PURCHASE OF PROPERTIES BY SENIOR MINISTER AND DEPUTY PRIME MINISTER BG LEE HSIEN LOONG

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, the Prime Minister has just recounted the sequence of events which started from a MAS report I received in March this year from Mr Koh Beng Seng, Deputy Managing Director of MAS in charge of financial institutions in Singapore. This report ultimately led to today's debate. As I was intimately involved, I believe it will be helpful to the House if I gave an account of how the investigations evolved and my own conclusions.

One of Mr Koh's responsibilities is to keep me informed of developments which will have impact on our financial markets. Around mid-March, he received reports that there was widespread market talk that Senior Minister and members of his family had purchased units in all HPL developments, with the suggestion that it involved some sort of cozy arrangement. This was immediately reported to me as the implications were very serious, as Senior Minister was involved and HPL was a listed public company.

The MAS routinely investigates market rumours of this type. But as this case involved Senior Minister, the Prime Minister had to be informed. The PM's instructions were specific - investigate and report. The rumours could not be allowed to fester, lest it undermined the integrity of the Government.

Around this time, there were also press reports of minority shareholders' unhappiness over HPL's handling of the sale of Nassim Jade. As HPL was a listed company, the case began to take on wider implications.

There were two parts to the investigation. Firstly, we had to establish whether HPL had done anything illegal or had violated any SES regulations in its handling of the sale of units at Nassim Jade. Secondly, the rumours linking Senior Minister to purchases of HPL properties had to be thoroughly investigated.

Mr Koh, working through the Stock Exchange, carried out a thorough investigation into HPL's handling of the sales of Nassim Jade and Scotts 28. After tracing through all communications between SES and HPL on Nassim Jade and Scotts 28, the Stock Exchange was satisfied that HPL had not committed any violations of SES regulations nor had the company made any attempt to conceal the purchases by Senior Minister and DPM Lee. All the transactions were above board and properly recorded. The company was however criticised by the Stock Exchange in a public statement issued on 22nd April 1996, but the criticism dealt with the company's tardiness in obtaining shareholders' approval for sales to directors. Both Senior Minister and DPM Lee fully endorsed the SES's investigations and its subsequent statement.

On the issue linking Senior Minister to HPL through the purchase of its properties, the SES was able to establish, through HPL, that Senior Minister and DPM Lee had indeed purchased units at Nassim Jade and Scotts 28. HPL also provided data on the prices and discounts given for all the units sold at both developments. The information showed that SM and DPM Lee received discounts of 7% and 12% respectively for purchase of units at Nassim Jade and discounts of 5% each for the units at Scotts 28. In the case of Nassim Jade, six other buyers also received 7% discounts, but only DPM Lee was given a 12% discount. This information was reported to the Prime Minister.

As the Prime Minister has related, he questioned Senior Minister and DPM Lee on their purchases as the discounts they received appeared to be on the high side. Both SM and DPM Lee were able to satisfy the Prime Minister that their purchases were above board and that there was no impropriety involved.

I was present at several of the discussions and it became clear to me that the purchases were completely normal. SM and DPM Lee had paid prices which they considered reasonable, but their actions had become entangled with the complex schemes used by developers to price and sell their new developments, involving the use of movable list prices and variable discounts. What we were facing was therefore a public perception problem.

Against this background, I had recommended to the Prime Minister that Senior Minister and DPM Lee should consider giving back the difference between what they received in discounts and what the public would perceive as normal discounts of around 5% usually given to early-bird buyers. Although Senior Minister and DPM Lee had done nothing wrong and were perfectly entitled to keep the discounts, I felt that this gesture would be seen as underlining the fact that they had not sought any special advantages. There was risk, of course, that some would misunderstand the gesture as an admission of wrongdoing, but this was a risk, I thought, worth taking. My feeling was that the public would only focus on the discounts given in the belief that Senior Minister and DPM Lee had received preferential treatment and that this was unfair. As you know, in the end, Senior Minister and DPM Lee both decided to donate all their discounts on their purchases and not just the differentials to charity. This was a generous gesture which I fully support.

I have related in some detail on the circumstances which led to today's debate. For those of us who were directly involved in the investigations, it was a wrenching but necessary exercise. I am confident that after today's and tomorrow's debate, the House will agree with me that the integrity and reputation of Senior Minister and DPM Lee has in no way been besmirched. The fact that we are debating the issue at all testifies to the integrity and soundness of the Singapore political system.

