Troubled investment house Westmont Investment Corp. (Wincorp) which has been linked to former Finance Secretary Edgardo B. Espiritu, is being charged with fraud and misrepresentation by one of its major investors.
Pearlbank Securities and its chairman Manuel Tan, who is also a Wincorp director and stockholder with a 25 percent stake in the investment firm, said in an P18-million lawsuit filed with the Securities and Exchange Commission (SEC) that Pearlbank was made to appear as a borrower in several debt instruments issued by Wincorp to some of its investors.
"Undoubtedly, the act of Wincorp is representing to different investors that Pearlbank borrowed against their investments, through the confirmation advises issued to said investors, or through any other means, violates such right and reveals a device or scheme employed by Wincorp and its officers amounting to fraud and misrepresentation detrimental to the interest of the public," read the complaint.
Tan, a former business partner of Espiritu, added that there are more claims now coming in, indicating that Wincorp has made it a practice to use non-borrowers as borrowers to skirt the 19-lender prohibition on investment houses.
Pearlbank learned that it was unwittingly named a borrower when several of these investors wrote the brokerage firm asking for payment after Wincorp folded up early this year.
Wincorp was incorporated in 1995 but collapsed earlier this year after its funders, more than 2,000 Binondo and Cebu-based Chinese-Filipino investors, pulled out of the company following Espiritu's resignation from the Estrada administration and began collecting from borrowers -- about 20 companies linked to Espiritu and his business associates. These include shareholders of listed firm Unioil Resources and Holdings Co. Inc. which owns 100 percent of Wincorp.
The companies have an aggregate debt of about P7 billion of which P5.5 billion was principal. The interest due was never paid but was instead capitalized or made part of the capital, thus giving Wincorp no income to service maturing placements of investors it was getting money from. Wincorp was chaired by Espiritu's son John, who was also head of Westmont Bank which extended a credit line to Wincorp. John has since then resigned from both posts.
At that time, it was this credit line that allowed Wincorp to settle the its maturing obligations. But when Westmont was bought early this year by the United Overseas Bank of Singapore, the latter cancelled the credit line and Wincorp tumbled since it had no money to pay its investors.
Tan said that Pearlbank which has no loans from Wincorp, was surprised to learn that it was named as a borrower, after one of Wincorp's investors, Huey Commercial, tried to collect P4.9 million out of a total investment of P110 million. Later, several other investors wrote Pearlbank, and it learned from reports that it has purportedly borrowed a total of P274 million.
Tan, in his complaint, said he attempted several times to obtain Wincorp company records, all addressed to Wincorp president Antonio Ong, asking for an explanation for "our company's name being maliciously used" as a borrower. Tan said he never got a reply, and instead, was completely ignored by Wincorp.
Pearlbank made its final attempt to get full disclosure of Wincorp's records last March 31.
Tan is suing Wincorp P10 million for moral damages, P5 million in exemplary damages, and P3 million for litigation expenses or a total of P18 million.
The collapse of Wincorp is supposed to be investigated by the Bangko Sentral ng Pilipinas which is still awaiting the audit report of the SEC which has jurisdiction over investment houses without quasi-banking functions.
Wincorp's borrowers include Power Merge with debts of P2.5 billion, headed by Luis Juan Virata, managing director of Jardine Fleming Exchange Capital.