Friday, May 06, 2005

Reviewer 3 - Conveyances and Transfers

We quote TLS in full. This is another legal point that all our readers should be familiar with. YGC can keep spending on full page ads and other PR gimmicks but they have to face up to the fact that all their efforts are backfiring because it is making us look and think harder. Regrttably, the word FRAUD is joining the word DISHONOR in terms of what items that may come to mind when we are asked to think about YGC.

TLS said...

To All:

I wanted to wait for the moderator to put in a new topic because I don't want my post to go to waste since in the latest posts, everyone has become distracted by what I see is a non-issue/possibly detractor-supplied info. We should focus energies on moving forward.

Anyway, I couldn't wait to post this because we need all the inputs and analysis we can get, especially in propping up our opposition paper whose deadline is a week away. If the moderators see it as useful, I'll just post it again when another topic comes up so that the right/concerned parties can read it again.

I believe that because PPI/Yuchengco established Lifetime to be able to continue on with its money-making in spite of its anticipated or manufactured problem with PPI, we should seriously look into the servicing of our contractual obligations by Lifetime Plans. There are two legal doctrines by which Lifetime Plans may be proven to be liable: the fraudulent transfer doctrine and the successor liability doctrine.

Under U.S. laws, a Fraudulent Transfer or Fraudulent Conveyance" is a transfer which a debtor makes for the purpose of defeating a creditor's collection efforts against the debtor. In a Fraudulent Transfer, a corporate action which impairs the rights of unsecured creditors, the courts must ignore what was done (the Fraudulent Transfer). This is whether the creditor's claim arose before or after the transfer was made. Transferring assets is a fraudulent act if you transfer them with actual intent to hinder, delay, or defraud any creditor or especially if it is done prior to filing bankruptcy. Such transfers should be considered fraudulent and voided by the courts.

Factors determining actual intent (of Fraud), if Original Owner / Entity:
1. Retained possession or control of the asset / property transferred after the transfer (may not be direct ownership; normally parties that commit fraudulent transfer will restructure to show no current ownership)
2. Disclosed or concealed the transfer;
3. Was sued or threatened with suit before the transfer;
4. Transferred all of its substantial assets;
5. Absconded (departed secretly);
6. Removed or concealed assets;
7. Did not receive value reasonably equivalent to the value of the asset transferred;
8. Was insolvent or became insolvent shortly after the transfer was made;
9. Transferred the asset shortly before or shortly after a substantial debt was incurred; and
10. Transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

From the above, I believe the actions taken by PPI/Yuchengco constitute a fraudulent transfer which would leave Lifetime Plans as liable for the contractual obligations of PPI as well.

By taking over the earnings assets or fixed-value contracts, Lifetime Plans became entitled to future installment payments on these plans – installment payments which would provide profit margins from which PPI could have possibly satisfied its contractual obligations or ensured adequacy of its ARL / Trust Funds had PPI continued with these fixed-value contracts. Indeed, as a result of Lifetime’s taking over the fixed-value contracts, PPI lost the right to share in the profit margins of the future installment payments and potential future profits deriving from the sale of additional fixed-value contracts. In addition, Lifetime Plans benefited and continues to benefit from PPI's Goodwill, most likely also without fully paying for this. The transfer eventually left PPI with a questionable asset, the Napocor Bonds.

So, where the transfer of assets strips a debtor corporation (PPI) of all its assets, and disables the corporation from earning money to pay its debts, thus leaving creditors and holders of claims no resources to which they may look for the payment of their due, the net result is in legal effect a fraud; and the courts must subject the transferee (Lifetime Plans) to liability for the satisfaction of claims against the corporation (PPI) whose assets it has absorbed.

Based on the second doctrine, I believe we can assert our basis to collect legal contractual benefits from Lifetime as a successor corporation to PPI. We assert that Lifetime is liable and is a successor because of two reasons: (1) there was insufficiency of consideration and, (2) it is merely a continuation of PPI.

We assume that the transfer of the earning assets of PPI into Lifetime was done through an “acquisition”, meaning Lifetime Plans purchased the earning assets of PPI, although liability may be imposed regardless of the exact form of transfer of assets between the corporations. But let’s assume a sale/purchase transaction between PPI and Lifetime Plans. We assert that PPI's sale/purchase or transfer of earning assets to Lifetime Plans lacked sufficient consideration and was designed to avoid the reach of creditors.

