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SEC fines Abacus Coal P2M over ‘misstatements’ in audited results

Securities and Exchange Commission (SEC) logo

THE Securities and Exchange Commission (SEC) said it ordered Abacus Coal Exploration and Development Corp. (ACEDC) to pay a fine of P2 million “for the material deficiencies and material misstatements” in its 2008 and 2009 audited financial statements.

“The Appellant is hereby ordered to correct its 2008 and 2009 Audited Financial Statements to reflect the total misstatements of assets and equity amounting to P2.7 billion,” the SEC in an decision signed by its Chairman Emilio B. Aquino on July 16.

The SEC affirmed with modification the order of its Company Registration and Monitoring Department (CRMD) outlining the penalty. The fine amounts to P1 million for each year of misstatement pursuant to the Securities Regulation Code (SRC).

The CRMD order was issued on Jan. 19, 2011.

The SEC also directed CRMD “to investigate the misstatements carried forward to succeeding audited financial statements” and reserved the right “to impose additional penalties until such are corrected.”

The case stemmed from the execution on Sept. 23, 2008 of ACEDC’s parent firm Abacus Consolidated Resources and Holdings, Inc. (ACRHI) of a deed of assignment of coal mining rights with appraised value of P2.7 billion in exchange for P295 million worth of new shares issued by the coal company. The transaction’s intent was to gain further control of ACEDC.

On Nov. 13, 2008, ACEDC filed with the SEC an application to increase its authorized capital stock to P300 million from P20 million in a filing subsequently approved by the SEC on Dec. 24, 2008.

The issuance of P295 million worth of new shares was fully subscribed and paid for by ACRHI through the assignment of coal mining rights.

ACEDC filed its 2008 audited financial statements on May 7, 2009 and its 2009 audited financial statements on May 7, 2010. In both 2008 and 2009, the company did not record in its balance sheet the increased capital stock and the acquired coal mining rights. Instead, it disclosed the information in the notes to financial statements.

On Nov. 30, 2010, ACEDC received from the CRMD a notice of conference to show cause why it should not be penalized for material deficiencies and material misstatements in its 2008 and 2009 audited financial statements.

Despite the company’s explanation in the conference, the SEC unit directed ACEDC to settle the imposable fine for violation of SEC Memorandum Circular No. 8 Series of 2009. The company filed its appeal on Feb. 28, 2011.

However, the SEC said the subsequent disclosures made by ACEDC in its notes to financial statements “are incomplete/deficient not only for the missing amounts or values but also for failure to make a clear connection” to the deed of assignment of mining rights by ACRHI in exchange for the appellant’s shares of stock worth P295 million. — Victor V. Saulon

Captive services firm touts productivity gains from inclusiveness

CAPITAL ONE Philippines, which provides captive services to its parent Capital One Financial Corp. (COFC), said it has found productivity to improve if the workplace promotes inclusiveness and diversity.

Capital One Philippines General Manager Peter Hayden told BusinessWorld in an e-mail interview that COFC’s captive center in the Philippines, said acknowledging worker individuality allows them to work to their potential.

“When associates are able to bring their whole selves to work — their different backgrounds, life experiences, and unique perspectives — everyone has a chance to thrive and realize their full potential. This enables ideas, approaches, and innovative solutions that reflect the interests and needs of our customers,” he said.

He said employees have an avenue known as Business Resource Groups (BRGs), which were “established as forums for employees to celebrate their shared culture, support each other and encourage continuous learning to meet business objectives,” he said.

Mr. Hayden also said work relationships improve when the company allows for flexible work time and periodic dialogue with management.

“We celebrate people. We see them with malasakit (compassion). We value our associates as much as we value our customers and communities,” he said.

COFC is a New York-listed bank and one of the largest credit card issuers in the US. — Gillian M. Cortez

Indonesia warns of damage to rice crop as drought parches fields

INDONESIA’s rice crop is at risk of damage from an unusually long dry weather spell that’s gripped several producing regions, raising prospects of elevated imports for a second year.

The dry weather has parched paddy fields across Java island, the main growing region, and the agriculture ministry sees the harvest failing in more areas than the 20,000 hectares already reported, according to Edy Purnawan, director of crop protection at the ministry.

With some areas going without rain for more than 60 days, the nation’s weather forecaster has warned the archipelago may be under the impact of a weak El Niño. The drought has prompted President Joko Widodo to order steps to mitigate the impact and consider artificial rain as an option.

The government will continue to monitor and assess the impact of the dry season on inflation and will announce measure to tackle the issue next month, Coordinating Minister of Economic Affairs Darmin Nasution said on Thursday.

Indonesia is preparing aircraft loaded with chemicals for cloud seeding, a type of weather modification that aims to change the amount of rainfall from clouds.

While there may be no impact from the drought on palm oil and rubber, the weather agency has warned of forest fires developing in Sumatra and Kalimantan, the country’s main growing regions of these commodities. Paper producer Asia Pulp & Paper Co. said it has taken steps to prevent forest fires.

“The drought-impacted areas are increasing and may reach 200,000 hectares, while failed harvest could double to 40,000 hectares by the end of the dry season in October,” Mr. Purnawan said.

While the estimate for the failed harvest is small compared with Indonesia’s total cropped area of about 12 million hectares, a similar crop failure last year forced the government to boost imports to the highest in six years. Ample stockpiles of rice with state-owned Bulog will likely prevent significant additional imports, according to the U.S Department of Agriculture.

The agriculture ministry plans to minimize the impact of future droughts by planting drought-resistant seeds, Mr. Purnawan said. Other food crops such as corn and soybeans were yet to be impacted by the dry weather, he said. — Bloomberg

As rural India develops taste for chocolate, a dominant Mondelez extends its reach

CHICAGO/HAROHALLI, INDIA — Two years ago, Satish P., a bakery owner in the small village of Harohalli near Bengaluru, had his doubts about stocking Mondelez’s Cadbury Silk bars.

