December 2005

The political parallels to the NKF scandal


    

 

 

Some observers have sensed nervousness on the part of the government over the fallout from the scandal at the National Kidney Foundation (NKF). One said to me that the expected general elections will not be called until the matter is put to bed. So far, he's been proven right, for while many expected elections in December, it hasn't come about.

I can see five aspects of the NKF scandal that parallels features of Singapore's political system, and now that the systemic failings of the NKF are being brought to public attention in such an ignominious fashion, they may cause longer-term complications for the ruling party. They are:

  • The use of defamation suits 
  • Durai's high salary and perks 
  • Incompetence in government 
  • Oversight of executives 
  • Dollars and cents as the criterion of success

 
The use of defamation suits

The moment Durai's and NKF's suit against Singapore Press Holdings (SPH) and journalist Susan Long collapsed on 12 July 2005, the point was not lost on Singaporeans. Here was proof, if they ever needed it, that defamation suits can be used for dishonourable purposes.

The Straits Times' article was not the first time allegations of impropriety at NKF had been aired. In August 1997 and December 1998, two volunteers at the NKF had also been sued for loose talk about misuse of funds at the charity. One of them, Archie Ong, made a casual comment to Alwyn Lim, another volunteer at NKF, that the NKF management squandered money meant for patients. He also said that Durai "jets about here and there in first class". [1] 

Alwyn Lim reported this comment to Durai and the next thing Archie Ong knew, he was faced with a lawsuit. Lacking the means to prove his allegations, he settled out of court. He had to pay a "five-figure sum" in damages and legal costs. [1]

Later, Alwyn Lim would be a board director and head the Finance Committee at NKF, flying first class alongside Durai.

In May 1999, the same thing happened again. This time, Tan Kiat Noi had to pay $50,000 in damages and legal costs for sending an email to 48 persons on 5 April 1999. Acording to news agency DPA, in her email, she alleged that the NKF did not help the poor and needy and paid its staff unrealistically high bonuses.  She also urged members of the public not to donate money to it. [2] 

DPA news agency quoted Matilda Chua, speaking for the NKF, as saying, "NKF employees were paid an average bonus of 1.4 months last year [i.e. 1998] and were not given a 13th month bonus." [2]

Chua herself received a bonus in 1998 equivalent to 14 months' salary. [4] 

But things were different with the 2005 case. Probably because SPH could afford high-powered lawyers, they could contest their suit where the volunteers and Tan Kiat Noi had not felt confident doing the same earlier. SPH's high-powered lawyers could demand from NKF the information they needed. What this information showed was not only that the Straits Times' article was well-founded, but also that the volunteers and Tan had been right all along.

The Singapore public now feels it was extremely perverse that the law had been used to shield wrong-doers from the "little guy". Only in the rare case of the NKF taking on a "big guy" – the Straits Times – was justice obtained.

As everyone knows, People's Action Party (PAP) ministers have regularly taken their political opponents to court for defamation, always against the "little guy". The Straits Times is unlikely to pick up this thread, but that's not to say it won't be a question asked around in coffeeshop talk: what's the difference between Durai's defamation suits and the PAP's?

Will the public recall the NKF scandal the next time the PAP sues someone for defamation? And then, if the court finds for the PAP, will respect for the judicial system go down the same chute?

 
Durai's high salary and perks.

There were audible gasps in the courtroom when, in July, Durai revealed that his annual salary and bonuses amounted to $600,000 a year. Did he forget that he was running a charity? people asked.

Did he forget that the money for NKF came from the pockets of ordinary citizens, almost all of whom earned less than he did?

To compound matters, Mrs Goh Chok Tong, the wife of the former Prime Minister, and then-patron of the NKF, remarked to the press that Durai’s $600,000 pay was "peanuts" for someone who ran a multi-million charity with a few hundred million in reserves.

She would later publicly express regrets for those words, but the damage had been done. The public would see the PAP elite as completely out of touch with the average Singaporean's feelings.

The additional revelations from KPMG's report on 19 December 2005 only makes things worse. The report documented how Durai was given backdated salary increments, paid extra for "overtime" work, and how he was given extra days' leave, only to convert those days into cash.  (See yellow box on the right)

He also charged an average of $32,952 a month to his corporate credit card in 2004. [3]

Singaporeans have never stopped grumbling about high salaries for ministers and senior civil servants. A case like this only keeps the grumbling alive.

Mrs Goh's now-withdrawn remarks also reveal the tendency to measure the appropriateness of salary levels as a ratio to how much money is in the kitty, while the common man may think in terms of what is morally right for the job.

