Badges of fraud

Small investors of Uniwide Holdings Inc. (UHI) are once again seeking court relief to make the guilty pay for their wrongdoings.

They have sued for estafa businessman Jack Ng Sr., president of both the Manila Bay Development Corp. (MBDC) and Republic Biscuit Corp. (Rebisco), UHI’s former chief finance officer Jimmy Cabangis and its ex-treasurer/comptroller Corazon Rey for allegedly defrauding them of P2.1 billion over the years through what the court has described as an “iniquitous” contract involving Uniwide’s lease of a 10-hectare reclamation property that has been home to its Coastal Mall in Paranãque City.

Led by Brenelie Rualo, these stockholders have filed before the Office of the City Prosecutor in Makati City an estafa complaint against Ng, Cabangis and Rey for allegedly squandering P1.7 billion of UHI funds for the construction of its Coastal Mall and then defrauding them of P381 million in  highly irregular mall rental payments.

Coastal Mall, which was envisioned in the 1990s to become the country’s biggest shopping mall complex, was built on a 10-hectare portion of MBDC’s 40-hectare Central Business Park II in Parañaque City at that time when Cabangis and Rey were Uniwide’s financial honchos.

In the derivative suit, Rualo said she was filing the case against the trio on behalf of over 15,000 investors “similarly situated” who bought P4 billion worth of stocks combined when Uniwide made its initial public offering (IPO) in 1996.

According to Rualo, the amount of P2.1 billion that was squandered was more than half of the P4 billion that was raised through the IPO, adding that the fraudulent acts and unlawful payments couldn’t have been perpetrated without the complicity of Ng, Cabangis, and Rey.

She noted that Uniwide’s continued payment of rentals “on an anomalous and highly irregular contract” was “not a business decision but a conspiracy by Ng, Cabangis and Rey to bleed dry and cannibalize the corporation of financial resources.”

Last July, Rualo and some 500 other small investors filed a derivative suit for damages before the RTC of Parañaque City to compel MBDC to return Uniwide’s rentals totaling P381 million as of 2005 and to pay damages to the aggrieved parties.

Aside from the P381-million payback, Rualo and her fellow small stockholders have asked the Parañaque RTC to compel MBDC to extend the lease contract on the Coastal Mall project by another 20 years to allow them to recover their investments; and order MBDC to pay Uniwide P100 million in damages.

Meanwhile,  investors led by Celso Eucogco have filed a petition to seek redress from MBDC for its “badges of fraud,” which, they said, were responsible for the P2.1-billion financial hemorrhage that eventually forced what was once the country’s biggest mall to go through receivership under the Securities and Exchange Commission (SEC).

Both complaints filed separately by Rualo and Eucogco traced Uniwide’s financial woes—and eventual SEC receivership—to the “anomalous” lease contract it had forged with MBDC—in connivance with Cabangis and Rey—covering a 10-hectare reclamation lot between Roxas and Macapagal boulevards, which Ng and MBDC had said would be transformed into a Greenhills-type commercial and shopping hub in southern Metro Manila.

Eucogco’s group has also filed a separate petition asking the Parañaque RTC to reverse the decision of the Municipal Trial Court  Branch 78 in Civil Case No. 2010-59 that MBDC had filed to eject Uniwide from its property.

This MTC case has to do with the earlier move by MBDC to seek Uniwide’s eviction from the property where the Coastal Mall now stands, even if Ng’s group is allegedly entirely at fault for failing to fulfill the terms of the agreement that the lessor peddled nearly two decades ago to convince his then-friend, Uniwide Group head Jimmy Gow to build the flagship mall on MBDC’s would-be commercial hub.

In yet another case, the Parañaque RTC had ruled the MBDC-Uniwide contract as “iniquitous” and described as an “inequitable conduct” MBDC’s acceptance of full rentals despite its failure to put up a business center as promised, the delay in the mall’s construction arising from the Macapagal Avenue project, and the Asian financial crisis that caused Uniwide to suffer greater business losses.

Aside from these court cases, Gow and his Uniwide Group are also fighting in court what they claim to be the unjust decision by the Securities and Exchange Commission (SEC) earlier this year to cannibalize UHI assets despite clear signs that this mall operator  was already enroute to financial stability following several years of being under SEC receivership.

