What moral recovery? SC's Puno asked to reverse ruling on San Miguel shares

ABS-CBN News

Posted at Nov 17 2009 09:22 PM | Updated as of Nov 18 2009 08:08 AM

MANILA - A lawmaker has urged Chief Justice Reynato Puno to heed his own call for moral recovery in the country by taking a second look at the Supreme Court's (SC) earlier decision to approve the conversion of the 24% sequestered common shares of San Miguel Corp. (SMC) into preferred shares.

In a statement, Quezon Rep. Lorenzo Tanada III challenged the SC to review the motion of reconsideration filed by groups representing the interests of coconut farmers as well as the dissenting opinion of Justice Carpio Morales.

"How can the PCGG (Presidential Commission on Good Government) protect the interest of the small coconut farmers within San Miguel if it has relinquished its voting rights and voluntarily gave control to Mr. Danding Cojuangco? He has been benefiting all these years from the coco levy funds while coconut farmers still languish in poverty," Tanada said.

The PCGG is the government agency tasked to conserve sequestered assets while ownerships are being contested in various courts. PCGG has sequestered various assets of late dictator Ferdinand Marcos and his allies, including SMC Chairman Danding Cojuangco.

Most of the sequestration cases, including the 24% stake in SMC that farmers are claiming to have been purchased using coco levy funds, remain unresolved. The contested shares in SMC are currently represented by government-appointed directors in the conglomerate's board.

"PCGG is mandated to keep in trust and preserve its value until its final turnover to their rightful owners--the coconut farmers. With the Supreme Court's concurrence to the PCGG and even the Solicitor General's recommendation that the conversion of SMC shares be allowed to take place, there is no assurance that the value of such shares will be preserved. Worse, PCGG loses its voting rights and control over those shares," Tanada said.

Last September, the SC granted the government's motion seeking the conversion of 24% sequestered common shares of SMC—registered in the names of Coconut Industry Investment Fund (CIIF) and its holding companies—into Series 1 preferred shares.

In a 33-page decision penned by Associate Justice Presbitero Velasco Jr., the High Court en banc held that the conversion "is advantageous to the public interest or will result in clear and material benefit to the eventually declared stock owners, be they be the coconut farmers or the government itself."

Owners of preferred shares are usually paid higher dividends than owners of common shares. However, preferred shareholders lose their right to vote on major business decisions and the right to be represented in the company’s board.

"The Supreme Court seemed to have been dazzled by the windfall gains that the supposed conversion can deliver and add on to the government coffers, while relegating to the sidelines the moral issues that have always plagued the coco levy," Tanada said.

Various groups have previously criticized the share conversion. Former Senate president Jovito Salonga, for instance, branded this as a "plunder in the making."