On a more personal note, I first came to know Senior Minister and DPM Lee personally when Senior Minister invited me to enter politics in 1984. In these past 12 years, I have come to know them well and to know that the accumulation of personal wealth and its trappings rank very low in their scheme of things. Members may be interested to know that over the years Senior Minister had contributed over $2 million to a variety of charities. Some $1.4 million was from awards received from defamation actions and the remainder was from honorariums and fees he received from lectures and speeches around the world, and from the sales of his book of speeches, photographs and CD-ROMs. DPM Lee has made similar donations to charity from his libel awards. I therefore find it difficult to understand how anyone could believe that Senior Minister and DPM Lee would use their positions to gain unfair advantage in the purchase of properties.

The Deputy Prime Minister (BG Lee Hsien Loong): Mr Speaker, Sir, I entered politics in 1984. At the time I was elected to Parliament, I already owned two apartments which my parents had helped me to buy many years earlier. I had lived in one of them since I got married in 1978 and started my own family. My wife had died in 1982. Three years later, in 1985, I remarried. I was then Minister of State. The next year, my wife and I started looking for a bigger house, because we intended to have more children. She hunted around. We found one. I bought a house with my parents' support and I have lived in it for the last nine years. After 1986, neither my wife nor I have bought or sold any properties until last year.

In October 1992, I discovered that I had lymphoma and began chemotherapy. I again started looking for a property to buy. My four children were then very young, aged between 3 and 11 years old. I had some savings, including in the CPF, and I wanted to invest them prudently, that means more than 3% interest from the CPF, so that if anything happened to me, my family would be well looked after. And my parents offered to help me out financially when I found a suitable property or properties.

I decided to put the money into property in Singapore rather than to buy shares or overseas assets. Because I was confident that with good Government, Singapore properties would appreciate steadily over the long term, and good Government was something which I could have a part in ensuring for Singapore. I decided against investing in shares because my wife did not want to manage a portfolio of shares and neither did I. Furthermore, I was a Cabinet Minister, moreover one responsible for economic policy and for me to have been trading actively in shares would have been very awkward.

So my wife scanned the classified advertisements and visited possible properties. On weekends, she went to open houses. She also drove around to look for signboards for new developments. When she spotted any possibilities, she would make discreet telephone enquiries using her maiden name. I told her some developers might know her maiden name. She said she called herself "Ms Ho". There are many Ms Hos. If the property was promising, she would do more groundwork, checking on the prices, the developer's reputation, etc. and only when she was reasonably satisfied, then she would get me to go and take a look. I went with her once or twice in 1993. Of course, once I go, the cover is blown. But I do not go unless we are reasonably serious.

In the end, after looking at many possibilities, we did not buy. The main reason was that we felt that the prices were very high. Little did we know what was going to happen afterwards. We thought that the market would correct. We kept our options open by reviewing possible properties from time to time, in 1994-95, but nothing much happened. Nevertheless, word that we were interested in buying properties rapidly spread. Regularly, we heard rumours of us moving to new homes. Friends and colleagues asked us whether we had bought properties at various places, some of which we had visited, some of which we had never heard of. We therefore knew that when we finally made a purchase, it would be the subject of considerable public interest.

In April 1995, I learnt from my mother that Hotel Properties Limited (HPL) was developing a small property called Nassim Jade. My wife thought it would be a good investment because Four Seasons Park, which was also developed by HPL, had a good reputation for quality. My mother told me to get in touch with Mrs Pamelia Lee for more details. Mrs Pamelia Lee is the wife of my uncle, Dr Lee Suan Yew. She is a close family member, who gave quite a bit of support to my children when they were younger, especially before I got remarried. She had also given my wife some leads previously when she went house hunting. Later on, we met Dr and Mrs Lee socially and we confirmed our interest in buying a unit.

My mother sent me a brochure on Nassim Jade, together with a price list and information on some of the units which were available. Because we were not sure which of these units would still be available by the time we booked, my wife and I shortlisted and ranked nine possible units. There were only 39 in the whole development.