Priced between 70 and 170 rupees, they seemed out of reach for customers used to paying only 5 rupees for the tiny chocolates he has sold for years. But he took a chance and now rings up to 3,500 rupees ($50) in Silk bar sales a month.

“Villagers can afford premium chocolates now,” he said.

As Satish and other Harohalli shopkeepers have found chocolate sales in India are taking off, helped by growth in disposable incomes that extends to the country’s 650,000 poorer villages where more than two-thirds of the population reside.

A boom in e-commerce and a sharp tax cut are also propelling sales higher, spurring global confectioners like Mondelez International, Inc., Nestlé SA and relative newcomer Hershey Co to invest further in the still small but rapidly expanding market.

Illinois-based Mondelez, India’s No. 1 chocolate maker, told Reuters “the big bulk” of a $150-million increase in global investment this year — the first hike in five years — will be in rural India.

The company, which first started providing Indian store owners with free display coolers in early 2000s, ramped up their distribution to rural areas over the last year. It now plans to be in about 75,000-100,000 villages in the next three years, up from 50,000 in 2018.

To that end, it is also expanding its fleet of refrigerated trucks and building a database that maps India’s small neighborhood stores and monitors sales of its products at those shops.

“There’s a misconception that rural consumers are poor. Not all of them are. There are rich farmers, who are coming into the consuming class,” Deepak Iyer, Mondelez’s managing director for India told Reuters.

Iyer said Mondelez was targeting villages with as few as 3,000 people. “There are families aspiring for premium products because they see them through mobile connectivity today.”

NEW PRODUCTS, MORE MARKETING
Mondelez CEO Dirk Van de Put said competitors will find it hard to match the firm’s scale in the country.

Cadbury’s vast, decades-old distribution network in India was a key attraction for Kraft Food in its $19.6-billion takeover of the brand in 2010. Kraft later split into two firms with its global snacks business renamed Mondelez.

“It’s not going to be easy (for rivals) to carve out space, to be really be noticed in the store,” he said an interview, adding that Mondelez has consistently grown market share in India for several years.

Mondelez says it now commands 66% of the Indian chocolate market. Cadbury, a 195-year old British confectionery brand, entered India in 1948 and its Dairy Milk, Silk and 5Star products have since made it a household name. The Dairy Milk brand alone accounts for 40% of the market.

Nestlé is ranked No. 2, followed by Ferrero and Hershey, according to Euromonitor. The companies have not disclosed market share estimates.

At $1.9 billion in annual sales, India has plenty of room to grow. China, also a developing economy with a similar population size, is a $3.2-billion market but both pale in comparison to the US market of $19.2 billion, Euromonitor data show.

Last year, chocolate sales in India jumped 15.4% after the government, keen to win reelection, overhauled its national sales tax for many items. The cut in tax to 18% from 28% reduced chocolate retail prices and companies nearly tripled the amount they spent on promotions, according to market research firm Nielsen.

Mondelez says its Cadbury brand, which has worked for decades with WPP’s Ogilvy India on Bollywood star-studded TV ads, is spending more on marketing. And to tap online demand, the company has created a Cadbury-only store on Amazon.com that personalizes gift boxes for India’s year-round festivals.

It is also introducing new products. Last month, it launched a low-sugar Dairy Milk bar, addressing a growing market for healthier products in India where 9% of adults have diabetes.

KISSES IMPACT
Nestlé, the world’s biggest packaged foods company, has also been investing in counter-top coolers, expanding distribution, running celebrity ads and launching premium products. Last year, it began importing its “hand-crafted artisanal” Les Recettes De L’Atelier bars from Europe.

Hershey is doing its best to catch up.

It entered India’s chocolate market in 2016 with its lesser known Brookside brand and announced plans the next year to spend $50 million in five years.

Rapid growth has come with the introduction of its 112-year-old Kisses brand last autumn, helping it replace Mars as India’s No. 4 chocolate company, although its products are only available in 14 cities and major online stores like Amazon.com, BigBasket.com and Flipkart.com.

“We’re at an early stage…we will extend this by going national and subsequently we’ll look at going down from urban to rural,” Herjit Bhalla, Hershey India’s managing director, told Reuters.

The unit had spent more than expected over the past year, funding celebrity ad campaigns and technology including hand-held devices that analyze store preferences, Bhalla said.

India’s e-commerce market is a priority, he added, with online orders accounting for over 4% of sales, higher than the 1% seen for India’s overall consumer goods market. — Reuters

Carry-over of excess EWT: Now an option

“Options! Options! Options!” – This was one of the lines I would always remember in the movie Four Sisters and a Wedding. The movie revolves around the abrupt decision of CJ, the youngest in the family, to get married to his fiancée, Princess. His four sisters, Teddie, Bobbie, Alex and Gabbie, connived to formulate a plan to stop the wedding from happening. One of which is to provide CJ with other options as the four sisters believed that CJ is only marrying Princess as she was the “best candidate in a diminishing pool of options.”

The continuous improvement in the tax rules and regulations gives taxpayers an additional option specifically on the over remittance of expanded withholding tax (EWT). The new option allows the taxpayer to carry over the over remittance to the succeeding quarter. However, before we explore the new option, let us revisit the old rules.

The rules and regulations, before the TRAIN (Tax Reform for Acceleration and Inclusion) Act took effect, provide two options in case the taxpayer overpays EWT. The options are (1) to file a claim for refund or (2) to be issued a tax credit certificate (TCC). These options were reiterated in a ruling (New Coast Hotel, Inc. vs. Commissioner of Internal Revenue) promulgated by the Court of Tax Appeals (CTA) en banc (EB). In the case, the taxpayer filed its EWT return for July 2012. Thereafter, the taxpayer filed an amended EWT return and reflected an over remittance in the amended return. The taxpayer indicated its intention to seek a refund on the over remittance by marking the “To be refunded” box. However, when the taxpayer filed its EWT return for the month of August, it reported the over remittance from the amended July 2012 return as “Advance Payments Made.”

