Chevron charged in US too over Malampaya sale

A complaint against Chevron was to be filed Thursday in the United States over its sale of interests in the Philippines’ Malampaya gas field. Filipino-American complainants allege that the oil giant, through Philippine subsidiaries, committed “multiple misrepresentations and concealments to shareholders.”

In the “groundbreaking” case, eight Fil-Am leaders referred to the transfer of interest by Chevron Philippines and Chevron Malampaya to Udenna Corp. Two of the eight, lawyers Loida Nicolas Lewis and Rodel Rodis, earlier charged directors of the subsidiaries with graft before the Ombudsman. Also impleaded in October 2021 were Udenna CEO Dennis Uy, Energy Secretary Alfonso Cusi and officials of the Philippine National Oil Company-Exploration Corp. The Philippines lost P21 billion to P42 billion in that sale, Lewis and Rodis stated.

The new complaint alleges violation of the US Securities and Exchange Act, Section 10(b) (5). The rule, promulgated by the US Securities and Exchange Commission, targets securities fraud. It prohibits acts or omissions that result in fraud or deceit in connection with the purchase or sale of any security.

The aggrieved shareholders included the complainants. Aside from Lewis and Rodis, they are Arthur Medel, Rocio Nuyda, Celia Lamkin, Eric Lachica, Ago Pedalizo and Art Garcia. They lead Fil-Ams in New York, Washington DC, California and Marianas.

Rule 10(b)(5) states: “Employment of Manipulative and Deceptive Practices – It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, (a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.”

The complaint names Chevron, subsidiaries Chevron Philippines and Chevron Malampaya, PNOC-EC, Udenna and subsidiary UC Malampaya as respondents. They supposedly “facilitat[ed] and allow[ed] the transfer of Chevron Malampaya’s interest in a service contract in violation of an applicable Joint Operating Agreement.”

Last Friday, Senator Sherwin Gatchalian turned over to the Ombudsman his energy committee’s findings of “graft, gross neglect of duty and grave misconduct.” Urging Cusi to resign, a Senate resolution endorsed criminal and administrative charges.

Gatchalian accused Cusi of “railroading the approval of the sale of participating interest of Chevron in Malampaya gas field.” He said energy and PNOC-EC officials reneged on their duty to approve beforehand any sale by Chevron of 45-percent interest in Malampaya. PNOC-EC with ten-percent interest had the option to match Chevron’s $565-million sale to Udenna. The $565 million was paid over one year mostly with borrowed money and partly with Chevron’s own earnings from Malampaya in that period, the earlier graft case stated.

Denying any wrongdoing, Cusi refused to resign. President Rodrigo Duterte stated that the deal was aboveboard. Uy, reportedly Duterte’s biggest presidential campaign contributor in 2016, said the sale was a “purely private transaction” between Chevron and Udenna subsidiaries.

More than a dozen protesting business and law associations invoked “national interest.” Udenna supposedly had no experience and knowhow in petroleum exploration and production. As well, that state-owned China National Offshore Oil Corporation will join the Malampaya operation.

Near Malampaya, within the Philippines’ exclusive economic zone, is Sampaguita gas field, Recto Bank, said to contain three times more petroleum. Malampaya supplies more than 30 percent of Luzon’s electricity. Operational failures can cause prolonged power blackouts – and shut down factories, water and telecom facilities, hospitals, malls, shops, offices and schools. Not to mention no electricity in homes.

“The assets in Malampaya belong to the Filipino people; we hope our leaders will do their best to protect it for future generations,” Rodis declared before filing the US case.

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