FDA scandal

Just recently, I came across an article published in the Bangkok Post about how many Thais are becoming very skeptical as to the merits of government regulatory agencies.

One reason cited involves governance issues surrounding  independent agencies. For instance, one of these agencies accepted expensive items from a private company under its regulation and then used the items as raffle prizes during its New Year party.

The article, prepared by Duenden Nikomborirak who is a director at the Thailand Development Research Institute, recommends that commissioners and executives of the regulatory body should be required to disclose the nature and value of each gift or hospitality that they receive or give to others on their website, including the reason for the gift. The agency should also disclose in detail itemized expenditures to allow the public to track the allocation of its financial resources on questionable expenses such as overseas trips, donations, and publicity; renumeration and severance of each commissioner and executive; even meetings with officers and employees of regulated businesses.

I was reminded of all these after learning that our very own Food and Drug Administration (FDA), which is the agency responsible for prescribing standards, guidelines, and regulations about tobacco and related products, admitted that it received a donation from the US-based Bloomberg Philanthropies group,which has committed $1.1 billion since 2007 to combat tobacco use worldwide.

Its Bloomberg Initiative to Reduce Tobacco Use aims to reduce global demand for tobacco through a comprehensive approach that combines policy change with increased public awareness, and its key strategies include creating smoke-free public places, increasing tax on tobacco products, among others. Just like Bloomberg, The Union is an international private group that advocates against all forms of tobacco products. Both are said to be under Bloomberg Philanthropies.

But the donations to our FDA were made while the latter is in the process of preparing the implementing guidelines for the regulation of electronic cigarettes and heated tobacco products (HTPs) as provided for by Executive Order 106 and Republic Act 11467.

In fact, Ilocos Sur Rep. Deogracias Victor Savellano and Nueva Ecija Rep. Estrellita Suansing have asked the House committee on good government and public accountability, via a resolution, to conduct an inquiry into this alleged questionable receipt of private funding by the FDA and other government agencies “in exchange for the issuance of specific and pre-defined policies against a legitimate industry under Philippine laws and in complete disregard of the rights and welfare of consumers.”

Unless Bloomberg and the FDA clarify the issue, it would seem that the donation was aimed at influencing the decision of the agency in the regulation of e-cigarettes (vapor products) and HTPs in the Philippines. In fact, in 2019, Bloomberg launched a $160-million program to promote a worldwide ban on e-cigarettes, despite evidence that these electronic nicotine delivery systems are about 95-percent less harmful than combustible cigarettes.

Prof. David Nutt of Imperial College of London, who chairs DrugScience, says the congressional probe should determine whether Bloomberg violated any US charity regulations, particularly if it illicitly interfered in the governance of another state. If it is illicit, the next step would be to challenge this in both Philippine and American courts, he said.

For his part, Dr. Joel L. Nitzkin, a US physician who was cross-trained in public administration, stressed that the congressional investigation should look into possible breach of the 1987 Constitution and several laws.

Meanwhile, health policy consultant Scott D. Ballin, who previously worked on US FDA regulation of tobacco, says the “Bloombergate” case is “troubling” as it involves the direct contribution of funding or money to a regulatory agency. He stressed that the overriding issue is indeed transparency and the requirements that a regulatory body follow  in drafting guidelines in ensuring that policy-related decisions are made based on sound science and as part of a transparent regulatory process.

Family feud

Just last week, a friend of mine was telling me that he received an invitation from some family members to be an incorporator and director in certain entities that they are registering with the Securities and Exchange Commission, in exchange for which he would get a few shares since to be a director, one has to own at least one share registered in his name in the books of the corporation.

This practice is fairly common among family members, especially since prior to the revision of the Corporation Code, there must at least be five incorporators and directors. But with the overhaul of the Code in 2019, all you need is two. In the case of a one-person corporation, there is only one stockholder and director who is also the president. The OPC and the reduction in the number of required incorporators and directors in the case of regular corporation is meant to curb the practice of getting even household help to be incorporators and giving them one share, since it is difficult to find five people whom you can trust.

This same situation happened in the case of the family-owned DW Capital Inc. (DWCI). Although it was a corporation on paper, the stockbrokerage’s operations were handled solely by Derwin Wong  and none of the other directors even held office at DWCI. Derwin, in fact, admitted that the other family members were never involved with the company operations. It just so happened that he made his father, David Wong Chi Yin, and his siblings Davidson, Derick, and Dianne, part of the corporation, again to comply with the legal requirement as to the number of incorporators and directors.

Derwin used to be married to Eda Frances who belongs to the Cebu-based Gaisano clan. Several members of Eda’s family opened trading accounts with DWCI and coursed some of their transactions through the latter, even though the Gaisanos have their own stock brokerage.

For almost a decade, they traded with Derwin as their stockbroker. But years after they split up,  Eda’s sister Valerie and their mother accused DWCI of unauthorized trading of their investments in blue-chip stocks handled by DWCI. They filed an estafa case against Derwin and Davidson while  a syndicated estafa charge was also filed against the five Wongs who were the incorporators of DWCI.

A third case for syndicate estafa (the first ones were dismissed) was filed in Cebu and the court issued an arrest warrant for Derwin and his siblings. Meanwhile, Valerie offered a P2-million reward to help effect the arrest of the father, who she claims fled to Taiwan. But the Cebu City RTC ruled that the prosecution failed to substantiate their syndicated estafa charge against the Wongs and bail was granted to Derwin.

Valerie then filed a fourth case with the Cebu RTC, but the Supreme Court transferred the case to the Makati RTC where it is now being heard. Meanwhile, the NBI working with the Interpol was able to arrest Derwin’s brother Davidson in Spain in January last year. Derwin and the others are still at large.

Unfortunately, there is still no end in sight for this legal/boardroom battle.

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