Another real-estate-scam-in-the-making being done by the Malaysian scammers.
AS I SEE IT
Is PRCI board trying to hide something?
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.