Adequate consideration for a transfer of assets between a buying (Lifetime) and selling (PPI) corporation is an important element when determining whether to impose successor liability. If the buying (Lifetime) corporation pays sufficient consideration for the seller's (PPI) assets, the selling (PPI) corporation's creditors can then seek to satisfy their Judgements from the sale proceeds. If the sale proceeds are equivalent in value to the transferred assets, then, assumedly, but not necessarily, no harm has been done to the creditors of the selling corporation. But from the financial statements available, it seems that PPI received no value for the earning assets it transferred into Lifetime Plans, therefore making the transaction questionable and a probable basis for the successor liability theory.

The other basis for the successor liability doctrine is that Lifetime is a mere continuation of PPI. Normally, when a corporation sells its assets to another corporation, the purchasing corporation does not become liable for the debts of the selling corporation. The rationale for this rule is that a "bona fide purchaser who gives adequate consideration and who lacks notice of prior claims against the property acquires no liability for those claims." However, four exceptions to this rule of non-liability exist. Successor liability is imposed if: (1) the purchaser expressly or impliedly agrees to assume liability; (2) the purchase is a de facto merger or consolidation; (3) the purchaser is a mere continuation of the seller; or (4) the transfer of assets is for the fraudulent purpose of escaping liability.

Now, Lifetime is practically PPI. Lifetime, despite being the new corporation established only in 2004, has or had substantially identical ownership (prior to its immediate transfer to Exemplar to enhance the layering), is operating the identical business (sales of pre-need plans) with identical employees (all of whom resigned en masse and transferred) at an identical location to PPI (prior to PPI’s transfer to Kamagong and its now floating address status). It received practically all of PPI's assets, at least the good ones, including PPI’s intangible goodwill. If that is not mere continuation, I don’t know how it can NOT be defined as such.

Lastly, I believe we should take a serious look at going after the perpetrators as well. Although individual shareholders of a corporation can never avoid liability for their own wrongful or tortuous acts, or for their own contractual defaults, doing business in the corporate form will, in many cases, limit the liability of shareholders to the amount of their investment in the corporation. For example, if a corporation is held liable for a wrong committed by one of its agents, or for a breach of contract, the corporate form will act as a shield to protect the individual shareholders from personal liability (unless the individual shareholder(s) personally guaranteed a corporate obligation or is(are) in some manner responsible for the damages to the injured party). But protection from personal liability is lost if there is a basis for invoking the "Alter Ego" doctrine. Under this doctrine, the law will disregard the legal fiction of a corporation's separate existence and "pierce the corporate veil", thus exposing shareholders to personal liability for corporate debts and obligations arising from tortuous or other acts if the court finds that it would be inequitable not to pierce the corporate veil.

There are two basic requirements for application of the alter ego doctrine: ..."(1) that there be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist and (2) that, if the acts are treated as those of the corporation alone, an inequitable result will follow." Other patterns that determine whether the alter ego doctrine might be applicable:
[1] Commingling of funds and other assets, failure to segregate funds of the separate entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses;
[2] The treatment by an individual of the assets of the corporation as his own;
[3] The failure to obtain authority to issue stock or to subscribe or to issue the same;
[4] The holding out by an individual that he is personally liable for the debts of the corporation;
[5] The failure to maintain minutes or adequate corporate records, and the confusion of the records of separate entities;
[6] The identical equitable ownership in two or more entities; the identification of the equitable owners of multiple entities with the domination and control of the entities; identification of the directors and officers of multiple entities in the responsible supervision and management of all; sole ownership of all of the stock in a corporation by one individual or the members of a family;
[7] The use of the same office or business location by multiple entities; the employment of the same employees;
[8] The failure to adequately capitalize a corporation; the absence of sufficient corporate assets;
[9] The use of a corporation as a mere shell, instrumentality, or conduit for a single venture or for the business of an individual or another corporation;
[10] The concealment or misrepresentation of the identity of the responsible ownership, management and financial interests; concealment of personal business activities;
[11] The disregard of legal formalities and the failure to maintain arm's length relationships among related entities or individuals;
[12] The diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another;
[13] The contracting with another with intent to avoid performance by use of a corporate entity as a shield against personal liability, or the use of a corporation as subterfuge of illegal transactions; and
[14] The formation and use of a corporation to transfer to it the existing liability of another person or entity.

I believe several of the reasons above apply in PPI/Yuchengco/Lifetime's case.

