CAP officials file counter-affidavits at DOJ

Top officers of College Assurance Plans Phils. Inc. (CAP) denied any involvement in the alleged unlawful act committed by the pre-need firm, saying the charges levelled against them by the Securities and Exchange Commission (SEC) are without basis.

In separate counter-affidavits filed at the Department of Justice, CAP officers said the SECcomplaint is fatally defective as it does not point to any specific act or omission on their part which would make them responsible for the alleged overselling of CAP’s pre-need plans.

CAP president Enrique Sobrepeña Jr. said Sec. 31 of the Corporation Code states that the civil liability of directors or officers is conditioned on a showing that they had a "direct hand in a patently unlawful act of the corporation."

"It is clear from Section 31 that being an officer or director does not ipso facto make an officer or director liable for unlawful acts of the corporation. The director or officer must also be shown to have actively participated in the alleged wrongful act in any of three ways – by voting for or assenting to a patently unlawful act, by being guilty of gross negligence or bad faith in directing the affairs of the corporation or by acquiring any personal or pecuniary interest in conflict with his duty as a director or officer," Sobrepeña said.

"In the absence of any alegation or proof that I participated in the commission of any alleged violation, there is no basis to hold me responsible merely because I am an officer of CAP," Sobrepeña stressed.

CAP treasurer James Marsh Thomson, for his part, said a corporation under the law and prevailing jurisprudence, is separate and distinct from its officers and directors and the latter do not incur liability due to the acts of the corporation.

Thomson also noted that in Sec. 73 of the Securities Regulation Code, only the corporate officer or officers responsible for the violation can be penalized for an offense thereunder.

CAP directors also reiterated the pre-need firm’s commitment to refund payments made by clients who have not yet claimed their investments.

They likewise branded the SEC’s allegation that CAP failed to account for the payments received for the unregistered plans as misleading. CAP said it already issued guidelines to facilitate refund of payments for the oversold plans.

The SEC filed last month a criminal complaint against CAP, its officers and directors for the unauthorized sale of pre-need plans.

The SEC sought the issuance of a hold-departure order against the respondents to prevent them from fleeing the country and evading criminal liabilities.

The respondents were particularly charged with 6,434 counts of unauthorized sale of pre-need educational plans and one count of failure to provide for uniform accounting system, reports and record keeping.

In its complaint, the SEC said CAP sold pre-need educational plans despite the fact that it knew it had no more registered plans to sell in violation of Sec. 16 of the SRC.

Despite the acknowledgement that they oversold unregistered plans for the period covering June 2004, CAP continued to sell unregistered plans from July 1 to Aug. 31, 2004. They admitted having oversold some 6,434 plans worth P325.33 million.

The SEC said the members of the board along with the responsible officers are liable under Sec. 73 of the SRC which states: If the offender is a corporation, the penalty may in the discretion of the court be imposed upon such juridical entity and upon the officer or officers of the corporation."