The Securities and Exchange Commission (SEC) is investigating a controversial loan agreement entered into by Clermont, a Singapore-based holdings group and a director Professional Services, Inc., operator of the Medical City, amid the brewing shareholder conflict in the hospital.
The SEC has formed a Special Hearing Panel (SHP), represented by the Enforcement and Investor Protection, Market Securities and Research, and Corporate Governance and Finance Departments, with the mandate to “resolve the rightful ownership of shares of Professional Services, Inc.”
The probe of the loan transaction is allegedly key to determine whether or not the shares of the block identified with the Clermont conglomerate were validly and legally acquired.
The probe stemmed from the petition filed by the erstwhile President and CEO of the Medical City who said the $38-million loan was given by the Singaporean firm to Medical City treasurer Jose Xavier Gonzales supposedly under very questionable, and even improper terms.
Dr. Alfredo Bengzon had earlier called on Jose Xavier Gonzales “to bare the truth” regarding the “real intention” of the loan from Viva Holdings, saying the transaction may have “failed to protect the interest of the company.” Viva Holdings is part of the Clermont Group, an international finance services and retail conglomerate.
In his petition, Bengzon said the group, allegedly through “fraudulent, deceptive and manipulative actions, acquired and increased their shareholding from at least 35 percent to more than 50 percent.”
The SEC SHP is probing Bengzon’s allegations that Gonzales had admitted that the $38-million loan given him by Viva was used for the acquisition of additional shares for his own holding company. Bengzon said Gonzales also admitted that the loan has been since “satisfied,” but questioned the terms of this satisfaction.
Bengzon alleged that under the loan agreement, the loan and all accrued interest could be converted to one share of Gonzales’ HK company. Gonzales could then buy back that share from Viva for only HK$101, if he was able to deliver to Viva an amended Articles of Incorporation of PSI, where the corporation’s Right of First Refusal was removed.
“Gonzales should explain why he got away with paying the measly amount of HK$100 for a US$38 million,” Bengzon said. Bengzon branded the transaction the “deal of the century.”
The SEC SHP is also probing the related Cooperation and Shareholders’ Agreement (CSA) entered into by Gonzales and Viva Holdings, following allegations that the agreement was not “promptly and fully disclosed” to the board and shareholders. Based on the Bengzon petition, the CSA, “proves that Gonzales and Viva Holdings were acting in concert” and that this enabled them to acquire a majority share of the corporation in a manner that violated Philippine laws under the Securities Regulation Code designed to protect investor rights.