Calling all legal beagles on our side and the legal team of the Coalition! I don’t know if RP laws are as robust as this but I believe we should and can use this as a basis. (Also our financial wizards - since this involves evaluation of the financials of PPI and Lifetime). Thanks to the posters who are moving our cause forward. Mabuhay kayo!

What we can add to this well written piece is the fact that the Philippines follows US legal juris prudens. In our previous posting, we had already talked about related party transactions and the fact that one has to be "whiter than white" when executing deals between companies owned by the same entity because of the problems of possibly defrauding creditors and minority shareholders.

If our information is current, the United States courts allows a clawback of all illegal transfers of assets of up to two years of the date of a company's filing for rehabilitation in the event of fraudulent transfers.

We will need to tie up TLS's article with the fact that thePPI assets under management were of a commingled nature. This has created very nasty conflicts of interest as well as non arms-length transactions among and between YGC entities entrusted to manage these assets on behalf of the planholder / creditor of PPI.

We wish to call on Commission Fe Barin to ensure that the SEC also follows US juris prudens on thsi issue. Comm. Barin had also better worry about the antics of large and listed Philippine companies with respect to misleading statements to regulators and to the investing public alike. Enron and Worldcom anyone?


At Friday, May 06, 2005 9:13:00 PM, Anonymous Anonymous said...

Comingling of trust fund assets defeats the purpose of putting up a trust fund. This is fraud in itself, for it compromises the funds intended for one's retirement (PENSION) with funds for one's EDUCATION and/or MEMORIAL needs.

The risk characteristics of these various FUNDS' requirements are so different - the use of SEPARATE TRUST FUNDS FOR DIFFERENT TYPES OF PRODUCTS SHOULD BE MANDATORY FOR ALL PRE-NEED COMPANIES.

Trust Officers of Trust Departments should exercise PRUDENCE in their investment decisions. How can there be PRUDENCE when RCBC and Pacific Plans are related ENTITIES, joined in their corporate umbilical cords by the OWNERSHIP POWERS of the Yuchengcos??

The SEC should ban pre-need companies whose trust funds are handled by banks with COMMON OWNERSHIP!

We planholders should also track the MONEYTRAIL of planholders' payments vis-a-vis the corresponding INFUSION of FUNDS to Pacific Plans' SOLITARY TRUST FUND.

There is FRAUD. No to REHAB!!

At Friday, May 06, 2005 9:37:00 PM, Anonymous Anonymous said...

How do you think PPI's trust fund ended up with the NPC bonds? It's trustee, RCBC, bought the bonds from RCBC! If that's not a conflict of interest, I don't know what is! Having said that, doesn't it make one wonder how the transfer price of the NPC bonds was determined when there was no secondary market for those bonds to speak of???

At Friday, May 06, 2005 11:35:00 PM, Anonymous Anonymous said...

Unfortunately my friend, prudence of Trust Officers is highly suspect when most of them are not as independent as should be. Unless the Trust Officer has the balls and the support to stand up to higher management/owners and be allowed to exercie such prudence, this will not happen.

And chances are if he/she had the guts to voice concerns, they might find themselves doing something else.

Hence it is the Central Bank and other regulatory bodies that should tighten up controls. Sad fact is that most regulators dont know what to look for and are quite bookish by merely looking at what is in the rules vs. what banks are doing to subvert the rules.

In the end, dont blame the Trust Officers of these banks, they need to keep their jobs - blame owners like Mr. Integrity

At Friday, May 06, 2005 11:47:00 PM, Anonymous Anonymous said...

Vic Agustin of the Inquirer says that RCBC is already bumping its DOSRI limits (i.e. it is lending huge money to sister YGC companies) and that RCBC used some creative accounting ala Enron and Worldcom to come up with a P1.2 Billion net income for FY 2004. If generally accepted accounting principles are applied and RCBC financial statements are accordingly restated, then their net income would not even amount to P100 Million.
All the more reason that you should take your money out of that Bank. It's bleeding even before the PPI fiasco exploded. Now that its being hit by a bank run, things will get worst.
These Yuchengcos were never really good managers. Yumaman lang naman yan dahil magaling kumabit sa mga politiko at mababang magpa-suweldo ng kanilang mga eempleyado.

At Friday, May 06, 2005 11:50:00 PM, Anonymous Anonymous said...

First, I am not a lawyer, but law is my hobby.

