Dominguez: Rappler case not about press freedom

DAVAO CITY — What happened to online news outfit Rappler is not about press freedom but about violating the rights of Filipinos from undue influence by foreign media, according to Finance Secretary Carlos Dominguez III.

“(Rappler people) were the ones who violated the rights of the Filipinos to be protected from foreign media,” Dominguez said during the annual homecoming of the Ateneo de Davao University High School Class of 1961 the other night at the Marco Polo Hotel.

Barely two weeks ago, the Securities and Exchange Commission (SEC) revoked Rappler’s license to do business, a decision that covers both the parent company Rappler Holdings Corp. and Rappler Inc., the media entity itself.

In canceling Rappler’s registration through a 29-page decision dated Jan. 11, the SEC said the company used “deception” to circumvent the constitutional provision mandating 100-percent Filipino ownership of mass media, by accepting over $1 million (around P50 million) from a foreign investor in Philippine depository receipts (PDRs).

Foreign entities are allowed to buy into private corporations for financial returns, without exercising any control in the company through PDRs as financial instruments.

Dominguez said the law mandating 100-percent Filipino ownership of mass media is meant to protect Filipinos from the influence of foreign media.

“Why did the framers put that in the Constitution? That is to protect the Filipinos,” Dominguez emphasized.

The SEC also referred to the Department of Justice for appropriate action after it canceled Rappler’s certificate of incorporation.

The SEC ruling was signed by chairperson Teresita Herbosa, commissioners Antonieta Ibe, Ephyro Luis Amatong and Emilio Aquino while the fourth commissioner, Blas James Viterbo, did not take part in the final decision.

The SEC stressed that Rappler was liable for violating SEC rules by engaging in a fraudulent transaction and circumventing constitutional restrictions on foreign ownership.

The SEC accused Rappler of having “intentionally created an elaborate scheme” to justify the receipt of over $1 million from foreign investor Omidyar Network (ON) which is owned by eBay founder Pierre Omidyar.

The SEC alleged that Rappler is a “mass media entity that sold control to foreigners,” and it undertook a “deceptive scheme to circumvent the Constitution” – and it did so even if the Constitution prohibits foreign ownership in Philippine media institutions.

Meanwhile, Rappler claimed it is owned and managed by Filipinos who founded the news website in 2012, led by journalist Maria Ressa.

Rappler has said it would question the decision of the SEC before the Supreme Court.

SEC ready to defend decision

The SEC, however, said it is ready to defend in court its decision against Rappler, believing it can easily thwart whatever legal argument to be raised by Rappler’s lawyers.

In an interview Friday night on the sidelines of the Annual Reception for the Banking Community at the Bangko Sentral ng Pilipinas, SEC chair Herbosa said the law is very clear.

“The answers are all found in the decision… Just focus on the provision which requires prior approval of Omidyar on practically all major corporate actions,” Herbosa said.

Rappler legal counsel Francis Lim, a known corporate lawyer, however, said that if there was indeed a violation, Rappler was not given time to cure it.

“The penalty is too severe,” he said.

But SEC lawyers said the penalty of cancelation of license is what was stated in Presidential Decree 1018 or the Mass Media Law.

The SEC said Rappler violated the Constitution because where mass media is concerned, no control whatsoever may be granted to foreign investors.

“One hundred-percent Filipino control means zero foreign control. Control is any influence over corporate policy and not limited to ownership of stock,” the SEC said.

But in its explanation to the SEC, Rappler said all its stockholders are Filipinos and that any economic benefits derived by foreign holders from the Omidyar PDRs are mere “distributions” and not strictly “dividends.”

The SEC did not accept Rappler’s defense because of the clause that specifies the need to get approval of at least two-thirds of PDR holders.

“It does not matter what capacity or device gives the foreigner control as stockholder or holder or otherwise; there must be none. It does not matter if control is only available in certain occasions; there must be no occasion,” the SEC said.