Inter-agency task force to probe Wincorp

An inter-agency task force is being created to investigate the collapse of Westmont Investment Corp. (Wincorp), an investment house associated with former Finance Secretary Edgardo B. Espiritu which is now saddled with debts of about P7 billion.

SEC sources said the Wincorp task force will have as its members the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). The task force will be established this week after representatives from the three agencies meet to discuss the scope of the investigation.

The collapse of Wincorp is supposed to be investigated by the BSP but it is still awaiting the audit report of the SEC which has jurisdiction over investment houses without quasi-banking functions.

Investment house used to be under the regulatory oversight of the BSP's department of thrift banks and non-bank institutions. The responsibility has since been transferred to the SEC. The corporate watchdog is supposed to determine if Wincorp violated the 19-lender rule prohibition under the General Banking Act which limits to 19 the number of investors in an investment house.

At the same time, the Capital Markets Development Council, an advisory group composed of public and private sector representatives, will also create a similar task force to assess existing laws on debt and investments instruments and to determine how violations can be plugged. It will be co-chaired by Finance Secretary Jose T. Pardo and Edwin Villanueva, president of securities firm Vickers Ballas Inc.

Wincorp was sued for fraud and misrepresentation by Pearlbank Securities and its chairman Manuel Tan who is also a Wincorp director stockholder with a 25 percent stake in the investment firm. Tan said in an P18-million lawsuit filed with the SEC that Pearlbank was made to appear as a borrower in several debt instruments issued by Wincorp to some of its investors.

"Undoubtedly, the act of Wincorp in representing to different investors that Pearlbank borrowed against their investments, through the confirmation advises issued to said investors, or through any other means, violates such right and reveals a device or scheme employed by Wincorp and its officers amounting to fraud and misrepresentation detrimental to the interest of the public," read the complaint.

For its part, Westmont Investment Corp. (Wincorp) issued a statement yesterday conforming that loans were granted to Pearlbank Securities.

Wincorp was reacting to a press release issued by Pearlbank Securities chairman Manuel Tan Kiansee claiming that his company's name was fraudulently used by Wincorp to borrow funds from various investors. Wincorp said that the loans granted to Pearlbank Securities were evidence by check payments representing proceeds of the loan.

Wincorp clarified that its role was merely to act as a broker for all borrowers and lenders, adding that most of the loans it brokered were covered by collateral. Wincorp said that before any loan can be brokered, it has to be approved by its board of directors, of which Tan Kiansee is a member.

Wincorp said that the line for Pearlbank Securities was discussed in the credit committee meetings even as it maintains that Pearlbank, therefore, has legitimate borrowings from Wincorp.

Wincorp has assured its investor/lenders that the restructuring of the loans is being pursued. Repayment plans are now being finalized by most of the borrowers that the lenders can be repaid.