LAND SCAM: Is PRCI board trying to hide something?

Another real-estate-scam-in-the-making being done by the Malaysian scammers.

Is PRCI board trying to hide something?

By Neal Cruz
Last updated 01:49am (Mla time) 08/27/2007

MANILA, Philippines – Last August 8, this column reported an emerging scam in the attempt of the Malaysian-led majority members of the board of the Philippine Racing Club, Inc. (PRCI) to swap the PRCI’s 26-hectare Sta. Ana racetrack worth 12 billion (that’s billion) with a P25-million moribund firm called JTH Davies Holdings.

Minority shareholders, who have been kept in the dark about the deal, asked for full disclosure of the details and documentation on the proposed exchange of properties. But the majority and management denied the requests. So the minority shareholders went to court which then issued a temporary restraining order on the deal and a subpoena duces tecum to the management to show to the minority shareholders all the documents pertaining to the two deals. The Malaysian-led faction of the board then filed a motion to quash the subpoena with the Court of Appeals. Obviously, the Malaysian faction is bent on preventing the minority shareholders from gaining access to information regarding “business transactions.”

The row has opened a Pandora’s box of violations of corporation laws. First, the Philippine Stock Exchange (PSE) bared that PRCI has breached the constitutional cap of 40 percent foreign ownership following a surge in unregistered foreign holdings in 2005—the year PRCI’s Malaysian-led group bought JTH Davies.

The row also brought into full view the personalities representing the Malaysian interest in PRCI. And the interesting discovery is that the controversial Datuk Surin Upatkoon a.k.a. Lau Khin Koon of Temasek Holdings fame sits on the board of the racing club. (Read August 8 column.)

The business community’s view is that the row should not have reached this level of intensity if only the Malaysian-led group had simply recognized the rights of the minority.

It seems that the Surin Upatkoon group, which includes the Westmont Investment Corp. (Wincorp) stalwarts led by Santiago Cua Sr. or Cua Sing Huan, failed to recognize the trend toward transparency in the Philippine corporate setting. And part of the move toward greater transparency is the protection of minority shareholder rights.

Cua Sr. is at present honorary chairman of PRCI while son Solomon is president, son Simeon is executive vice president, and son Santiago Jr. is director and treasurer.

There is now a silent revolution of reforms in the Philippine corporate world. Unknown to many, this is an initiative and a collaboration of the Securities and Exchange Commission, PSE, the Bangko Sentral ng Pilipinas (BSP) and other such organizations.

That revolution began with the passage of the Securities Regulation Code (SRC) or Republic Act 8799. The Code set new provisions including the clarification of the scope of insider trading and market manipulation and the protection of minority investors.

Also part of the reforms was an SEC requirement for publicly-listed companies to have a “Manual of Corporate Governance” which guarantees corporate records to be “available for inspection by any stockholder of the corporation at reasonable hours on business days.”

In addition to the SRC, the Corporation Code (CC) also protects minority shareholders. Both the SRC and the CC guarantee the minority’s “right to information and inspection, right to vote, legal process for redress and the right to bring derivative/class action suits.”

This means that when the Filipino shareholders of PRCI asked that they be given full disclosure regarding the purchase of the moribund P25-million JTH Davies Holdings for P450 million, they were merely exercising the right guaranteed by the SRC and the CC.

They were also exercising that right when they asked for full disclosure of the aborted swap deal that would have made the moribund JTH Davies a billionaire firm overnight. And they were exercising the same right when they brought the derivative action against the Surin Upatkoon/Santiago Cua Sr. group.

The reform environment initiated by the SEC, BSP and PSE is the reason the business community tends to view arguments by the lawyers and public relations people of the Malaysian-led group as comic and absurd. The group branded the Filipino shareholders as a “noisy minority” and questioned their move asking for full disclosure. Are the Malaysians aware of the reforms in the corporate world?

These reforms are obviously an offshoot of the Enron and WorldCom scandals that rocked corporate America. The image of senior executives being led away in handcuffs by FBI agents continue to haunt not just the US but the global business world.

The Surin/Cua group has boasted that it has asked the Court of Appeals to quash a subpoena issued by the regional trial court. This legal maneuver can only be viewed as an effort to block full disclosure.

And when one is trying to hide something from the full light of day, the logical question is: “Are they trying to hide something?”

As lawyer Brigido Dulay Jr., a PRCI director representing minority stockholders said, “if the Malaysian-led group has nothing to hide, why are its lawyers going out of their way to quash a court order for them to show the documents related to the deals?”

The lawyers of the Surin/Cua group would do their clients a great service if they are educated on Philippine corporate reforms. This should correct current perceptions regarding both their moves and their principals.

These lawyers should play their cards right. A miscalculation might propel the PRCI now into the local version of the Enron scandal. Transparency would help deter such fate.

For starters, they can help us understand how a P25-million firm could be bought for P450 million and later exchanged for a P12-billion chunk of prime real estate.


