MANILA, Philippines?Reversing a lower court?s decision, the Court of Appeals has ordered the criminal prosecution of businessman Dante Tan, a crony of deposed president Joseph Estrada, and seven others for the insider trading and stock price manipulation scandal that hit Best World (BW) Resources Corp. in 1999.

The BW stock scandal caused the near collapse of the Philippine stock market.

At the impeachment trial of Estrada in the Senate on Jan. 11, 2001, a few days before he was ousted, former Finance Secretary Edgardo Espiritu testified that Estrada jointly owned BW Resources with Tan.

The appellate court?s Second Division reversed the orders issued by the Pasig Regional Trial Court Branch 268 in 2007 that dismissed the criminal cases against Tan and seven others for violation of the Revised Securities Act?s Section 26 and 27 on stock price manipulation.

The Court of Appeals said Pasig RTC Judge Amelia Manalastas committed grave abuse of discretion when she absolved Tan, Federico Galang, Eduardo Lim Jr., Hermogenes Laddaran, Raul de Castro, Emmanuel Edward Co, Mario Juan and Jimmy Juan from criminal prosecution.

Tan, former president of BW Resources Corp., has reportedly left the country.

Tan and his co-respondents were accused of manipulating the stocks of BW in 1999, which caused BW stock price to skyrocket from P2.04 in January 1999, to a record high of P107 on Oct. 11 when Macau gambling tycoon Stanley Ho accepted an offer to become its chair. But a day after, the stock plunged to P68, causing heavy losses to many investors.

Estrada?s call to SEC chair

The state-owned Philippine Amusement and Gaming Corp. had granted an online bingo franchise to BW Gaming and Amusement Corp., which was owned by BW Resources.

Estrada acknowledged Tan was among his contributors in his 1998 presidential campaign.

Estrada was impeached in November 2000 on charges, among others, of intervening with the duties of a public servant when he called up then Securities Exchange Commission chair Perfecto Yasay five times to clear Tan of any wrongdoing in the BW insider trading scandal.

Bubby Dacer?s death

When the BW stock scam broke out, Tan hired Salvador ?Bubby? Dacer as PR man to contain the damage, according to Antonio Carpio, now Supreme Court associate justice, in his column on June 24, 2001 when he was still a columnist for the Philippine Daily Inquirer.

?It is possible that during this time Dacer came to know that Estrada had a substantial interest in BW. Dacer may even have come into possession of documents to prove Estrada?s ownership of BW stocks,? Carpio said in his column.

Carpio also said one ?shocking document that has surfaced is a letter by Estrada?s own lawyer, brazenly written on Malacañang letterhead and addressed to Tan, demanding the turnover to Estrada of BW stocks worth over P500 million. This document inextricably links Estrada to the BW stock scam.?

Motive for murder?

Carpio said ?the revelation of this document, if proven to be in Dacer?s possession at the time he was killed, could establish the motive behind Dacer?s killing.?

Investigations by the SEC and the Philippine Stock Exchange (PSE) uncovered heavy share-buying by Tan.

Tan reportedly sold his shares to friends and clients at discounted rates to jack up the price of BW shares and to show that the shares were actively traded in the stock market.

The SEC and PSE also found that BW?s daily turnover circulated only among 10 brokerage firms.

The PSE report said that Jimmy Juan acted as Tan?s dummy when he amassed 58.8 million BW shares worth at least P130 million. The shares were allegedly transferred back to Tan.

A certain Cesar Marcelo was cited in the PSE report as having engaged in a significant number of cross sales in which Tan acted as the buyer and Marcelo as the seller.

Kiting activities

These transactions were supposed to have been used to perpetrate Tan?s ?kiting? activities, which are prohibited under PSE rules.

Kiting is a scheme in which a stockholder sells his shares to a broker under a special buyback arrangement to get cash even before the clearing and settlement date, which is four days after the transaction date. When the buyback date is due, the stockholder would then sell the same shares under a similar arrangement with a second broker to get cash to pay for the first broker.

Rejecting Tan?s contention that the charges against them had already been extinguished, the appellate court?s Second Division ruled that the new Securities Regulation Code (SRC), which took effect in August 2000, did not decriminalize the offenses penalized under the old Revised Securities Act (RSA).

The appellate court pointed out that Sections 26 and 27 of the old RSA that penalized the manipulation of security prices were reenacted in Sections 24 and 26 of the new SRC.

Wash sales

?The SRC did not modify the elements of the offenses relative to the manipulation of security prices via ?wash sales,? ?matched orders,? ?marking the close,? or ?abuse of EQ trade facility.??

Wash sale involves the buying and selling of shares in which there is no actual transfer of ownership. The aim is to create an impression of heavy trading to lure investors to come in and push the prices up.

Matched orders, on the other hand, are manipulative acts in which a buyer and seller agree to a transfer of shares in a bid to show market activity.

Provisions of old law reenacted

The decision, penned by Associate Justice Jose Catral Mendoza, said the pertinent provisions in the old law were reenacted in the provisions of the new law.

The appellate court also pointed out that the simultaneous repeal of the RSA and reenactment of its provisions in the SRC ?only proves that there is no legislative intent to repeal or decriminalize the offenses and penalized under the RSA.?

?Hence the acts penalized before the reenactment under RSA continue to remain offenses and the pending cases have not been affected by the repeal,? the court added.

Associate Justices Portia Aliño-Hormachuelos and Ramon Bato concurred in the decision.

The charges against Tan and his co-accused were filed on March 2002 before the Pasig RTC. Four years after, Tan filed a motion to quash on the grounds that the RSA had already been repealed with the enactment of the SRC.

The Pasig RTC granted Tan?s motion on Aug. 15, 2007. The other accused followed suit with their own motion to dismiss the charges against them, which the court granted on Nov. 21, 2007.

The government appealed the lower court?s ruling.