It’s a ruling that is bereft of substance and enforcement.
The Securities and Exchange Commission correctly ruled that the takeover of Medical City by the current majority shareholders was illegal and violated the country’s Securities Regulations Code.
But the corporate regulator stopped short of saying that the perpetrators should stay out of the corporate board of Medical City as their action was void ab initio, or of no legal effect from the outset.
The SEC declared that the group, comprised of companies owned by Medical City executive Jose Xavier “Eckie” Gonzales and the Singapore-based Viva Group, employed means that were “manipulative, deceptive and fraudulent” in their efforts “to surreptitiously take over Professional Services Inc. (PSI),” the company that manages the healthcare brand.
The regulator said the group of Gonzales “adroitly circumvented” the SRC provisions specifically aimed at protecting shareholders from hostile takeovers.
The SEC decision was adverse to the Gonzales-Viva group. Yet, the group could be celebrating the ruling as a victory, as the regulator let them off with a mere fine of P44 million plus, which is peanuts compared to the resources of the Viva group and the value of its investment in Medical City.
The Gonzales-Viva group may have scored the initial victory and easily afford the P44-million fine, but its reputation has been sullied after taking over Medical City using methods that the regulatory body declared illegal.
Now, will the group be able to face the hospital’s employees and exert its leadership, tainted as they are by the SEC decision? Will the Medical City’s corps of doctors continue to work under the leadership of a group found by the SEC to have taken over their hospital using fraudulent means?
The public’s interest for a year has been stoked by concerns that the Viva Group, owned by a powerful business group based in Singapore, may have run roughshod over Philippine laws in its efforts to take control of the country’s leading healthcare brand. Gonzales, the trusted nephew of Medical City founder, Dr. Alfredo Bengzon, played a key role in the takeover scheme and further fueled the corporate drama.
The SEC stood its ground against these powerful interests. It identified violations of law and the violators. Is the punishment, however, commensurate to the violations?
More questions
The fines imposed against the Gonzales-Viva group will go to and benefit the SEC. How will the shareholders of the Medical City be compensated then? They suffered damage as a result of the illegal takeover. Their shares were diluted. They lost the ability to raise new capital and the opportunities from the bigger fund.
More importantly, how can a group which has merely paid a fine be allowed to continue control of the organization it has taken over illegally? Will this not set a bad precedent in the business community? Does the payment of a fine “legitimize” what the SEC said was an unlawful takeover?
It would also be interesting to find out how the Eckie Gonzales-Viva Group intend to face suppliers, bankers and other business stakeholders given that the SEC had found them guilty of engaging in fraudulent practices.
A particularly weighty question is how the Ateneo community will respond to the SEC ruling that declared the takeover illegal.
The Philippine Jesuits appear to have a significant shareholding in the Medical City. The Medical City is the teaching hospital of the Ateneo School of Medicine and Public Health.
Meanwhile, the incoming president of the Ateneo de Manila, Father Roberto Yap, SJ, the current president of Xavier University-Ateneo de Cagayan, was among those who provided compelling testimony at the SEC against the Eckie Gonzales-Viva Group.
It turns out that Father Bobby was among those who were booted out by the Eckie Gonzales-Viva Group from the Medical City board after they took over.
Father Bobby and the rest of the Ad Majorem Dei Gloriam community may be experiencing a moral dilemma of their own. After all, how can they bring greater glory to God when they have to deal with a group who controls the hospital, which Ateneo partly owns and uses to train future doctors? Would not the Ateneo compromise its own long held traditions of upholding truth and justice by going on a modus vivendi with this group?
There will be continuing questions and debate on how and why the SEC allowed the Eckie Gonzales-Viva Group to escape with a mere slap on the wrist.
E-mail: rayenano@yahoo.com or extrastory2000@gmail.com or business@manilastandard.net
