• Unmaking of an empire: The Reghis Romero 2nd debacle


    Still haunted by a multitude of legal cases in connection with botched multibillion deals he had in the past, Reghis Romero 2nd of the construction firm R-II Builders Inc. (RBI) is facing yet his worst legal nightmare. That is, against his most unlikely foe–his own son, Michael “Mikee” Romero.

    Contrary to norms of building or even expanding an empire, the elder Romero’s fierce attacks against his supposed heir is largely seen as the crunching, or even death of one. To some, the legal tussle signals the emergence of the son as the more capable ruler.

    In fact, Mikee was ranked 26th among the country’s richest tycoons in 2013, outperforming other big names in business, including his own father.

    The elder Romero, now believed to be cash-strapped for having to spend so much on litigations, including that with the Home Guaranty Corp. (HGC), has wrestled control of the Harbour Centre Port Terminal Inc. (HCPTI), a company that had experienced financial setbacks until the younger Romero’s sound management skills catapulted the firm as one of the most successful enterprises around.

    From the grapevine, it was learned that Mikee’s role was more of a “trouble shooter” for having to salvage everything that the father had nearly lost, including his reputation. When Reghis was kidnapped by the Abu Sayyaf in 2001, along with a female friend at the Dos Palmas Resort in Palawan, it was Mikee who reportedly ensured his release. But nobody admitted payment of ransom.

    Mikee is credited for converting the family’s reclaimed land into Harbour Centre Port Terminal and dreams to build a “seaport highway” across the Philippines. He also has 65-percent stake in Manila North Harbor, the country’s biggest port, where San Miguel Corp. is a partner.

    At a very young age, Mikee went into mining and hotels, acquired a 20-percent stake in Air Asia Philippines and 15 percent in Alfred Yao’s Zest Airways.

    As a keen sportsman, he captains the country’s polo team and owns a baseball team (Manila Sharks) and a Philippine Basketball Association team (GlobalPort Batang Pier).

    Unknown to many, the father-son feud over control of the HCPTI is an offshoot of the infamous Smokey Mountain Development and Rehabilitation Project (SMDRP), an ambitious P6.7-billion project planned 22 years ago but which was bungled by the inability of Romero’s firm to finance it. Up to now, the project remains the subject of active court cases between the HGC and RBI, the latest information from which is that the elder Romero was seeking a “universal settlement” but was rejected by the HGC.

    Stinking deal
    On March 19, 1993, the National Housing Authority (NHA) and RBI entered into a Joint Venture Agreement (JVA) for the development of the Smokey Mountain dump and the reclamation of the area across Radial Road 10 (R-10). Under the JVA, RBI shall finance all aspects of development of no more than 40 hectares of the Manila Bay area across R-10.

    Also, the company shall undertake construction of 3,500 temporary housing units complete with basic amenities and the construction of 3,500 medium rise low-cost permanent housing units on the supposed area where the dump stood. A profit-sharing scheme between the NHA and RBI was devised.

    On February 21, 1994, the parties again entered into another agreement known as the Amended and Restated JVA (ARJVA), which delineated phases of the project into Phase 1 and Phase 2.

    Phase 1 involved the construction of 2,992 temporary shelters and the clearing and levelling-off of the dump and the construction of the permanent housing units. Phase 2, on the other hand, involves the construction of an incineration area for the on-site disposal of the garbage.

    The ARJVA also expanded the planned reclamation from 40 hectares to 79 hectares but reduced the number of temporary shelters to 2,992. Still, in all, the total cost of the project was P6.69 billion. The modifications were used by RBI to justify the increase in the share of RBI of reclaimed lands from 40 to 79 hectares.

    Again, on August 11, 1994, the National Housing Authority and RBI amended the ARJVA with the following conditions: for RBI to be entitled to 79 hectares of reclaimed area; the construction of a commercial area composed of 1.3 hectares; and the financing of all housing units beyond the share of the NHA.

    Unfortunately, RBI reneged on its obligations and failed to fully finance the project, prompting the national government (NG) to come up with a “securitization” scheme to save it.

    Thus, on September 26, 1994, the NHA and RBI, alongside HGC as guarantor and the Philippine National Bank as Trustee, entered into an Asset Pool Formation Trust Agreement that provided mechanics for implementation of the project.

    The Asset Pool Trust Agreement had the following functions: To raise funds for the project, the Asset Pool, through PNB, shall issue Smokey Mountain Project Participation Certificates (SMPPCs), which will be marketed by RBI to the public; and to enhance the values of the SMPPCs and to attract investors in the certificates.