Thereafter, the taxpayer received a Preliminary Notice from the Large Taxpayers-Document Processing and Quality Assurance Division (LT-DPQAD) which indicated that the August EWT return could not be processed due to underpayment of tax. The LT-DPQAD stated that the offsetting of EWT is not allowed. Determined, the taxpayer filed a letter addressed to the Commission of Internal Revenue (CIR) requesting the cancellation and withdrawal of the assessment. However, without waiting for the decision for the CIR, the taxpayer paid the assessed deficiency to stop the accumulation of interest and subsequently filed a claim for refund.

The CTA EB ruled that the over remittance of EWT when the taxpayer filed its July EWT return cannot be used to offset against EWT due on the succeeding period or be treated as an advance tax payment. Line 18 of the BIR Form No. 1601-E only allows taxpayers to choose any of the two options in, i.e., to be refunded or to be issued a TCC. The CTA EB states that clearly, that the option to carry over the excess to the subsequent month/s is not a remedy.

The CTA EB also noted that the taxpayer reflected the over remittance in the amended July 2012 return as “Advance Payments Made” of the August 2012 EWT return. The CTA EB took note that the payment form (BIR Form No. 0605) is accomplished every time a taxpayer pays taxes and fees which do not require the use of a tax return (e.g., second installment of income tax return, deficiency taxes, delinquency tax, registration fees, advances payments, etc.). In case of over remittance, BIR Form No. 0605 is not accomplished. Hence, it is clear that the “advance payments made” contemplated in BIR 1601-E do not refer to an over remittance of EWT made from previous month/s.

The above rule has proven to be very inefficient and sometimes overly difficult, on the part of the taxpayer. Any mistake in the computation of the EWT which results in over remittance requires the taxpayer to file a claim for refund or TCC. As the refund process of overpaid taxes is most times too costly in terms of time and effort on the part of the taxpayers, such overpaid taxes remain unclaimed for long periods.

Hence, the issuance of a new regulation by the BIR giving the taxpayers a more viable option to claim overpaid EWT offers a new ray of hope to taxpayers. This is Revenue Regulations (RR) No. 11 -2018 issued by the Bureau of Internal Revenue (BIR) on March 15, 2018. The RR provides the new forms and deadline for filing of EWT returns. In the RR, taxpayers are instructed to use BIR Form No. 0619E for the monthly remittance of EWT and BIR Form No. 1601-EQ for filing the quarterly EWT return.

The BIR further publicized the new BIR Form No. 1601-EQ through the issuance of Revenue Memorandum Circular (RMC) No. 27-2018. The RMC provides that the amount to be indicated in the return shall be the total taxes withheld for the quarter. Likewise, remittances made for the first two months of the quarter using the BIR Form No. 0619E shall also be reflected therein. In the event that the result after indicating the total taxes withheld and remittance made for the quarter is still payable, the taxpayer shall remit the tax due thereon. On the other hand, in case of over remittance, the amount can be carried over to the next taxable quarter within the same taxable year. Such option was reflected in the new BIR Form No. 1601-EQ. Before, this option was not available in the old EWT return. (See illustrations)

Now, taxpayers have the option to carry over the overpayment for EWT to the next taxable quarter. However, it should be emphasized that the new form allows the carrying over of an over remittance to the next quarter but only within the same calendar year. It specifically stated that the carrying over is not applicable to the succeeding year.

The additional option given to taxpayers is a good indication that the BIR is continuously improving our withholding tax system. This new option is indeed more practical on the part of the taxpayers. It allows for easy means of correcting mistake which resulted to over remittance of taxes. I am hoping that the tax authority will give more Options! Options! Options! to ease the tax compliance requirements in our country.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Anthony Joseph A. Cometa is a manager of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Scenarios

Reliable sources have disclosed that Operation “Awakening the Believers” was rolled out globally in early July. Simultaneous attacks were launched in Syria, Libya, Mozambique, Somalia, Tunisia, Afghanistan, Egypt, and Iraq. Islamic State Southeast Asia (ISEA) will allegedly follow suit with multiple coordinated attacks in the Philippines, Thailand, and Indonesia. The attacks will reportedly come in waves, first from July to September, then another wave till the end of the year. High value targets such as churches, hotels, malls, public transport, and other heavily populated areas are reportedly in their sights.

Extremist organizations around the world regard themselves as part of Islamic jihad. They refer to themselves as the “World Islamic Front for Jihad against Jews and Crusaders,” serving as an umbrella organization for terrorist coalitions and independent networks with common ideologies and shared operational ties, such as the “black flag” groups operating in the Philippines which are aligned either with Al Qaeda (AQ) or Islamic State (IS or Daesh), e.g. the Abu Sayaff Group (ASG), Sayful Ansarul Khilafa fi Luzon, Ansarul Khilafa fi Filipin, Bangsamoro Islamic Freedom Fighters (BIFF), and IS Ranao.

They regard Islam as their way of life and despise Western values (e.g. democracy, secularism, equality, human rights). Islamist terror organizations advocate all-out jihad against unbelievers (kuffars) wherein ends justify any and all means of terrorism. “Black flag” is the term used to denote terrorist groups and social movements that follow the Salafi religious interpretation of Islam which is literalist and puritanical. Based on traditional Islamic literature its followers are known as the “al-Khawarij.”

Terrorist financing funds specific missions and sustains the organization’s existential requirements. These are sourced from state sponsors, business fronts, criminal activities, and tithing. They are also supported by Black Flag-affiliate International Non-Government Organizations (BINGOs) such as the Muslim World League, the World Assembly of Muslim Youth, the International Islamic Relief Organization, Islamic Wisdom Worldwide, and Benevolence/Mercy

Foundation that fund education-social-cultural-youth coalitions, movements or foundations. Additionally, the link between terrorism and organized crime is well established, such as drug trafficking, kidnapping, extortion, arms smuggling and other criminal acts connected to terrorists.

