The Securities and Exchange Commission (SEC) nullified the acquisition of majority shares by Jose Xavier Gonzales‘ companies in the operator of The Medical City for alleged fraud.

The SEC on Thursday, August 20, voided the acquisition of majority shares of Professional Services Incorporated (PSI), which were made by Gonzales and his partners through Viva Holdings (Philippines), Viva Healthcare Limited, Fountel Corporation, and Felicitas Antoinette Incorporated (FAI).

The SEC said a decision by the en banc last August 13 affirmed that Gonzales’ companies violated the mandatory tender offer rules and committed fraud when they took over PSI. (READ: SEC sides with Bengzon in The Medical City takeover)

The SEC earlier said Gonzales’ companies misled the board of directors and other shareholders to approve the increases in the company’s capital stock and allow the respondents to increase their shareholdings.

Gonzales’ companies managed to increase their collective shareholding to over 50% largely through subscriptions during capital stock increases in November 2013, July 2014, August 2017, and October 2017, from one million to two million shares.

The SEC earlier said the companies acted together to acquire majority of the shares in PSI, and did not disclose the plan to other shareholders.

The latest en banc decision, however, noted that the corresponding increases in the authorized capital stock of PSI are valid. The shares will be considered unsubscribed and allocated for subscription by investors.

“Shares acquired from other shareholders, namely Splash Corporation, San Miguel Corporation and Insular Life Assurance Company Ltd, shall likewise be canceled and revert to PSI as treasury shares, which may be sold to other persons,” the SEC said.

“Once the shares are sold and paid for, PSI shall reimburse Viva Holdings, Fountel, and FAI for the subscriptions that were nullified,” it added.

The SEC earlier slapped a P50-million penalty on the majority shareholders of The Medical City for the takeover.

The Medical City was founded and led by former health secretary Alfredo Bengzon. Gonzales is Bengzon’s nephew.

In a statement, Gonzales expressed disappointment over what he called the SEC’s “questionable decision,” adding that it was “arbitrary, unfounded, and, to a certain extent, overreaching.”

“The decision effectively forces The Medical City to pay us back at least P10 billion in cash that we have been investing since 2013. This adds further pressure and uncertainty to a hospital network already straining with the many problems caused by the COVID crisis, including its cash flow. Currently, The Medical City continues to wait for PhilHealth to settle an estimated P750 million worth of reimbursements,” Gonzales said.

He also said the SEC’s decision risks “depriving the hospital network of badly-needed resources in its fight against COVID.”

He added that his legal team will exhaust all means to ensure that the decision will not affect the hospital’s operations.

Meanwhile, Bengzon lauded the decision, as it “rectifies the illegal dilution brought about by the fraud, resulting in substantial financial gain and restoration of control to the legitimate shareholders of The Medical City.” – Rappler.com