The owners of Banco de Oro (BDO) recently became the targets of a two-pronged legal offensive that could either permanently damage its otherwise unsullied reputation or, at the very least, cost the second-biggest universal bank in the country a pretty sum in damages.

The pincer attack was recently launched through both the courts and the Monetary Board of the Bangko Sentral ng Pilipinas. The case has also been elevated for arbitration with the International Chamber of Commerce of Singapore.

The complainants are not exactly lightweights in the local business and social registry. They are former Bataan representative Felecito “Tong” Payumo (also former administrator of the Subic Bay Metropolitan Authority), former Insurance commissioner Benjamin Santos and lawyer Eduardo de los Angeles (former chairman of the Philippine Stock Exchange).

In their complaint to the Monetary Board, Payumo and Santos questioned “the rather cavalier and arbitrary way” the BDO recently disposed of its controlling shares worth P176 million in one of its subsidiaries, Maxicare Healthcare Corp. The Maxicare shares were allegedly sold by BDO to Antonio Go and his holding company, Pin-An Holdings, but not before receiving payment from the “rightful” buyers, namely, Payumo, Santos and de los Angeles.

The three contend that the shares should have been sold to them instead, by virtue of their right of first refusal, as provided for in Maxicare’s shareholders’ agreement.

In their complaint to the Monetary Board, the three are now asking that Banco de Oro be penalized under the General Banking Act of 2000 and Monetary Board Circular 341 for not conducting its business in a “safe and sound manner.”

They are also asking the Monetary Board to determine if the directors and officers of BDO possess “not only the qualifications, but also, and more particularly, the integrity and fitness so necessary in conducting a business so impressed with public interest as the banking business.”

In other words, BDO, its officers and directors are being accused of duplicity, dishonesty and lack of integrity in its business dealings.

Antonio Go, by the way, used to be the chairman of Equitable PCI Bank, which Banco de Oro had absorbed in one of the country’s celebrated mega-deals in the banking sector.

Maxicare was organized in 1998 by Philippine Health Care Providers, Philippine Commercial International Bank (PCIB) and Cigna International Holdings. PCIB and Cigna later sold their holdings totaling 120,000 shares, to BDO. Then, on September 6, 2007, BDO disclosed that it intended to sell these shares for cash on an all-or-nothing basis to Go or his holding company, Pin-An Holdings.

BDO apparently considered health care extraneous to its core businesses, thus its decision to sell its lion’s share in Maxicare.

BDO apparently did not give much importance to the “right-of-first-refusal” provision in Maxicare’s stockholders’ agreement. But it did go through the motions of serving notice of its intention to sell its shares—to Maxicare and to all the original stockholders of the company.

On December 5, 2007, or within the 90-day deadline, several original stockholders of Maxicare availed themselves of their right of first refusal. BDO subsequently recognized three of them—Payumo, Santos and de los Angeles. The three formalized their intention to buy the 120,000 shares in separate letters, all dated December 3, 2007, to Maxicare president Jose Pastor Puno.

On December 5, 2007, BDO formally informed the three that based on Maxicare’s stockholders’ agreement, “BDO will immediately execute in your favor the sale documents covering the said shares, provided BDO receives the payment of P176 million in cash or cleared funds at the BDO Savings Account No. 1463-46716-8 with BDO-EPCI Tower 1 Branch [463] in Makati Avenue corner H.V. de la Costa, Makati City, on or before December 5, 2007.”

The letter was signed by Erlaster Sotto, the authorized BDO representative. On the same day, the Payumo group informed Sotto in a joint letter that they had deposited the required payment at the specified BDO savings account as instructed.

It was after the payment was made when BDO suddenly started to waffle. The sale documents were not delivered as promised. First, the excuse was BDO president Nestor Tan was abroad and couldn’t sign the documents. But when Tan arrived, the Payumo group was told Tan was under explicit instructions to sign the sale document in favor of Go, and not to any other party.

On December 10, the Payumo group demanded immediate delivery of the sale documents. The next day, however, Sotto informed the three that 10 other stockholders of Maxicare were protesting the deal, that the issue now had to be resolved by the senior management of Maxicare and its legal counsel.

What was strange to them was that on December 11, or the day the Payumo group was expecting delivery of the sale documents, the Maxicare board of directors convened. In that meeting, de los Angeles, as corporate secretary, was asked to step out just as board discussions turned to “other matters” in the agenda.

Upon being called back to the meeting, de los Angeles was informed that the three had been disqualified as buyers based on the objections posed by Dr. Macasaet and nine other stockholders. In that same meeting, the board formally awarded the 120,000 shares to Go and Pin-An Holdings.

As if to add insult to injury, the Maxicare management a few days later informed de los Angeles that he had been replaced as corporate secretary. When he demanded proof of his removal by the board, he did not get the courtesy of a reply. He learned later that the board had applied for a new stock-transfer book to legalize the sale to Go and Pin-An Holdings.

Unfazed, the Payumo group sent BDO a “notice of failure” to lay down the basis for arbitration proceedings. The stockholders’ agreement provides that any dispute arising among stockholders should be amicably settled. But after 30 days, an unresolved controversy should be submitted for arbitration by the International Chamber of Commerce in Singapore. As we speak, arbitration proceedings are now being conducted under the rules of the Singapore body.

The Payumo group has persisted in its quest by filing a motion for reconsideration with the Court of Appeals to stop or nullify the sale of the Maxicare shares to Go. A Makati Regional Trial Court sustained the three’s position that they are the rightful buyers, but dismissed the case anyway on the ground that the issue had become moot and academic. The sale of the shares to Go had been entered in the new stock-and-transfer book.

What we have here is a brazen display of corporate arrogance. And from the looks of it, Banco de Oro is in for a long, protracted fight. Even the members of the Maxicare board are facing perjury charges. The three BDO “victims” are simply not the type who will take an obvious injustice lying down.  

Omerta_bdc@yahoo.com

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