Investments are always welcomed in the Philippines as long as they are done aboveboard and transparent. But if they are concealed and manipulative to the detriment of another shareholder, the investment is a fraud and plainly illegal.
The Securities and Exchange Commission in a recent ruling found out that corporate laws were violated in the ongoing boardroom row at The Medical City. A group of investors identified with a Singaporean conglomerate, according to the corporate watchdog, committed violations of the Securities Regulation Code that resulted in a hostile takeover of the hospital facility.
The SEC resolution highlighted the method of a Singaporean investor claiming to have acquired a majority stake in Medical City, in partnership with entities identified with the erstwhile treasurer of the beleaguered institution.
The SEC has found the Singaporean investment firm Viva Holdings Inc. and its local partner, Jose Xavier Gonzales
and his firms, in violation of at least three major provisions of the Securities Regulation Code.
The schemes used by the Singaporean firm and Gonzales, says the SEC, “were concealed” from the board of directors and shareholders of Medical City.
“Through such concealment, the respondents misrepresented their independence from one another” to acquire the majority stake. The SEC noted that the act prejudiced “the unsuspecting shareholders whose share value and voting power have declined” as a result of the scheme.
The SEC said the Viva-Gonzales group violated provisions of the Code which expressly prohibited “fraudulent, deceptive or manipulative act or practices in connection with any tender offer.”
At the heart of the SEC probe of the The Medical City mess are two agreements signed by Viva Holdings and Gonzales’ local firms. These are the shareholder covenant that ties the two groups tightly together, and a questionable $38-million loan agreement, the proceeds of which were supposedly used by the Gonzales group to acquire majority shares of Professional Services Inc., which owns and operates The Medical City.
The SEC is currently looking into the terms of the loan to determine if Viva Holdings is actually the so-called ultimate “beneficial owner” of the shares. The agency in particular is reviewing if laws established by the Securities Regulation Code to protect minority shareholders were violated in the acquisition of a majority stake of corporation.
Were “fraudulent, deceptive and manipulative acts” indeed used by the Viva and Gonzales partnership,as concluded by the SEC, in their bid to gain control of a revered institution like the Medical City?
The SEC gave the Viva-Gonzales’ group a deadline to answer why they should not be held liable for the violations they committed. The group said it would in time prove the SEC wrong.
The SEC’s role has become crucial at this time when the country’s hospital industry is looking for major growth and expansion. Huge capital investments are needed to modernize the country’s hospital sector.
Philippine private hospitals are moving fast to help the national government cope with the demand for more hospital beds. The World Health Organization is calling for an infrastructure in health services that provides two hospital beds for every 1,000 population. The current ratio in the Philippines is 0.8 hospital bed for every 1,000 Filipinos.
Meeting the WHO standards is not being shouldered by the government alone. If that were so, it will take 30 years more before the Philippines can get any closer to the ideal ratio. But local and foreign investors have started bridging the deficit in the healthcare sector.
Singapore’s sovereign wealth fund GIC, formerly known as the Government Investment Corporation of Singapore, is one aggressive investor in the healthcare sector with over $100 billion in investible funds.
GIC poured in some $84 million of those funds into the country’s hospital industry through Metro Pacific Investment Corp.’s healthcare unit, Neptuna Stroika Holdings Inc. The investment led to the expansion of well-known top hospital brands, including Makati Medical Center and Asian Hospital and Medical Center.
The two hospitals join Medical City and St. Luke’s hospitals in an exclusive list of medical institutions accredited by JCI, an international rating organization, with the highest standards of excellence.
GIC’s entry is evidence that investors that come into the country with good intentions and in accordance with established rules can contribute well to the growth of the hospital industry.
E-mail: [email protected] or [email protected] or [email protected]