Unfortunately, TLS is referring to the US Uniform Transfer Act of (UFTA). In fact, not all states have adopted it (41 out of 50). This law has no counterpart in the Philippines.

In the philippines, we only use the legal definition of fradulent transfer which is

fraudulent conveyance
n. the transfer (conveyance) of title to real property for the express purpose of putting it beyond the reach of a known creditor. In such a case the creditor may bring a lawsuit to void the transfer. However, if the transfer was made without knowledge of the claim (or before a debt has matured), for other legitimate reasons, and/or in the normal course of business, then the creditor's attempt to obtain a judgment setting aside the conveyance will probably fail.

We have specialized laws dealing with fraudlent conveyance which is the plunder law (government officials), and also one for real-estate. There is not fraudulent transfer act for securities/trust funds.

Pacific Plans will be most likely using "for other legitimate reasons, and/or in the normal course of business" as their reason.

At Saturday, May 07, 2005 12:16:00 AM, Anonymous Anonymous said...

Hey, TLS!

I love it when you talk dirty!

At Saturday, May 07, 2005 7:46:00 AM, Anonymous Anonymous said...

Did you notice that while PPI is saying that they will pay in Year 2010 at 7% interest, in reality, PPI is offering negative, repeat, negative interest. All you need to do is look at your respective letters sent by PPI.

In my case, my high school scholar has availed of P70,014 in his 1st year. PPI estimates availments in the next 3 years at the same amount (completely ignoring possible tuition fee increases). Now, Pesos 70,014 for 3 years will amount to P 210,042. Deducting the P 35,000 tuition support, the resulting PPI obligation amounts to P175,042 over the next 3 years. Compare this amount to PPI’s computed Maturity Value on July 31, 2010 of Pesos 145,400.

If I am entitled to P175,042 in 2005-2007, and PPI delays these payments to 2010, and considering that there is an interest earning of 7%, shouldn’t the amount increase? Yet, PPI is going to reduce, not increase, the amount by giving only P 145,400 in year 2010.

It is easy to compute the correct maturity value in 2010. The P35,042 due in 2005 will earn 7% interest per year over 5 years to 2010. The P70,042 due in 2006 will earn 7% interest per year over 4 years to 2010. The final P70,042 due in 2007 will earn 7% interest per year over 3 years to 2010. The total of all these, or the correct maturity value in 2010 is P226,653. This is 56% higher than what PPI would have us believe as the proper amount.

How is PPI trying to hoodwink us into accepting their erroneous computation? Their method, as shown in their letters to us, is to multiply the amount of their future obligation by a low number, in my case by 64%. This is supposed to “de-escalate” their future obligations to 2004 values (not 2005), by assuming an interest rate, according to my computations, of over 20% per year. Then, they escalate the supposed 2004 value by 6.5% every year (not even 7%) up to 2010.

What is the concept behind PPI’s computation? The “de-escalation” to 2004 values is like theoretically advancing payments to us, and for that we are paying PPI over 20% interest per year advanced. (Note that even if the money is already due today in 2005, PPI is able to de-escalate by choosing 2004 as base). On the other hand, when the payment is delayed from 2004 to 2010, PPI is offering only 7% (I compute only 6.5% in their formula).

What crazy method is this? When PPI theoretically advances the amount to us, we pay them over 20%, but when PPI actually delays payment, they give us 6.5% interest.

While the delay in payment is in itself unacceptable, PPI even tries to cheat us by reducing the delayed amount by a very large percentage.

At Saturday, May 07, 2005 10:36:00 AM, Anonymous Anonymous said...

"Deducting the P 35,000 tuition support, the resulting PPI obligation amounts to P175,042 over the next 3 years. Compare this amount to PPI’s computed Maturity Value on July 31, 2010 of Pesos 145,400."

Because, you forgot to add the remaining 35,000(less a small deduction) balance from this year's tuition, 6-8 months from now, which will be given to us as soon as rehab plan is approved.
If you add it all up, it will match to what they said, in your case P175K

At Saturday, May 07, 2005 2:19:00 PM, Anonymous Anonymous said...

using the above argument, there is a chance that we can file criminal case against not only the yuchengo group but the directors individually as well for conniving in defrauding thousands of planholders, can we file attachment suits against them, if yes, then they surely will come out and talk to us for a settlememnt

At Saturday, May 07, 2005 3:46:00 PM, Anonymous Anonymous said...

Philippine Daily Inquirer

May 07,2005

Breaktime: Lesser of two e-bills
Conrado R. Banal III

THIS is getting scary.

