SINGAPORE: Investigations, including by the Corrupt Practices Investigation Bureau (CPIB), found no evidence of criminal wrongdoing or preferential treatment given to two ministers who rented state properties for their personal use.
It emerged in early May that Home Affairs and Law Minister K Shanmugam and Foreign Affairs Minister Vivian Balakrishnan had rented two black-and-white colonial bungalows at 26 and 31 Ridout Road.
Interest in the matter arose after opposition politician and Reform Party chief Kenneth Jeyaretnam questioned if the ministers were “paying less than the fair market value”.
In the CPIB report released on Wednesday (Jun 28) following a month-long review, the agency said it found no preferential treatment given to the ministers and their spouses.
There was also no disclosure of privileged information in the process of the rental transactions, and no evidence to suggest any abuse of position by the ministers for personal gain, said CPIB in the report.
On May 23, Mr Shanmugam and Dr Balakrishnan called for an independent review. Two reports, by Senior Minister Teo Chee Hean and the CPIB, were released on Wednesday, alongside a statement from the Prime Minister’s Office.
The CPIB report detailed that Mr Shanmugam pays S$26,500 a month for the rental of 26 Ridout Road, and Dr Balakrishnan paid S$19,000 a month for the rental of 31 Ridout Road. Dr Balakrishnan’s rent was revised to S$20,000 in 2022 due to “prevailing market conditions”.
In Mr Shanmugam’s case, he had informed the then-deputy secretary of the Ministry of Law that he would recuse himself from any discussion related to the rental of the property.
He instructed the then-deputy secretary to approach then-Senior Minister of State for Law Indranee Rajah if any matter related to the property had to be referred to the minister. He also informed Mr Teo that if the matter had to go beyond Ms Indranee, she would approach Mr Teo.
SLA said earlier in May that Mr Shanmugam had notified a senior Cabinet colleague that he was making a bid for the property.
In the end, there was no matter raised by the Singapore Land Authority (SLA) to the Law Ministry during the entire rental process, said CPIB in its report.
There would have been an actual conflict of interest if Mr Shanmugam made decisions that affect his rental of 26 Ridout Road, said Mr Teo in his report, also released on Wednesday.
This is because Mr Shanmugam is the Minister for Law, and the ministry oversees SLA.
“Minister Shanmugam had thus recognised the potential conflict of interest, duly declared it to Senior Minister Teo, and taken effective steps to eliminate this potential conflict and to prevent any actual conflict from arising,” Mr Teo’s report read.
The Attorney-General’s Chambers (AGC) has agreed with CPIB’s findings and recommendations, it said in the report.
AGC has directed that no further action be taken because “the facts do not disclose any offence”, the report added. “The investigation into this matter is closed.”
26 RIDOUT ROAD
The two reports released on Wednesday addressed questions about how the two ministers came to rent the two respective properties, and the transparency in the marketing for these properties.
The Ridout Road estate was under the management of professional third-party managing agents, and they determined how to market the properties based on prevailing market conditions, said Mr Teo’s report.
According to CPIB, the availability of 26 and 31 Ridout Road was made known to the general public. Both had “For Lease” signs displayed at their gates, and the latter was listed on the State Property Information Online website.
Properties managed by SLA are generally available for rental through an open tender. Those managed by agents, mainly residential and commercial, can be rented directly from the agents.
The guide rent is the “reserve rental based on market rates as determined by qualified valuers”, the authority told CNA previously.
The 9,350 sq m property at 26 Ridout Road had been vacant since December 2013. In January 2017, Mr Shanmugam asked the then-deputy secretary of the Law Ministry for a list of a few properties available to the public to rent, and visited some of them, including 26 Ridout Road.
In January 2018, Mr Shanmugam appointed a property agent to represent him for the rental transaction of 26 Ridout Road, and during a site visit, he noticed thick and overgrown vegetation on an empty slope of land adjacent to the property, the CPIB report said.
Through his property agent, the Home Affairs and Law Minister negotiated with SLA on the clearing of the adjacent land before leasing the property, the report read.
“Mr Shanmugam negotiated with SLA on clearing of the adjacent land before leasing the property. He was not confident that the adjacent land would be maintained in a way that would keep the place free of health and safety issues,” said CPIB in the report.
Mr Shanmugam then offered to maintain the adjacent land at his own cost. In his interview with CPIB, he said he did not want to lease the additional adjacent land as that would come with legal obligations.
But according to SLA, if Mr Shanmugam was to maintain the adjacent land at his own cost, the adjacent land would have to be included in the tenancy of 26 Ridout Road, the report read.
SLA then adjusted the fencing of the adjacent land, increasing the land size from 9,350 sq m to 23,164 sq m.
