Executives of the collapsed Enron in the US are currently facing trial over allegations of manipulation and outright deceit. At least the wheels of justice are working.
Here in the Philippines, blatant displays of white collar crimes have regrettably become all-too-common. And the perpetrators go scot-free. They used the same skills in luring the public to buy their products in manipulating the legal system and the existing patronage-based politics currently in place. The best example would be the pre-need fiasco involving subscribers of College Assurance Plans (CAP) of the Sobrepeñas and Pacific Plans of the Yuchengco Group.
CAP was the industry pioneer in the pre-need industry, and the most popular. CAP and other pre-need companies capitalized on every parent’s dream of sending their children through college. Pre-need plans work like insurance, but with a twist. Upon maturity, the plans were supposed to pay the full tuition regardless of the amount. They call this the traditional plans. The standard plans now require a definite amount to be paid upon maturity.
The problem arose during the height of the Asian financial crisis, when most investments of these companies’ trust funds were invested in real estate projects that went sour and fell drastically in value. During the real estate boom of the mid-nineties, the real estate company of the Sobrepeñas, Fil-Estate, went on an aggressive real estate development mode, developing subdivisions and golf courses all over the country (Camp John Hay, Forest Hills, Manila Southwoods and Fairways & Bluewaters in Boracay), and even invested in Metro Rail Transit (or MRT) bonds which offered low rates. And so, the resulting cash flow didn’t match its expectations.
It is less clear for Pacific Plans, as financial statements do not clearly show where the funds were invested. But a towering answer lies along the corner of Ayala and Buendia Avenues, the humongous twin tower RCBC Plaza, owned by the Yuchengcos, reportedly constructed at a cost of approximately PhP12 billion.
And so when the school year beckoned and schools started adjusting their tuition rates to account for inflation, these two decided to simply bail out, leaving millions of subscribers, who were faithfully paying their premiums, clueless and desperate.
In the case of Pacific Plans, it did not seek to be bailed out using the liquid funds of its sister companies, particularly its commercial bank RCBC, which happens to be one of the largest banks in the country. It didn’t want to pass on the burden of paying subscribers’ tuition fees even as the tower failed to bring in the expected revenues early on (the towers were completed when the vacancy rate in Makati was high, resulting in falling rental fees).
So its owners simply created a new company, transferred the non-traditional plans in force to this new entity, and declared Pacific Plans, now consisting of only the remaining traditional plans, bankrupt.
You can’t just do that. It’s cruel! Shouldn’t these companies be held accountable for their bad investment decisions? Why let them get away with it? They can’t just run away from their obligations and hide under the skirt of bankruptcy laws, look the other way and then right under their subscribers' noses, set up a similar company while leaving the traditional plan holders holding empty bags. Why punish the subscribers who simply stuck faithfully to their end of the deal?
It is downright ugly.
Enter the politicians. Go figure which side they are supporting. Truth is, executives of these two companies have strong ties with the political elite. Robert Sobrepeña happens to be golfing buddy of former President Fidel Ramos (he had to be, he developed so many golf courses using plan holders’ money, didn’t he?). And Alfonso Yuchengco, Chairman of the Yuchengco Group of Companies which owns Pacific Plans, happens to be a former Ambassador. Get it?
These two companies are making their lawyers do all the talking, citing obscure Supreme Court rulings that allow them not to honor their obligations to their plan holders, while investing billions to other business ventures. Oh yes, they’re liquid. According to the SEC, Pacific Plans isn’t insolvent at all. In fact, Sobrepeña’s Fil Estate is planning to invest P1 billion in various real estate projects, most notably the North Triangle project along EDSA near the MRT.
Ambassador Yuchengco, for his part made the dramatic gesture of shelling out P250 million of his own money to make sure children of Pacific Plan holders get to enroll last year. Out of the goodness of his heart? Think again. It comes with an 8% interest rate.
Robert Sobrepeña remains defiant and is in no mood to dip into his own fortune to shoulder the matriculation of CAP holders.
There’s only one motive why all these things are happening: GREED, lots of it.
The plan holders are taking their fight to the Supreme Court and all possible avenues to force these two companies to honor their obligations and punish them for being socially irresponsible.
I do hope the regulatory agencies, particularly the SEC, come up with a stronger framework on which to monitor pre-need companies, such as mandatory transparency in its operations and investments.
The fact that so many Filipinos slave away in foreign lands only to find out the money they invested in the pre-need plans won’t be able to send their children through college after all, should be enough to jolt our lawmakers to address this lamentable situation.
I am not optimistic, however. This is the Philippines, it is easy to lose hope here. You ever why wonder why so many, risking life and limb, leave this country?
