‘MAKE the thief’. An important body of research works has produced empirical evidences that support this assumption. Researchers point out that most criminals do behave rationally when they decide go ahead or not with a crime. It means that they will evaluate whether the benefits outweigh the costs or risks of committing it. Hence, it is important to understand that whatever the strength of somebody’s motivations to commit a crime, he cannot do it if the environment is not favorable. On the contrary, easy opportunities may create temptations too attractive to resist and hence may spur people into criminal actions. So we can postulate that environmental factors for crime opportunities are key necessary causes of unethical and fraudulent behaviors, as they are the catalysts that translate motivations into unethical or even criminal actions.

The findings from these research works have important practical implications for fraud crime fighting policy and practice. They especially highlight the importance of focussing on the treatment of environmental/contextual factors so as to ensure a more effective fraud risk management system by:

  1. removing the opportunities or at least making it as difficult as possible to commit the crime, and
  2. making the costs of a crime greater than the benefits by ensuring a high risk of being exposed and hence punished for it.

Therefore based on these research findings, every organization must establish a solid governance & risk management control system aimed at enhancing the honesty, integrity, transparency and effectiveness of its management practices (see an example using King III report as a basis). So I will evaluate the strength and deterrence of the governance & risk management control system of CHC by assessing, whether the accused leaders had the OPPORTUNITY to “break or bend the rules” and the ability to CONCEAL their activities to try to avoid getting caught and punished for it. 

To do so, I will review the following areas to compare CHC practices with recommended risk management best practices:

  • Governance Structure
  • Board Role & Dynamics
  • EMs and AGMs Role & Dynamics
  • Information Transparency & Disclosure to Stakeholders
  • CHC Organizational Culture & Influence on Members’ Behaviors

Governance Structure

The governance structure refers to the distribution of roles and responsibilities between the various key groups of internal & external stakeholders of an organization. The governance structure in CHC before the beginning of the case appeared to have been, at least on the surface, pretty ‘standard’ although on the lower range of the Governance Maturity spectrum.

justice statue with sword and scale. cloudy sky in the backgroundFirst, CHC has a Church Board. The Church Board is overall in charge of ensuring proper management and oversight of the church activities. In organizations, among other things, the Board is supposed to be the First Line of Defense against inappropriate top management behaviors.

Second, there is the AGM of the Executive Members (EMs).They elect the board members and are supposedly in position to question, discuss and approve (or reject) the orientations, objectives and activities of the church that are proposed by the Leadership.

Third, of course, CHC also has an Internal Audit Department who, on an on-going basis, is supposed to (1) monitor operating results, (2) verify financial records, (3) evaluate the effectiveness of internal controls, (4) assist with improving efficiency and effectiveness of operations, and (5) detect fraudulent behaviors.

Finally, CHC has External Auditors, who are responsible for determining, among other things, whether (1) the accounting records are accurate and complete, (2) prepared in accordance with the provisions of applicable regulations, and (3) the statements prepared from the accounts present accurately the organization’s financial position and the results of its financial operation.

However, we should also highlight some WEAKNESSES in the CHC Governance Structure as follows:

  • There did not appear to be any Board Level Committees dealing with Risk, Ethics & Compliance management issues.
  • There are no traces of any Remunerations Committee that would have been in charge of reviewing how leaders & top management are compensated.
  • There was apparently no risk & business continuity management departments that would have been in charge of designing and implementing GRC (Governance, Risk & Compliance) Framework in the organization.
  • There was no Whistle Blowing hotline system that would allow any member to raise the alert about any unethical or fraudulent behaviors they may have been witnessing,

These committees, departments & systems are usually necessary fixtures of a proper governance structure as they allow more focus, on-going scrutiny and granular management of important issues that affect the performance & sustainability of an organization.

