Medical City is mired in disruptive legal row

The battle for control of The Medical City is heating up, with the Securities and Exchange Commission and a Pasig trial court heading for a collision course.

A group led by Singapore-based financial services and retail conglomerate Clermont and Medical City executive Jose Xavier “Eckie” Gonzales claimed a “legal victory” at the Regional Trial Court of Pasig after securing a preliminary injunction against the group of Medical City investors led by Dr. Alfredo Bengzon.

Clermont, whose origin appears to be further down the southern hemisphere (Its founder, Richard Clermont, is a New Zealander), is joined in the legal dispute by Gonzales whose interest is represented by Fountel Inc., a locally-registered company. 

Gonzales was a former executive of the Benpres Holdings Corp. (now Lopez Holdings Corp.) and interestingly himself a Bengzon on the mother-side.

Gonzales himself, according to sources, introduced Clermont to Bengzon sometime in 2013. Medical City at that time was raising equity to fund expansions and Clermont’s entry was, thus, a welcome development.

But the sources said Dr. Bengzon realized shortly that the Clermont-backed group—which now claims to have a 54-percent majority of the hospital—did not fully disclose its takeover intentions, prompting the former health secretary to file a complaint with the SEC.

The court injunction appears to have given the Clermont-backed group control of the hospital but its hold seems shaky. For one, the SEC has started a full-blown investigation of the shares acquired from management company Professional Services Inc., which  runs the hospital.  The corporate watchdog is set to rule on the validity of the share sale.

The Clermont-backed group may have to contend with certain legal questions in the aftermath of the Pasig court-issued injunction. Legal circles are confused over the court order as it may have put the court and the SEC on a direct collision course.

Did the Pasig court deliberately ignore the ongoing probe of the SEC panel on the validity of the shares of the takeover group? One lawyer noted that the SEC instructed both parties to hold on to the status quo until it had ruled on the validity of the shares held by the Clermont and Gonzales group. 

More legal questions, however, are surfacing. Did the TRO and injunction implicitly “recognize” the validity of the majority stake held by the Clermont-backed group in Medical City in gaining control of the hospital’s operations? Legal pundits noted that the power and authority to establish such ownership legitimacy was in the hands of the SEC and that the TRO and injunction might have undermined the SEC. 

Complicating the legal situation is the observation that the Clermont group which obtained the TRO from the Pasig Court has yet to establish a legal standing to secure such an order. They must show a clear legal right and standing to obtain the order.

Other issues are complicating the legal tussle. A source said the Clermont alliance might not be as solid as the group wanted it to be. Another group of investors appears to have distanced itself from the alliance. Lombard Investments claimed that it was “not a partner of nor otherwise affiliated with the Fountel/Clermont group.”

Two of the Clermont group’s nominee to the “new” Medical City board had refused to accept the board seats. Dr. Dan Alonzo and Dr. Dodie Alfonso said they had “withdrawn” their participation in the new board because they respected the SEC “status quo” order per the advice of their legal counsel.

The two doctors also said they “believe in reforms” but stressed they wanted the reforms “done the right way.” They appear to be in the same boat as the SEC, which is now investigating if the modicum of the take over at Medical City was indeed done “the right way.”

Open access

Transparency is the buzzword in the telecommunications sector. Senator Bam Aquino of the Senate Committee on Science and  Technology is pushing for the passage of the Senate Bill No. 1763, or the Open  Access in Data Transmission, to solve the issue “that has been a thorn on the side of many Filipinos for years.”

The bill if passed is expected to facilitate the entry of more players into the  different segments of the telecommunications and data transmission  industry from network infrastructure to multiple services operations.

The Senate is leading the country in leveling up broadband competitiveness in the global marketplace by transforming the heretofore “vertically integrated single network  into a decentralized, distributed setting where services in different segments can be provided by different entities,” according to bill co-author Senator Sherwin Gatchalian.

One of the earliest and most urgent application of the ‘Open   Access Model’ is in the TowerCo program of the Department of Information and Communications Technology in preparation for the selection of a third player.

An ‘Open Access Model’ is meant to correct the laggard state of   the Philippines’ internet connectivity, service delivery and cost expenditures by the sharing among different players of a common,  physical infrastructure or tower.  

The ‘Open Access Model’ in the Philippines could hasten the build-up of tower infrastructure network  through a democratization of the policy to open up the TowerCo concept to all those interested to participate, and not narrowing it down to just two  so-called independent players.

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Topics: The Medical City , Securities and Exchange Commission , Pasig trial court , Clermont
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