While this cute administration of Gloriaetta is doing its best to do nothing about the so-called "crisis situation" in the pre-need industry, who should step forward to help ease the panic among the pre-need public?

Well, he is none other than Alfonso Yuchengco, a former ambassador, also known in business as a "taipan," head of a multibillion-peso conglomerate engaged in banking, insurance, and ... well, almost everything.

Yuchengco just committed to give his own money to help the education plan beneficiaries of the troubled pre-need firm Pacific Plans Inc. The man is personally raising funds (from out of his own resources, I was told), amounting to P250 million.

I don't know about you, but I can surely use P250 million, for instance, to buy my own helicopter, so that I can avoid the heavy traffic in this metropolis, where nobody seems to be in charge, and, thus, I can save on my gasoline bill.

I am not too hard to please, really.

* * *

ANYWAY, before my power of persuasion makes Yuchengco give that P250 million to me instead, I am only saying P250 million, anyway you look at it, is still P250 million. It must hurt to give away that much money!

To think, legally, Yuchengco has no obligation to give me all that money ... I mean, no, not that, but that he will actually not go to jail, if Pacific Plans collapses.

Pacific Plans is a corporation. In the legal world, if Pacific Plans goes bankrupt, that's it. You cannot just go to the houses of its stockholders, say, to get their last pairs of underwear-used or unused, clean or soiled, with holes or without.

Let us even assume that Pacific Plans made some bad business decisions. For instance, when it started more than 30 years ago, it failed to foresee that, only 20 years later, our government would allow our benevolent schools to raise their tuition somewhere up there in the vicinity of the stratosphere.

It was a bad decision for Pacific Plans, right? In this country, where government policies change faster than Kris Aquino can change boyfriends, when you go into business, you must be able to predict everything, particularly major events such as the Second Coming, to the exact second that it will happen.

Pacific Plans' bad business judgment of failing to hire psychics and prophets, nevertheless, was not Yuchengco's fault. I could give the man more credit than just legal obligation for giving away P250 million. He did not have to do it.

* * *

WE are talking here about a shrewd businessman. In his time, not many in the business community would dare to cross swords with Yuchengco in any business deal. Am I right or what, Robert?

But the affairs of Pacific Plans are different. I don't think that, in his heart of hearts, Yuchengco is looking at this as just another business transaction. Lives-real breathing human beings-are involved here.

If Pacific Plans goes under, there also goes the dream of thousands of if its plan holders for their children to get good education. To avoid bankruptcy, Pacific Plan has a rehab plan. This needs money. Okay -- tons of money!

And so let's just say that Yuchengco's giving away P250 million of his personal money, is the soft heart in the man. And that, as I said in the beginning, scares me. I don't want our business moguls getting soft. This is a dog eat dog business world, I tell you.

* * *

IN THE EARLY 1980s, for the sake of our action stars in the Senate, a similar crisis erupted in the banking system.

At that time, businesses were collapsing like the lungs of heavy smokers.

Unfortunately, those businesses owed a lot of money, and they owed it to banks and the public.

Thus, everybody (i.e., the few people who have 90 percent of the country's wealth) was rushing to get their investments out of banks and investments houses.

To ease the panic, the now-defunct Central Bank of the Philippines decided to open to the financial system a lending window. BAILOUT was how the media called it.

But that was the only way to calm down the public. Moreover, the Central Bank exacted a stiff price from the owners of the troubled businesses.

They had to infuse fresh funds, and if they could not, they had to give up some if not all of their businesses.

The difference between then and now is that, now, this popularity-challenged cute administration of Gloriaetta is not doing anything at all about the pre-need "crisis."

Understandably, it is busy trying to raise its popularity rating.

* * *

IF ANYTHING, under the cute administration, the Securities and Exchange Commission was even causing all the panic by leaking "information" to media about the problems of certain pre-need companies.

Luckily, things have changed at the SEC, under its new chairperson, Fe Barin, who was with the Central Bank during the crisis time in the 1980s.

Barin was only the long-time lawyer of the Monetary Board, the policy making body of the country, when it was overseeing a terrible crisis.

She is no stranger to this kind of problem. And so slowly, the SEC is changing its combative stance against the industry under its former chairperson.

* * *

ACTUALLY, the SEC will need help from other sectors, if we are going to solve this crisis once and for all. The school system is not the least of them.