We should also mention the peculiar and “vulnerable” situation of Ordinary Members (OMs) who are ”Common” Worshippers in CHC. There are OMs who provide generously their time (through volunteer works) and money (through tithes and donations) to the church. In a way, they are both members and “customers” of CHC. However, their level of access to information and ability to control the management is extremely limited as they have no right to attend the AGM and hence, have no voting rights. Practically, their only rights is to use their voice to ask questions or complain if they are not happy with something. But to do so, they would need to know what is going on and have the capability to “make themselves heard” by the leadership.

Finally, we can also observe that CHC is an independent non-denominational Church. That means that there are no other formal external authorities – apart from the regulator, i.e. the Commissioner of Charities (COC) – that could have had the power to exercise monitoring and control over CHC’s spiritual and managerial directions. Pastor Kong Hee does have spiritual mentors he refers to occasionally, however it seems that he has changed mentors at key crossroads of CHC development. Hence, the extent of the real influence that those mentors can exercise on Pastor Kong Hee, especially if they were to disagree with some of his important decisions, is difficult to evaluate. Would Pastor Kong listen to them and change his ways or would he simply choose a new mentor that tells him something that aligns with what he wants to hear?

Church Board’s Role & Dynamics

While there is a Board supposed to be the first line of defense of the Church with the role of ensuring proper management and oversight of the church activities, according to the evidences brought forward by the Commissioner of Charities (COC) and the Commercial Affairs Department (CAD), CHC Board members “have been less than prudent in the discharge of their duties toward the Charity and its members” (See COC Portal). In short, it means that the control exercised by the Board was deficient. From the information made available during the first week of trial, it looks like many important decisions were actually made by a very small group of insiders, apparently centered around Pastor Kong Hee and Pastor Tan Ye Peng, who were respectively the Chairman and Deputy Chairman of the CHC Board. The rest of Board members appeared to have played more of a supporting role, as a willing “rubber stamping chamber”, approving formally decisions already made by the top leadership sometimes months after those decisions had been executed by the operational management.

self-censorship4How could the kind of situation we just described be possible? Part of the answer may lie with the composition and the repartition of the roles in CHC board, which I would characterize as highly problematic from a Corporate Governance perspective. First of all, examining the role the Chairman of the Board, I should stress that it is a very important function because the Chairman sets the agenda and he is in a position of authority that can strongly influence the outcomes of the discussions and decisions made by the Board. That’s the reason why Corporate Governance best practices recommend that the Chairman of the Board should not cumulate his role with any direct managerial or other responsibilities in the same organization so as to avoid conflict of interests and ensure he is able to fulfill his controlling duties without undue biases. However, in CHC case, Pastor Kong Hee was at the same time, in charge of pastoral duties, directly involved in executive management decisions and overseeing the executive management of the church through his roles as Senior Pastor of the Church and Chairman of CHC Board. While this kind of situation is actually quite common in many charities, it is potentially very unhealthy and can open the door to a wide range of ethical and managerial problems as the Chairman could easily abuse his powers. Hence in order to counter balance the power of Chairman of the Board, Corporate Governance best practices would also dictate that there should be a strong and independent element on the Board with independent Directors able to challenge forcefully the Chairman and the Executive Management. In practice, independent Directors should make up at least half of the Board, especially when the Chairman of the Board is cumulating this role with other important executive leadership or managerial functions in the same organization as this was the case in CHC.

Unfortunately, it seems that there was no real independent element in the CHC Board. Indeed the CHC board members may not have been truly in the most favorable position to exercise independently their oversight duties due to the peculiar nature of their respective relationships with Pastor Kong Hee. To put it simply, he was their trusted spiritual leader and hence it seems indeed that all the board members submitted willingly to his spiritual and temporal authority. In essence, they were loyal followers of Kong Hee and his wife, Sun Ho. As a result, they were devoted to the realization of their vision for the future of the church. Therefore, when the same man of God told them that the crossover is a direct mission given by God to Sun Ho and that it has been confirmed by signs and prophets, it is understandable that they may have found it very hard to question the wisdom of this decision. We can conclude that Pastor Kong Hee and his trusted Deputy Senior Pastor Tan Ye Peng had both a strong temporal & spiritual authority in the Church and were subjected to very little (if any) human control at board level.

