CA trims SEC-imposed fine on G Cosmos of Genta Ogami

The Court of Appeals (CA) has reduced the fine imposed by the Securities and Exchange Commission (SEC) on G. Cosmos Philippines Inc. to only P1 million.

G. Cosmos, an advertising firm owned by controversial Japanese national Genta Ogami, was originally slapped with a P57.18 million by the SEC for selling unregistered securities in violation of the Securities Regulation Code.

While it upheld SEC’s cease and desist order against G. Cosmos, the Appellate Court directed the corporate regulator to collect only P1 million from the advertising firm considering this was "the maximum amount of fine" that may be imposed by the SEC under the SRC.

In its order, the CA noted that under section 54 of the SRC, the SEC may impose a fine of no less than P10,000 or more than P1 million on a company found to have violated any of the provisions of the securities law.

"Clearly, the P57,180 fine imposed by the respondent is unconscionable and is not warranted under the circumstances," the CA said.

The SEC, however, is set to appeal the case, saying its assessed penalty is on account of various violations of the SRC.

Apart from the payment of fine, G. Cosmos was also ordered by the SEC to return investments due to its 5,178 members.

The CDO was issued by the SEC on Dec. 13, 2001 following mounting complaints from the public against the company. G. Cosmos collects money for advertising from the average consumer for its mail order sales business.

The money collected is used to conduct mail order sales in Japan through newspaper, television or magazine ads and profits are paid directly to the people who have paid for the advertising costs. Advertising of products is done through the company’s affiliates in Japan.

To register as a member, an interested investor must pay a membership fee of P3,500 and an annual membership fee of P6,000 unless there is a waiver of fees as part of corporate promotion.

G. Cosmos offers a five-percent incentive commission to members who can recruit new members to the system which will be deducted from the net profit/dividend earned by the new investor.

Once a member, an individual who pays the advertising cost of a product receives his profit or income four months after his entry.

Under the firm’s investment scheme, the rate of profit is 30 percent of the total sales of the product.

The percentage participation of a member in the 30-percent rate of profit has to be calculated on the basis of his proportionate share in the advertising cost of the product.

Ogami, who reportedly has a mailfraud case in Japan, could no longer be located. He was investigated by the Bangko Sentral ng Pilipinas (BSP) for his alleged involvement in the shuttered Unitrust Development Bank.

Unitrust was placed under receivership by the Philippine Deposit Insurance Corp. early 2001 following massive withdrawals amounting to about P100 million.

Unitrust depositors were apparently worried about the future of the bank under a new management led by Ogami who had reportedly acquired 20 percent of the bank through one of his holding firm firms, G. Universal Co. Ltd.

Initial investigations by the BSP, however, showed that Ogami did not appear to be a direct owner of G.Cosmos and Unitrust.

The control of the bank, however, has been made apparent as its new owners have approved a resolution changing its name from Unitrust to the Philippine Bank of Ogami. BSP officials earlier expressed concern over the possibility that G. Cosmos will use Unitrust’s branch network to peddle its products since the advertisements of the bank had given the impression that the development bank will go into businesses other than banking.