SEC: Omidyar donation did not cure Rappler's violation
MANILA, Philippines — In a decision handed down days before the term of President Rodrigo Duterte ends, the Securities and Exchange Commission affirmed its findings on the questions on foreign ownership alleged against Rappler Inc. and Rappler Holdings Corp. (RHC) over its use of financial instruments.
The SEC said the subsequent donation of Omidyar Network of its Philippine Depositary Receipts (ON PDR) — financial instruments that give foreign investors passive economic interest in a Philippine company — did not cure Rappler Inc.’s violation. The regulatory body also said it did not violate Rappler’s right to due process when it resolved the order of the Court of Appeals to evaluate the legal effect of Omidyar Network of all its PDRs to Rappler staff.
The SEC Commission En Banc said in its 12-page order dated June 28:
Wherefore, premises considered, the Commission finds that the Donation did not cure the violation by Rappler Inc. and Rappler Holdings Corporation…. and hereby affirms the administrative penalties imposed in the Decision dated 11 January 2018 declaring void the [ON PDR]…. And revoking the Certificates of Incorporation of Petitioners Rappler, Inc. and Rappler Holdings Corporation.
The SEC then ordered its Company Registration and Monitoring Department to effect the revocation of certificates of incorporation of Rappler Inc. and RHC.
“In the instant case, Rappler and RHC willfully violated the Constitution in relation to PD No. 1018 when they granted Omidyar control through the ON PDRs. The issuance of the ON PDRs was made during the lifetime of Rappler and to further its operations for the purpose, among others, of securing additional funding to make its business global,” the SEC said.
It added: “Considering the seriousness and gravity of the infraction, and that it was no less than the Constitution that was violated, this Commission finds and so holds that the penalty of revocation, which was already meted out against Rappler and RHC in the SEC Decision, should be affirmed and sustained.”
But Rappler lead counsel Francis Lim, in a virtual conference, said they disagree with the SEC ruling and they intend to avail of legal remedies available to them. He added that they will file a Petition for Review before the Court of Appeals.
Omidyar donation
The CA in July 2018 remanded the case to the regulatory body to evaluate the legal effect of Omidyar’s donation. But the SEC, in its order, pointed out that the court’s directive to “evaluate” meant “for the Commission’s independent appreciation and determination of legal effect of the supervening donation, free from the influence of any other person, including Rappler and RHC.”
The regulatory body asserted they could not have violated Rappler and RHC’s right to due process following the directive of the CA. They said the two subjects “were not entitled to participate in the said legal evaluation.”
Lim called this “highly irregular” and said they should have been able to respond.
SEC also pointed out that the waiver being executed during proceedings showed it was “merely an afterthought” and done to make it appear to the SEC and the CA that Omidyar will not exercise control over Rappler. It also found Omiyar’s donation also an afterthought, “carried out to salvage the existence of Rappler and its operations as a mass media entity.”
“In any case, the Waiver did not and will not exculpate Rappler because as held in the 2018 decision, the constitutional provision requiring full and absolute Filipino ownership in a mass media entity was violated the moment the ON PDRs, which granted control to a foreign entity, were issued,” it said.
Finality?
In the SEC ruling, the regulatory body said the 2018 decision of the CA, which revoked Rappler’s business registration, has already attained finality.
It read: “With the issuance by the Supreme Court of a Resolution dated 25 September 2019, declaring the case closed and terminated, the CA forthwith issued a Resolution dated 4 December 2019 therein declaring that its 2018 Decision has attained finality as of 21 March 2019. Consequently, an Entry of Judgement was issued in the instant case.”
But Lim, in the virtual conference, explained that the SEC was referring to the CA decision only.
He asserted that as early as April 2019 — months after the CA upheld its earlier ruling — they filed a Manifestation before the Supreme Court that the appeals court decision cannot become final and executory, pending the SEC review of Omidyar donation effects in the case.
Lim said they opted to wait for the CA decision following the SEC report on Omidyar donation before they can bring matters to the high court.
Attacks on Rappler
The SEC 2018 ruling turned out to be the first in a string of legal challenges to be filed against the media network and its CEO, Maria Ressa.
The high-profile journalist has since been the subject of ten arrest warrants, and seven cases — including five tax-related ones and a cyberlibel conviction under appeal — are still pending in Philippine courts.
Lim said they believe the SEC will not implement the ruling — by, for example, physically locking the office of Rappler — pending the period of their appeal. But he stressed that they have already prepared for the worst case scenario on the matter.
“Our hope is people, and I know the SEC, they are reasonable persons we can disagree on particular issues but at the end of the day the SEC is working for the good of the country,” he said.
Ressa meanwhile asserted: “Absolutely, we will continue to operate business as usual.”
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