MANILA, Philippines — Former Health Secretary Alfredo Bengzon's attempt to regain control of The Medical City (TMC) made headway after corporate regulators announced Wednesday the nullification of majority company shares acquired by his nemeses through "fraud."
In a decision dated August 13, the Securities and Exchange Commission (SEC) sitting en banc affirmed the resolution issued by a special hearing panel that penalized a group of shareholders for "violating the mandatory tender offer rules and committing fraud" in taking over Professional Services Inc. (PSI), the operator of TMC.
The shareholders that were sanctioned were Viva Holdings (Philippines) Pre. Ltd., Viva Healthcare Limited, Fountel Corporation and Felicitas Antoinette, Inc. (FAI). Fountel and FAI are controlled by the family of Jose Xavier Gonzales, Bengzon's nephew and director of PSI.
In its decision, the SEC en banc revised the panel's original resolution, which only penalized Gonzales' group but fell short of deciding on their purchase of additional company shares. The original resolution also failed to resolve the issues surrounding the 2018 stockholders' meeting that led to Bengzon's ouster as TMC's chief executive.
The "modified" resolution now declares "null and void with immediate effect" all shares acquired by Gonzales and other shareholders in question. Once the nullification is completed, the SEC ordered its general counsel "to immediately resolve the case" involving the controversial 2018 stockholders' meeting.
'Tainted with illegality and fraud'
The battle to control TMC, one of the premier hospitals in the country, erupted after Bengzon questioned the legality of the September 2018 stockholders' meeting that saw his removal as CEO and the election of Gonzales as chairman of the board. The newly elected officers picked Eugenio Jose Ramos to replace Bengzon.
Bengzon then rejected the results of the election and accused Gonzales and his group of illegaly acquiring over 50% shares and of violating several corporate regulations for their failure to file proper disclosures and make a tender offer.
The former health chief's nephew then ran to a Pasig court to secure a temporary restraining order. Bengzon sought to block the order by going to the Court of Appeals (CA), which rejected his plea and ruled that Bengzon can no longer occupy his post in a holdover capacity since he was already replaced.
It is unclear how the SEC's decision will affect the CA's ruling on the same case. Gonzales' group, however, may still ask the appellate court to reverse the SEC's decision.
According to the SEC, Gonzales' group managed to increase their shareholdings by entering into a cooperation and shareholders agreement (CSA) and subscribing to PSI's capital stock increases. The directors and other shareholders of PSI only learned about the CSA in 2017, when Ayala Healthcare Holdings Inc. failed to acquire shares in the company.
"By doing so, the CSA Parties secured for themselves the opportunity of subscribing from the increase in capital/unissued stock or from the outstanding capital stock of PSI, protected such acquisitions, and used the same to their advantage by asserting that they were exempt," the SEC said.
"The subscription contracts, deeds of assignments and deeds of sale which the CSA Parties executed and entered into to effect such acquisitions were thus tainted with illegality and fraud for which reason," it added.