Another Land-scam in the making…

Hmmm… it seems that more land-scams are coming out in the open and using “technical legal-looking channels” to appear legitimate. Like the story of the “heirs of Homer Barque” and their outrageous claim to a property that is clearly not theirs, here is another story…. As I See It : RP stockholders may be cheated in P12-B deal

By Neal Cruz

Posted date: August 08, 2007

There were two related stories in the newspapers this week on the corporate sector. The first is the disclosure by the Philippine Stock Exchange (PSE) of a report by the Philippine Dealing System Holdings Corp. that at least four local corporations have breached the limit set by the Philippine Constitution on the ownership of local publicly listed companies by foreign interests. These are Asian Terminals Inc., Edsa Properties Holdings Inc., Mabuhay Holdings Corp., and Philippine Racing Club Inc. (PRCI), which owns and operates the prime 26-hectare Sta. Ana racetrack in Makati City.

The second story was about the denunciation by its minority stockholders of a sellout of the PRCI to a shell corporation controlled by Malaysians. In fact, it has the appearance of another multibillion-peso scam. The assets of PRCI would be swapped with a company with only a P25-million capitalization called JTH Davies Holdings. The firm has admitted that it has been consistently in the red until 2005 and that it has disposed of all its earning assets.

A P25-million firm without assets would be swapped with the PRCI whose main asset is the 26-hectare racetrack in Makati worth P12 billion. The racetrack is the only big open space left in Makati, and you can put two Rockwell shopping centers in it. That is why land developers are salivating to get their hands on it. That property will be swapped with a shell company with a P25-million capital? There’s something very wrong here.

PRCI is a public corporation whose shares are sold in the Philippine Stock Exchange. It has many small stockholders. At least 25 percent of the shares are held by Filipino minority stockholders. Whatever happens to it is, therefore, of public interest.

The Filipinos objected to the deal for two reasons: (1) they were kept in the dark regarding the transaction, alleging that the Malaysian-led group refused to furnish them with documents and details pertaining to the transaction; and (2) the swap would have taken away from the racing club its most important earning asset, the racetrack.

The Malaysians partnered with the Cua family in PRCI. The Cuas are led by 80-year-old Santiago Sr., who also goes by the name of Cua Sing Huan. His three sons — Santiago Jr., Solomon and Simeon — also own significant holdings and important positions in the racing club. Santiago Sr. is the honorary chair, Solomon is president, Simeon is executive vice president, and Santiago Jr. is a director.

The Malaysian interest in PRCI is represented by the Kuala Lumpur-based Magnum Holdings Berhad, which has four board seats, led by Datuk Surin Upatkoon.

A look at the Internet on the backgrounds of the Cuas and Datuk Surin will send shivers climbing up and down the spines of Filipino shareholders. Santiago Cua Sr. once served as president of Wincorp Corp. Santiago Jr. served as senior executive vice president of the defunct Westmont Bank. Wincorp, it will be recalled, was involved in a giant misadventure in the late 1990s, which saw a lot of companies and business personalities go under. Westmont, on the other hand, went bankrupt and closed down. Many cases filed by investors and depositors are still being tried by the courts.

Datuk Surin Upatkoon, a.k.a. Lau Khin Koon, on the other hand, figured in the Temasek Holdings scandal that rocked the Thai business community and led to the downfall of Thai Prime Minister Thaksin Shinawatra. Datuk Surin turned out to be the major stockholder of a private firm used in the controversial takeover by Temasek Holdings of Thailand’s Shin Corp. The takeover was the fuse of a major political scandal in Bangkok. Thai politicians accused Datuk Surin of being a “Temasek stooge” or “front.”

The takeover generated overwhelming Thai anger. Thais call the Temasek takeover a “sellout” of their country’s sovereignty. They believe Datuk Surin was the key player in that deal.

The takeover of our own multibillion-peso racing club is very similar to the Temasek takeover. Is Datuk Surin about to do a Temasek on PRCI?

According to the PSE, PRCI breached the limit on foreign ownership in 2005. It was also in 2005 that PRCI led by the Malaysian group purchased the moribund JTH Davies and apparently started preparing the ground for the swap.

It would seem that the Magnum group bought more shares in PRCI in 2005, over the limit of 40 percent. No other foreign group would want to get into PRCI unless it can control the firm, either directly or through local “representatives.” Magnum may have also decided to buy more shares to fund the JTH Davies purchase. Also, Magnum may have decided that it is cheaper to breach the constitutional limit, fund the JTH purchase and then swap its shares with the prized Sta. Ana property rather than directly buy it. JTH Davies is a P25-million firm; Sta. Ana is a P12-billion property.

It is understandable that Filipino shareholders would protest. Take the Sta. Ana racetrack out of PRCI and its share prices will plunge.

There is, therefore, public interest that must be protected here to preserve confidence in the capital market. Filipino minority stockholders must also be protected from becoming victims of an emerging scam.

For most of those who breached the cap, it looks like a simple case of foreign investors wanting to cash in on infrastructure development opportunities in the Philippines. For the racing club, it looks like a scheme for a very cheap way to get hold of a prized real estate.