Collapsed investment house Westmont Investment Corp. (Wincorp) will be asked to submit its comments on charges it broke existing rules on the issuance of commercial papers.
An SEC official said Wincorp should be able to justify why its operations should not be suspended. A unit of the SEC, the brokers and exchanges department (BED), has recommended the issuance of a cease and desist order (CDO) against the company.
The BED said the CDO may appear moot and academic since Wincorp already stopped issuing commercial papers, but it would at least preserve the assets of the company for the benefit of the victims and/or investors.
The BED also recommended that Wincorp be investigated by the SEC's prosecution and enforcement department (PED) for possible filing of criminal charges against individuals responsible for the violation.
The BED recommended the CDO after its audit of Wincorp revealed the investment house illegally issued long-term commercial papers (LTCPs) and other papers of indebtedness, contrary to its claims that it merely acted as a broker.
SEC sources added Wincorp violated several rules governing the issuance of LTCPs, among them, its failure to register LTCPs. The rules require that borrowing from institutional lenders require the registration of LTCPs, especially if they exceed P5 million and if the lenders number more than 10.
Sources said there is strong evidence showing that the proceeds from the loans were deposited in the accounts of several of Wincorp's shareholders.
Wincorp brokered about P7 billion worth of loans to 20 companies believed to be mostly controlled by its former president, John Espiritu, son of former Finance Secretary Edgardo Espiritu. Wincorp is the investment house of Unioil Resources and Holdings Corp. which is in turn controlled by the elder Espiritu and close business associates.
SEC sources said that although Wincorp made it appear it was only acting in behalf of the borrowers and lenders, evidence shows it deposited in its own account the proceeds of the loans.
The BED noted that in case the borrower fails to pay the principal amount and interest due, Wincorp pays in advance the interests to the lenders/funders/investors, and that the instrument is being renewed upon maturity by Wincorp. It added the evidence of indebtedness or the loan instrument was also negotiated without recourse to individual lenders.
A number of Wincorp investors have earlier asked the SEC to conduct an investigation of stockholders and owners of the firm, including United Overseas Bank (UOB), formerly Westmont Bank.
Apollo X.C. S. Sangalang, legal counsel for some of the investors who are both depositors of UOB and holders of securities issued by Wincorp, urged the SEC to expand the scope of the probe and to look into the past and present stockholders and beneficial owners, directors, officers and employees of the investment house and the bank.