It is not over

MANILA, Philippines – The Supreme Court has dismissed the petition of the Government Service Insurance System (GSIS) to uphold a Securities and Exchange Commission (SEC) cease-and-desist order on the solicitation of proxies in last year’s annual stockholders’ meeting of the Manila Electric Co. (Meralco).

According to the SC’s second division, the regular courts and not the SEC should decide on questions over the solicitation of proxies for the election of corporate directors.

The SC ruling resolved a question of law. It did not however resolve the lingering question as to why certain SEC officials allowed themselves to be used in the bid to wrest control of Meralco from the Lopezes.

The case is that people like SEC Commissioner Jesus Martinez, who issued the CDO, should have been brought to justice not only over his role in the Meralco-GSIS row but also over his alleged involvement in the Legacy case.

Even the SC recognized the fact that the controversy involving the personalities that may have taken part in the Meralco row has not been settled. “It is our resolute inclination that this case, which raises interesting questions of law, be decided solely on the merits, without regard to the personalities involved or the well-reported drama preceding the petition,” the SC stated.

With its rejection of SEC’s jurisdiction over the GSIS complaint, the SC ruled that it only followed that the CDO and the show cause orders issued by the SEC were invalid.

The SC agreed with the Court of Appeals that the CDO was issued without due process and for an indefinite period and was signed by only one of five SEC commissioners.

“Simply put, Commissioner (Jesus) Martinez is not the SEC. He alone does not speak for and in behalf of the SEC,” the SC said.

“The SEC acts through a five-person body, and the five members of the commission each has one vote to cast in every deliberation concerning a case or any incident therein that is subject to the jurisdiction of the SEC,” the high tribunal pointed out.

The now retired Martinez has been implicated in another controversy – the Legacy scam. Should his liability as far as the Meralco and Legacy controversies be limited to the non-payment of his retirement benefits? He shouldn’t be allowed to go scot-free that easily.

X’mas just around the corner

The government has found itself in the middle of another controversy, this time involving the unsolicited proposal of a Swiss company for the setting up of a strip stamp system for the cigarette manufacturing industry. These tamper-proof revenue stamps will be placed on cigarette packs to make sure that manufacturers have paid the appropriate taxes.

The BIR pre-bidding and awards committee (PBAC) has endorsed the build-operate-transfer proposal of SICPA Product Security SE despite the fact the latter complied with only 35 out of the 83 technical requirements set by the BIR itself for the project. This was, in fact, contained in the committee findings.

The committee found out that SICPA has a paid-up capital of 1.3 million Swiss francs or only about P54 million or less than three percent of the P2 billion needed to initially implement the project. The project cost may reach P13.3 billion in seven years.

The committee ‘temporarily’ declared SICPA as not “possessing the financial capacity to sustain the financing of the project.” The panel fears SICPA may be overleveraged or has more than the acceptable amount of debts in its books than it has capital. Inspite of this, it endorsed the project.

The National Economic Development Authority wrote the BIR to remind it of the rule that a company intending to do business with the government must maintain a debt-to-equity ratio of 75:25 “to avoid overleveraging and to ensure that the project proponent’s financial capacity for debt repayment or other investment activities will not be at stake.”

Also, under the SICPA proposal, cigarette makers are to pay more than P14 billion over seven years for the strip stamps and other services.   There is also a “take or pay” provision wherein the government will deposit in escrow a specific amount equivalent to the price of more than two million strip stamps. If manufacturers do not use them all, the difference will be paid out from the escrowed amount. This is virtually a form of government guarantee not allowed by the BOT law.

Alarmed by all these, the House ways and means committee, led by Rep. Exequiel Javier, is set to investigate the SICPA proposal. Javier himself filed the resolution calling for the probe.

Finance Undersecretary Gil Beltran has said a project such as that of SICPA should be subjected to public bidding. But after an alleged dressing down from Finance Secretary Gary Teves, Beltran clarified that what he meant was the proposal should be subjected to the so-called “Swiss challenge.” Under the BOT law, an unsolicited proposal before it is accepted should be opened to other interested bidders. If another party comes up with a better bid, the original proponent will be allowed to match the offer.

The Philippine Tobacco Industry, the umbrella organization of all cigarette manufacturers, is an observer in the BIR PBAC on the SICPA. However, the PTI has reportedly never been invited to participate nor informed of any meetings of the PBAC. When PTI requested for an official copy of the SICPA proposal, they were not given one, citing “confidentiality.”

Meanwhile, the NEDA Investment Coordinating Committee said they will look into the financial capability of SICPA first before the DOF and BIR can act on the unsolicited proposal.

At the moment, PBAC is negotiating with SICPA representatives on the final proposal. Why should it negotiate without clearance first from NEDA on the company’s financial capability?

Does this have anything to do with reports that a ranking Philippine official has already assured SICPA that it would be awarded the project?

They say there is a law mandating government to use fool-proof stamps on cigarette and liquor products that has not been enforced for the last 12 years. So why the rush?

It’s beginning to look like Christmas.

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