    To do the second task of attracting investors, the certificates were backed up by the Asset Pool consisting of the following: the 21.2-ha Smokey Mountain Site in Tondo,
    Manila; the 79-ha Manila Bay foreshore property in the name of NHA; proceeds from the SMPPCs; disposable assets due to RBI and/or its proceeds as defined in the JVA; the resulting values inputted by RBI for pre-implementation and start-up work amounting to P300 million; the 2,992 housing units to be constructed; and all pertinent records of the project.

    Then, on September 26, 1994, the HGC guaranteed the SMPPCs to the tune of P2 billion. The benefit of the guaranty can be enforced under the following circumstances: failure of the Asset Pool, through the PNB Trustee, to redeem the regular SMPCCs upon maturity; and declaration of an off-mark liquidation of the Asset Pool.

    The contract of guaranty led to the securitization of the project through the issuance of 5,216 SMPCCs upon the Asset Pool, with a par value of P1 million each and classified into the following: Regular SMPPCs worth P2.519 billion issued for the general public; Special SMPPCs worth P1.403 billion issued exclusively for the NHA; and Subordinated SMPPCs worth P1.294 billion issued exclusively to RBI for its rights and interest int he JVA, redeemable with the turnover of all residual values, assets and properties remaining n the Asset Pool after both the Regular and Special SMPPCs are redeemed and all obligations are settled.

    As guarantor, the HGC assumed all obligations and paid all investors who bought the SMPPCs amounting to more than P4 billion, including interests. In exchange, the entire asset pool was conveyed to HGC.

    HGC officials claimed in previous reports that RBI was paid billions for an incomplete project but that the company of the elder Romero still questioned the conveyance of the entire Asset Pool to HGC and filed lawsuits against HGC. There are still five known cases pending in court related to the matter.

    On June 22, 2011, the Supreme Court denied with finality RBI’s motions and ruled in favor of HGC.

    On October 24, 2002, all the Regular SMPPCs issued had reached maturity and unredeemed, including that of the Social Security System (SSS), which was among the major investors in the project.

    The HGC claimed it has already paid SSS P876 million in interest for P1.15 billion investments in the project. It also offered to settle its outstanding obligation to SSS with pieces of property of equal value but the latter rejected the offer.

    Arbitration is currently ongoing between HGC and SSS before the Office of the Government Corporate Counsel (OGCC). HGC has already offered almost P2 billion worth of assets for SSS’ evaluation. Also, the equity contribution due HGC from the annual National Government budget has been earmarked for settlement of the balance to SSS so that the dues can be settled.

    Including all housing projects of the SSS, the HGC still owes it nearly P4 billion.

    Birth of HCPTI
    It was on March 1, 2001 when the HCPTI was born, following the execution of a Subscription Agreement between the Asset Pool, through its trustee, Planters Development Bank (PDB) and HCPTI.

    HCPTI had entered into an agreement with the Asset Pool for the development and operations of a port in the Smokey Mountain area, a major component of the SMDRP, to provide a source of livelihood and employment for Smokey Mountain residents and spur economic growth.

    Under the Subscription Agreement, HCPTI preferred shares had a premium and penalty interest of 7.5 percent per annum and a mandatory redemption feature.

    The Asset Pool paid the subscription by conveying to HCPTI a 10-hectare land, which it acquired from NHA being a portion of the reclaimed land of the SMDRP. Certificates of Titles were issued to the company.

    But HCPTI’s failure to obtain a license to handle foreign containerized cargo from the Philippine Ports Authority (PPA) caused it to suffer a net income loss of P132 million in 2002 and P15.5 million in 2003.

    The governing Board of the Asset Pool eventually conveyed a number of HCPTI shares to RBI in lieu of cash payment for the latter’s work in SMDRP.

    RBI claimed that it was entitled to receive the amount of P643 million for the costs it incurred in SMRDP and that it has rights over a five-hectare portion of the Vitas, Tondo, property. The claims were based on the memorandum of agreement that RBI and NHA signed on August 27, 2003.

    Doting son, prodigal father?
    In March 2011, the elder Romero divested his ownership and control from HCPTI after having completely conveyed his shares totaling 689,258,653 in favor of Harbour Centre Port Holdings Inc. (HCPHI), which is under the direct control of his son.
    Since then, the younger Romero diligently managed the 68.11 percent of the total issued and capital stock divested by his father to his firm and has not sold, transferred or even disposed of its shares in the company.

    But late last year, the elder Romero, through his companies R-II Holdings Inc. and RBI, took over control of the 10-hectare facility and “illegally” seized control of the terminal operations from One Source Port Support Services Inc., the service provider controlled by allies of the younger Romero that has been there since 2007.

    This forced seizure of the port operations caused the younger Romero to lock horns with his father, the former legally asserting his right over the firm that he hardly worked for and helped become the giant that it is today.

