SINGAPORE - Without a doubt, the scandal at the National Kidney Foundation
(NKF) was the biggest story in Singapore last year. Six months after the story
about the country's largest charity first surfaced, the public's feelings
reached new levels of disgust with the release at the end of the year of a
report by independent auditors KPMG.
Moreover, with questions raised about the government's role as regulator and
the use or misuse of defamation suits, the fallout could well have a political
dimension.
For more than a decade, NKF has had a very high profile, raising millions of
dollars annually. MediaCorp, Singapore's primary TV broadcaster, held regular
shows involving its top stars performing
daredevil stunts to raise money for NKF, with huge audience ratings. One
estimate suggests that seven in 10 Singaporeans have donated to the charity.
Consequently, a great majority of Singaporeans feel they have a stake in the
organization.
The saga began when the Straits Times newspaper on April 19, 2004, published a
critical article about the NKF and its chief executive officer, T T Durai,
alluding to wastefulness and extravagance. Both the charity and the CEO sued
Singapore Press Holdings (SPH), which owns the Straits Times, and journalist
Susan Long.
However, during the trial it emerged that the newspaper's claims were not
without foundation. In particular, Durai admitted under cross-examination that
a gold tap had been installed in the executive bathroom and that he had been
flying first-class despite denials.
However, what took the public's breath away was the revelation that his salary
and bonuses from 2002 to 2004 amounted to S$600,000 (US$370,000) a year, an
amount some NKF donors might not earn in 20 years. This was compounded by some
careless words from Tan Choo Leng, wife of former prime minister Goh Chok Tong.
She was at the time the patron of NKF.
Asked by the media for a reaction, she said the amount was "peanuts" compared
with the amount of donations the high-flyer raised for the charity. She
subsequently expressed regret for her comments. After only two days of
hearings, the NKF and Durai withdrew their suit.
However, questions then arose as to how previous accusations of extravagance
had been suppressed by the threat of defamation suits. In one case, Archie Ong,
an NKF volunteer, alleged that Durai flew first-class. In another, Tan Kiat Noi
alleged in an e-mail that staff were being paid unjustifiably high bonuses. Not
being confident of proving their claims, both apologized publicly and paid
substantial damages and legal costs - S$50,000 in Tan's case.
Now with hindsight, people see that these allegations were probably true,
except that without access to powerful lawyers and evidence held internally
within the NKF, they had no way of proving their cases. The misuse of such
legal threats is an extremely sensitive issue in Singapore, given the number of
times government ministers have resorted to this tactic against political
opponents.
With the collapse on July 12 of the latest suit against SPH and the credibility
of the NKF in shreds, the government had to step in, arm-twisting the CEO and
the entire board of directors to resign. A new board, headed by Gerald Ee, was
assembled and an interim CEO appointed from outside the organization.
The new team immediately appointed KPMG to conduct a thorough audit, with
results released on December 19. More skeletons from the closet were revealed.
Abuses had been gathering since the late 1990s. Not only was Durai flying
first-class, so were other board members and volunteers. Durai received
numerous salary increments and bonuses, including a 39% hike in1997 that was
backdated 11 months. He also claimed overtime pay for working through weekends,
a practice that is unheard of for someone in a CEO's position. He was paid
S$187,000 between September 1997 and October 2003 for this.
He cashed in unused leave for a total of S$350,000 between 1995 and 2003 when
other employees of NKF were generally not permitted to convert their leave
entitlements into cash. In addition, his leave entitlement was raised from 21
days a year to 31 in 1999 and applied retrospectively to 1992, giving him 70
additional days of unused leave. This he cashed in for S$73,000.
Durai charged an average of S$32,952 a month to his corporate credit card in
2004. The total he received from NKF from all these non-salary sources was well
above the figure of S$600,000 that had emerged at the trial.
KPMG found that proper governance was completely missing: the directors had in
essence delegated all authority to the CEO. "Power was centered around one man,
and was exercised in an ad hoc manner through Mr Durai and his coterie of
long-serving assistants," the auditors said.
Among the "coterie" was Matilda Chua, whose 1998 bonus was equivalent to 14
months' pay. And when she resigned in June 2000, she was given a further 25%
increase, backdated to April. This was on top of an 11% salary increase in
February the same year. In addition, on leaving, she was given a six-month
bonus amounting to S$75,000, with a further ex gratia payment of S$75,000. She
was also allowed to cash in unused leave for nearly S$80,000. KPMG thought it
unusual to reward an employee so much as she was quitting. In 2002, she
returned, joining the board of directors.
In 2001 and 2002, NKF entered into two contracts with Forte Systems and
Protonweb Solutions, companies owned by Pharis Aboobacker, a personal friend of
Durai's. Chua also had an interest in Protonweb. The two contracts, worth a
total of S$7.5 million, were for software and "call-center services". The
software and services were never satisfactorily delivered, yet progress
payments amounting to more than S$4 million were paid out.
KPMG also pointed out that many figures released to the public were misleading.
The numbers of persons helped had been inflated, and only 10 cents of every
dollar donated went to patients' care and subsidies, despite earlier claims of
52 cents.
While the KPMG's remit was to unearth the facts internal to NKF, in the process
they found failings in outside parties too.
The most disturbing to the public was how the National Council of Social
Service (NCSS) had been unhappy with the NKF as far back as 1999. The NCSS had
concerns about how the NKF had inflated their claims regarding subsidies given
to patients and spent on dialysis, how staff costs had shot up by 30% and how a
"disproportionate" amount of money had been spent on fund-raising compared to
patient care.
Unknown to the public at the time, the NCSS had sharply shortened NKF's status
as an Institution of Public Character (IPC) from five years at a time to two-
or three-month renewals. An IPC status allows a charity to collect tax-exempt
donations. Finally, in December 2001, when the NCSS felt the NKF had repeatedly
failed to address its concerns, it terminated NKF's IPC status though this was
not publicized then.
Former NCSS president Robert Loh told the Straits Times that NCSS had become
aware of "coffee-shop talk about the excesses at NKF then and its controversial
fundraising methods".
For reasons not clear, the authority to issue IPC status passed to the Ministry
of Health in 2002, which soon after renewed NKF's charity status for three
years.
The ministry, in explaining its decision, pointed to the clean bill of health
given by PricewaterhouseCoopers, NKF's external auditors from 1988 to 2004, as
well as from KPMG in a 2004 assignment commissioned by the ministry to review
NKF's operations.
In a news conference just days after the release of KPMG's latest report,
Minister for Health Khaw Boon Wan accepted on behalf of his ministry a share of
the blame. He also promised that "there will be no cover-up of any wrongdoing"
and if anyone is suspected of having done so, he would be prosecuted.
Singaporeans' anger is palpable. Beyond the abuse of the donations they had
given to NKF over the years, they see failure by regulators to do their jobs
and intolerable arrogance by high-flyers who played fast and loose with facts
and figures, and who were quick to sue anyone who might have exposed them.
Whether they see this scandal as something specific to NKF or whether they
attribute it, to some degree, to the political culture as a whole, is an open
question. A clue may come in the next general election, widely expected early
this year.
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