Equitable PCI Bank defends Romulo nomination

Denying any wrongdoing, Equitable PCI Bank said the instances of disqualification of an independent director do not apply to the nomination and appointment of former Foreign Affairs Secretary Roberto R. Romulo.

This was in response to the Securities and Exchange Commission (SEC) ruling disqualifying Romulo as independent director of the bank due to a provision in the Securities Regulation Code (SRC) that states that the independent director must not be an officer or employee of the corporation they serve, as well as any affiliate, subsidiary or related company thereof.

Romulo is chairman and director of Equicom Systems Management Inc. (ESMI), a company majority owned by Equitable Development Corp., which is a substantial shareholder of EPCI Bank.

An independent director is defined under the SRC as someone independent of management and free from any business or other relationship which could reasonably be perceived to materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director.

The independent director should not be related to any director, officer or substantial shareholder of the covered company, any of its related companies or any of its substantial shareholders. He must not also be employed in any executive capacity by the covered company, any of its related companies and/or by any of its substantial shareholders within the last five years.

In a letter to the SEC, EPCI Bank corporate secretary Nilo T. Divina said ESMI is not a subsidiary of the bank and neither is it a related company of the bank as defined in the SRC.

"For the record, ESMI is majority-owned by Equitable Computer Services Inc. On the other hand, Equicom is not majority-owned by Equitable Development Corp. but by Mr. Antonio Go who, as the records will bear out, is not even a substantial shareholder of the bank. Thus, it cannot be said that Romulo is or has been a director or officer of a related company of the bank or any of its substantial shareholders," Divina said.

"Even assuming arguendo that EDC is the majority shareholder of Equicom as has been incorrectly stated in the SEC letter, the fact that corporation A has substantial stockholders who hold majority stake in another substantial shareholder which in turn holds majority stake in another company which itself owns majority shareholdings in corporation E does not make corporation A a related company of corporation E within the purview of SRC Rule 38.1."

"Be that as it may, even with the cited affiliations of Mr. Romulo with ESMI, such alone could not have reasonably substantiated a perception of partiality or material interference in independent judgment. Fairness dictates that surrounding circumstances ought to be considered. It is a known fact that as chairman of the bank’s audit committee, Mr. Romulo has taken the bank’s management to task in several major issues," Divina further said.

Divina pointed out that Romulo, in many instances, has shown tenacity and independence of judgement with respect to major issues involving the bank.

"Precisely the categorical enumeration of the disqualification grounds reflects the very intention of the crafters of the SRC to provide objectively solid and clear standards for disqualifying an independent director. To rule otherwise is to dangerously leave the matter of qualifying or disqualifying an independent director to very subjective and hazily set guidelines," Divina said.

The SEC is now studying the possibility of imposing administrative and criminal charges against the bank and its directors for incomplete disclosure of information relating to Romulo’s qualification in violation of the SRC and regulations of the Revised Penal Code.

GSIS president and general manager Winston Garcia earlier filed criminal charges against five officials of EPCI Bank for allegedly conspiring to have Romulo elected as an "independent director" of the bank, knowing his lack of qualifications, and withholding the information from the bank’s stockholders, other directors and the bank’s nomination committee.

Garcia said such scheme was aimed at preserving the artificial majority that the Go family has in the board of directors of the bank to the prejudice of minority shareholders, including the GSIS and Social Security System who were all deprived of their right to have a legitimate and qualified independent director in the board.

Romulo is the second independent director candidate disqualified by the SEC due to a SRC prohibition. Just last week, the SEC barred former environment and natural resources secretary Fulgencio Factoran for being a director of PCI Leasing and Finance Corp., which is a wholly owned subsidiary of EPCI Bank.

The GSIS is seeking two board seats in the EPCI Bank board to protect the interest of the 1.5 million members of the GSIS including those of the SSS. Together they hold more than 40 percent of the bank’s stockholdings.

Garcia claimed that the bank deprived the GSIS of one of its two representatives in the board, replacing one of them with an "independent" director beholden to the Go family.

Romulo earlier withdrew his name from nomination as independent director of EPCI Bank due to the brewing controversy on his appointment.

"I made this decision in light of all the acrimony and abusive propaganda that have been generated in the lead-up to Tuesday’s Annual General Meeting, because I believe it is no longer possible for me to serve prospectively as an independent director and stay silent about what is taking place at the same time.

"By taking myself out of the nomination process, I hope to restore some sanity and fairness to the voting for directors and the determination of who should lead EPCIB this coming year. In my two years as independent director, I believe I have served ably and responsibly the duties reposed in me. The excellent performance of the Bank these past two years testify to its high quality of good governance," Romulo said.