Rualo and the other petitioners had accused Cabangis  and Rey of conspiring with MBDC in perpetrating what they called the “badges of fraud” that bled Uniwide dry and led to its SEC receivership beginning 1999.

Cabangis and Rey resigned from UHI, respectively, in 2003 and 2004.

The “badges of fraud” include: first, the 50 percent reduction in the lease area from 20 hectares to just 10 hectares shortly after the lease agreement was signed, to give way to what is now known as the Macapagal Boulevard; second, MBDC’s failure to inform UHI beforehand of a government plan to build this highway that would slice through that very property, which later on forced Uniwide to alter its architectural designs and construction plans and, worse, return P400 million to investors who were hoping to lease space in a much bigger mall; third,  absence of a renewal clause giving UHI the option to extend the lease at the end of the original 20-year contract to give it enough time to recover the investment; third, absence of a payment moratorium during the construction phase, which compelled the lessee to pay rentals in full even during the first two years of the lease when Coastal Mall was being built from 1997 to 1998; and, fourth,  MBDC’s move to evict Coastal Mall when the Uniwide Group was asking for more lenient lease terms as a result of Ng’s failure to build a commercial center in that area.

Rualo said  Ng enticed Gow to lease his MBDC property on the representation that Ng would build a commercial center on the area even though at that time Ng already knew that he was not building any.

She pointed out that Ng and MBDC should have agreed to extend UHI’s lease, given that MBDC never developed the business district from 1997 to 1999, contrary to its commitment that the area would be turned into a commercial area with Coastal Mall as the anchor;  the P800 million that Ng had spent in developing the reclamation property most likely came from profits from Rebisco’s business relationship with Uniwide.

After committing fraud against Uniwide in not developing the area, Rualo said Ng and MBDC even had the gall to file a case for damages amounting to P700 million and claiming ownership of the Coastal Mall that was built for P2.1 billion.

Like many other ordinary employees “who dreamed of retiring early in life,” Rualo pointed out in the estafa complaint that she and the other small investors had “saved whatever (was) left of their small (salaries) to invest in the shares of stock of the Uniwide when it made a public offering.”

It was no joke to save P5,000 for an IPO purchase in 1996, she said, when the average daily pay then was just P145.

MBDC first brought the eviction case against UHI before the Philippine Dispute Resolution Center, but the request for arbitration was denied.

in February 2010.  MBDC then went to the Paranaque Metropolitan Trial Court (MTC), which ruled in its favor and ordered Uniwide to vacate the leased premises and turn it over to MBDC.

Investors though were wondering why the MTC did not dismiss the case when it had no jurisdiction in the first place - the case involved a claim for P700 million in damages which is above the MTCs jurisdictional amount of P500,000.

Uniwide then elevated the case to the Parañaque RTC and asked the court to release it from the onerous terms of its contract, given that the other party failed to deliver its commitments.

It also asked the RTC to grant its original proposal to continue paying the monthly rentals on the leased area at the old rate without the stipulated yearly increases.

On November 19, 2012, the Parañaque RTC ruled in favor of Uniwide, saying”the misrepresentations of the defendant (MBDC) that a business center will be developed in the area and the unforeseen construction of Macapagal Avenue which triggered a major change and delay in the construction plan of the Uniwide Coastal Mall, coupled with the occurrence of the so-called Asian Financial Crisis that hit the country’s economy in 1997, thereby rendering heavy business losses to the plaintiff (Uniwide Holdings) while the defendant was well-paid of the rentals albeit without doing good its part of the bargain pursuant to the parties’ understanding prior to and during the formation of their lease contract,  these in the consideration of the Court can be considered as inequitable conduct or accident that would entitle [Uniwide] to equitably seek the reformation of the contract.”

On public service

The recent incident involving Makati Mayor Junjun Binay and his cohorts against the security guards of Dasmarinas Village only goes to show that some “public servants” have this distorted understanding about public service - that the public are their servants and public officials are the masters, even though they derive their mandate, and their salaries and huge perks, monetary or otherwise, from the people.

If there is one standard that public servants should follow, it is Jesus’standard of leadership. This is from Mark 10:42-45:

“And Jesus called them to him and said to them, ‘You know that those who are considered rulers of the Gentiles lord it over them, and their great ones exercise authority over them.“But it shall not be so among you. But whoever would be great among you must be your servant, and whoever would be first among you must be slave of all. For even the Son of Man came not to be served but to serve, and to give his life as a ransom for many.”

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