Businessman Roberto Ongpin. INQUIRER file photo
A letter from the Securities and Exchange Commission (SEC) detailed the circumstances that could prove that businessman Roberto “Bobby” Ongpin might have engaged in insider trading when he bought Philex Mining shares, a few days before he sold a big block of Philex shares to tycoon Manuel Pangilinan at an agreed price.
Insider trading happens when someone makes an investment decision to make a profit or avoid a loss based on information that is not available to the general public.
SEC Chair Teresita J. Herbosa told Senate President Juan Ponce Enrile in the letter dated September 14 that Ongpin was still considered “an insider as defined under Section 3.8 of the Securities Regulation Code” despite his resignation as a Philex officer on Dec. 7, 2009, when the sale of Philex shares to Pangilinan at P21 each was finalized.
An SEC investigation showed that Ongpin resigned as director and vice chair of Philex Mining on the same day. His exit from Philex was disclosed to the Philippine Stock Exchange on Dec. 8, 2009.
Herbosa, however, said Ongpin’s resignation from Philex at that point meant “he may have been in possession of material information not available to the general public when he purchased Philex shares on Dec. 2, 2009.”
Senator Sergio Osmeña III, chairman of the Senate committee on banks and financial institutions, said the dates were important and crucial in establishing insider trading.
Fourth hearing
Osmeña’s committee and the Senate blue ribbon committee held their fourth joint hearing Tuesday on the alleged behest loans that Development Bank of the Philippines (DBP) granted to Ongpin in 2009.
The investigation has now expanded to include insider trading that Ongpin allegedly committed using shares purchased through loans obtained from DBP.
So far, it has been established by the Senate committees that Ongpin sold a total of 550 million Philex mining shares to Pangilinan in 2009. But Pangilinan said in his affidavit dated October 24 that he bought 452,088,160 Philex shares from Ongpin.
Ongpin reportedly obtained two loans from DBP—one for P150 million and another for P510 million.
Ongpin bought DBP’s 50 million Philex shares for only P12.50 using the P510-million loan from the government bank.
Ongpin later acquired Philex shares for P19.25 each that he sold to Pangilinan.
Private agreement
Osmeña recalled that in late November 2009, Ongpin was an officer of Philex Mining when he “entered into a private agreement” with Pangilinan to sell Philex shares at P21 each following a negotiation from November 24 to 27 at Makati Shangri-La Hotel.
“The private deal between the two entrepreneurs came into financial close on Dec. 7, 2009,” Osmeña said.
The senator pointed out that Herbosa’s letter to Enrile showed that on Dec. 2, 2009, the Ongpin-owned Goldenmedia Corp. bought 49,964,500 Philex shares at P19.25 per share.
According to Osmeña, Ongpin and the Pangilinan-owned Two Rivers Holdings Corp. signed a share purchase agreement (SPA) that same evening for the block sale of 452,088,160 Philex shares at P21 per share. The transaction cost P9,493,851,360.
Hours before SPA signed
“Ongpin bought millions of Philex shares a few hours before the SPA was signed, and he bought these shares at a price much lower than the price that he knew that Pangilinan was buying Philex shares,” Osmeña said.
“The higher Pangilinan acquisition cost (of P21 per share) was known only to Ongpin. This is material information that the public does not know. This is clearly insider trading,” the senator said.
Osmeña said Ongpin would be hard-pressed if he continued to insist that he was not involved in insider trading during that episode. “How can he say that he did not engage in insider trading when he traded Philex shares based on information that only he was privy to?” he asked.
The senator said Pangilinan did not announce to the public that he was buying Philex shares at P21 per share.
Herbosa’s letter to Enrile supported Osmeña’s allegations.
Walter W. Brown
The SEC chair said Ongpin was with Walter W. Brown “together with DBP” when Ongpin signed the SPA with Pangilinan.
“Based on the surveillance report of our Market Regulation Department, … Ongpin may have committed insider trading relative to his acquisition of Philex shares through Goldenmedia … in violation of Section 27 of the Securities Regulation Code,” Herbosa said.
At the same time, Osmeña said he was “disappointed in” Pangilinan for his apparent disinterest in suing Ongpin for failure to return short-swing profits following the sale of Philex shares at a higher price.
Short-swing rule
Under the SEC’s short-swing profit rule, a company insider (in this case, Ongpin) is required to return any profit made from the period of purchase to the period of sale of company stock if both transactions occurred within a six-month period.
A company insider is defined as any officer, director of holder of more than 10 percent of the company’s shares.
Osmeña said Pangilinan had until Wednesday to file the recovery suit.
Disappointed
“I’m very disappointed in Mr. Pangilinan. The deadline is (Wednesday) and he has absolutely not exercised his fiduciary responsibility to the minority holders of Philex,” Osmeña said in an interview after the Senate hearing Tuesday.
“OK, (Pangilinan) owns 40 percent of Philex Mining? Fine! But the law, specifically Section 23.2 of the Securities Regulatory Commission, says he must sue for the disgorgement of short-swing profit,” he added.
“Any director and any stockholder of Philex can now take him to court and accuse him of shirking his responsibility,” the senator warned.
At least P412M
Osmeña said that from the Philex shares that Ongpin bought from DBP and sold to Pangilinan, Ongpin would have already earned “a minimum of P412 million according to the Commission on Audit.”
Asked whether he was under the impression that Pangilinan was uninterested in recovering the profits Ongpin enjoyed, Osmeña said, “Yes.”
“He’s the chief executive officer of many corporations. If this is the way he will keep his minority shareholders in (Manila Electric Co.), Manila Water or (Philippine Long Distance Telephone Co.) or Philex, then I think it’s a crime,” the senator said.
Also yesterday, Osmeña clarified that the affidavit from Pangilinan explaining how the SPA with Ongpin went would not establish how Ongpin committed insider trading in connection with the sale of Philex shares.
“Nothing in the Pangilinan affidavit pins (Ongpin) down for insider trading. You need the SEC letter (from Herbosa) side by side the Pangilinan affidavit to establish this,” Osmeña said.