MANILA (UPDATE) - The Securities and Exchange Commission said Thursday it nullified the majority acquisition of shares in The Medical City (TMC) by a group led by Jose "Eckie" Gonzales after finding it to have "employed fraud" and violated regulations.
In a statement, the SEC said it nullified the acquisition of shares by Viva Holdings, Viva Healthcare, Fountel and Felicitas Antoinette in Professional Services Inc (PSI), the operator of TMC.
"The Securities and Exchange Commission (SEC) has nullified the acquisition of majority shares in Professional Services, which operates The Medical City, by a shareholder group found to have employed fraud in taking control over PSI," the SEC said.
The SEC also penalized the group for violating the mandatory tender offer rule and committing fraud in taking over PSI.
All share acquisitions made by the group were, later on, declared "null and void with immediate effect," the SEC said.
TMC's Board has been divided between 2 factions since its former CEO Alfredo Bengzon was ousted by the group led by Gonzales, who is his nephew.
Bengzon, a former Health Secretary, has been fighting Gonzales’ boardroom coup at the SEC and in court.
In its decision issued Thursday, the SEC said shares acquired by Gonzales' group from other shareholders, such as Splash Corp, San Miguel Corp and Insular Life Assurance Co should be canceled and revert to PSI, which may be sold to others.
The hospital operator was also ordered by the SEC to reimburse the shareholder group for the nullified subscription.
The SEC earlier found Gonzales' group guilty of violating several provisions of the Securities Regulation Code (SRC). This includes the requirement for those who acquire directly or indirectly the beneficial ownership of more than 5 percent of equity securities to report the same to the issuer, the exchange where the security is traded, and the SEC within 10 days.
The rule "defines as a fraudulent, deceptive or manipulative act an omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, with regard to tender offers," the SEC said.
The SEC cited other rulings that highlighted other violations by the group.
In January this year, the Court of Appeals denied Bengzon’s motion to overturn the results of an election that ousted him as CEO and voted in a new board for TMC in 2018.
Gonzales' control of the TMC board, however, has been undermined by the SEC decision.
"Following the nullification of the shares acquired by the respondents, the Commission En Banc directed the SEC Office of the General Counsel to immediately resolve the case relating to the conduct of meeting and the election of the members of the board of directors of PSI.”
The SEC said there are still pending motions regarding the contested election and has declined to offer further comment.
Bengzon's camp welcomed the SEC decision saying it upholds the interests of TMC and its shareholders.
"This decision rectifies the illegal dilution brought about by the fraud, resulting in substantial financial gain and restoration of control to the legitimate shareholders of The Medical City (Professional Services Inc, “PSI”)," said Eric Puno, Bengzon's lawyer.
Gonzales’ camp has yet to release a statement as of posting.
--- With a report from Warren de Guzman, ABS-CBN News