The cost of clearing the site, replanting the greenery and the fencing was S$172,000, which was initially borne by SLA and subsequently recovered from Mr Shanmugam’s rent.
The cost of maintaining this additional land is S$25,000 per year, which is paid for by Mr Shanmugam.
According to the CPIB report, Mr Shanmugam and his agent were not aware of the guide rent.
“His agent studied the rental of comparable neighbouring properties, and independently determined and valued the rent. Minister Shanmugam instructed his property agent that he should not be paying less than his neighbours,” the report read.
A neighbouring unit was tenanted at S$26,000 per month. Mr Shanmugam’s final negotiated rent amount was S$26,500, which met the minimum rental to be achieved by SLA.
Since the property had not been in use since 2013, substantial repairs were needed, said the CPIB report. SLA paid S$515,400 for essential repair works at 26 Ridout Road.
Mr Shanmugam paid an additional S$61,400 to build the car porch. He also said in his interview with CPIB that he paid more than S$400,000 for additional improvement works to the state property.
Under SLA policy, upon expiry of the lease, the property with any approved improvements, will be surrendered to the authority as it is, without any right of claims or recovery of costs by the tenant.
In June 2018, Mrs Shanmugam signed the tenancy agreement of nine years, broken up into three terms of three years. After the first three-year term, the tenancy was renewed in June 2021 for a second three-year term, at the same S$26,500 per month.
The rent for the second term was determined by SLA considering prevailing market conditions, said CPIB in the report.
In its review, CPIB discovered that there was a “lack of precision” in SLA’s use of the term guide rent.
SLA said on May 12 that Mr Shanmugam bid above the guide rent, but this was incorrect. The S$26,500 rental paid by the Law and Home Affairs Minister was equal to the guide rent.
With the additional cleared land at 26 Ridout Road, SLA valued the minimum rental of the property at S$26,500.
But SLA instead assessed the guide rent to be S$24,500, because on top of this sum, it intended to charge Mr Shanmugam another S$2,000 to recover the amortised cost of works to clear and incorporate the additional land, said CPIB’s report.
This “lack of precision” was only discovered during CPIB’s investigation, and it informed SLA.
“Despite this issue with the guide rent, SLA did ensure that Minister Shanmugam paid not less than S$26,500, the minimum rental to be achieved,” the report read.
CPIB has confirmed that this lack of precision in the process of deriving the guide rent did not result from any ill intent on the part of any SLA officers involved. It found no evidence of any mala fide abuse of position in the valuation.
In Mr Teo’s report, he said the SLA valuation team’s professional view is that gross floor area, which represents the available live-in space for the tenant, is a more important factor than land area when determining the guide rent for black and white bungalows.
The rental of a black-and-white bungalow is usually less than for a typical Good Class Bungalow in the same location or of the same size, his report noted.
This is because black-and-white bungalows lack modern amenities and are not easy to retrofit. Incoming tenants usually have to spend money to upgrade the unit, and they do not own the development rights to the land.
Instead, he has to pay for maintenance costs to upkeep the land where the property is located, the report said.
31 RIDOUT ROAD
The property at 31 Ridout Road has a land size of 9,157.36 sq m and had been vacant since July 2013. Two unsuccessful bids were made below the prevailing guide rent – S$12,000 in July 2018 and S$5,000 in August 2018.
Mrs Balakrishnan came across a “For Lease” sign at 31 Ridout Road, and contacted SLA’s appointed managing agent on Sep 11, 2018, and they negotiated a rental price.
The managing agent named an asking rent of S$19,000, and Mrs Balakrishnan agreed, but asked that essential repair works and upgrading of the toilet be included.
She later agreed to bear the costs of the toilet upgrading after the managing agent rejected it, considering it to be improvement works.
According to the CPIB, neither Dr Balakrishnan nor his wife were aware of the guide rent. SLA later accepted the lease proposal because the offer of S$19,000 was above the prevailing guide rent of S$18,800.
The managing agent also had queries on the “policy for VVIPs”, the CPIB found. SLA’s leasing manager replied in her email that there there was no “policy for VVIPs”, and all prospects and tenants were to be treated equally.
SLA paid S$570,500 for essential repair works at 31 Ridout Road. In his interview with the CPIB, Dr Balakrishnan said he paid more than S$200,000 for additional improvement works to the state property.
The tenancy agreement for seven years – broken up into a first term of three years, and two more terms of two years – was signed by Mrs Balakrishnan in October 2019.
After the first three-year term, Mrs Balakrishnan requested for, and was granted a renewal of five years lease, broken up into a second term of three years and a third term of two years, which was beyond what was earlier granted, said CPIB’s report.
The rental for the second term was increased from S$19,000 to S$20,000 per month, taking into consideration the prevailing market conditions of 2022.