Court of Appeals denies Rappler appeal in SEC case

MANILA, Philippines – The Court of Appeals (CA) has denied the motion for partial reconsideration filed by Rappler and upheld its earlier findings that the company’s foreign investment amounted to prohibited foreign control of a media company.

In rejecting Rappler's appeal on February 21, the CA reiterated its earlier ruling that the Securities and Exchange Commission (SEC) should review its previous order revoking Rappler's license in light of the donation to Filipino managers of shares previously held by Omidyar Network.

The court said it will no longer discuss the issue so as not to preempt SEC's re-evaluation.

In its latest resolution, the CA's Special 12th Division reiterated its directive to the SEC in its July 2018 decision.

"Thus, it is incumbent upon the SEC to evaluate the terms and conditions of said alleged supervening donation and its legal effect, particularly, whether the same has the effect of mitigating, if not curing, the violation it found petitioners to have committed. If so, this may warrant a re- examination of the sanction of revocation of petitioners' Certificates of Incorporation imposed by the SEC En Banc in the assailed Decision."

The CA said it stands by its order remanding the case to the SEC for the commission "to conduct an evaluation of the legal effect of the alleged donation stands and binds petitioners."

The disputed SEC order is only one of at least 10 cases lodged against Rappler Inc, Rappler Holdings, and its officers and staff since President Rodrigo Duterte blasted the company in his July 2017 State of the Nation Address, falsely accusing it of being American owned. (LIST: 10 cases vs Maria Ressa, Rappler directors, staff since 2018)

The commision began its probe of Rappler shortly after the President's speech, and ordered its license revoked 6 months later.

The questionable provision in Rappler’s agreement with Omidyar is a clause that provides for a “prior discussion” if the company was to amend its articles of incorporation.

Rappler argued that the agreement was an example of a negative covenant, or a promise not to do something.

The CA pointed out that under the corporation code, amending by-laws needs the majority vote of board of directors or owners. “Because of clause 12.2.2, this corporate act of amending the Articles of Incorporation or Bylaws, is now subject to prior discussion and approval of Omidyar Network, a foreign entity,” the CA said.

The CA said “it does not matter” that the agreement only applies if the amendment would prejudice Omidyar. “Mere grant of control, regardless of the actual exercise of such control, already constitutes a violation of the foreign equity restriction on mass media,” said the CA.

“The grant of control to a foreign entity over a mass media entity, regardless of the actual exercise of such foreign control, is already considered a violation,” the court added.

Pending cases

Rappler must now wait for the result of the SEC’s reevaluation. (READ: FAQs: Rappler SEC case)

Meanwhile, the company and its CEO Maria Ressa face 5 counts of tax charges in court that stemmed from the PDR issue.

Ressa and Rappler's 2017 Board of Directors also face an anti-dummy complaint pending before Pasig City prosecutors. 

The complaint was triggered by a January 2018 order of then-justice secretary Vitaliano Aguire II for the National Bureau of Investigation to file appropriate cases against Rappler in relation to the SEC order. Rappler.com

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email lian.buan@rappler.com or tweet @lianbuan.

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