The government has always argued that however big the topline figure is, total ministers' salaries are just a small percentage of the government budget, and that given the heavy responsibility to run an economy of billions, high salaries are justified. That's the ratio justification. Mrs Goh's remark basically runs along the same vein. 

Few have bought that kind of argument, and now the depravity of it all as seen from the NKF saga, have once more turned people against it.

 
Why did the Health Ministry renew the NKF's charity status?

We don't yet have the answer to this, but whatever comes out in the next few weeks, one thing will not change:  the NKF did not deserve to have its IPC status renewed. "IPC" stands for Institution of Public Character, which entitles a body to collect tax-exempt donations.

Whatever excuses the Health Ministry is coming up with, people are not going to accept them easily.

It's already clear from KPMG's report that the National Council of Social Services (NCSS) was extremely unhappy with the NKF as far back as 1999. The NCSS 

  • felt the NKF had inflated the subsidies they said they had given to patients and spent on dialysis, 
  • noted how staff costs had shot up by 30%, 
  • and how a "disproportionate" amount of money had been spent on fundraising compared to patient care. [9]

All these have now turned out to be true. For example, KPMG estimated that the NKF only spent about 10 cents of every dollar donated on patient care and subsidies, when previously the charity claimed it spent 52 cents. [5]

The NCSS' unhappiness was such that in late 1999,  it sharply shortened NKF's IPC status to 2 or 3-month renewals, when normally, it is renewed for 5 years at a time.

Still, the NKF did not improve and in December 2001, the NCSS terminated NKF's IPC status altogether. [9]

 

The scandal in brief

For the sake of readers outside Singapore, here is a summary of the scandal at the National Kidney Foundation (NKF):

On 19 April 2004, the Straits Times published an article by journalist Susan Long about allegations of wastefulness and extravagance (e.g. gold-plated taps) at the NKF. The charity and its Chief Executive Officer, T T Durai, sued Singapore Press Holdings, which owns the Straits Times, and Long.

The case came to trial on 11 July 2005. Within 2 days, it collapsed, when Durai and NKF admitted in cross-examination that what had been written was not altogether untrue. The plaintiffs withdrew their case, leaving them liable for the defendants' costs.

The public was astounded to hear of Durai's $600,000 annual remuneration and the perks he enjoyed, including first-class travel on Singapore Airlines. 

The Minister of Health, Khaw Boon Wan, immediately stepped in and arm-twisted Durai and the entire Board of Directors to resign.

The new Board immediately commissioned auditing firm KPMG to conduct a thorough internal audit. KPMG's report was released on 19 December 2005, giving an even worse picture than expected. Among its findings:

Durai received numerous salary increments, including a 39% raise in 1997 that was backdated 11 months.

He encashed unused leave for $423,000 between 1995 and 2003 when NKF employees were not permitted to convert their leave to cash. [3]

He was paid $187,000 for "overtime" between 1997 and 2003. [3]

He flew first class as did other Board directors and senior volunteers [3]

A former employee, Matilda Chua, was treated unsually well, receiving frequent, hefty salary increases. Even when she resigned, she was given a backdated raise. This was in addition to 6 months' bonus of $75,000 and a further ex-gratia payment of another $75,000 on her departure. Like Durai, she was permitted to encash her unused leave. She got $79,195. [4]

She then came back as a member of the Board.

In 2001 and 2002, NKF signed 2 contracts, together worth $7.5 million, with Forte Systems and Protonweb Solutions, both owned by Pharis Aboobackar, Durai's personal friend. The software and call centre services promised in these contracts were never satisfactorily delivered, yet progress payments – over $4 million – were made. [7] [8]

Matilda Chua also had an interest in Protonweb Solutions. 

Durai and others went on a $70,000 "study tour" of Las Vegas in 2004. [6]

 

Then for some yet unexplained reason, the authority to issue IPC status to medical-type charities was passed to the Health Ministry. The Ministry gave NKF back its IPC status, this time for 3 years.

Now that events has shown abuses at the NKF,  the Health Ministry too claimed it had an inkling as to the problems there.  In 1999, it sent a representative, Dr Ling Sing Lin, to sit in on its board meetings. This representative felt she was being stonewalled throughout, so after attending 4 meetings, she withdrew. [11]

But why, really, was she sent there? See box on the right. 

Throughout all this, not a word leaked out to the press. No one thought it necessary to issue a press statement even though as a charity with huge fund-raising events, it very much concerned the public. The NCSS breathed not a word. The NKF certainly didn't. And the Health Ministry renewed its IPC status.

