First Holdings hits GSIS for filing criminal case

MANILA, Philippines - First Philippine Holdings Corp. (FPHC), the power generation unit of the Lopez family, has denounced the criminal complaint filed by the Government Service Insurance System (GSIS) against FPHC’s corporate secretary, saying it is “premature and with no legal leg to stand on.”

Last week, the GSIS filed before the Pasig Prosecutor’s Office a complaint against FPHC corporate secretary Enrique Quiason for allegedly violating Sec. 74 of the Corporation Code for refusal to provide all company records and documents relating to the call option agreement the listed holding firm entered into with Metro Pacific Investments Corp. (MPIC) in connection with shares of Manila Electric Co. (Meralco).

Sec. 74 of the Code provides that “any officer or agent of the corporation who shall refuse to allow any director, trustee, stockholder or member of the corporation to examine and copy excerpts from its record or minutes in accordance with the provision of the Code, shall be liable and in addition shall be guilty of offense, punishable under Sec. 144 of the Code.

Quiason said he required from GSIS chief legal counsel Estrella Elamparo a copy of a GSIS board resolution authorizing her request and specifying the reasons thereof. “Unfortunately, Elamparo unjustifiably refused to provide such board resolution, claiming that the GSIS Law Office can act on behalf of GSIS. In fact, the complaint-affidavit filed by Elamparo did not contain such authority,” he said.

Quiason pointed out that without a copy of the resolution of the board of GSIS authorizing Elamparo to examine the records of FPHC as well as stating the specific reasons for the request, he could not bring the matter to FPHC’s board for its consideration.

“We cannot make any presumptions of regularity of your actions specially since this involves a private transaction… FPHC is merely trying to protect the interests of all its shareholders and other stakeholders. It may not be amiss to point out that GSIS had a failed attempt to take over management control of Meralco by obtaining an illegal cease and desist order from the Securities and Exchange Commission,” Quiason said in a letter to Elamparo.

The CDO had attempted to invalidate FPHC’s proxies at the 2008 Meralco annual shareholders’ meeting and to prevent FPHC from exercising its voting rights. This would have caused great and irreparable damage to FPHC and its stockholders. 

“The incident resulted in litigation between GSIS and FPHC including the filing of criminal charges against you and Mr. Winston Garcia before the Ombudsman. Considering these antecedents, FPHC cannot assume that your request is related to a legitimate stockholders’ concern rather than a malicious tool to fish for evidence to bring about nuisance or strike suits (underscoring supplied),” Quiason added.

The agreement include the provision of a P11.2 billion by MPIC to FPHC and for FPHC to grant a 6.7 percent or approximately 74.6 million common shares of Meralco at P300 per share. The call option is exercisable at any time from the date the call option is granted until March 31, 2010.

A call option is a financial contract between a buyer and a seller, wherein the buyer has the option to buy stocks at a specified time in the future.

Together, MPIC and its sister firm, mobile telecommuications company Pilipino Telephone Corp. or Piltel, control 34.7 percent of Meralco. Should MPIC exercise the call option, the group’s total shareholdings in Meralco will hit 41.7 percent or well over the tender offer threshold of 35 percent.