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.