More investors to sue Wincorp

More investors of Westmont Investment Corp. (Wincorp) are coming out to sue the investment house associated with former Finance Secretary Edgardo B. Espiritu and which is now saddled with debts of about P7 billion.

Securities and Exchange Commission Chairman Lilia Bautista said a legal counsel for several unnamed investors has indicated they are preparing to take Wincorp to court through the corporate watchdog's prosecution and enforcement department (PED) which is expected to conduct an investigation into alleged fraudulent practices applied by Wincorp in securing its loans.

Another unit of the SEC, the brokers and exchanges department, has been conducting an audit into Wincorp's finances and was reportedly about to recommend a cease and desist order against the investment house but was put off pending the decision on whether Wincorp violated the 19-lender rule under the General Banking Act which limits to 19 the number of investors or lenders in an investment house.

Earlier, Wincorp was sued for fraud and misrepresentation by Pearlbank Securities and its chairman Manuel Tan who is also a Wincorp director stockholder with a 25-percent stake in the investment firm. Tan said in an P18-million lawsuit filed with the SEC that Pearlbank was made to appear as borrower in several debt instruments issued by Wincorp to some of its investors.

"Undoubtedly, the act of Wincorp in 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 and Espiritu were partners in several Espiritu-controlled businesses. He said more claims are coming in, indicating Wincorp has been naming non-borrowers as borrowers to go around the 19-lender prohibition on investment houses. Under the law, investment houses without quasi-banking functions cannot go beyond 19 lenders.

Pearlbank learned it was named a borrower when several of these investors wrote the brokerage firm, asking for payment after Wincorp folded up early this year.

Wincorp was created 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 the 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 combined debts of More investors... about P7 billion of which P5.5 billion was principal. The interest due was never paid but instead was 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 resigned from both posts.

At that time, it was this credit line that allowed Wincorp to settle 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 Pearlbank which has no loans from Wincorp, got a letter from one of Wincorp investors, Huey Commercial, collecting 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. - By Rocel C. Felix