Here in the Philippines, blatant displays of white collar crimes have regrettably become all-too-common. And the perpetrators go scot-free. They used the same skills in luring the public to buy their products in manipulating the legal system and the existing patronage-based politics currently in place. The best example would be the pre-need fiasco involving subscribers of College Assurance Plans (CAP) of the Sobrepeñas and Pacific Plans of the Yuchengco Group.
CAP was the industry pioneer in the pre-need industry, and the most popular. CAP and other pre-need companies capitalized on every parent’s dream of sending their children through college. Pre-need plans work like insurance, but with a twist. Upon maturity, the plans were supposed to pay the full tuition regardless of the amount. They call this the traditional plans. The standard plans now require a definite amount to be paid upon maturity.
The problem arose during the height of the Asian financial crisis, when most investments of these companies’ trust funds were invested in real estate projects that went sour and fell drastically in value. During the real estate boom of the mid-nineties, the real estate company of the Sobrepeñas, Fil-Estate, went on an aggressive real estate development mode, developing subdivisions and golf courses all over the country (Camp John Hay, Forest Hills, Manila Southwoods and Fairways & Bluewaters in Boracay), and even invested in Metro Rail Transit (or MRT) bonds which offered low rates. And so, the resulting cash flow didn’t match its expectations.
It is less clear for Pacific Plans, as financial statements do not clearly show where the funds were invested. But a towering answer lies along the corner of Ayala and Buendia Avenues, the humongous twin tower RCBC Plaza, owned by the Yuchengcos, reportedly constructed at a cost of approximately PhP12 billion.
And so when the school year beckoned and schools started adjusting their tuition rates to account for inflation, these two decided to simply bail out, leaving millions of subscribers, who were faithfully paying their premiums, clueless and desperate.
In the case of Pacific Plans, it did not seek to be bailed out using the liquid funds of its sister companies, particularly its commercial bank RCBC, which happens to be one of the largest banks in the country. It didn’t want to pass on the burden of paying subscribers’ tuition fees even as the tower failed to bring in the expected revenues early on (the towers were completed when the vacancy rate in Makati was high, resulting in falling rental fees).
So its owners simply created a new company, transferred the non-traditional plans in force to this new entity, and declared Pacific Plans, now consisting of only the remaining traditional plans, bankrupt.
You can’t just do that. It’s cruel! Shouldn’t these companies be held accountable for their bad investment decisions? Why let them get away with it? They can’t just run away from their obligations and hide under the skirt of bankruptcy laws, look the other way and then right under their subscribers' noses, set up a similar company while leaving the traditional plan holders holding empty bags. Why punish the subscribers who simply stuck faithfully to their end of the deal?
It is downright ugly.
Enter the politicians. Go figure which side they are supporting. Truth is, executives of these two companies have strong ties with the political elite. Robert Sobrepeña happens to be golfing buddy of former President Fidel Ramos (he had to be, he developed so many golf courses using plan holders’ money, didn’t he?). And Alfonso Yuchengco, Chairman of the Yuchengco Group of Companies which owns Pacific Plans, happens to be a former Ambassador. Get it?
These two companies are making their lawyers do all the talking, citing obscure Supreme Court rulings that allow them not to honor their obligations to their plan holders, while investing billions to other business ventures. Oh yes, they’re liquid. According to the SEC, Pacific Plans isn’t insolvent at all. In fact, Sobrepeña’s Fil Estate is planning to invest P1 billion in various real estate projects, most notably the North Triangle project along EDSA near the MRT.
Ambassador Yuchengco, for his part made the dramatic gesture of shelling out P250 million of his own money to make sure children of Pacific Plan holders get to enroll last year. Out of the goodness of his heart? Think again. It comes with an 8% interest rate.
Robert Sobrepeña remains defiant and is in no mood to dip into his own fortune to shoulder the matriculation of CAP holders.
There’s only one motive why all these things are happening: GREED, lots of it.
The plan holders are taking their fight to the Supreme Court and all possible avenues to force these two companies to honor their obligations and punish them for being socially irresponsible.
I do hope the regulatory agencies, particularly the SEC, come up with a stronger framework on which to monitor pre-need companies, such as mandatory transparency in its operations and investments.
The fact that so many Filipinos slave away in foreign lands only to find out the money they invested in the pre-need plans won’t be able to send their children through college after all, should be enough to jolt our lawmakers to address this lamentable situation.
I am not optimistic, however. This is the Philippines, it is easy to lose hope here. You ever why wonder why so many, risking life and limb, leave this country?
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