Is It A Duck?

Bobby Ongpin issued a full-page ad “to set the record straight” on the Philex affair (What is it about records that they have always to be straightened?).

To recall, DBP sold Ongpin’s company, DVRI, 50 million of its Philex shares at P 12.75 on Nov. 4 2009, expedited by a P660 MM loan. Ongpin sold the position to Manny Pangilinan (MVP) a month later at P21.00 for a tax-free gain of P412 MM.

For The Defense

Ongpin has been buying Philex since 2007. His superior intellect identified the company as a promising investment.

The loan was to a good client in the ordinary course of DBP business, was adequately collateralized and was repaid with interest. No harm done, no behest. The BSP has not flagged the loan.

The price of P 12.75 was a premium to what the stock had been trading ( although the stock ended at P12.75 on closing day). DBP profited on the loan and on the trade. It was also able to sell the balance of its Philex position at P21.00 only because it was consolidated with Ongpin’s bloc.

DBP did not offer its shares to MVP because it was too small to command a premium.

DBP “obviously” expedited the loan because the stock market is unpredictable, the world could have, theoretically, come to an end.

A righteously defiant Ongpin invited the Senate Blue Ribbon to make his day.

For The Prosecution

“ The DBP deal stinks” is how a current Philex director put it to me. It is not about how much DBP made but how much it did not make.

The accusers say the deal is either a breach of trust, an insider trading scam, a behest loan, a conspiracy to defraud; or all of the above. The system was wired all the way.

The DBP officials are potentially liable for breach of trust or worse. MVP was a buyer of Philex shares as were, according to Ongpin, GSIS and San Miguel. As a director (nominated, incidentally, by Ongpin) and “one of the smartest bankers in the country”, DBP President Rey David knew this. He was obligated to offer the DBP bloc to all parties in a transparent bidding; yet dealt exclusively, secretly and expeditiously with his friend -and now business associate- Ongpin. It is about the process, not about the price.

Insider trading is transacting on a stock using privileged information. The case hinges on whether on Nov. 4 the accused already knew MVP was willing to pay significantly more than P 12.75 for Philex. The market talk is they (and a select few) did and were frenetically accumulating stock. Sen. Enrile said as much and his source is bullet-proof.

Only MVP knows when and to whom he disclosed his price. His dilemma: If indeed he had innocently but prematurely divulged his number to certain parties, he may be liable for “failure to publicly disclose material information”, a violation as an officer of a listed company.

As the elephant in the room, MVP needs to make a statement before others do it for him. While he would clearly like the whole thing to go away, his silence only adds to unnecessary but growing speculation of his role, however reluctant, in the mess.

A behest loan is a questionable credit extended at the instance of  persons in authority for personal gain. Behest happens ‘at the time the loan is made’. That the loan was repaid does not automatically disqualify it as such: A bank robber who returns the money is still a bank robber.

The loan apparently meets at least two (of possible eight) conditions sufficient to qualify as behest especially if it supports a criminal activity like insider trading.

DBP “obviously” expedited the loan not because, as Ongpin claims, the stock might drop but because the stock was rising propelled by insiders and the big boys (MVP, GSIS, SMC). This threatened the deal. Indeed Philex continued to climb to a high of P 19.38 in the following weeks.

A conspiracy is defined as parties acting in unison to defraud. The Philex matter has some of its elements: A seeming pattern of behavior established in the Meralco, Petron, MRT and Lehman deals , possible behest loans and insider trading. The outline is there but the dots have to be connected. Following the money trail in DVRI and beyond might help.

This is the prosecution’s narrative: That a band of brothers, acting in concert with the power of their positions, custody of public funds and privileged information, using a scheme simple in design but devious in intent, plundered the national treasury.

The accused and friends are lawyering up while marshalling their vast financial firepower to condition public opinion and who knows who else.

Right now the Philex affair moves, talks and smells like a duck. The question is, is it a duck? Or, even possibly, a rat?


About Leo Alejandrino

The blog is principally a commentary on Philippine politics and economics.
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4 Responses to Is It A Duck?

  1. Ed Piy says:

    In corporate law, there is the “corporate opportunity” doctrine which spells out the duties and liability of a director in respect of a business opportunity that should accrue to the benefit of the corporation – see or

  2. manuelbuencamino says:

    It’s a duck that smells like a fish.

  3. Where there’s smokethere’s fire.

  4. Gary Chua says:

    A plausible speculative twist is that MVP was part of the conspiracy. Why will he be willing to buy at P21 when the prevailing market price was around P12.75? Premium, my baby soft behind! Remember, he is not the ultimate buying principal. He is acting on behalf of its ultimate beneficial owner which are the Salim family of Indonesia. Could he be screwing the Salim’s buttocks in exchange for his personal proverbial piece of the pie. Just think about this angle…

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