Extremist organizations use state-of-the-art communications technologies to promote their cause worldwide, threaten, recruit, coordinate attacks, shape public opinion, and influence the global political and media agenda. The Internet is an ideal means for marketing terrorism: it’s decentralized, unrestricted, and accessible. Many Facebook accounts for example are used by IS, AQ, local black flag groups and support organizations here and abroad. There must be a focused effort to identify the users, take them offline, and shut down these accounts.

Due to ISIL’s crushing defeat in the Middle East, there has been an observable migration of foreign terrorist fighters (FTFs) to South East Asia to seek safe haven (Wilayatul Mashriq) and establish new provinces or “wilayats” under Daulah Islamiya (IS) governance rules. During and after the Marawi siege, FTF bodies were recovered and identified by the authorities. Marawi was part of the IS campaign to establish a Southeast Asian caliphate and a wilayat in Mindanao. Foreign jihadists were, and still are, “embedded” among local terror groups, waiting to strike at opportune times, perhaps ala Mumbai or Sri Lanka, or Ipil.

The Daulah Islamiya Wilayatul Mashriq coalition of the ASG, the Maute Group, and BIFF is a serious concern because geographically and ethnically diverse groups banded together and fought as one to lay siege on Marawi. Their areas of operation dangerously intersect, if not overlap, with those of the Moro National Liberation Front and Moro Islamic Liberation Front, as well as that of the Communist Party of the Philippines-National Democratic Front of the Philippines-New People’s Army. This has led to cross-pollination of ideologies, grievances, and subversive tactics that fan opportunities for tactical cooperation nationwide in the realm of terror attacks where they’re co-located.

The increasing number of suicide bombings in the past 12 months indicate a higher level of commitment to the militant cause. Last January, an Indonesian couple was behind the Jolo cathedral’s bombing that killed 21 people. A month ago, on June 28, two suicide bombers attacked an army camp. Eight were killed (including the two bombers) and 22 were wounded in that attack. A year ago, in July, 10 persons were killed at a Lamiftan, Basilan checkpoint when a suicide bomber allegedly from Morocco detonated the bomb in the van he was driving.

Our authorities believe that at least seven foreign Islamic terrorists — allegedly from Egypt, Malaysia, Indonesia, and Singapore — are currently scattered in Sulu, Basilan, and Maguindanao teaching skills like producing IEDs, planning attacks, recruitment and developing potential suicide bombers. Furthermore, Defense Secretary Delfin Lorenzana recently disclosed that reports are being verified that close to 100 foreign jihadists from Indonesia, the Middle East, Thailand, Bangladesh, Turkey, and Morocco are scattered in various parts of the country.

Despite its territorial and manpower losses, ISIS is expected to persist in 2019. Classic ISIS operations such as vehicle to knife attacks, bombings and armed assault, arson, raids, and even explosives-laden drone attacks are likely. Compounding matters is the violent discord between Sunnis and Shiites. Here at home, we’ve seen dangerous signs of that in Mindanao and in Manila as rivals fight for turf and influence. Local religious leaders are dismayed by this troubling development with the prospects of sectarian violence worsening.

Preparedness is everything. It’s about saving lives, protecting the economy, and preserving our freedom from oppression, hatred, prejudice, and intolerance. Our safety and security depend on our vigilance and preparations for the worst case scenarios. Prevention is top priority but if they manage to slip through, a swift crushing response is essential. Staying on top of the game requires thorough planning, integration, training, equipage, jointness of effort at the policy, crisis management and operational levels, and skillful execution.

Intelligence and counter-terror forces should keep sharing information and conducting joint drills — table top exercises and field training exercises — over and over again until they get it right. Incident commanders should be pre-chosen and thoroughly trained to have zero tolerance for incompetence and laxity. Bottom line: do not underestimate, or be overconfident, or take anything for granted.

 

Rafael M. Alunan III served in the cabinet of President Corazon C. Aquino as Secretary of Tourism, and in the cabinet of President Fidel V. Ramos as Secretary of Interior and Local Government.

rmalunan@gmail.com

map@map.org.ph

http://map.org.ph

SONAsaan na ba talaga tayo ngayon? At hindi SONAsaan na tayo?

(First of two parts)

I admit I did not watch the State of the Nation Address (SONA) live on July 22. But I had to see it because I teach Politics and Governance in the Loyola School of Social Sciences in the Ateneo de Manila University.

I heard the President was one hour late to the event. If my ears did not deceive me, I counted 39 bursts of applause and 22 of laughter interrupting the President’s 93-minute speech. And, as expected, I also counted at least 10 curses.

It is interesting to note that was there was no applause nor laughter when the President talked about the West Philippine Sea and China and about corruption (except maybe one laugh?).

“So where are we (the Philippines) really now today?,” he asked.

I will now quote parts of the President’s speech and give my own (right or wrong) unsolicited insights.

1. “But the landslide victory of the Administration candidates as well as the latest survey results show that my disapproval rating is at 3%”

True, the Administration candidates won by a landslide. The conduct of the recent automated election, like all other Philippine elections, was not without criticism, however. First, the Liberal Party, known as the legitimate opposition, was not recognized as such. The election watchdog NAMFREL withdrew at the last moment because they would not to be given the data for its open election data website. After 25 minutes of counting by the Transparency Server, everything stopped for the next seven hours. More 500 SD chips were replaced a few days before the election. It would be good for an independent IT organization to analyze and determine what actually happened during this last election and conclude what the effects of these events were.

Some would also argue over the accuracy of the 3% disapproval rating reported by the Social Weather Station (SWS) and similarly by Pulse Asia, particularly when the former also reported that 90% of respondents do not trust China and three of five would like the International Human Rights team to investigate the spate of killings in the country. But both reports give the President bragging rights and emboldens his officials to do what he commands — rightly or wrongly.

2. “It has been three years since I took my oath of office, and it pains me to say that we have not learned our lesson. The illegal drug problem persists… I respectfully request Congress to reinstate the death penalty for heinous crimes (applause) related to drugs as well as plunder.”

