The legal dispute can be traced back to the time when ATR Kim Eng chairman Ramon Arnaiz loaned Araneta P157 million in 1999 which was invested in LBC Global Corp. (now known as PHMI Holdings Corp.). Along with this arrangement is an option for LBC to go for an initial public offering or return ATR’s 10-percent investment in the company. In 2004, ATR filed a lawsuit when Araneta’s group refused to return the 10-percent investment of ATR in LBC Global which had amounted to P323.25 million. In retaliation, Araneta filed a case in the Philippines to nullify an agreement he entered into for the acquisition of a pre-need company, alleging that Arnaiz misled him and that ATR mismanaged the trust fund of the pre-need firm. In 2006, a Makati RTC judge junked Araneta’s case and upheld the validity of the contract, saying that Araneta clearly understood the agreement, and took the latter to task for using the court to extricate himself from a bad bargain.
The LBC saga has become the biggest talk of the town in the Filipino community along the San Francisco Bay Area especially with the filing of a lawsuit by ATR in San Mateo County against LBC Holdings USA president Hugo Bonilla and Monica Araneta, daughter of LBC chairman Linggoy Araneta. The lawsuit is part of ATR Kim Eng’s efforts to enforce an earlier decision by a Delaware Court ordering Linggoy Araneta, Bonilla and LBC chief financial officer Liza Berenguer to pay $24.5 million for "waste and breach of fiduciary duty" over the unexplained disappearance of LBC Global Corp. assets. In its ruling, the Delaware Court said Araneta showed an intention to injure ATR, and that it displayed contempt for juridical proceedings when it provided false and incomplete responses to ATR’s demand to scrutinize corporate records. The court also took Berenguer and Bonilla to task for being "paid stooges" who allowed Araneta to defraud ATR.
ATR’s California lawsuit alleges that Bonilla illegally transferred the title of a real property in Wedgewood Drive in Hillsborough, California worth several millions of dollars to Monica Araneta for a mere $100, in an attempt to protect the said property from the Delaware Court’s judgment. It was also reported that Bonilla transferred two other Newark properties to a niece and another relative under suspicious circumstances. On March 16, Bonilla filed for personal bankruptcy with the US bankruptcy court in the Northern district of California. There’s suspicion that Bonilla’s claim of personal bankruptcy is likewise fraudulent since he is only facing one creditor – ATR Kim Eng Financial.
Earlier in January, ATR filed with the Superior Court of California in Alameda County a memorandum opposing the ex-parte application for stay of enforcement proceedings filed by Bonilla. The California Court ruled that a stay would be issued if an undertaking twice the amount of the Delaware judgment, or close to $49 million, was filed with the court to secure the judgment. None was filed however, so no stay had been issued. Since registering the Delaware judgment in California, a series of court orders have been issued to aid ATR in its enforcement efforts, resulting in the attachment of Bonilla’s accounts at Mission National Bank (MNB) amounting to $544,000 – which are now in the possession of the California Sheriff. Two weeks ago, a California Superior Court judge also ordered the officials of LBC USA and MNB to bring documents that would help explain the whereabouts of the stocks and assets of Linggoy Araneta who, according to a testimony by Bonilla, is a shareholder of MNB and its parent company MNB Holdings. Araneta had reportedly transferred his shares to his heirs, and ATR wants to find out if the transfer had been conducted in a deceitful manner.
Being the single biggest legal case involving a Filipino company in memory, this whole episode has caught the attention of the Filipino community in California. ATR lawyers have vowed to pursue this case to the very end. The worst anyone can do is to get entangled with the US justice system. For one, legal fees can become so enormous – with sources telling me the total expenses for both sides could reach up to $5 million. No doubt this high profile court battle will get even uglier. If the criminal case progresses and a conviction is achieved, then once again, the extradition treaty between the United States and the Philippines will be put to a test.