From boom to bust

The arrest of now-resigned (some quarters insist the more apt description is “forced-to-resign) AG&P chairman Joseph “Joe” Sigelman a couple of days after New Year certainly came as a big surprise to the Filipino business community. AG&P happens to be one of the biggest modular construction and fabrication companies in Southeast Asia with over 5,000 employees providing asset and support services for oil and gas, mining, power and construction sectors.

Sigelman – who graduated with honors from Princeton and has quite a string of business awards and accolades under his belt – came off as an iconic personality of sorts when he took over the company after it was sold by DMCI in 2011 and made it profitable. In June last year, AG&P issued over $91 million in debt notes to finance its expansion in light of the growing global demand for modularization across offshore oil, mining, power and civil infrastructure projects, with the BPI, Land bank and the DBP underwriting the massive fundraising by the industrial company.

As it turns out, the boom has turned to bust with Sigelman arrested by the FBI for allegedly bribing government officials in Colombia in violation of the Foreign Corrupt Practices Act (FCPA). Those who bought into the capital line offering of AG&P -- impressed no doubt by the remarkable growth of the company with Sigelman at the helm – are now worried that the case could jeopardize their investment, like Anscor which invested an additional $40 million in shares, the Ortigas Group and Tony Olbes also invested millions of dollars worth into the initial offering. Changes have since been made at AG&P with Cesar Buenaventura replacing Sigelman, with the company clarifying that they are not a party to the legal proceedings in the US.

 Before AG&P, the 42-year-old Sigelman was the CEO of PetroTiger, an oil and gas company based in the British Virgin Islands with operations in Colombia. Sigelman and two others are accused of bribing Colombian officials to facilitate approval for an oil contract worth $39.6 million. Sigelman and cohorts are also accused of drawing kickbacks by negotiating a higher purchase price for a company acquired by PetroTiger, with the kickback allegedly deposited to Sigelman’s Philippine account.

The FCPA bars American companies and individuals from paying kickbacks and offering bribes to secure business in foreign countries. The US DOJ has been vigorously pursuing investigations, working with the US Securities and Exchange Commission to spot “red flags” like vague service contracts and bank transactions to individuals who are not related to a business especially if the amounts are higher than normally charged for a particular work or service. Sources say the DOJ has its hands full with 150 investigations that include big companies. A few days ago, a subsidiary of New York-based Alcoa, a leading aluminum producer, pleaded guilty to violating the FCPA and will pay a total of $384 million in fines – the fifth largest FCPA settlement to date – for bribing Bahraini officials, including members of the royal family to obtain long-term aluminum supply contracts with the prices marked up. The payoff was reportedly made through a London middleman with the amounts deposited to offshore accounts in Switzerland, Liechtenstein and Luxembourg.  

Slow start

The market debut of Top Frontier Investment Holdings – the majority shareholder of San Miguel Corp. with over 66-percent stake – did not go as well as expected, with Ramon Ang’s (RSA) initial price offer of P178 per share closing at P98.95 per share or a 44-percent drop. Apparently, investors were a bit cautious about the decline in the shares of San Miguel which is saddled with an $18-billion debt.

According to an inside analyst, the first offering normally has ups and downs, but other analysts maintain that the ups or downs are usually not more than 10 percent. But this one with Top Frontier is almost a 50-percent drop, making a lot of investors wary and doubtful about where this is all going.

Ang, the perennial optimist, is unfazed, saying investors are just confused and that the “astute” ones will eventually make money. San Miguel is continuing to look at other assets to acquire like mining firms, although the company has been known to buy and then sell assets – making investors wonder what the endgame is.

Reverse discrimination

An expat (whose identity we will withhold) emailed us in reaction to our Sunday column on the international goodwill shown to the victims of Typhoon Yolanda, saying he, too, has a lot of good feelings about Filipinos. However, he laments the “discrimination” that he and other foreign residents have been experiencing from the Philippine government. While a Filipino green cardholder in the US has the same rights as that of an American citizen except for the right to vote during elections, American legal residents in the Philippines are discriminated against. Aside from the fact that they cannot own property and have to buy it under their spouse’s name, government employees render service to these expats in a begrudging manner and give them the runaround, expecting an under-the-table incentive to do their work.

“We have brought millions of pesos into the Philippines over the years we have lived here…we have paid our taxes, purchased goods, contributed to charities, provided employment and more, and yet we are discriminated against constantly in many subtle and not-so-subtle ways,” he said, adding that this kind of discrimination shown by government employees could negate all the international goodwill shown to Filipinos.

Spy tidbit

Mike Toledo of the MVP group told us PLDT has completed installing over 150 kilometers of submarine fiber optic cables worth P400 million to link earthquake-hit Bohol with major network centers in Visayas and Mindanao. This will support tourism, BPO hubs and small and medium scale entrepreneurs, he said. 

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