A far cry from his earlier declaration “I will resign if I do not eliminate drugs in six months,” the President now admits illegal drugs continue to pour in, even near Malacañang Palace. Where are the drugs coming from? How is the supply — mostly coming from China as Senator Ronaldo “Bato” dela Rosa once said during the campaign — able to pass through Customs?

What lessons have we not learned? That Tokhang that has killed 24,000 people including children, but the big time drug lords (Peter Lim, Kenneth Dong, etc.) as identified by the Philippine Drug Enforcement Agency have not been arrested nor prosecuted? Will the death penalty stop such shipments when no big time drug lords have been arrested?

Interestingly, President Duterte has a former president, Joseph Estrada, a senator, Ramon Revilla, Jr., and maybe one or two others found guilty of plunder, among his friends!

3. “Our warped loyalty to family, friends, and tribal kin continue to exact a heavy toll on our programs designed to uplift the poor and reassure our investors, our foreign investors local, and the business sector in this country.”

If one ties this up with the many controversial political dynasties (the President’s family included) in the country (although it’s the people who voted for them) and friends (Gloria Macapagal-Arroyo, Ramon “Bong” Revilla, Juan Ponce Enrile, Jinggoy Estrada, and Imelda Marcos who has been convicted but remains free, the Tulfos, and Bong Go who’s family is cornering big government projects in Davao) and the President may have a point here.

4. “I have fired or caused the resignation of more than a hundred officials and appointees of government without regard to relationship, friendship, and alliance.”

While a number of high officials have been fired or forced to resign by the President, a good number have actually just been “promoted” or “assigned” to other government positions after being “fired.” Take the case of former Philippine National Police General and Bureau of Customs (BOC) Chief Isidro Lapeña who was fired when a P11 billion ($533 million) drug shipment was released in Manila in 2018 — he was transferred to a harmless cabinet post as head of the Technical Skills and Development Agency. The same thing happened with another former BoC Commissioner Nicanor Faeldon who resigned as customs chief following congressional hearings into the smuggling of P6.4-billion worth of shabu. He was first appointed deputy administrator in the Office of Civil Defense and is now Director General of the Bureau of Corrections.

5. “We are long on rhetoric but short on accomplishments… That is why I implore those who occupy positions of power and authority to let your deeds and accomplishments do the talking. Lead by example. Words ring hollow when not followed by positive and prioritized actions.”

Walk the walk as they always say. It’s nice to hear promises like “Give me six months, I will eliminate drugs or else I will resign.” Or “I will jetski to Panatag Shoal and plant the Philippine flag,” or “solve traffic” or “I will stop corruption…” Especially during the campaign period.

6. “As of July 9, 2019, we collected more than P61 billion from GOCCs or government corporations, 32% of which, or P16 billion, from PAGCOR. [applause] This is more than the P36 billion collected in 2017. My salute to Andrea Domingo. [applause] Magpasugal ka pa, ma’am, nang marami (Gamble some more, ma’am, a lot). [laughter]”

Gambling is illegal in China. The news media has recently been flooded with stories on the influx of Philippine Offshore Gaming Operations (POGO) with 100,000 Chinese workers who are allegedly not paying taxes. Would the Roman Catholic Church accept such money if the majority of the gamblers are foreigners? Just asking.

7. “Simplify and make your services responsive to — client-friendly. Your client is the Filipino, our employer — from where the money in our pockets come from, from your salaries.”

My own experience getting passports for myself and my children in an offsite facility in Marikina in 2018 was highly positive and worth thanking the Department of Foreign Affairs and the Duterte Administration for.

8. “Equipped with political will, the government ordered the closure of Boracay Island for six months to prevent further deterioration. We cleaned and rehabilitated the island and I allowed it to heal naturally.”

It was highly commendable of government to clean Boracay Island. But news of the influx of Chinese business establishments and tourists during its opening, a mountain flattened during the closure, and recent flooding (which normally happens when trees are cut — a no brainer) at the height of Typhoon Falcon somehow negates such high commendation.

(To be continued.)

 

Benjamin Roberto Gomez Barretto is currently a part time professor with the Political Science Department of Ateneo de Manila University. He is also Vice-President for Planning and Community Services of the Pamantasan ng Lungsod ng Marikina as well as its Dean for the College of Management and Technology. He was the former Executive Director of the Jesuit Volunteers Philippines Foundation Inc. and was a former Administrator of the Ateneo School of Government.

Promoting Corporate Governance under the Revised Corporation Code — 3

(Third of three parts)

This is an abridged version of the talk I recently gave to the MAP Corporate Governance Committee officers and members on the Revised Corporation Code which was enacted into law on Feb. 20, 2019.

MORE TRANSPARENCY
There are many new provisions in the Code that are for more transparency, a component of good corporate governance. Sec. 73 specifies the books and records that must be kept at the principal office:

1. Articles and by laws and amendments;

2. Current ownership structure and voting rights of the corporation, lists of stockholders or members, group structures, intra-group relations, ownership data and beneficial ownership;

3. Names and addresses of all the members of the board of directors and trustees and executive officers;

4. A record of all business transactions;

5. A record of the resolutions of the board of directors or trustees and of the stockholders or members;

6. Copies of the latest reportorial requirements submitted to the SEC;

7. Minutes of all meetings of the stockholders or members, directors or trustees reiterating the contents as were set forth in Sec. 74 of the old Code: a.) time and place of meeting, b.) how it was authorized, c.) notice given, d.) the agenda, e.) whether it was regular or special, f.) its object if special, g.) those present and absent, h.) every act done or ordered done at the meeting, i.) upon demand of a director, trustee, stockholder or member, when any director, officer stockholder or member entered or left the meeting, j.) upon similar demand, the yeas and nays on any motion or proposition and a record thereof carefully made, k.) the protests of a director, trust, stockholder or member on any action or proposed action must be recorded in full upon their demand.

