I refer to the dust-up between the minority and majority shareholders in Eastern Telecommunications Philippines, Inc. (ETPI). Not another one between shareholder factions, you say? Don’t we have enough controversies in this fractious country to last us all a lifetime? Well, yes, but as you’ll see, this one presents questions more basic than those issues hogging the headlines.
In the red corner, I mean, in the minority is AGN Philippines, Inc., a wholly-owned subsidiary of Australian Gigahertz Network Inc. (AGNI), which owns 40 percent of the outstanding shares. In the majority is a motley group composed of 30.2 percent representing sequestered shares, 20 percent from the so-called "Africa group" and 10.2 percent of government shares from a compromise deal with Bobby Benedicto.
This 30.2 percent, together with another 20 percent owned by the "Nieto group," constituted a slim but clear majority of the shares. The balance of 9.8 percent is owned by Smart Communications.
The brouhaha began when last May 10th, the majority, represented by three directors in a five-man board, voted to oust the chairman of the board and the president, both AGNI nominees. But this was allegedly no mere musical chairs of top corporate executives. The real reason for this "unceremonious ouster" was to clear the way for the purchase of ETPI shares by a prospective buyer that was unqualified under PCGG policy.
Then it got really ugly. First, AGNI wrote the Australian government about the matter, calling the actions of two appointees of the Presidential Commission on Good Government "morally and politically reprehensible" and warning that these actions "severely jeopardized" the Australian investment and would have "immediate and damaging ramifications for Australia-Philippine relations."
Upon instructions of the Australian Minister of Trade, the Australian Ambassador to the Philippines wrote then Secretary of Trade and Industry Juan Santos stating: "While this is a primarily a commercial matter, AGNI’s claims if correct raise serious concerns about the security of investor’s interest in the Philippines and the impartiality of Philippine government appointees to act in the interests of good governance. I would be grateful if you would examine these claims with a view to ensuring the impartial conduct of the appointees in question."
Two things were wrong in this effort to turn an internal corporate squabble into an international incident: First, the response of the home government wasn’t quite the shot across the bow that AGNI was expecting. Second, the request sent to Secretary Santos to ‘examine these claims" to ensure "the impartial conduct" of the PCGG appointees, was both misdirected and entirely too tentative.
The DTI Secretary isn’t in charge of these matters. Further, if all the Ambassador wanted was to ensure impartial conduct, I can bet the PCGG directors in question will be able to spend hours telling all who care to listen just how impartial and consistent with corporate good governance their actions were.
In fact, the PCCG-appointed directors have already started to do that in media, with charges that the AGNI-backed executives were responsible for over P1 billion in accumulated ETPI losses during their watch. The ousted executives deny that, of course, asserting that during their tenure they were actually able to reduce substantially the losses suffered by ETPI when appointees of the government and majority shareholders were at the helm. I’m sure, though, that an independent audit will determine who’s right, if the parties care to engage a reputable outside auditor to undertake that project.
AGNI also filed a case before the Makati regional trial court asking, among other things, that the ousted Board Chair and President and CEO be reinstated and that ETPI be barred from transferring any of its shares to the prospective buyer. The trial court declined to issue a temporary restraining order, but trial on the merits will be conducted.
In the meantime, AGNI filed a separate petition for the disqualification of one of the PCCG-appointed directors on the ground of prior conviction by the Supreme Court of an offense involving moral turpitude. That director happens to be old friend, fellow governor of the Manila Overseas Press Club and veteran journalist Emil Jurado.
It appears that in the Securities and Exchange Commission’s Code of Good Governance, a person may not sit as board member if he is "finally convicted judicially or administratively of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false oath, perjury or other fraudulent act or transgressions."
In 1995, the AGNI petition alleges, Emil was found guilty by the Supreme Court of contempt of court for certain comments made in his newspaper column regarding a court case between ETPI and Philippine Long Distance Company.
In my view, whether this one instance of contempt of court can be cited as "moral turpitude" is a huge stretch, since turpitude implies depravity, wickedness, base or disgraceful conduct. Moreover, the list of offenses in the SEC code of conduct seems to imply turpitude of the kind found in the fraudulent conduct described therein, none of which Emil was accused of before the Supreme Court. Finally, as far as I know, Emil has been a director of ETPI for many years. Why is his disqualification sought only now?
I must stress I haven’t talked to Emil about this column. Nor have I discussed with either ETPI or AGNI what I’m about to discuss next time. Briefly, I think the reality is that AGNI must realize that its minority position may not, in the absence of any agreement, be enough to get them into top management.
However, the Australians have raised some interesting questions of policy and fundamental government commitments which warrant careful scrutiny not only by a court, but also in any review of the Constitution. This I discuss in our next piece.