Romulo refutes Garcia charges

Presidential Adviser Roberto R. Romulo refuted yesterday the charges brought up by Government Service Insurance System (GSIS) president and general manager Winston Garcia to the Department of Justice (DOJ) relating to his appointment as an independent director in Equitable PCI Bank, the country’s third biggest lender.

In a statement, Romulo said Garcia’s relentless campaign against him "has now reached the realm of the ridiculous as he ignores even the rulings of regulatory authorities and the common-sensical interpretation of corporate laws and regulations."

Garcia filed a criminal complaint against Romulo and four other former EPCIBank officials for "deceit" or fraud under the Revised Penal Code for allegedly hiding information from the bank’s stockholders that Romulo "was not qualified to be an independent director of the corporation because of his being an officer of two bank subsidiaries."

The GSIS, along with another state pension fund Social Security System, has substantial stockholdings in EPCIBank.  Preliminary hearing of the case was set for June 22 by the DOJ after subpoenas were sent to the respondents.

GSIS legal counsel Jason Natividad said the DOJ was the proper forum for the criminal complaint because the Securities and Exchange Commission (SEC) has no authority to determine whether a crime has been committed for violation of the Securities Regulation Code (SRC).

The SEC en banc has yet to decide on EPCIBank’s appeal involving the P1.8-million fine imposed against the bank for hiring Romulo as an independent director.

"The GSIS is not guilty of forum shopping since the SEC has no authority to render a valid judgment on the criminal aspect of the complaint filed. The authority of the SEC is only limited to the administrative aspect of the complaint for non-compliance with the SRC and does not cover criminal complaints," Natividad said.

However, Romulo pointed out that Garcia had earlier filed a similar complaint before the SEC, which on May 8, 2006 ruled that "criminal sanctions should not be imposed on EPCIBank and its nomination committee."

"When an individual is nominated as an independent director, the burden of determining whether he is qualified or not for the position does not fall on his shoulders but on those of the corporation and its nomination committee," said Romulo, adding that "the pertinent regulations governing the election and role of independent directors in publicly listed companies are of very recent vintage."

"They were only promulgated in the light of the Enron case in the US and other corporate debacles," he added.

He said EPCIBank, like any other covered company was caught in the transition period. "Thus, covered companies applied the law and the rules in the way it understood the same, especially in the absence of jurisprudential decisions on the matter and adequate monitoring regulation from the SEC."

In his complaint, Garcia said Romulo was elected as an independent director of EPCIBank for the past two years even though he was not qualified.  Despite this knowledge, the bank’s nominating committee did not disqualify Romulo from running for the EPCIBank board.  They also allegedly hid this information from the stockholders of the bank.

Garcia pointed out that under the SRC, an "independent director" must not be an officer or employee of the corporation where they will serve as such and they must not have been directors, officers or employees of any affiliate, subsidiary or related company thereof.

However, according to Garcia, Romulo was a member of the board of directors of Equicom Systems Management Inc., a company which is a joint venture of the Equitable Group and Telus International as claimed in its website.  Romulo was also chairman of the board of directors of Equitable Card Network, Inc., a subsidiary of EPCIBank, Garcia added.

"As an independent director, Mr. Romulo is mandated by law to exercise his own independent judgment free from the influence of the other members of the board and other related interests," Garcia noted. – Zinnia dela Peña