Moreover, Sec. 49 enumerates in detail what every board shall endeavor to present to stockholders or members at each regular meeting:

a.) Minutes of the most recent regular meeting including among others: voting and vote tabulation procedures; questions from the floor; matters discussed and resolutions reached; record of voting results for each agenda item; list of directors, officers and stockholders who attended meeting; other items SEC may require in compliance with corporate governance standards [note: these are matters added to those required in Sec. 73 or in paragraph (7) above];

b.) Members’ list for nonstock corporations, and for stock corporations the material information on current stockholders and voting rights;

c.) Detailed, descriptive, balanced and comprehensible assessments of the corporation’s performance, which shall include information on any material change in the corporation’s business, strategy, and other affairs;

d.) Financial report; adequacy of internal controls or risk management systems and statement of all external audit and non-audit fees;

e.) Dividend policy, why not given;

f.) Directors or trustees profiles which shall include qualification, relevant experience, length or service in the corporations trainings and continuing education attended and their board representation in other corporations;

g.) A director or trustee attendance report in committee meetings or stockholders and board meetings;

h.) Appraisals and performance reports for the board and criteria and procedure for assessment;

i.) A director or trustee compensation prepared in accordance with code and rules SEC may prescribe;

j.) Director disclosures on self-dealings and related party transactions; and, or,

k.) The profiles of directors nominated or seeking election or reelection.

One of a stockholder’s important rights is the right of inspection, and Sec. 73 has important changes:

1. A representative of the director, trustee, stockholder or members may exercise the right;

2. The inspecting or reproducing party shall remain bound by confidentiality rules under prevailing laws, such as the rules on trade secrets or processes under RA 8293 IP Code, RA 10173 Data Privacy Act of 2012, RA 8799 SRC and the Rules of Court;

3. Further, a requesting party should be a non-stockholder (or member) of record;

4. A competitor, director or officer, controlling stockholder or otherwise represents the interests of a competitor shall have no right to inspect or demand reproduction;

5. The requesting stockholder, if rejected without cause, may avail of a summary procedure whereby within five days from receipt of a report from the stockholder concerned, the SEC shall conduct a summary investigation and order forthwith the inspection or reproduction.

INVOLUNTARY DISSOLUTION AND FORFEITURE OF CORPORATE ASSETS
Sec. 138 on Involuntary Dissolution now provides the specific grounds for dissolution motu proprio by the SEC or upon verified complaint by any interested party. Sec. 138 (e) is the particular portion which is intended to prevent the corporate vehicle from being used relative to certain criminal activities and impose criminal liability on the corporation itself in accordance with the UNCAC model. A corporation may thus be subject to involuntary dissolution proceeding before the SEC:

a. Upon finding by final judgment that the corporation: 1. was created for the purpose of committing, concealing or aiding the commission of securities violations, smuggling, tax evasion, money laundering or graft and corrupt practices act; 2. committed or aided in commission of securities violations, smuggling, tax evasion, money laundering or graft and corrupt practices and its stockholders knew of the same; and, 3. repeated and knowingly tolerated the commission of graft and corrupt practices or other fraudulent or illegal acts by its directors, trustees, officers or employees.

Take note — if the corporation is ordered dissolved by final judgment under paragraph (e), its assets, after payment of its liabilities, shall, upon petition by SEC with the appropriate court, be forfeited in favor of the national government without prejudice to the rights of innocent stockholders and employees for services rendered and to the application of other penalty or sanction under the Code or other laws.

MORE ENFORCEMENT POWERS FOR THE SEC
Some of the new enforcement powers of the SEC are also found in the Securities Regulation Code:

1. Conduct investigation and prosecute offenders;

2. Administer oaths;

3. Enjoin, prevent violations through the issuance of a cease and desist order (CDO): a. upon reasonable basis to believe a person has violated or about to violate the Code, rule, regulation or order of the SEC and; b. ex parte to enjoin an act or practice which is fraudulent, can be reasonably expected to cause significant, imminent and irreparable danger or injury to public safety or welfare;

4. Cite a person in contempt;

5. Exercise its visitorial power to examine and inspect records, regulate and supervise activities, enforce compliance and impose sanctions over all corporations.

Sec. 158 provides the administrative sanctions imposable by the SEC depending on extent of participation and seriousness of violation: a. fine from P5,000 to P2 million and not more than P1,000 for each day of continuing violation but in no case to exceed P2 million; b. permanent CDO; c. suspension or revocation of the certificate of incorporation; and, d. dissolution and forfeiture of assets under the conditions in Sec 138 (e).

The following new provisions refer to specific criminal violations and their corresponding penalties which the court, upon conviction, may impose these fines:

• Sec. 159, unauthorized use of corporate name, P10,000 to P200,000

• Sec. 160, violation of director’s (trustee’s, officer’s) disqualification provision, P10,000 to P200,000 at discretion of court and permanent disqualification. Where violation is injurious or detrimental to public, P20,000 to P400,000 plus the director, trustee or officer may be permanently disqualified.

• Sec. 161, violation of duty to maintain records, allow their inspection or reproduction, P10,000 to P200,000 if injurious or detrimental to public, P20,000 to P400,000 to be imposed on the corporation or those responsible.

• Sec. 162, willful certification of incomplete, inaccurate, false or misleading statements or reports, P20,000 to P200,000. When wrongful certification is injurious or detrimental to the public, the auditor or responsible person may also be punished with P40,000 to P400,000. Any person responsible is liable.

• Sec. 163, an independent auditor, in collusion with directors or representatives of the corporation, certifies financial statements despite its incompleteness or inaccuracy, failure to give a fair and accurate presentation of condition, despite containing false or misleading statements, P80,000 to P500,000. When the statement or report is fraudulent, has the effect of causing injury to the general public, the independent auditor or responsible officer, P100,000 to P600,000.

• Sec. 164, obtaining corporate registration through fraud, P200,000 to P2 million if injurious or detrimental to public, P400,000 to P5 million will be imposed on those responsible for the formation of the corporation and those who assisted directly or indirectly therein.

• Sec. 165, fraudulent conduct of business, P200,000 to P2 million, if injurious or detrimental to the public, P400,000 to P5 million will be imposed on the corporation.

