SEC drops complaint against Flavier, two CAP directors

The Securities and Exchange Commission (SEC) has dropped the criminal complaint it filed against Sen. Juan Flavier and two other directors of College Assurance Plans Phils. Inc. (CAP).

In a supplemental complaint-affidavit filed with the Department of Justice (DOJ) late Wednesday, SEC said it is excluding Flavier, Eusebio Tanco of STI and Rafael Evangelista as respondents in a criminal complaint against CAP directors.

"In view of the investigation conducted by the Compliance and Enforcement Department (CED) and upon proper evaluation of the affidavits executed by respondents, SEC has determined that their inclusion in the complaint-affidavit is not essential," SEC said.

The SEC last month filed before the DOJ a complaint against CAP directors for unauthorized sale of pre-need plans from June to August 2004 in violation of the Securities Regulations Code.

In its complaint, the SEC said that directors of corporations, being responsible for the management of the corporation, have the obligation and legal duty to ensure that the company is operating within the bounds of law.

Recommended for criminal prosecution along with Flavier, Tanco and Evangelista were CAP chairman Alejandro Roces, CAP president and CEO Enrique Sobrepeña Jr., CAP treasurer James Marsh Thomson and CAP directors Coronado Munasque, Ernesto Espaldon, Robert John Sobrepeña Jr., William Russel Sobrepeña, Romulo Espaldon, Gillian Akiko Thomson and Ma. Romela Bengzon.

In his affidavit, Flavier said he was never involved in the day-to-day operations of CAP as his job as senator prevented him from participating in the management of the pre-need firm’s operations.

Flavier, who served as director of CAP from January 2002 to January 2005, said he has no shareholdings in CAP except for the nominal share assigned to him in order to comply with the legal requirement that a director of a corporation must have at least one share of stock registered in his name.

In discharging his duties as director of CAP, Flavier said he merely relied on the information given by CAP management or disclosed during meetings of the board of directors.

"I can state with moral certainty that in all the CAP board meetings I attended, the alleged unauthorized issuance and sale of pre-need plans from June to August 2004 was never discussed nor brought up. Similarly, the CAP officers did not bring to my attention nor to the attention of the board of directors the fact that the SEC has restrained CAP from selling additional plans," Flavier said.

Flavier noted that in late 2003, the CAP board approved a recovery plan aimed at improving its liquidity by increasing its capital and enhancing the value of its trust assets to meet the actuarial reserve liability. This recovery plan, however, was never implemented, forcing Flavier to resign as director of CAP in January 2005.

"In view of the failure of CAP management to pursue and implement the CAP recovery plan and considering my strong reservations on the credibility and viability of the various financial proposals being discussed in the board, I tendered my irrevocable resignation as director of CAP," Flavier said.

Tanco likewise denied having participated in the day-to-day operations of CAP.