IT expert to be charged for unauthorized sale of tech company

MANILA, Philippines - The Department of Justice approved recently the criminal indictment of information technology (IT) expert Augusto “Gus” Lagman for the alleged unauthorized sale of a technology firm he partly owned to the Philippine Investment Management Inc. (Phinma) in 2007.

Justice Undersecretary Linda Malenab-Hornilla signed a resolution last June 17 that ordered the filing of charges of estafa against Lagman based on the complaint of businesswoman Nora Bitong, majority owner of Systems Standard Inc. (SSI) that owned Vinta Systems.

Hornilla reversed a resolution of the Makati City prosecutor’s office two years ago that cleared Lagman.

The department said there is probable cause to file the case in court after it was established that Lagman misled the board of directors of SSI when he “falsely represented that there were no substantial developments” in the planned infusion of capital amounting to $1 million to Vinta Systems by a potential US-based investor, Aureos Capital.

Lagman ran SSI as chairman of the board and chief executive officer, but Bitong is a majority stockholder of the firm and she owned 40 percent of its outstanding capital stock.

In a nutshell, the DOJ said the move of Lagman and members of the board to sell SSI’s shares was detrimental to Bitong’s financial position.

In her complaint, Bitong argued that the sale to Phinma of shares of SSI in Vinta, which develops, sells and distributes computer software since June 2000, was illegal since it did not have the approval of two-thirds of stockholders as required by section 40 of the Corporation Code.

“The false representation inveigled the directors to approve the conversion of his alleged cash advances into equity in System Standard and as a result of such conversion, he was able to own shares of stock belonging to Systems Standard and sell the same at a premium for his own benefit,” the complainant said.

Bitong said she objected to the sale of SSI shares to Phinma, which was still approved by the board in a meeting on Sept. 5, 2006 while she was on a foreign trip.

She stressed that Lagman’s report to the board on the supposed lack of progress in the proposed deal with Aureos was wrong: “In fact, there were already ongoing negotiations which lasted for a year before the planned infusion of capital was disclosed by respondent Lagman and only after the conversion of his alleged cash advances in Vinta Systems into equity had been approved.”

The DOJ bought this argument and said Lagman could be held liable.

“Respondent Lagman admitted that Aureos Capital had expressed interest in investing in Systems Standard during a meeting of its board of directors on March 10, 2005.

“Considering that Aureos was a big investor willing to infuse much needed capital that could revive the business of Vinta Systems, respondent Lagman should have promptly disclosed this fact during the board meetings of Systems Standard even if the potential investment was only a possibility,” the 10-page resolution stated.

Due to this, the DOJ said elements of estafa are present in this case, the offended party suffered damages and was “induced to part with his money or property” by false pretense, fraudulent act or fraudulent means.

It also recommended the filing of estafa charges against company directors Herman Gamboa, Cassius Ramirez, Peter Valdez and corporate secretary Vimka Bernadette Pacis. Charges against Valdez, however, were not pursued after he died.