• Sec. 166, acting as intermediaries for graft and corrupt practices makes the corporation liable for P100,000 to P5 million; if any director, officer, employee, agent or representative engaged in graft and corrupt practices, the corporation’s failure to install: (a) safeguards for the transparent and lawful delivery of services, and, (b) policies, code of ethics and procedures against graft and corruption shall be prima facie evidence of corporate liability.

• Sec. 167, engaging intermediaries for graft and corrupt practices, the corporation is liable P100,000 to P1,000,000

• Sec. 168, tolerating graft and corrupt practices — the director, trustee, or officer who knowingly fails to sanction, report or file the appropriate action with proper agencies, allows or tolerates the graft and corrupt practices or fraudulent acts by its directors, trustees, officers or employees, P500,000 to P1 million.

• Sec. 169, retaliation against whistleblowers — any person who knowingly and with intent to retaliate, commits acts detrimental to a whistleblower, P100,000 to P1,000,000

• Sec 170, other violations of the Code; separate liability of P10,000 to P1 million; if committed by the corporation, after notice and hearing may be dissolved in appropriate proceedings before SEC which dissolution will not preclude appropriate action against director, trustee or officer responsible

Liability for any of the foregoing offenses shall be separate from any other administrative, civil or criminal liability under the Code and other laws. While imprisonment is not a penalty, criminal charges may be brought for falsification, use of a falsified document and other penal offenses or statutory offenses like violation of the anti-graft and corrupt practices act, tax evasion, smuggling, money laundering, that have imprisonment as penalty.

While the foregoing provisions may single out the corporation as the person liable, directors, officers, employees, and even third persons may also be prosecuted and imposed the same fines as penalties under Sections 171 and 172.

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP)

 

Atty. Teresita “Tess” J. Herbosa is of Counsel of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW) and former Chair of the Securities and Exchange Commission (SEC).

tjherbosa@accralaw.com.ph

map@map.org.ph

http://map.org.ph

No climate crisis

WASHINGTON, DC — The various presentations at the Heartland Institute’s 13th International Conference on Climate Change (ICCC-13) on July 25 in this city reiterated what many scientific papers from the fields of meteorology, geology, climatology, physics, chemistry, biology, mathematics, etc. have found — there is no climate crisis or climate emergency.

Global warming is true, climate change is true, but they are largely natural, nature-made and not man-made (or anthropogenic), and cyclical. What is termed and called by others as “extreme weather” has no baseline period as basis of comparison. So when asked, “extreme weather compared to when, 200 or 800 or 10,000 or 10 million years ago?” the answer is often the sound of silence.

The fact is that there was “extreme weather” during the Roman warm period, Medieval warm period, until the current modern warm period, and in the next hundreds and thousands of years into the future.

Dr. Roy Spencer, a climatologist at University of Alabama in Huntsville (UAH) observed that the Coupled Model Intercomparison Project (CMIP) of the World Climate Research Program (WCRP) models are “warming about twice as fast as both UAH satellite temperatures and the average of four global reanalysis datasets. And even if observed warming is due to increasing CO2, it is too weak to notice in our lifetime.”

Dr. Nir Shavi, a physicists at the Hebrew University of Jerusalem, argued that “actual evidence points to a strong solar climate link and a low climate sensitivity, future warming will be benign, and that solar activity should be taken but it is ignored by the UN IPCC (United Nations Intergovernmental Panel on Climate Change).”

Dr. Jay Lehr, a hydrologist and famous author of a thousand-plus scientific articles, noted that there are at least 12 climate variables — changes in seasonal solar irration, energy flows between the air and land, etc. — that people should look into and study before declaring with certainty that there is indeed a climate emergency.

Governments, upon the prodding of the UN, make policies bases on wrong “climate crisis” scenario of “unprecedented, unequivocal global warming.”

Thus in the Philippines, we enacted the Renewables Energy (RE) Act of 2008 (RA 9513) which gives plenty of special privileges to solar/wind/biomass/hydro power producers, like the feed in tariff (FIT) or guaranteed price for 20 years, to “help save the planet.” The higher oil, diesel, coal taxes under the TRAIN law (RA 10963) is also done along this goal.

There were two reports in BusinessWorld in July 29 related to this:

1. “NGOs call for more aggressive moves to adopt renewable energy”;

2. “Deputy Speaker vows ‘big push’ on department bills, pay hikes.”

Pushing for more intermittents like solar/wind power will further raise electricity prices. Expanding some existing bureaus into full Departments will further require more taxes to finance more Departments and bureaus.

Many East Asian economies hardly pay attention to injecting more solar/wind into their national electricity grid. In particular, Indonesia, Malaysia, South Korea, Singapore, Vietnam, Taiwan, and Hong Kong have a solar and wind share of only 2% or lower of their total electricity generation. And these economies generally have high per capita income (see table).

To create more climate-related agencies — the Department of Disaster Reduction and Department of Water Resources — on top of having the Department of Environment and Natural Resources and the Climate Change Commission, etc. and they will create more regulations to “fight” less rain and more rain, less flood and more flood, less cold and more cold.

We should not further expand bureaucracies but instead, expand conventional energy sources to significantly expand our electricity production, which will help bring down energy prices and make electricity supply become more stable.

 

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com

PSE index inches higher ahead of Fed meeting

By Arra B. Francia, Senior Reporter

THE MAIN INDEX eked out gains on Monday as investors mostly stayed on the sidelines ahead of the US Federal Reserve’s policy meeting.

The benchmark Philippine Stock Exchange index (PSEi) added 0.05% or 4.53 points to close at 8,188.52, managing to post gains despite being sold down for most of the day. The broader all-shares index likewise rose 0.15% or 7.44 points to 4,963.04.

“The main index was down for most of the day on below average trading volumes. Investors are on the sidelines as we await the outcome of the US Federal Reserve meeting on Wednesday,” AAA Southeast Equities, Inc. Research Head Christopher John Mangun said in an e-mail.

The US central bank’s policy-setting Federal Open Market Committee (FOMC) will hold its two-day policy meeting from July 30-31, where it is expected to cut key interest rates by 25 basis points.

