Lawyer hits SEC rules on foreign ownership, wants PLDT probed anew

A former lawyer of ousted Chief Justice Renato Corona on Monday contested before the Supreme Court the guidelines on foreign ownership set by the Securities and Exchange Commission (SEC) and called doe a re-investigation of the Philippine Long Distance Telephone Company (PLDT) equity structure.

 

In a 26-page petition for certiorari, lawyer Jose "Judd" Roy III alleged that Section 2 of the SEC Memorandum Circular No. 8 Series of 2013 was "tailor-made to accommodate the scheme of PLDT for conforming with the Constitution."

 

Roy claimed the SEC circular allowed PLDT to amend its articles of incorporation so it may issue preferred voting shares then sell the stocks to a "non-complying entity" called BTF Holdings Inc. This, the petition noted, would address the foreign ownership limits in public utilities as set under Section 11 of Article XII of the Philippine Constitution.

 

"How can a non-complying corporation like PLDT with about 60 percent foreign capital, incorporate a wholly-owned holding company to buy more equity in PLDT, and now claim that the purchase is a purely Filipino equity participation?” Roy noted in his petition.

 

Since the petition was already at the Supreme Court, SEC chairperson Teresita Herbosa declined to comment on the issue. "I haven't read the petition fully. And since it's already filed, it would not be prudent to discuss issues," she said in a text message to GMA News Online.

 

"I can only say petition disputes MC8 (Memorandum Circular No. 8) for not being in accord with Gamboa resolution," Herbosa added.

 

Only foreign voting stock has the authority to approve a decision of a company with 60 percent foreign equity to "allocate hundreds of millions to buy additional equity," Roy said.

 

"Clearly, Filipinos are not in effective control of corporations such as the BTF Holdings Inc.," he said.

 

PLDT head of public affairs Ramon Isberto said their lawyers have yet to study the petition. "PLDT is fully compliant with the Gamboa decision of the Supreme Court and the SEC rule with respect to foreign ownership. We will study the petition and respond in due course," he said.

 

The "unconstitutional use" of the PLDT Beneficial Trust Fund, which Roy said was "effectively controlled by foreigners," to purchase the 150 million voting preferred shares of PLDT "should not be ignored.

 

"Our key concern here is to ensure an abiding respect for our Constitution and the right to develop an independent national economy effectively controlled by the Filipinos," the petitioner added.

Declare PLDT BTF as non-PHL national

 

Roy asked the SC to declare the PLDT Beneficial Trust Fund as a non-Philippine “... national and that any corporation in which it owns more than 60 percent of the outstanding capital stock should also be declared as a foreign corporation."

 

The SC should direct the SEC to re-investigate PLDT and determine if the telco giant violated Section 11, Article XII of the Constitution, which sets foreign ownership of a company at a maximum of 40 percent of the capital, according to the petition.

 

"The SEC should correspondingly be ordered to issue new guidelines regarding the determination of compliance with Section 11, Article XII of the Constitution in accordance with the Gamboa Cases, with warning that any deviation from the said decision will be treated as contempt of court," Roy said.

 

In the Gamboa case, the high court  in June 2011 defined the term "capital" under the Constitution as limited to foreign ownership of domestic public utilities to 40 percent.

 

The court said the SEC should use only common voting shares in assessing the capital stock of the firm to determine the level of foreign ownership in PLDT. 

 

This would mean that 64 percent of PLDT is owned by foreigners, in violation of the 40-percent limit under the Foreign Investments Act of 1991.

 

A month after the SC ruling, in July 2011, PLDT filed a motion asking the high court to reconsider the decision, prompting the high court to conduct oral arguments in Baguio in April 

 

Roy was a defense lawyer for Corona during the latter's impeachment trial last year. It was Corona who had earlier expressed fears that the ruling in the Gamboa case would trigger "possible economic repercussions." 

 

In the petition, Roy noted, "We are not against foreign direct investments. We just see an opportunity here to set aright the import, interpretation and most importantly, the implementation of the constitutional directives.

 

"We want to strengthen the rules on foreign investments to attract the type of investors that bring real and durable development. We aim for a regulatory regime that recognizes the need to protect an independent national economy effectively controlled by Filipinos," he added. — With a report by Danessa Rivera/VS, GMA News