A day or two later, my wife learnt, either directly from HPL or through Mrs Pamelia Lee -- we cannot remember now, and we cannot pin it down -- that none of the units we had selected were available. Instead, HPL offered her one other unit, #02-06. She was also informed that there was a 7% discount. The price, net of discount, was given as $3,570,100.

I read this morning in the newspapers that Mr Ong Beng Seng, the Managing Director of HPL, had said at the press conference yesterday, that HPL had not issued any price lists for Nassim Jade. I was surprised because I had received such a price list for Nassim Jade, although not for Scotts 28. The price list had come together with the brochure from my mother. I can only surmise that the HPL staff had made a mistake, and gave the list to my mother when she visited the HPL office, because when I received another copy of the brochure from Mrs Pamelia Lee, there was no price list inside. There could be other explanations. It is not a major point.

My wife and I agreed to this unit and this price without bargaining. Having spent more than two years looking for a property without any result, we had decided to buy a property soon. We had also reluctantly concluded that property prices were unlikely to fall, even though we had considered them to be too high for a long time.

We did not consider the 7% discount in any way significant. We knew that developers routinely gave discounts from the nominal list price. Per square foot my discounted price was $1,658, much higher than most other condominiums in the vicinity, or for that matter in Singapore.

A few days later, Mrs Pamelia Lee telephoned at home. I picked up the phone. She had a message from Mr Ong Beng Seng. He had told her that HPL had already committed unit #02-06 to another buyer. He requested her to ask me if I would agree to change to another unit, #02-07. This was bigger than #02-06 and would cost $75,000 more, which is $3,645,100. He quoted the price in dollars, for the total sum. No discount percentages were mentioned.

I immediately replied that I accepted. I did not bargain. Subsequently, I told my wife, and she agreed with my decision. #02-07 was also not one of the units on our original shortlist. The new price worked out to $1,565 per square foot, still very high. But my wife felt that it was reasonable, using the Four Seasons Park prices as her benchmark. We did not calculate the percentage of the discount because this was not a factor in our decision.

The next day, I instructed my lawyer, Miss Kwa Kim Li of Lee & Lee, that I had agreed to purchase unit #02-07 instead of unit #02-06. My wife and I put the unit in our joint names. When we signed the sale and purchase agreement, Lee & Lee lodged the usual caveat against the property in the Land Registry, setting out our names and the purchase price, to give notice of our interests in the flats.

Neither I nor my wife visited the Nassim Jade site or HPL's office. Throughout this transaction, I never met or talked to any of HPL's directors or managers, except for Dr Lee Suan Yew and Mrs Pamelia Lee, as I have recounted.

In October 1995, I learnt about Scotts 28 from my mother. I was still looking out for an apartment to invest in one more apartment. My four children are now between 7 and 15 years old. They all read, even the youngest one. But they are all different, with different personalities and needs. My eldest son is studying at the Singapore School for the Visually Handicapped. He is taking his PSLE this year. My wife and I had discussed this often, and had decided to buy one more property to make some specific trust arrangements for our children for part of my assets.

My mother sent me the brochure, which she had obtained through Miss Kwa Kim Li. I asked Miss Kwa to book one unit. I accepted the unit HPL offered, at their offer price, which was $2,776,400, which I considered reasonable. No discount was mentioned. It worked out to $1,365 per square foot.

Subsequently, I signed the sale and purchase agreement, and again I put the unit in the joint names of my wife and me. My lawyer filed two caveats in the Land Registry, one when HPL gave me the option form, and another when we signed the sale and purchase agreement.

This entire transaction was done through my lawyer. My wife and I had no contact whatsoever with any of HPL's directors or staff on this matter. Neither have we visited the Scotts 28 site. Dr Lee Suan Yew and Mrs Pamelia Lee were completely not involved in this second transaction.

The matter rested there until March 1996 when the Stock Exchange was investigating HPL. The Prime Minister then asked me whether I had bought properties in Nassim Jade and Scotts 28. I told him I had and the prices I paid. The Prime Minister then asked me what discounts I received. I did not know. So I looked up my files, and calculated, based on the price I had agreed to for Nassim Jade, and the old price list that I had, that HPL had given me a discount of 12%. This was when I first became aware that the discount had been 12%.

For Scotts 28, I looked up my records, but I could find no record of any list price or any mention of any discount from the list price. So on 1st April 1996, I asked my lawyer whether she knew. She said that she was not aware of any discount or published list price. However, she did not think that the price I had paid was special.