“Many expect the FOMC to cut the funds rate by 25 bps at the July meeting, as virtually all the signals from the Committee point this way. However, decision will be released only on Wednesday night (Manila time), and this event has kept many at bay,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile phone message.

Four sectoral indices moved to positive territory, led by mining and oil which jumped 0.62% or 49.44 points to 7,920.41. Property climbed 0.43% or 18.76 points to 4,365.85; holding firms gained 0.12% or 9.56 points to 8,008.68, while financials firmed up 0.01% or 0.36 point to 1,848.85.

In contrast, services plunged 0.99% or 16.51 points to 1,635.39, while industrials shed 0.16% or 18.53 points to 11,449.21.

Turnover was thin at P4.84 billion after some 667.34 million issued switched hands, lower than Friday’s P5.90 billion.

Foreign investors remained in net selling position at P180.74 million, lower than the previous session’s P278.02 million.

Decliners outpaced advancers, 100 to 91, while 53 names were unchanged.

“The PSEi was able to stay above the support at 8,150. However, it is looking weaker and weaker by the day. We will not see the market go up until we get more volume. Hopefully it can still trade between the range of 8,150 and 8,300,” AAA Equities’ Mr. Mangun said.

Meanwhile, Wall Street indices ended higher last Friday on the back of strong earnings and better-than-expected US economic growth data. The Dow Jones Industrial Average climbed 0.19% or 51.47 points to 27,192.45. The S&P 500 index jumped 0.74% or 22.19 points to 3,025.86, while the Nasdaq Composite index surged 1.11% or 91.67 points to 8,330.21.

Positive sentiment failed to touch Asian stocks, as most also focused on FOMC’s decision as well as the resumption of trade talks between the US and China set on July 30.

Peso weakens vs dollar on US GDP growth data

THE PESO declined due to better-than-expected US economic growth. — BW FILE PHOTO

THE PESO weakened against the dollar on Monday due to a stronger-than-expected US gross domestic product (GDP) report.

The peso closed Monday’s session at P51.09 versus the greenback, 3.5 centavos weaker than its P51.055-per-dollar finish on Friday.

The peso opened the session at P51.005 per dollar, surging to as high as P50.93 intraday. However, its worst showing stood at P51.10 against the US currency.

Trading volume thinned to $767.25 million from the $859.34 million that switched hands the previous session.

A trader said the peso traded within a tight range yesterday, strengthening initially as it rode on Friday’s momentum.

“However, it was quickly supported at around P50.95 and it eventually (weakened) in line with other currencies as the dollar strengthened during Asia time,” the trader said in a phone interview.

Another trader said the local unit weakened on reduced bets of a 50-basis-point cut in the US Federal Reserve policy rate cut following the release of a stronger-than-expected second-quarter GDP report.

US economic growth slowed to 2.1% in the second quarter from 3.1% the previous quarter, even as strong consumer spending tempered the effects of declining exports and smaller inventory build.

However, the economy slowed less than expected from the 1.8% expected by economists polled by Reuters.

“I think the market is just on a wait-and-see mode and trade within range ahead of the Fed meeting this week,” the first trader added.

The US central bank is widely expected to cut interest rates by at least 25 basis points during the July 30-31 meeting of its policy-setting Federal Open Market Committee.

Earlier this month, Fed chair Jerome Powell hinted on a cut in benchmark rates, saying the central bank will “act as appropriate” to sustain expansion as “crosscurrents” such as trade tensions and concern on global growth are weighing on the economy.

For today, the first trader expects the peso to trade between P50.95 and P51.15 versus the dollar, while the other gave a P51-P51.20 range.

Most Asian currencies also lost steam on Monday as the dollar strengthened on the back of strong US GDP data and investors remained cautious ahead of this week’s Federal Reserve meeting where a rate cut has been largely priced in.

Investors will also be watching the resumption of Sino-US talks as the world’s top two economies make yet another attempt to resolve their differences on trade and other issues that have roiled financial markets for over a year now.

The dollar clung to a two-month high against a basket of currencies in Asia after better-than-expected US GDP data last week enhanced its yield attraction against rival currencies. — Karl Angelo N. Vidal with Reuters

Duterte wants Batanes patrols amid China row

PRESIDENT Rodrigo R. Duterte wants regular patrols near the islands of Batanes province amid China’s land reclamation activities in the South China Sea.

The president, who visited the northern province on Sunday after a series of earthquakes hit Itbatan town at the weekend, said the Philippine Coast Guard should ensure Batanes “remains ours.”

“You might want to ask the Coast Guard to come here,” Mr. Duterte told Defense Secretary Delfin Lorenzana during a briefing with Batanes officials, according a transcript emailed by the presidential palace. “Not everyday but just to assure that those islands will remain ours.”

Mr. Duterte said the government had bought a fast boat that the Coast Guard could use to patrol the northern islands.

He said China is known to have grabbed some lands and the Philippines cannot afford to do the same. “If we steal from China, we might get fired at by missiles,” he said in Filipino. It’s the government’s job, he added to “preserve the Republic of the Philippines.”

The Coast Guard last week took delivery of assets meant to upgrade its sea patrol capabilities and response to natural disasters. The assets included 73 rubber boats with outboard motors, 12 rigid-hulled inflatable boats, 90 pickup trucks, seven buses and five ambulances.

China’s neighbors are racing to empower their Coast Guard fleets amid increasing tensions in the South China Sea.

China claims sovereignty over more than 80 percent of the South China Sea based on its so-called nine-dash line drawn on a 1940s map.

It has been building artificial islands in the disputed Spratly Islands and setting up installations including several runways.

Mr. Duterte has sought closer investment and trade ties with Beijing, including over resources in the disputed sea, since he assumed office in 2016.

His predecessor, Benigno S. Aquino III, sued China before an international arbitration tribunal over its territorial claims, and won. He also strengthened Philippine alliance with the US to try to check China’s expansion in the main waterway. — Arjay L. Balinbin

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