Biz Buzz: ‘Show cause' vs Team Eckie

Aspecial hearing panel of the Securities and Exchange Commission (SEC) has issued a show-cause order to a group affiliated with

Jose Xavier “Eckie” Gonzales

in relation to the battle for control of Professional Services Inc. (PSI), owner and operator of The Medical City, against his uncle,

In an order dated Nov. 8, the SEC hearing panel issued a “formal charge” against Fountel Corp., Felicitas Antoinette Inc. (FAI), Viva Healthcare Ltd., Viva Holdings (Philippines) Pte. Ltd., citing violation of Sections 18, 19 and 26 of the Securities Regulation Code (SRC) and the pertinent implementing rules.

The four-page order said the respondents failed to file SEC form 18-A, which required any shareholder with ownership of more than 5 percent to report changes in ownership.

The panel also cited the respondents’ intention to increase their minimum aggregate interest in PSI to 50.1 percent, which had been realized over the years.

But based on SEC rule 19.2.A of the amended SRC implementing rules, any person or group of persons acting in concert who intend to acquire 35 percent or more of equity shares in a public company shall disclose such intention and make a tender offer. The respondents failed to conduct the mandatory tender offer, the SEC panel said.

The panel had taken into account complaints filed by several shareholders, officers and directors including Bengzon, whohave expressed alarm and displeasure over the “clandestine” moves.

“Respondents entered into funding scheme where foreign funds were channeled from Viva Holdings to Fountel and FAI through a series of transactions, as reflected, among others, by the CSA (cooperation and shareholders agreement) and loan agreement,” the SEC panel said.

“Respondents’ contracts were concealed to the board of directors and stockholders of PSI. Through such concealment, respondents misrepresented their independence from each other to effectively subscribe to substantial shares in PSI, and eventually acquired majority shares in the target company, to the prejudice of the unsuspecting stockholders, whose share value and voting power have declined,” it added.

Based on the show-cause order, the respondents must explain why they should not be held liable for violation of the law and SEC regulations within 15 days.

“We contest the SEC’s initial findings regarding the procedural filings of forms 18A, 19 and 26, and note that they do not in any way affect the rights of Fountel and Viva to exercise their shareholder rights,” a statement from Fountel said.

“We emphasize that this is not a ruling and that we have been afforded 15 days to respond to the charges on these administrative matters. We are confident that our submissions will demonstrate that we have consistently complied with all SEC rules. It is business as usual at TMC.”

—DORIS DUMLAOABADILLA

Dr. Alfredo Bengzon. Most wanted whistleblower

As previously reported in Biz Buzz, a researcher had uncov- ered evidence that a local pharmaceutical giant had been cheating the government of billions of pesos worth of income taxes for decades.

Based on the researcher’s calculations—which so far no one has been able to refute— the pharma company has been deliberately and systematically underdeclaring its profit by at least P5 billion a year, thereby reducing its annual taxes by approximately P1.5 billion.

If the government were to take this company to task, it could rightfully collect 10 years worth of back taxes, a surcharge of 50 percent, plus interest at 12 percent a year. This would come up to around P40 billion, plus the additional P1.5 billion a year every year going forward.

With this kind of evidence, it is no wonder that the researcher is currently being pursued and courted (for lack of a better word) by many different parties to join them and help reclaim the money. Thankfully, however, there’s a good chance that the funds might end up benefiting Filipinos in a very tangible way. Last week, President

Duterte ordered the suspension of the second phase of the TRAIN law increasing the excise tax on fuel by P4.50 a liter in 2019. However, economic managers have warned that the suspension had to be on a period-to-period basis, and subject to constant review. A full year suspension, they say, will result in forgone revenues of P41 billion.

Consequently, the whistleblower is currently in dialogue with a number of senators, according to sources. His exposé can potentially cancel the P41 billion in lost revenues and lead to the suspension of the additional excise tax for the entire 2019. In this case, the entire country would undoubtedly hail the senator(s) who made it possible as heroes. That’s definitely an “everybody wins” scenario: In aid of the Filipino people, in aid of election and, yes, in aid of justice.

Perhaps the only party that has to swallow a bitter pill is the pharma company itself, but that can be considered rightful medicine for decades’ worth of tax evasion.

—DAXIM L. LUCAS

Broken glass

Exactly three years ago, we wrote about the “eagle” family trouble wherein the eldest surviving sibling was allegedly outmaneuvered by the twoyounger siblings for his inheritance.

Regretfully to this day, his two siblings still do not want to give him his rightful share. As of this writing, records showed that the family dilemma remained pending in court.

As if adding insult to injury, the two siblings are allegedly bent on dragging out the case to delay the rightful distribution of properties.

One sibling is a high-end audiophile enthusiast and an avid golfer. The other sibling has a polo-playing family.

Unfortunately, the late father suffered from Alzheimer’s disease before his demise ... which the two younger siblings allegedly used to their advantage. Tsk tsk.

—DAXIM L. LUCAS

Restless banana growers

Banana exporters seem to have grown restless with the government’s move to ease tariff and nontariff restrictions on Philippine bananas and have decided to take matter into their own hands.

With new officers at the helm, the Pilipino Banana Growers and Exporters Association (Pbgea) has decided to hold dialogues with their business counterparts and government officials abroad to ensure the steady entry of the country’s prized cavendish bananas to international clients.

Officials of Pbgea are set to go to South Korea—where the Philippines is one of its major importers—by end-November to discuss the possible elimination of tariffs.

Other executives are also scheduled to go to Australia and Japan where Philippine bananas are also well loved.

“We only want a level playing field ... where our bananas are taxed heavily,” Pbgea officer Stephen Antig said.

Currently, nearly 90 percent of South Korea’s banana imports come from the Philippines. Yet, the country’s agricultural exports face a heavy 30-percent tariff.

Meanwhile, Central American countries like Costa Rica, El Salvador, Honduras, Nicaragua, Colombia and Panama will soon benefit from zero import tariffs to South Korea by 2021.

Even Vietnam, a fellow Association of Southeast Asian Nations member, will get to sell bananas to South Korea at zero tariff in three years.

Pbgea is worried that these countries will eventually eat into the Philippines’ global market share.

So what’s stopping the East Asian country to grant the same privilege to the Philippines?

—KARL R. OCAMPO

Local startup

Philippines-based startup CrewBloom is seeking a slice of the lucrative outsourcing business.

While the Philippines is a well-known outsourcing destination for some of the world’s largest companies, there’s still a gap for smaller, even microsized firms looking to grow their businesses while tapping talent overseas.

CrewBloom is building its brand as the go-to provider of outsourcing needs for these so-called MSMEs. In particular, it is targeting US-based companies seeking to grow but otherwise have had a difficult time finding the right support.

CrewBloom was started by New York-based Brianna Car

ney and Kate Ringcodan. The pair has so far found mild success, having signed up more than 100 Filipino contractors offering services such as voice, customer service, administrative work and tech support.

CrewBloom uses a 100-percent remote model—there is no office for their contractors, who generally prefer more flexible schedules anyway. This allows CrewBloom’s clients to save up to 70 percent in terms of overhead costs.

Carney said the business had so far been growing at a healthy pace. While focused on the Philippines, itself a great source of world-class talent, CrewBloom could eventually export its business model to other markets, she said. E-mail us at bizbuzz@inquirer.com.ph. Get business alerts and a preview of Biz Buzz the evening before it comes out. Text ONINQ BUSINESS to 4467 (P2.50/alert)