PLDT files lawsuit in US District Court versus First Pacific

Setting the stage for what is expected to be a long drawn out battle, the Philippine Long Distance Telephone Co. (PLDT) has filed a suit in the US District Court against controlling shareholder First Pacific Co., Ltd. of Hong Kong for violation of disclosure requirements under the US Securities Law.

In its complaint, PLDT alleged that First Pacific failed to disclose a copy of the memorandum of agreement it entered into with the Gokongwei group last June 4, in violation of Item 7 of Schedule 13D of the US Securities Exchange Act of 1934 which rquires as an exhibit "copies of all written agreements, contracts, arrangements, understandings, plans or proposals relating to," among others, "the acquisition of issuer control" and the "transfer ... of the securities."

The complaint was filed in the US District Court, Southern District of New York on July 3.

PLDT officials emphasized that this is just one of several violations that First Pacific made and PLDT is concerned about the negative impact to the company and its shareholders as a result of these violations.

PLDT management and its board of directors led by Chairman Antonio O. Cojuangco and president and chief executive officer Manuel V. Pangilinan, who is concurrently First Pacific executive chairman, have declared war against First Pacific when they questioned the deal entered into between First Pacific controlling shareholder Anthoni Salim and Gokongwei group chairman emeritus John Gokongwei Jr. which calls for the eventual sale of 16 percent of PLDT to the Gokongwei group.

In fact, there are talks that Cojuangco and Pangilinan are building up their war chest in order to raise enough funds to present a better offer to Salim than what the Gokongweis have to offer. Over a three-year period, the Gokongwei group will pay the amount of $616.6 million for a two-thirds share in a joint venture arrangement that will assume First Pacific’s stake in PLDT and another $100 million also over a three-year period for majority control of Bonifacio Land Corp. (BLC).

The $100 million refers to the assumption by the joint venture arrangement of a loan extended by First Pacific subsidiary Larouge BV to another subsidiary Metro Pacific Corp., secured by shares in BLC. (See related story on B-1)

The Philipines’ largest telecommunications company noted in its complaint that First Pacific’s amended Schedule 13D which is filed with the US Securities and Exchange Commission and the New York Stock Exchange is materially deficient since it excluded as an exhibit, a copy of the "legally binding" MOA entered into with the Gokongwei group on or around June 4 whose ultimate purpose is to transfer control of 31.5 percent of the voting rights in PLDT stocks to the Gokongwei group.

It pointed out that First Pacific’s refusal to file the MOA even after a written request by PLDT for the former to correct its deficient disclosure has deprived, and will continue to deprive PLDT shareholders, as well as the marketplace as a whole, of information concerning the details of the transfer of a significant block of PLDT’s shares, and the potential shift in corporate control, which is clearly adverse to the purpose of, and in serious violation of Schedule 13D of the US Securities Exchange Act of 1934.

"First Pacific’s failure to disclose the MOA is consistent with their broader disregard of securities law, PLDT’s corporate by-laws and shareholder agreements which could create legal liabilities for First Pacific and their Board," PLDT officials explained.

It was also learned that First Pacific has also refused to disclose copies of the MOA to its other board members.

Instead of filing a copy of the agreement as required by law, First Pacific only filed press releases that contained "selective information" about the agreement with the Gokongweis. Section 13D of the Securities Exchange Act of 1934 specifically prohibits selective disclosure because this is grossly unfair to minority shareholders who must be completely informed.

Sources said First Pacific through its counsel Ron Brown used to file complete and comprehensive documentation with the US Securities and Exchange Commission and the New York Stock Exchange in full compliance with the disclosure requirements. "This is the first time in First Pacific’s history that "Mr. Ron Brown as counsel and executive director has filed press releases instead of the required ‘written agreements’ in violation of the disclosure requirements under the Securities Exchange Act of 1934," the source said.