    The battle for control over the company took an ugly turn when Reghis, realizing that he might lose the prized company to the “rightful owner,” filed five separate non-bailable, qualified theft cases in five cities against Mikee, none of which prospered.

    The camp of the younger Romero showed copies of the Deed of Assignment transferring the terminal operations from father to son. Reghis claimed that the Deed was forged but failed to prove it. In fact, a financial report released by R-II Holdings Inc. for 2010-2011 indicated that the father’s companies had transferred “100% of its interest to HCPTI in favor of [Harbour Holdings].”

    Also, the father’s claims of forgery were debunked by his own firm’s report that he had divested his interests and has received full compensation for it.

    Only recently, an 11-page decision dated May 6, 2015, Judge Silvino Pampilo Jr. of the Manila Regional Trial Court Branch 26 said the court “recognizes the authority of the movant’s board of directors to which Michael L. Romero belongs, and their authority to act for and in behalf of HCPT Incorporated…”.

    The court clarified the ownership issue, citing the “first Deed of Assignment transferred and conveyed to HCPHI the 286, 495, 652 shares of RII Builders which shares represent 28.21 percent of the total issued and outstanding capital stock in HCPTI.”

    “The second Deed of Assignment, on the other hand, transferred and conveyed again to HCPHI the 403,799,000 shares of RII Holdings, representing 39.90 percent of the total issued and outstanding capital stock in HCPTI or for a total of 68.11 percent corporate shareholding out of the total issued and outstanding capital stock in HCPTI,” it said.

    Pampilo said corresponding taxes were even paid on the said transfers as evidenced by the Certificates Authorizing Registration and Tax Clearance Certificates Issued by the Bureau of Internal Revenue, in relation to the transfer between RII Holdings and HCPHI, and the transfer between RII Builders and HCPHI.

    “Notably, plaintiff did not bother to refute movant’s allegations and arguments regarding the 68.11 percent ownership of HCPTI in HCPTI,” the court noted.

    Pampilo said “these two Deeds of Assignment to date, remain valid and effective, as the same were not questioned, controverted, much less nullified in a court of law.”

    The ruling stressed, “In fact, they were all duly reflected in the general information sheet of HCPTI from 2011 up to 2014. Let it be noted further that they were duly notarized such that any doubt as to [their]due execution and authenticity is dispelled.”

    ‘Illegal takeover’
    The father-son contest grew more intense when Pasig City Regional Trial Court (RTC) Branch 167 presiding judge Rolando Mislang ordered R-II Builders Inc. and R-II Holdings Inc. to stop exercising management and control over the ten-hectare facility, in favor of One Source.

    Mislang said the takeover of the terminal facility by the elder Romero’s firms was illegal as the companies failed to prove ownership.

    The service provider had filed a complaint in November, when Romero “physically took over the operation” of One Source and cited the service provider in a Sept. 22 letter for “inefficiency,” threatening to rescind the Port Ancillary Services Contract.

    The judge issued a permanent restraining order against the elder Romero’s companies and disallowed representatives, agents and employees “from further disrupting and interfering with the peaceful management, control, operations and possession of the Harbour Centre Terminal Facility.”

    In January, however, the Court of Appeals (CA) issued a temporary restraining order (TRO) against Mislang’s ruling, effectively retaining control over the facility in favor of the elder Romero.

    The four-page CA resolution, stopped the Pasig City Regional Trial Court from allowing service provider One Source to manage the port facility.

    The CA Special Second Division composed of Associate Justices Danton Bueser, Remedios Salazar-Fernando and Pedro Corrales directed One Source to cease and desist from taking over the port terminal.

    In a 26-page motion, One Source accused Bueser of bias and partiality in favor of the elder Romero, noting that in all the cases involving HCPTI, Bueser was always the “ponente,” or writer of the decision, the motion noted.

    The CA Second Division issued a resolution, written by Bueser, that directed Romero 2nd to amend his petition by impleading HCPTI as co-petitioner even though Romero 2nd did not file any motion.

    One Source said the resolution was issued even though it filed a motion for leave to file opposition to the application of a temporary restraining order dated December 11, 2014.

    The January TRO issued by the Second Division was followed by a March 11, 2015 resolution by Bueser that ordered the issuance of a writ of preliminary injunction that stopped Mislang’s TRO and his previous orders regarding the HCPTI case.

    The writ of preliminary injunction was issued by Bueser on March 19, 2015.

    One Source noted that in all the resolutions, Bueser was always a signatory despite changes in the composition of the justices hearing the cases.

    The three-member division has opted to inhibit from the case, not only Bueser, in order to preserve judicial honor.

    Responding to the motion to inhibit, Bueser, together with Associate Justices Samuel Gaerlan and Pedro Corrales, recused from handling the case in a resolution dated April 29.


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