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BY VIVIEN CHAN
THE packages came with fancy names like Bronze Merchant, Silver Merchant, Bronze, Silver and Gold Prime.
Tens of thousands of participants forked out between $240 and $12,000 to buy such packages and were told that they would receive vouchers to buy online goods, bonuses and other compensation in return.
But at the end of the day, it was a business model that was 'bound to fail', said Mr Luke Steadman, the prosecution's expert witness who took the stand yesterday on day two of the Sunshine Empire trial.
Mr Steadman, a forensic accounting expert, is one of two vice-presidents in the forensic services department of CRA International, based in London. He was instructed by the Singapore Commercial Affairs Department to look into the sustainability of the Sunshine Trading Scheme.
Mr Steadman testified that while the Sunshine scheme is similar to multi-level marketing (MLM), the consumer rebates privileges (CRP) aspect is unique.
The maximum payout of CRP for the Silver and Gold Prime packages exceeded the package prices. The Silver Prime cost $3,000 and the Gold Prime $12,000.
The most popular of the packages was the most expensive Gold Prime, accounting for 65 per cent of the 16,784 sold.
Likening the scheme to a 'money circulation scheme', Mr Steadman said there had to be another source of income from outside the business for it to continue trading.
'By October 2007, the company was not retaining any revenue,' he said.
Almost any money going into the business was used to service the payments.
Mr Steadman said: 'The Sunshine trading scheme was bound to fail.'
He noted that 'Sunshine continued to pay CRP at a level that was unsustainable'.
When asked by Deputy Public Prosecutor (DPP) Aedit Abdullah what would happen if the scheme was allowed to continue, Mr Steadman replied that the majority of participants would then lose money.
Mr Steadman will continue to give his evidence when the defence's expert report is ready for exchange.
Housewife Wen Liang Ying, 38, also took the stand as the third prosecution witness.
Madam Wen testified that she became a participant of the scheme after being introduced by her friend, Ms Zhao Jing, around October 2007.
Madam Wen said she invested $25,240 of her savings in Sunshine, buying two Gold Prime packages and one membership.
She said she received about $4,000 in CRP payments.
When asked by DPP Siva Shanmugam why she invested in Sunshine, Madam Wen replied: 'To make money.'
She added that Ms Zhao told her that she could 'make back the money one year after' her investment.
Ms Zhao also told her that Sunshine was a 'big company' and had properties overseas.
Under cross-examination by defence counsel Subhas Anandan, it was revealed that Madam Wen, who moved to Singapore from Hainan, China, in 1994, did not fully understand the International Merchant Agreement that she signed. The document said that it was not an investment scheme and that the CRP was not guaranteed.
Madam Wen said: 'I don't think my upline (Ms Zhao) understands English and so she did not explain these things to me.'
Mr Subhas asked her: 'And because of what this upline told you, you just signed this document without understanding what it's all about?'
She replied: 'Yes, she's my friend and I trusted her. She said it (the business) was doing a good job.'
She added that she has since lost touch with Ms Zhao.
Throughout the proceedings, the three accused remained calm and looked on intently, occasionally referring to their documents. The trial continues.
ABOUT THE CASE
FORMER head of Sunshine Empire James Phang, 49, is being jointly tried with his wife, Neo Kuon Huay, 46, and former director, Jackie Hoo, 29, for conspiring to 'unjustly enrich themselves dishonestly'.
Phang and Hoo are alleged to have carried out Sunshine Empire's business for the fraudulent purpose of selling packages when Sunshine did not have sustainable means of funding the returns.
More than $180 million is alleged to have been collected from their sales.
They face the following charges:
One charge of fraudulent trading.
Eight charges of abetment to criminal breach of trust as an agent.
Six charges of falsification of accounts.
One charge of fraudulent trading.
Eight charges of abetment to criminal breach of trust as an agent.
Six charges of falsification of accounts.
- If convicted of fraudulent trading, Phang and Hoo face a maximum of $15,000 fine and seven years' jail on each charge.
- If convicted of abetment to criminal breach of trust as an agent, they face a maximum of life imprisonment and a fine.
- If convicted of falsification of accounts, Phang and Neo face a maximum of seven years' jail with a fine.
This article was first published in The New Paper.
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