NBI asked to junk charges vs Nextel

The Department of Justice has asked the National Bureau of Investigation to dismiss a complaint filed against Nextel Communications Phils. Inc. (NCPI) and its corporate shareholders for alleged violation of the anti-dummy law as well as the constitutional limitation on foreign equity in public utilities.

According to the DOJ, Nextel is considered a Philippine national , which is defined under Republic Act no. 7042 or the Foreign Investment Act of 1991 as . . . . a corporation organized under the laws of the Philippines of which at least 60 percent of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines."

"NCPI is at most a 40-percent foreign-owned corporation. The Filipinos presumably control NCPI management because nothing has been said and proved that there were times NCPI had elected more than 40 percent or four foreign directors of the11-member board of directors," the DOJ added.

The NBI earlier forwarded to the DOJ for preliminary investigation a complaint filed by Paquito Sta. Maria De Jesus, a stockholder-director of Jetcom Inc., which in turn is a corporate stockholder of NCPI, against certain NCPI officers as well as officers of companies that own NCPI shares.

The complainant alleged that Nextel International Inc. (NII) held equity interest in NCPI as high as 87.7 percent, in violation of the Anti-Dummy Law, by tucking in its interests in NCPI corporate subscribers, namely Top Mega, Joyce Link, Gamboa Holdings, and Emerald Investments.

He also claimed that since the entire capital contributions of ACCRA Investments in Gamboa Holdings and that of ACCRA Holdings Inc. in Emerald Investments were money loaned from NII, ACCRAIN and ACCRAHO were dummies of NII.

ACCRAIN and ACCRAHO were organized by ACCRA Law Office in 1974 and 1996, respectively, as holding companies and its investment arms. Using their available funds or borrowed capital, both companies have had investments in companies like PLDT, San Miguel Corp., and Philcom.

But according to the DOJ, the foreign equity in NCPI never exceeded the maximum 40 percent allowed under the law. Corporate shareholders Gamboa Holdings, Emerald Investments, and Foodcamp , it said, qualify as Philippine nationals under R.A. 7042, irrespective of whether 40 percent of their outstanding capital stocks are owned by foreign nationals.

The department noted that it is the control test, as embodied in the Foreign Investment Act, which is the method presently adopted and used by the Securities and Exchange Commission (SEC) or the National Telecommunications Commision (NTC) in computing allowable foreign equity for the purpose of incorporating companies engaged in partly nationalized business or an issuing certificates of public conveniences and necessity, "not only to NCPI but also to other telecommunications companies like Globe Telecom and Isla Communications who share the same capital structure and foreign equity component as that of NCPI."

According to the control test method, which originated from Opinion No. 182 of the DOJ in Jan. 19, 1989 and formally embodied in Section 3 of RA 7043, a corporation 60 percent of the outstanding capital stock of which is 60 percent owned and held by Philippine citizens is a Philippine national.

The DOJ emphasized that the "grandfather rule" upon which the complainant based his contention is no longer the basis in determining the extent of foreign ownership in a corporation engaged in a partly nationalized business. "This method has been abandoned and superseded by the control test long before the transactions in question were entered into by respondents sometime in the late 1990s," it added.

In its ruling, the DOJ also noted that there is no evidence to support complainant’s claim that NII owns the shares of stocks which ACCRAIN and ACCRAHO holds in Gamboa Holdings and Emerald Investments or that these latter companies are false simulation by which NII controls NCPI ownership and management.