The Executive Members (the EMs) and AGM’s Role & Dynamics

censorshipCHC Executive Members (EMs) have the right to participate and vote at the AGMs. They are electing the board members and are supposedly in position to question, discuss and approve (or reject) the orientations, objectives and activities of the church. Unfortunately, from the information available, it appears that the same kind of loyalty and submission to authority principles, we have already observed and described in the previous section about the CHC board members, also applies here for the vast majority of the EMs who seem to believe that they are duty-bonded to show support for their Spiritual Leaders without asking questions and without having second thoughts. However as also demonstrated by the Milgram experiment (where a minority of participants refused to continue the experiment despite the pressures exerted on them), not everybody will follow the ‘flow of the herd’. In a large body of people (about 700 EMs), statistically, some are actually bound to ask difficult questions to the Church leaders, disagree and resist.

Nevertheless in most instances, challenging the  the wisdom of certain decisions made or proposed by the church leaders appeared to have been a futile endeavor.  According to testimonies from church insiders, the EMs who asked “difficult” questions during AGM were perceived negatively as rebellious by the leadership and even by the vast majority of the EMs body. In such a case, what can you do when the majority is against you? These ‘rebellious’ EMs would usually be rebuked, singled out for spiritual counseling and often would end up being sidelined with not many options left but to stay and keep quiet or leave the Church without making noise. At least not until somebody blew the whistle to the COC.

Information Transparency & Disclosure to Stakeholders

It is widely recognized that having access to the right information at the right time is essential for effective decision-making. However, information asymmetry naturally happens in organizations among different groups of stakeholders, with the ones in charge of the management typically having access to more quality information than others. Hence, there is always a risk that they would take advantage of this situation to exploit other stakeholders. Therefore, it is important to have mechanisms that redistribute the relevant information to the various stakeholders who need it so as to ensure appropriate level of transparency necessary to support effective integrity and accountability by the leadership. So what was the situation in CHC in this regard?

Looking at how the communication about the Crossover project has been managed as an example, it can help us understand the characteristics of information sharing and stakeholders communication’s practices in CHC.

Positive spin truth1. Trust in Leaders Rather Than Disclosure of Information

When I examined the church communication over many years it became quite clear that it is built on one key assumption: There is an expectation that church members should have strong faith in the goodness and wisdom of their spiritual leaders. In other words, church members should TRUST that their spiritual leaders, being men of God, will do the right things and hence church leaders can decide what information to share or not. Church members should not feel the need to ask additional questions. Pastor Kong Hee in his preaches had many times used the metaphor of the sheep and the shepherd, explaining that a sheep must trust and follow the shepherd because he loves the sheep and knows what is best for them.

2. Public Relation Exercise Not Information

For example, for many years the essential purpose of communication about the Crossover project was not to provide information, but rather to convince church members that Sun Ho’s Crossover was a success story.  It essentially consisted of victories announcements when Sun Ho’s singles reached the top of the US dance charts or was invited to sing or attend some A-list events. There were also regular glowing reports about her achievements on the humanitarian fronts.  

This is clearly not information when you carefully select and put a positive spin on some news items to frame what people see and how they will see it, while avoiding talking about some of the less favorable or negative news items.

Here I must stress that this kind of PR communication practices are not specific to CHC. Indeed in the political arena, the business marketplace and media, exaggerations and spins in communication are commonplace.

3. Crossing the Thin Red Line between PR Spins and Outright Deception?

Being commonplace does not make it right, especially for charities and religious organizations that are supposed to abide by much higher level of principles and values systems. Furthermore, there is a very thin “red line” between an exaggeration or a spin and an outright deception.  Was the line crossed in CHC, when from the facts and many testimonies, it appears clearly that the general body of Church members was led to believe that Sun Ho’s crossover was NOT financed by the church? Pastor Kong Hee himself had repeatedly claimed that his wife was very successful and was making a lot more money than him, that her music career was her own business and it is independent from the Church. How do you interpret that?

