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By William B. Depasupil, Reporter
FORMER senator and now Dangerous Drugs Board Chairman Vicente
“Tito” Sotto 3rd and Quezon City Rep. Matias Defensor Jr. are
facing criminal complaints before the Department of Justice for
allegedly violating the provision of the Securities Regulation Code
(SRC).
In its 25-page complaint, Securities and
Exchange Commission’s (SEC) Compliance and Enforcement Department
(CED) has charged Sotto, Defensor and 13 officers and directors of
the Capitol Hills Golf and Country Club (CHGC) of making false
entries in their audited financial statements (AFS) for the period
1996 to 2006.
Sotto was member of the CHGC board from
1995 to June 2003, while Defensor has been a board member from 1998
up to the present.
The SEC filed the complaint after it found out,
among others, that the Capitol Hills and its officers “made untrue
statement in their audited financial statements.”
Facing imprisonment
If found guilty, Sotto, Defensor and others may
be meted with a fine ranging from P50,000 to P5 million or
imprisonment of not less than seven years to a maximum of 21 years.
Also charged were former Agrarian Reform
Secretary Horacio “Boy” Morales and Pablo Roman, CHGC president
from 1995 to present, and board members Angel Rodriguez, Antonio
Meris, Edmundo Magnabijon, Claro Abello, Victor Roman, Patricio
Roman, Librado Vicente, Bibiano Elegir, John Matias Defensor,
Edgardo Guevarra and Abelardo Villanueva.
The SEC has also asked the Justice department to
place the respondents on the watch list of the Bureau of
Immigration.
Ayala Land deal
Records showed that based on Capitol Hills’
1996 AFS, sometime in 1992 the company and Ayala Land Inc. (ALI)
entered into an agreement wherein the former will convey a parcel of
land to ALI for the latter to develop the same into saleable lots.
As part of the deal, Capitol Hills would receive
from ALI 40 percent of the gross selling price actually received by
ALI from the sale of the developed lots.
In addition, Capitol Hills also received an
advance payment of P30 million from ALI, which was applied against
the 40 percent share of Capitol Hills in the gross sales of the
developed lots.
Advanced funding
In 1995, Capitol Hills received from ALI an
additional advance amount of P10 million.
In 1996, Capitol Hills and ALI formalized their
agreement for the development of approximately one-half of the
existing property of the golf club.
In exchange, ALI advanced the funds needed by
Capitol Hills to acquire a parcel of land, consisting of at least
140 hectares in San Jose del Monte, Macabud, Montalban, Rizal to be
developed into a 36-hole golf course.
But when SEC conducted its regular examination
and auditing of Capitol Hills records, it discovered that the latter
made an understatement of the cash advances in their AFS by P361.63
million for the period 1992 to 2004.
The understatement was discovered when the
advances to Capitol Hills per book of ALI were compared to the 1992
to 2004 AFS of Capitol Hills.
Interest payments
The commission on also discovered that
there was also a discrepancy between the records of ALI and Capitol
Hills pertaining to the interest payments covering the period 1996
to 2006 which were presented under “Borrowing Cost on Macabud Golf
Course Project” and “Borrowing Cost on advance Payment of P30
million and P10 million additional advances for the developed lots
by ALI.”
Under the certification provided by ALI, the
total advances given to respondent Capitol Hills from 1992 to 2004
amounted to P9226,482,551, but Capitol Hills only declared the
amount of P564,852 as advances received from ALI.
Tampered documents
“The financial statements thus submitted for
the said periods are not, among others, faithful representations of
the transactions entered into by Capitol Hills with ALI and thus
violates not only Section 48 of the RSA and Section 68 of the SRC
but also the requirements stated under Rule 68 of the SRC rules,”
the SEC complaint said.
Per certification of ALI, the SEC observed that
the total interest payments reached the amount of P231,228.055, but
Capitol Hills declared in its AFS for the said period that the total
borrowings cost per notes amounted to P184,121,777 only.
Misrepresentation
“Thus, the understatement herein made would
only mean that there was overpayment of interest expense to ALI.
Such misrepresentation made by respondent Capitol Hills in its AFS
for the period of 1996 to 2006 is misleading and violates the
requirement under the SRC Rules that the financial statements must
provide material and prudent information regarding the payments of
interest or liabilities of the corporation,” the SEC lamented.
Likewise, the SEC said Capitol Hills
declared the acquisition cost of Macabud properties at P211.5
million in its AFS for the year 2000 despite the lack of basis for
such valuation considering that the deeds of sale for the said
properties were not made available to Capitol Hills until 2004.
“In short, respondent Capitol Hills
placed an acquisition cost on the Macabud properties in the amount
of P211.5 million without any basis in violation of Section 68 of
SRC in relation to Rule 68 of the SRC Rules,” the SEC added.
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