Medical City takeover illegal, says SEC

MANILA, Philippines — The Securities and Exchange Commission (SEC) ruled as illegal the takeover of The Medical City by a group of investors led by Jose Xavier Gonzales and his partner company Viva Holdings, a Singapore-based private equity fund.

In a resolution issued on Nov. 22, a special hearing panel at the SEC said shareholders of Professional Services Inc. (PSI) violated the securities law when “they surreptitiously took over the company behind The Medical City.”

The SEC panel  found  Viva Healthcare Ltd., Viva Holdings (Philippines) Pre. Ltd. and Felicitas Antoinette, Inc. (FAI) guilty of fraudulent acts when they violated numerous provisions of the country’s Securities Regulation Code (SRC), notably those on disclosure and tender offer requirements.

They were found to have violated Section 18 of the SRC.

The provision requires any person who acquires directly or indirectly the beneficial ownership of more than five percent of equity securities to report the same to the issuer, the exchange

where the security is traded and the SEC within 10 days.

The panel held Fountel Corp., alongside Viva Healthcare, Viva Holdings and FAI accountable for violating Rule 19.2.A and 19.12 of the 2003 Amended Implementing Rules and Regulations.

SRC Rule 19.2.A provides that any person, or group of persons acting together, who intends to acquire 35 percent or more of a public company’s equity shares shall disclose such intention and contemporaneously make a tender offer to all shareholders.

“With regard to tender offers, meanwhile, SRC Rule 19.12 describes as fraudulent, deceptive or manipulative the omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading,” the SEC said.

The panel imposed a penalty of P1 million plus P2,000 for each day of continuing violation from Aug. 1, 2013 up to the time that SEC Form 18-A is filed.

Meanwhile, each respondent must pay P1 million plus P2,000 for each continuing violation, from July 31, 2013 to May 15, 2018 for violating SRC Rule 19.2.A, in relation to Rules 19.3.A and 19.3.B.

The hearing panel  imposed the same penalty for the respondents’ violation of SRC Rule 19.12.

On Sept. 6, 2018, the SEC resolved to create the panel after several shareholders, including PSI chief executive officer Alfredo Bengzon questioned the acquisition by the respondents of the company’s majority shares.

Bengzon welcomed the SEC’s decision.

“We are extremely gratified that the SEC has decided in favor of all the legitimate shareholders of The Medical City. As a result of the fraud perpetrated by the Gonzales companies and Viva Holdings, we have suffered significant losses in the value of our investment in The Medical City and more importantly, in our voice to direct the course of this institution, which we have grown over the decades into the country’s largest healthcare network operating under a single brand,” Bengzon said.