Lopez firm sues GSIS chief, SEC execs for conspiracy

MANILA, Philippines –  First Philippine Holdings Corp. (FPHC) yesterday filed graft charges against Government Service Insurance System president Winston Garcia, GSIS general counsel Estrella Elamparo-Tayag and two top officers of the Securities and Exchange Commission (SEC).

In its complaint, FPHC president Elpidio Ibanez alleged that Garcia, Tayag, SEC Commissioner Jesus Enriquez-Martinez and Hubert Guevara, SEC director of the compliance and enforcement division, conspired to ensure that GSIS would obtain more seats on the Board to the prejudice and damage of FPHC as a substantial shareholder of Manila Electric Co. (Meralco).

FPHC, the holding firm for all power generation and power-related activities of the Lopez family, owns 33.4 percent of Meralco and now manages the power utility firm.

Ibanez said Garcia and Tayag have engaged in “acts that are contrary to law, unreasonable, unfair and conduct unbecoming of public officers.”

He said the respondents violated Sections 3 of Republic Act 3019 or the Anti-Graft and Corruption Practices Act.

Ibanez said that FPHC was embarrassed by the purported issuance of the cease-desist-order (CDO) and in the manner it was to be enforced.

The FPHC official said the respondents’ actions also significantly brought down the share price of Meralco in the Philippine Stock Exchange (PSE), which damaged Meralco’s stockholders, including FPHC.

“It also forced FPHC to incur significant costs/expenses in order to defend and protect its rights and interest,” he said.

If proven guilty of these charges, the GSIS and SEC officials will be fined the equivalent of six months’ salary or suspension not exceeding one year or removal from office.

The graft case was filed as an offshoot of a supposed CDO served by the SEC officers during Meralco’s stockholders meeting on May 27, 2008.

“Respondent Martinez issued the CDO without authority, in the absence of an investigation, with manifest partiality, and sought to insure that GSIS would secure more seats in the board of Meralco,” Ibanez said.

The complaint said that “Guevara aided and abetted the foregoing, serving and announcing what was clearly a patently invalid CDO and timing of the service of CDO to the detriment of Meralco’s stockholders in general and FPHC in general.”

According to the complaint, the CDO was not dated; was only signed by Martinez, and not by any other commissioner of the SEC; did not have a docket number and did not bear the official seal of the SEC.

“When Martinez issued the CDO and Guevara sought to implement the same, both officers failed to exercise the requisite extraordinary diligence by, among other things, acting without jurisdiction,” he said.

“Guevara acted with manifest partiality, evident bad faith, gross ignorance of the law and/or gross inexcusable negligence in the performance of his official duties by serving the CDO only after the certification of a quorum, despite having the opportunity to serve the CDO prior to the stockholders’ meeting, or at the very least, before a quorum was certified; serving the CDO in a blatant attempt to recognize proxies in favor of the officers of Meralco as well as those in favor of FPHC’s authorized proxies.

SEC Commissioner Jesus Martinez declined to comment on the graft charges until he receives a copy of the case filed by FPHC.

The SEC issued in May an order favoring a complaint filed by GSIS requesting for supervision of the May 27 annual meeting of Meralco and invalidation of proxies on the ground that the Meralco management failed to comply with the applicable rules on proxy solicitations.

In an earlier comment filed with the Court of Appeals, the SEC said the order was issued in the “valid exercise of its regulatory jurisdiction under the Securities Regulation Code (SRC) and that the order, while signed only by Martinez, had the backing of two other SEC commissioners.

The SEC said while SEC Commissioner Raul Palabrica was not physically present at the SEC office when the CDO was issued, “Martinez deliberated the issue raised in the urgent motion with Palabrica through telephone continuously until he returned to Manila around 3 p.m. on March 26, 2008.

“There is no law, rule or regulation requiring all orders or resolutions issued by the SEC to be signed by all the members thereof. It is enough that certain authorized officers of the SEC sign an order or resolution for the SEC. In fact, most orders or resolutions of the SEC are merely signed by its general counsel by authority of the SEC,” the SEC said.

The SEC argued that the issue of non-compliance with the rules on proxy solicitation is not an intra-corporate controversy but a matter within the SEC’s administrative and regulatory jurisdiction under section 20 of the SRC.

The SEC pointed out that the transfer of the power to hear and decide intra-corporate controversies from the watchdog agency to the regular courts did not strip the SEC of its administrative and regulatory powers.

Moreover, the SEC said the petition filed by GSIS “sufficiently alleged serious violation of the SRC and its amending rules and regulations by petitioners, especially Meralco’s acting corporate secretary Anthony Rosete.” With Zinnia dela Peña