A special hearing panel of the Securities and Exchange Commission imposed a P50.25-million fine against the companies of Filipino executive Jose Xavier Gonzales and Singapore-based private equity fund Viva Holdings for alleged violations of the Securities Regulation Code.
The panel headed by Erwin Edward Mendinueto issued a resolution dated Nov. 22 which found Viva Healthcare Limited, Viva Holdings (Philippines) Pre. Ltd., Fountel Corp. and Felicitas Antoinette Inc. liable for violation of the Securities Regulation Code.
The SEC formed a special hearing panel after several shareholders, including Professional Services Inc. chief executive Alfredo Bengzon questioned the acquisition of the company’s majority shares by corporations related to Gonzales, his nephew.
“We are extremely gratified that the SEC has decided in favor of all the legitimate shareholders of The Medical City,” said Bengzon, the founder and long-time CEO of PSI.
“As a result of the fraud perpetrated by the Gonzales companies and Viva Holdings, we have suffered significant losses in the value of our investment in The Medical City,” Bengzon said.
“The SEC’s rightful decision paves the way for the restoration of shareholder value and voice lost over these many months,” he said.
The SEC panel said to surreptitiously take over TMC, the respondents acquired majority of PSI shares through omission of material facts, which misled the board of directors and other shareholders to approve increases in the company’s capital stock and allow them to increase their shareholdings.
It said that while the respondents intended to acquire 35 percent or more of the equity shares in PSI as early as 2013, the plan to acquire majority of the shares in PSI was not communicated or could not be inferred during the board meetings, where increases in the company’s capital stock were discussed and approved.
“Consequently, offerors’ failure to disclose material information [which had the effect of misleading shareholders in their investment decisions] before acquisition of 35 percent or more of equity shares is a prohibited practice under SRC Rule 19.12,” the SHP said.
SRC Rule 19.2.A provides that any person, or group of persons acting together, who intends to acquire 35 percent or more of a public company’s equity shares should disclose such intention and contemporaneously make a tender offer to all shareholders.
The panel said the respondents also violated Section 18 of the SRC when they failed to file beneficial ownership report when they acquired more than 5-percent stake in PSI.
It said that for violation of Section 18 of the SRC, it imposed the penalty of P1 million plus P2,000 for each day of continuing violation from Aug. 1, 2013 up to the time that SEC Form 18-A was filed.
Each respondent was also ordered to pay P1 million plus P2,000 for each continuing violation, from July 31, 2013 to May 15, 2018, for reported violation of SRC Rule 19.2.A
It said Viva Healthcare, Viva Holdings, FAI and Fountel were found to have “adroitly circumvented” the prevailing rules at the time to avoid the requirements of a mandatory tender offer.
The SHP said the respondents conveniently structured their acquisition to ensure that the mandatory tender offer would not apply.
It said SRC Rule 19.3.B requires any person or group of persons acting in concert, who intend to acquire 35 percent or more of a public company’s equity shares to disclose such intention.