1620070001(SINGAPORE) Further accusations of mismanagement and self-indulgence were hurled at former National Kidney Foundation (NKF) chief T T Durai yesterday, on the second day of an expected two-month High Court hearing.

A packed public gallery buzzed as lawyers from Allen & Gledhill (A&G), representing the new NKF board, said Mr Durai charged millions of dollars to the charity's credit card on his overseas trips.

The court was also told that Mr Durai manipulated the restructuring of the IT system at NKF to benefit a company that he and former NKF director Matilda Chua had set up - and generously overpaid himself and 'favoured employees' such as Ms Chua.

A&G Senior Counsel K Shanmugam said little of this came to light as Mr Durai engendered a 'culture of secrecy' at NKF, so costs and expenses were never truthfully revealed.

Mr Durai's shenanigans were also permitted by an ineffectual board, that delegated excessive powers to him and failed to exercise independent supervision, Mr Shanmugam said. He likened the situation to that of an 'emperor with no clothes' - the emperor being Mr Durai and the clothes being the supervisory powers of the board.

Former board chairman Richard Yong, ex-treasurer Loo Say San and Ms Chua are also being sued by the new NKF board - for being derelict in their duties.

Hotel expenses

The most startling claim yesterday related to Mr Durai's credit card charges. According to Mr Shanmugam, Mr Durai charged more than $2 million to the charity's American Express corporate credit card, over a period of seven-and-a-half years, when he was travelling overseas.

Mr Durai spent $1 million on the credit card for hotel bills alone, Mr Shanmugam said. He stayed in top-of-the-line establishments like Ritz-Carlton, Sheraton, Westin and Hyatt, he approved his own hotel expenses and he often flew first class.

'He stayed in luxury and travelled in luxury,' Mr Shanmugam said, adding that Mr Durai did this while pretending to be frugal.

Contracts with Forte & Protonweb

Mr Shanmugam also told the court that Mr Durai manipulated the restructuring of the IT system at NKF to benefit two companies related to him: Global Net Relations (GNR), a company that he and Ms Chua set up in 2000, and Forte Systems, a company owned by his friend Pharis Aboobacker. Mr Aboobacker is also a defendant in the suit.

The court heard that in August 2000, GNR and Protonweb Solutions - another company owned by Mr Aboobacker - worked together to develop a customer relationship management software program called Cradle, which GNR later implemented for Forte.

That same month, Mr Shanmugam said, Mr Durai 'suddenly decided the NKF needed a new IT platform with customer relationship management features'. And he chose Forte to carry out the project - even though its tender price was higher and Forte was rated as 'technically most deficient' in an NKF evaluation report of software vendors. The contract was signed without the board's approval. Forte then used the Cradle program from GNR and Protonweb to develop the software for NKF.

Mr Durai also removed the NKF's IT head at the time, Nikhilesh Gupta, because the latter disagreed with Mr Durai over the need for a new system. Mr Durai installed Ms Chua as head of a technology development committee he formed to look after the software project with Forte.

Mr Shanmugam said Mr Durai and Mr Loo then caused NKF to make advance payments of US$800,000 to Forte to 'assist Forte's cash flow', even though it was clear Forte had no contractual entitlement to them. Mr Durai, Mr Yong and Mr Loo then made NKF issue a further payment of $1.3 million to Forte for variation claims, even though NKF technical staff felt only about a tenth of these claims were legitimate.

Forte failed to deliver the system and the NKF was forced, in 2005, to revert to the old IT system that Mr Durai wanted to replace.

Mr Shanmugam said the defendants were in breach of their duties to act in NKF's best interest and avoid conflicts of interest, and had abused their powers. Mr Durai had also failed to disclose his interest in GNR.

Mr Shanmugam said Mr Durai also entered into a separate contract - a call-centre services outsourcing agreement - with Protonweb in 2002. He said Mr Durai did this without calling a tender, going against NKF's tender protocol. NKF made advance payments of $900,000 to Protonweb before the call centre was even set up.

Mr Shanmugam said Mr Durai abused his position by causing NKF to pay out against its interests and diverting the charity's resources to this project.

Durai's pay

Mr Durai and 'his coterie' received excessive payments from NKF that were not brought to the attention of the board, Mr Shanmugam said. The remuneration sub-committee was ineffectual, deferring all matters relating to staff remuneration to Mr Durai, he said.

The court heard how Mr Durai had his salary increment backdated. And his leave entitlement and ex-gratia payments were never shown or approved by the board.

Mr Shanmugam also related how the former NKF board was never consulted over salary increments and bonuses that Mr Durai paid to Ms Chua. Her salary was raised substantially three times in three years, along with hefty bonuses. And, 'most incomprehensible of all', Mr Shanmugam said, Ms Chua was paid a six-month bonus of $75,000, an ex-gratia bonus of $75,000 and allowed to encash unused leave amounting to $79,195 when she left NKF for GNR.

'It then naturally led to a number of people benefiting themselves without the adequate checks and balances, it rendered all external and internal checks and balances completely perfunctory and ineffective . . . but at the same time, (it) gave NKF a facade of proper corporate governance and internal controls - but in truth, there was none, and deliberately so, in order to perpetuate Mr Durai's control and personal benefit,' Mr Shanmugam said.

NKF's charitable aims perverted

Mr Shanmugam said NKF, under Mr Durai, lost sight of its charitable objectives and the culture of fund-raising became corrupted: 'The organisation became a perpetual money-making machine.'

He told the court that from 2001-2003, funds raised by the NKF grew from $59.5 million to $68.2 million. Yet the net amount spent on dialysis and transplants during the period fell from $12.1 million to $7.2 million.

Mr Shanmugam said the patients' welfare was seldom, if at all, discussed at meetings, and the number of clinical staff was far outnumbered by the number of non-clinical staff.

The hearing continues today, with lawyers for the defendants delivering their opening statements. A&G is expected to call its first witness, computer expert Tan Swee Wan, in the afternoon.

He is expected to testify about Mr Durai's alleged destruction of computer documents, which was mentioned on the first day of the hearing on Monday.

Senior Counsel K Shanmugam on:
TT Durai awarding contracts to GNR and Protonweb, companies he had an interest in:
'It is the most fundamental breach that a fiduciary can engage in - taking money out of the company to put it into the pockets of his business partner in order to benefit himself, and clothing it with a hypocrisy that defies imagination, clothing it with an apparent sense of respectability and legitimate due process.'

The hefty salaries and bonuses and luxurious travel arrangements accorded to Mr Durai and his allies:
'The cynicism, and by this stage, the absolute disregard for any notion of honesty comes out, because it was NKF's funds that were being used as a private property of Mr Durai and his special friends to distribute to who they liked, regardless of how gross it was. They were all in it and there was no shame involved. Everyone was entitled to take money from NKF.'

The transformation of the NKF under Mr Durai:
'The organisation became - I think it's the closest equivalent that one can find to a perpetual money-making machine. It lost sight of its charitable objectives, and the culture of fund-raising became corrupted.'