Gonzales group asks CA to nullify SEC ruling

APETITION has been filed before the Court of Appeals (CA) seeking to enjoin the Securities and Exchange Commission (SEC) from implementing its August 13 decision nullifying the majority stake acquired by a group of shareholders led by the family of Jose Xavier Gonzales.

In a 141-page petition filed with the Court of Appeals (CA) , Fountel Corp. and Felicitas Antoinette Inc. (FAI), both controlled by the Gonzales family, argued that the supposed fraudulent practices committed against the board of directors of Professional Services Inc. (PSI), the operator of The Medical City (TMC), is an intra-corporate dispute that falls outside SEC’S jurisdiction.

They maintained that the jurisdiction belongs to the Special Commercial Court (SCC).

Aside from Fountel and FAI, the other shareholders sanctioned by the SEC in its August 12 resolution were Viva Holdings (Philippines) Pre. Ltd. and Viva Healthcare Ltd.

The SEC held that these group of shareholders violated the mandatory tender offer rules and committed fraud in taking over PSI.

The Gonzales family and the camp of former Health Secretary Alfredo Bengzon are contesting control over PSI.

Bengzon, a stockholder of PSI, is a former member of the Board of Directors of PSI and was also previously its president and chief executive officer.

The SEC’S decision stemmed from the complaint of several shareholders, including Bengzon, questioning the acquisition of the company’s majority shares by entities related to his nephew, Gonzales.

In its petition before the CA, Fountel and FAI stressed that the SEC’S ruling should be nullified since this would have an impact on the collective efforts of the government and the private sector to stop the spread of Covid-19.

The petitioners said the dispute involves the control and ownership of PSI, which owns and manages at least five major hospitals in Metro Manila, Pampanga, Iloilo, Pangasinan and Laguna and at least 48 clinics all over the country and 216 beds specifically for Covid-19 cases.

“All of these hospitals and clinics are presently at the forefront of the Philippines’s battle against a worldwide pandemic—and with the Securities and Exchange Commission voiding the ownership of more than 51 percent of shares in the corporation, and thereby throwing the ownership and management of these entities up in the air, operations of these frontline institutions are being placed at risk by a threatened complete change in management at a time when seamless and unhampered operations can mean the difference between the life and death of their patients,” the petitioners added.

Gonzales, current chairman of the board of TMC, also expressed his disappointment over the SEC ruling.

“Everything we did was guided by adhering to the law and the SRC [Securities Regulations Code], so we were surprised that the SEC, which has in its own records all our documents, claims that we did not disclose any of our actions," he said.

“They themselves gave us approval to conduct a mandatory tender offer to all the minority shareholders of TMC in April 2018. But now they say we were hiding information that they themselves possessed in their files.”

Furthermore, the petitioners said the SEC ruling voided several private billionpeso transactions, without the benefit of a judicial trial, and in violation of the constitutional proscription against deprivation of property without due process of law.

Gonzales’s camp added that SEC was never granted the power to nullify transactions under the SRC.

They added that there were sufficient evidence on record to clearly show that proper disclosures were made to the PSI Board in the course of their acquisition of PSI shares.

TMC’S intra-corporate dispute started in 2018, when then CEO Bengzon refused to hold the legally mandated shareholder elections scheduled in June of that year.

Doctors and shareholders, upset over the violation of their rights to vote, banded together to hold a special shareholder meeting and voted in a new board and a new management team led by Dr. Eugenio Jose F. Ramos as CEO.

Based on the audited financial results for 2019, TMC had the highest revenue on record under the first full year of Ramos; TMC Ortigas grew more than 7 percent, while at the same time managing costs which had spiraled out of control under the previous management.

Petitioners also sought the issuance of an ex-parte temporary restraining order to immediately enjoin the SEC from implementing its decision.