Sale of Meralco shares didn’t happen – Landbank
Sale of Meralco shares didn’t happen – Landbank
There is no violation of the Anti-Graft Law since the block sale of the bank's Meralco shares did not materialize, Landbank says

MANILA, Philippines – The Ombudsman has no basis for indicting former officials of the Land Bank of the Philippines (LBP) in a graft complaint related to the block sale of Manila Electric Company (Meralco) shares, LBP said in a statement Monday, September 28.

The supposed sale of the bank’s Meralco shares did not push through, LBP said, thus the bank did not violate the Anti-Graft Law.

Former key officials from LBP and the Social Security System (SSS) face graft complaints before the Ombudsman in connection with the block sale of Meralco shares of stock to a company identified with controversial businessman Roberto “Bobby” V. Ongpin.

Retired general Thelmo Cunanan, former chairman of SSS, and ex-Finance Secretary Margarito Teves, former chairman of LBP, both appointees of former president Gloria Macapagal-Arroyo are among the executives being probed over the block sale of Meralco shares. (Ex-Landbank, SSS execs face graft charges over Meralco deal)

“There is no basis for a criminal indictment or administrative sanction against former members of the LBP board of directors, including some incumbent bank officers,” the LBP statement read.

The bank added that even prior to the Ombudsman’s announcement on September 24, incumbent LBP executives had already filed their joint counter-affidavits on February 16, 2015 in response to the complaint filed by the Field Investigation Office (FIO) of the Ombudsman in November 2014.   

Not disadvantageous

The complaint was in connection with the sale of LBP’s 46.59 million Meralco shares of stock to Global 5000 for P4.916 billion/P90 per share ($105.04 million / $1.24 a piece), through a share purchase agreement (SPA) executed on December 2, 2008. At the time of SPA’s signing, Meralco shares were trading at P58 ($1.24 per share).

“Clearly, LBP could have earned trading gain of about 210% or about P2.8 billion ($59.83 million), more or less, exclusive of the fixed interest of P554 million ($11.84 million) provided in the SPA,” LBP said.

It also cited the Department of Justice’s Opinion No. 86 series of 2012 on December 15, 2012, stating that the implementation of the SPA is not in violation of Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act.

The bank added that the sale of its Meralco shares did not push through because unknown to LBP and Global 5000, the bank’s 42 million shares in Meralco were illegally transferred to Josefina Lubrica, assignee of Federico Suntay on November 28, 2008. The transfer was  to satisfy a 2001 decision of Department of Agrarian Reform adjudicator Conchita Miñas’ awarding P157 million ($3.35 million) to Suntay, as compensation for an agricultural land in San Jose, Occidental Mindoro, which was acquired through the government’s land reform program.

“Although the judgment award in favor of Suntay was only P157 million ($3.35 million), LBP’s 42 million shares in Meralco, then valued at about P2.4 billion ($51.25 million), was illegally garnished, cancelled, and transferred to Lubrica.  

The Supreme Court ruling that restored LBP’s ownership of Meralco shares, in a decision dated December 14, 2011 G.R. No. 188376, stated that the 2001 decision of Miñas is not yet final and executory and cannot be implemented, and that the 42 million Meralco shares are LBP’s corporate assets that cannot be garnished to satisfy a judgment in a just compensation case.

The same High Court ruling also directed Meralco to restore LBP’s ownership of the 42 million shares of stock. “LBP has so far recovered 38.63 million shares out of the 42 million shares illegally transferred to Lubrica,” the bank said.

It was after the Supreme Court decision became final and executory in September 2012 that a certain Emilio Suntay III reportedly filed a complaint before the Ombudsman against officials of Landbank and Global 5000 for alleged violation of the Anti-Graft Law in connection with the SPA execution in December 2008.

“Obviously, the said complaint is a reaction to the Supreme Court decision which paved the way for Landbank’s recovery of its lost shares, filed clearly with the intention to vex and harass LBP officers after it obtained that favorable decision from the Supreme Court,” the bank said.

LBP retains ownership

It added that since the sale did not push through, LBP fully retains ownership of the Meralco shares, including the dividends that had been declared from the time the SPA was executed until today.

LBP’s earnings from its dividends from the Meralco shares now amount to about P2.1 billion ($44.85 million). (READ: No controversial Meralco share sale – Landbank)

LBP added that it did not surrender its voting rights to Global 5000 because the latter did not tender or pay the downpayment as agreed upon in the SPA.

The report that “LBP officials gave unwarranted benefits, advantage or preference to Global 5000” has no basis, and that the SPA, aside from the fact that it was never implemented, provides for ample protection to LBP in case Global 5000 fails to comply with its obligations.

LBP also argued that the possession and title to the Meralco shares remain with the bank until full payment, and that any amount paid will be forfeited in the bank’s favor in case of non-payment of the purchase price. Also, the SPA provides for LBP’s entitlement to fixed interest of P554 million ($11.84 million) or 13.2% of the purchase price.

“The capitalization of the buyer in a contract to sell therefore is not important. In other words, the SPA was not a loan transaction, but a sale transaction,”  Landbank said.

LBP explained that Global 5000 (now SMC Global Power Holdings Corporation, a wholly owned subsidiary of San Miguel Corporation [SMC]) is allied with SMC, and that the persons or incorporators (Ongpin, Iñigo Zobel, and Joselito Campos, Jr.) behind the company are all well known in the business community. Thus, “there could not have any doubt on Global 5000’s ability to source the funding for the sale.”

The Meralco sweetheart deal was approved by SSS officials despite Global 5000’s lack of proven record considering it was only established one year prior to the sale, the FIO earlier said.

LBP also said that while the supposed transaction was undertaken only in a matter of 10 days, the proposal to sell the Meralco shares was made on November 7, 2008 but the SPA was executed on December 2, 2008. “Prior to these dates however, LBP had already been in constant negotiation with other parties for the said sale.”

The deal involved the purchase of the state-run firms’ shares in Meralco by units of SMC and Ongpin-led firms. At the time, Meralco was controlled by the Lopez family and the target of a brewing battle for control by major business groups, including that of businessman Manuel V. Pangilinan. The deal that pushed through involved a P90-per-share valuation payable over 3 years. Pangilinan’s group offered to pay the same in cash.

“Given that the Lopezes were the strategic shareholders of Meralco for a very long time and who understood clearly the value of the business, LBP’s transaction was clearly at the fair price,” the bank said.

The bank added that the SPA has never been the subject of any Commission on Audit (COA) and Bangko Sentral ng Pilipinas (BSP) exception, in so far as LBP is concerned.

“The Meralco shares, being publicly listed, are considered as ‘merchandise or inventory’ held for sale in the regular course of business of Landbank and thus, exempted from the requirement of public bidding under COA Circular No. 89-296 dated January 27, 1989. This has been confirmed by no less than LBP’s statutory counsel, Office of the Government Corporate Counsel (OGCC),” the bank said.

The Philippine Daily Inquirer wrote on Monday that the Ombudsman investigation over the Meralco deal came as the election fever heats on.

Teves, one of the officials being probed, is the treasurer of the United Nationalist Alliance (UNA), political party of Vice President Jejomar Binay, the first to declare his presidential bid.

Controversial businessman Ongpin, meanwhile, is a supporter of Senator Francis Escudero, the running mate of Senator Grace Poe, the third to declare her 2016 presidential bid. –

$1 = P46.82

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