We can conclude that there was a clear lack of transparency and strict information control organized by the leadership, who could decide what information can be shared or not for whatever reasons, deemed appropriate by the leadership. Even at the Church Board and AGM levels, the trial proceedings have revealed that the information provided to at least some board members and EMs was not always timely and complete.

CHC Organizational Culture & Influence on Members’ Behaviors

The corporate culture is one of the key drivers of people’s behavior in organizations. People’s behavior will tend to conform to the values deeply rooted in an organizational culture. Therefore, to support effective checks & balances in the governance system, you will need to nurture a proactive and risk-aware culture, that promotes information transparency, responsibility and accountability. So what was the situation in CHC?

Herding BehaviorAs already mentioned in previous sections of this post, CHC members may have been bound and blinded by a strong sense of loyalty to their spiritual leaders and subjected to the natural principle of submission to authority. Indeed the natural respect that the worshippers/learners have for a their spiritual leaders/teachers led primarily to a one-way and downward communication that left little (if any) space for questions and discussions. Furthermore, as mentioned in the previous section, public expression of negative feelings or reservations held or felt against church leaders or church policies and activities have been strongly discouraged (if not prohibited) in CHC, as they are considered as gossip leading to disunity. The church has “strict teachings” on it and Pastor Kong Hee in his preaches said a number of times that Gossip is Satan’s lethal weapon. It seems that the proper course of actions (in CHC) if a member is unhappy or has questions about something is to ask his cell group leader privately and be contented with whatever answer he gets. If they are still not happy, spiritual counseling is available for “difficult” cases, apparently usually to convince them that they are in the wrong at least according to some testimonies you can find on CHC confessions Facebook page (a forum for people claiming to be former or current members of CHC, where they can share their experiences). Not following that course of actions would be considered as gossiping, creating disunity and hence going Satan’s way. This is obviously not really an option for a good christian. Here again the options are limited: to stay and keep quiet, or leave the Church without making any noise.  In this regard, it must be noted that actually a large number of members have left the church over the years, it is reasonable to assume that most of them left because they were unhappy with something about the church and/or its leadership.

In summary, putting it all together, one-way communication, selective information disclosure, strong peer pressures and church leaders’ close supervision of church cell groups have been working very effectively to promote a culture of OBEDIENCE and CONFORMITY in CHC. Voting with their feet by leaving the church quietly often ended up to be the only option out for the so-called “rebellious” characters.

Conclusion on the Opportunity factors and Fraud

As highlighted by the COC report on CHC and as actually at least partially acknowledged by CHC management themselves as well, the oversight and control structure and prevailing culture in CHC, before the start of the case, appeared clearly to have been on the weaker side leaving the church very VULNERABLE to possible unethical or even fraudulent activities.

However we must stress that having both the motivation and the opportunity may still not be enough to ensure that unethical or fraudulent acts will be committed.  This is because human behavior is also influenced by the values system of the individual considered. A values system forms a moral code of conduct, a sort of compass that helps people in differentiating what is right or wrong, what is good or bad and hence guide an individual’s behavior in society. So should somebody tempted  to commit unethical or fraudulent acts, he would need to find a way to justify his behavior to be able to Break the Rules without feeling that he is doing something really wrong by breaching commonly accepted values and principles.

This will be the purpose of my next post on this case entitled “CHC Case – Can you rationalize a Crime to be a Benefit to Society? . It will focus on the third question of the the Fraud Triangle, i.e. the RATIONALIZATION Factor. We will assess from the facts how it could be possible for the accused CHC Leaders to RATIONALIZE their behavior.

Go to Next Post: City Harvest Case Part 4 – Can You Rationalize a Crime to be a Benefit to Society? 

Source: Marc Ronez, http://marcronez.wordpress.com/2013/08/04/city-harvest-case-part-3-the-opportunity-makes-the-thief/, 04/08/2013. (Accessed 07/08/2013.)