Kwa Kim Li explained to me that when Senior Minister and I had bought the Scotts 28 units, she had decided to check that the prices we were paying were reasonable. Lee & Lee had acted for other buyers above and below our units, and also for buyers of different types of units in the same development. She had compared the prices, and found them all fairly consistent, with regular increases for each higher level, which is the standard practice. She had not told us about this at the time, as it was not her duty as solicitor to check the pricing.

So I asked her to check with HPL. She did, and I read her account. This is a note which she has given me:

`On 1st April 96, Lee Hsien Loong phoned me to ask whether he was given a discount when he purchased unit #19-05 [This is in Scotts 28], and if he was, what was the quantum of the discount. I replied that I was not aware that the discount was given. He instructed me to ask Mr Thio, which I did. [Mr Thio is Mr Thio Gim Hock of HPL]. Mr Thio informed me on 1st April 1996, that generally all buyers in the 136-unit project received discounts. About 35 purchasers received 5% discount, of whom Lee Kuan Yew and Lee Hsien Loong were two. This was the first time that I, and thus my clients, learnt that they had received the 5% discount. I also asked Mr Thio whether there was a list price of all the units made public at the time of the launch in October 95, as some developers had, so that buyers could, on their own, calculate the discounts that they were given. He said that there was no list price available to the public. I then asked how a purchaser could have known whether the price he was paying was discounted. He replied that there was no way a purchaser could know whether he was getting a discount and, if so, what discount he was getting, unless the developer informed him.'

There was nothing secret about our purchases at Nassim Jade and Scotts 28. My wife and I put the properties in our joint names. We made no attempt to conceal these purchases. Information about them were available to the public through caveats lodged in the Land Registry.

In fact, I regularly received letters in the mail addressed to me by name at my home telling me, "Dear Mr Lee, I understand you own a unit at Nassim Jade. I have buyers available. If you are interested, please contact me at the following telephone number, pager." I just threw them into the wastepaper basket. I bought these properties not for speculation, but as long term investments to provide for my family.

When I bought the units, I did not know what HPL was charging the other buyers, or what discounts HPL was offering other people, least of all, could I tell what HPL would charge or give to buyers who came after me. The high prices I was paying gave me no reason to believe that HPL was offering me special terms. In fact, my concern was that I was paying too much, not too little. I assumed that HPL was charging me what it was charging other buyers.

HPL's press statement and press conference yesterday, explaining how it priced and sold the units at Nassim Jade and at Scotts 28, confirmed that they had treated their sales to me on a purely commercial basis. But as the Prime Minister said, that is ex-post information. What I had was ex-ante information. At the time I had to judge based on what they had offered me.

When we became aware of the speculation and rumours about the properties we had purchased, the Senior Minister and I decided to bring the matter out into the open through a public statement. To have remained silent would have given the wrong impression that we had something to hide, or to be ashamed of.

After the Prime Minister announced that in future Ministers should first clear their property purchases, together with any known discounts, with him, we decided to give the discounts we had received to the Government. We wanted to put the matter beyond doubt that the Prime Minister would have approved our purchases under the new rules, had these new rules been in place earlier. In other words, we were voluntarily and retrospectively subjecting ourselves to the new rules which came into effect after the event.

The Prime Minister has since asked the Accountant-General to return our cheques. The Senior Minister and I have decided to give the money to charity, to underline our position that we had never asked for the discounts and did not purchase the properties because of them.

I have recounted how I bought the units at Nassim Jade and Scotts 28. I have also told Members about the other properties which I had previously bought, so that Members will know the background and the circumstances of my purchases at Nassim Jade and Scotts 28. Really, these are private matters which I have no obligation to disclose publicly. But I have explained them to dispel any lingering mystery or doubt over my purchases at Nassim Jade and Scotts 28.

The high standard of honesty and integrity which the PAP has established is one of Singapore's most precious assets. It is a system which I grew up with, and which I value. As a Cabinet Minister, I am all the more conscious of my duty to uphold these standards, and to set the tone, by example, for what constitutes proper conduct on the part of political leaders and public officers. My moral authority depends on that.

I am therefore grateful for this opportunity to explain the facts of my two property purchases last year, and to answer Members' questions on this matter.