The SEC withheld renewal of CAP’s licenses to sell new plans in September 2004 when the existing license expired.
The protracted delay in the renewal of the dealer’s license caused the company to cope with cash flow problems since all pre-need companies depend on the cash coming in from the sale of new plans to provide the financial resources for operational costs.
Of the P424 million CAP has paid out during the period, the bulk amounting to P253 million has been paid out to schools in Metro Manila.
These include University of the East (P4 million), Adamson University (P3.7 million), La Consolacion (P1.7 million) and AMA - Quezon City (P1.3 million).
Outside Manila, recent payments to planholders made from CAP’s regional offices include Davao (P36.8 million), Cebu (P36.3 million), Pampanga (P26.1 million), Iloilo (P22.3 million) and Cagayan de Oro (P15.9 million)
"With these payments CAP has proved that its word is its bond. There may have been some delays and slight difficulties here and there, but on the whole the company has met its commitments in full to its planholders despite the serious cash flow problems caused by the SEC dragging its feet with regard to the renewal of the dealer’s license to sell new plans. We could have taken the easy way out as other pre-need companies have done but we will not do that," CAP’s first vice president Bobby Café said.
CAP said it remains committed to meeting obligations to all planholders despite its financial problems, aggravated by rising costs of tuition.
"In spite of the problems caused by the unrestrained tuition fee increases, CAP is not giving up nor running away from the problem. We have been paying and still continue paying tuition fees," Café said.
The CAP official made the statement following a class suit filed by a group of CAP planholders before the Makati Regional Trial Court, accusing management of funnelling funds to Sobrepeña family-owned companies to the detriment of thousands of its planholders.
Represented by lawyers Maricel Lopez, former head of the Compliance and Surveillance Department of the Philippine Stock Exchange, and Tomas Syquia, former head of the SEC’s investigation arm, CAP planholders sought the nullification of their policies and the return of their investments.
CAP planholders also sought the appointment of a management committee to prevent further dissipation of the assets of the pre-need firm.
In their petition, CAP planholders said the board of directors of CAP and subsidiary/affiliate Comprehensive Annuity Plans and Pension Corp., particularly the Sobrepena family, breached their fiduciary obligations by using funds of the pre-need firm as their "personal piggy bank to bankroll directly and indirectly the operations of their family-owned corporations."
Among these companies they claimed that benefited from the alleged self-dealings by CAP include Fil-Estate Corp., Fil-Estate Development Corp., Camp John Hay Golf Club., Fil-Estate Properties Fil-Estate Management Inc., Fil-Estate Land Inc., Fil-Estate Golf & Development Inc., Fil-Estate Sports Corp., Fil-Estate Infrastructure Inc., CAP General Insurance, CAP Realty, Camp John Hay Golf Club Inc., Metro Rail Transit Corp., Manila Southwoods, Southwoods Eccocentrum, Sherwood Hills Golf & Country Club, and Global Building Systems Inc.
CAP planholders alleged that the company and its trust company "wasted and misapplied the payments made by planholders by purchasing investments and entering into contracts with Sobrepena-affiliated companies allowing illegal and dubious profits to affiliates, its interlocking directors and officers in violation of Sect. 130 of the Corporation Code, the Securities REgulation Code and the Civil Code."
CAP planholders likewise claimed that CAP had channelled some funds to Bank of Commerce allegedly to keep the bank afloat.
They claimed that CAP purchased Bancommerce shares for P815.46 million (approximately P237.28 per share) or at a premium of P137.28 per share or a profit of P471.77 million.
During the time the investment was made, the par value of CAP shares was at P100 per share.
Bancommerce president Raul de Mesa, however, said his bank did not have anything to do with it, pointing out that the investment was, in fact, made by another trustee bank which he refused to identify. "We are not the only trustee bank of CAP and all investment decisions of CAP are submitted to the SEC for approval."
De Mesa also stressed that all investments made by CAP had the consent of the SEC.
He said stockholders of Bancommerce subscribed to the same price offered to CAP.
Nevertheless, Café said CAP is doing everything it can to further beef up its trust fund. He said shareholders of the company increased its capitalization from P300 million to P8 billion.
"We filed with SEC documents covering P6.5 billion worth of assets as new capital which assets shall be developed and made to grow to meet future obligations. We have been paying and still continue paying tuition fees. Funds have been sourced out for the incoming school year," Café said.
From its incorporation in 1980, CAP became the largest pre-need firm. It has a total of 53,000 sales agents of CAP education and pension plans and has a work force of 2,500 employees nationwide for its entire group.