DOJ junks SEC complaint vs CAP for lack of evidence

The Department of Justice (DOJ) has dismissed the criminal complaint filed by the Securities and Exchange Commission (SEC) against officers and directors of College Assurance Plans Phils. Inc. (CAP) due to insufficient evidence.

The SEC sought the criminal prosecution of CAP officers and directors for unauthorized sale of pre-need plans in violation of the Securities Regulation Code (SRC).

"After a careful and painstaking perusal of the affidavits that were submitted by the parties, this office finds that there is no probable cause sufficient to indict the respondents for the alleged violations of the SRC," the DOJ said in its order.

"Evidently, the complainant failed to point out or ascribe any specific act that would show respondents’ involvement or participation in the supposed violations of the SRC by CAP.

It is fairly evident that the complainant merely resorted to abstract and general avements on the duties of the board of directors and officers under the Corporation Code and the CAP Manual of Governance, "the Justice Department further said.

Hubert Guevara, head of the SEC’s Compliance and Enforcement Department, said while they have not yet received a copy of the order, the SEC will file a motion for reconsideration or a petition for review before the DOJ.

According to the DOJ, the petition suffers from "vagueness and generalization."

"The complainant’s mere assumption that CAP’s officers and directors have done something illegal or criminal or have participated in the alleged SRC violation, if any, merely by virtue of their being officers or directors of CAP, cannot properly establish probable cause much less prevail over the constitutional presumption of innocence," the DOJ said.

"Well-entrenched is the rule in a preliminary investigation, the complainant must present evidence to support his accusations against the respondent.

It is a well-settled rule that the purpose of a preliminary investigation is to secure the innocent against hasty, malicious and oppressive prosecution and to protect him from an open and public accusation of crime, from the trouble, expense and anxiety of a public trial and also to protect the state from useless and expensive trials," the DOJ added.

The Justice Department likewise concurred with CAP’s view that its directors and officers are merely members of the board of directors of CAP and their duty was principally to attend the board meetings and to participate in the laying out of policies and the general management of the business affairs of CAP.

"Furthermore, this panel of prosecutors is of the view that complainant failed to rebut respondents’ allegation that the alleged unauthorized issuance and sale of pre-need plans from June to August 2001 was never discussed nor brought up in the CAP board meetings and that no board resolution was ever passed approving the alleged sale or pre-need plans for the aforementioned periods."

"Complainant should have been aware of this considering that during these periods there were always representatives from the SEC during the board meetings. However, instead of meeting respondents’ allegation squarely, complainant conveniently argued that the records of voting and/or minutes of the board meetings of the board of directors are all internal records of CAP and that only during a full-blown trial, when the minute books of the corporation is subpoenaed by the trial court from the corporate secretary and testimonies given thereon, can all parties verify the truth of the statements made by respondents that they did not meet nor vote on the sale of unregistered plans," the order further said.

The DOJ said while there appears to be some plans sold in excess of the authorized amount, these circumstances "do not give rise to a culpable violation of the SRC."

"The SEC is the regulatory body charged with the implementation of the SRC and in implementing the rules which govern the pre-need industry. Even while it already knew that CAP had oversold some pre-need plans, the SEC did not consider the sales to be unlawful or to have been made in violation of the SRC," the Justice Department said.