The whole thing smells of things under the carpet, if not backroom deals. Why would a ministry look the other way? Were they awed by a big man who could do no wrong? Does our entire government function in awe of big men? On the face of things, there appears to be a certain clubbinness among high-flyers in our establishment that lead to the suspension of critical enquiry of each other's doings.

Are all these highly-paid ministers and civil servants exercising independence of mind? Are they even competent?

 
Oversight of executives

This brings me to another facet of KPMG;s report – that there was no meaningful system of governance. There were no effective checks and balances. Ultimately, "Power was centred around one man, and was exercised in an ad-hoc manner through Mr Durai and his coterie of long-serving assistants," the auditors said.

The Board delegated its powers to the Executive Committee, which delegated its powers to the CEO.

How many Singaporeans, I wonder, would draw parallels with our parliament's relationship with our executive? With the PAP holding almost all the seats, is our parliament ever going to be a meaningful check on the government?

But we're all men and women of integrity, the PAP says. Well, for many years, people might have said the same of the coterie running the NKF. They even had libel suit victories to prove how unassailable their integrity was.

Shouldn't we learn from this and place more value in systems and institutions rather than live in awe of big men, letting them bend the rules, e.g. redrawing constituency boundaries at the last minute, raising election deposits, clamping down on political websites?

 
Dollars and cents as the criterion of success

Why was the NKF held in such awe? Because it was fantastically good at raising money.

Government-controlled Mediacorp became complicit in it too, staging mega NKF shows, featuring many of its top TV stars doing dare-devil stunts.

Letter-writers to the press had in the past queried the thinking behind all this. They had wondered, are we being asked to donate because kidney dialysis is a good cause, or because we don't want to see the TV stars suffer? The performers sometimes have to hold on precariously until a money target is reached.

This awkward question was ignored.

Large fractions of the money that the NKF raised were channelled back into more fund-raising activities. They spent more money on fund-raising than on clinical work.

A new low was reached in early 2005 when the NKF paid Mediacorp's ChannelNewsAsia to produce a series of documentaries which no doubt lauded the charity. In other words, they were using donated money to garner praise for themselves. That fact too was kept from the public. [10]

It seems this charity measured itself by the amount of funds it can put its name to. The dollar figure became the be all and end all of its existence. The bigger the bank account, the higher its virtue.

At the NKF, there seems to have been the belief that so long as the bank account is kept fat, the provision of services will take care of itself.

Here is the political question: Do we see governing a country in the same way? Do we measure success in governance merely by economic numbers?

Shouldn't leaders give equal, or perhaps greater weight to mission goals that are qualitative, moral and humane in nature, such as justice, equality, political accountability, human rights and freedom? Or are we misled into thinking that so long as there is economic growth, all these issues will either take care of themselves, or can be dismissed as irrelevant?

© Yawning Bread 


 

Why did the Health Ministry send a representative to NKF's board meetings? 

If you look at the Straits Times' story [11], the spin is that "the ministry had seen a number of warning signs."

But it also said, "The reason she was on the board was to try to influence the NKF to provide more peritoneal dialysis, as well as examine its policies and decide whether it was keeping too much in reserves. But after 'four or five meetings, she decided...she was not able to contribute', so the ministry pulled her out."

Thus her reason to be there was to try to persuade the NKF to try a new clinical procedure (and failed). It had nothing to do with issues of governance.

 

Footnotes

  1. Source: The New Paper, 23 Dec 2005,  'Sad that I lost a friend' 
  2. Source: DPA news http://www.dpa.org.sg/news/news_may_1999-1.htm
  3. Source: Straits Times, 20 Dec 2005,  'The man, his pay, his perks' 
  4. Source: Straits Times, 20 Dec 2005,  'Matilda Chua'
  5. Source: Straits Times, 20 Dec 2005,  'Patients got just 10 cents from every $1 donated'
  6. Source: Straits Times, 20 Dec 2005,  'Nothing to show for $70,000 Las Vegas "study trip" '
  7. Source: Straits Times, 21 Dec 2005,  'That costly $3.3m error of judgment'
  8. Source: Straits Times, 21 Dec 2005,  'That flawed call centre service deal' 
  9. Source: Straits Times, 22 Dec 2005,  'NCSS warned NKF and raised alarm back in 2001' 
  10. Source: Straits Times, 22 Dec 2005,  'Ministry stepped in when...'
  11. Source: Straits Times, 22 Dec 2005,  'Health Ministry accepts partial blame for the mess'

 

Addenda

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