The main problem of the pre-need industry, at least as far as the education plans, is the rapid and sharp increase in tuition.

The figures are actually frightening. Based on reports, in one nursing school, for instance, Pacific Plans paid P28,000 during the first year of college of one particular education plan beneficiary.

It went up to P45,000 for the second year of the course, and then to P75,000 for the third year, and finally to P91,000 for the fourth year.

I think something must be done about that kind of abuse.

Sure, for us parents who bought education plans, we can just go to the streets to force the pre-need companies to shoulder that kind of exploitation.

But what will happen to those who do not have education plans? Do their kids just grow up to become action stars in the Senate?

* * *

NOW THE other side of the coin is this: the investment opportunity in this country is not that great either for the pre-need firms to earn enough to cover even just, er, MILD increases in tuition.

For example, based on an actual case, Pacific Plans sold an education plan to customer in 1990, collecting as total of P13,800 all in all, through annual installment on the plan.

By the time the plan holder was through billing Pacific Plan, the company already spent something like P308,021 -- and for just one beneficiary.

Actually, no investment in this country-or in whole world-can give you that kind of return. In our actual example, the return to the plan holder was more than 2,000 percent, after Pacific Plans paid for all the school bills.

For the pre-need company, therefore, to cover for such a wonderful increase in tuition, it must earn from its investments close to 35 percent a year.

Again, no investment in this country can make that kind of money. And this is true, even if it is a company under Yuchengco.

Well, maybe you will make that kind of money if you go into illegal drugs or the illegal numbers game "jueteng." Heck, you don't even need capital for those "businesses." You just burn in hell, that's all.

For plan holders, the alternative is to put their money in pyramiding schemes, or bet it in Internet gambling schemes, where the promised return can run up to 60 percent a year. The only problem is, in both virtual and actual rackets, you don't see your money again.

Is this problem thus a question of the lesser of two, well, e-bills? To me, the evil in the pre-need today is that we think it is just the problem of the businesses. The schools must pitch in, I guess.

At Saturday, May 07, 2005 11:54:00 PM, Anonymous Anonymous said...

After reading Banal's comments here, I thereby deduce the following:

1. We can blame it all to the government, whenever there are failures be it pre-need to fishball kariton.

2. Sure tuition fees are exorbitant- why do you think there is a need for pre-need education plans?

3. Heck, it's their (YGC's) agents who approached us and gave us the idea! Of course, with the blessings and FAT COMMISSIONS from YGC! By the way, part of their sales pitch? Yuchengco yan! to think I fell for this hook line and sinker. You see I trusted the Yuchengcos then! I didn't get CAP, I got a Pacific Plan!

4. Correct me about this- you mean if PPI collapses, the officers and directors are free from any criminal liability? Huh? A sabagay, si Uncle Al nga pala!

5. PPI being a corporation is indeed with limited liabilities within its capitalization- however, why do they place this cute tag line under it "a member YGC group of companies"? Pa-cute lang siguro!

At Sunday, May 08, 2005 12:21:00 AM, Anonymous Anonymous said...

6. Forget about OBLIGATIONS AND CONTRACTS- if you follow Banal's reasoning. You can always blame it to the government and "sneakily" squirn your way out of a written contract!

Ganun lang pala e! so the other pre-need firm can also use the same excuse over and over again!

At Sunday, May 08, 2005 12:53:00 AM, Anonymous Anonymous said...

Banal is a disappointment. Like most titles of his articles, his write-up on PEP is still pa-cute. How sad.

At Sunday, May 08, 2005 5:28:00 AM, Anonymous Anonymous said...

Back to the Honorary Award to be conferred on Alfonso T. Yuchengco by the University of San Francisco McLaren College of Business on Friday, May 20, 2005:

LET US INUNDATE THE BOARD OF TRUSTEES, SCHOOL OFFICIALS AND ALUMNI WITH OUR EMAILS - our personal stories of how we saved, scrimped, and toiled just to be able to pay for the educational plans of our children, the treachery by which Yuchengco has reneged on his contractual obligations, the anxiety of our young children over their schooling and their future, etc.

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At Sunday, May 08, 2005 9:02:00 AM, Anonymous actus said...

Wow, Mr. Banal! You sure don't show a lot of depth in your writing, but I can't blame you. No real issues there in what you've wrote, only pa-cute stuff that's not well thought of and researched. Well, you have a column to write...

And tuition fee increases not being the same as the available yields on the average? Well, Pacific Plans sold these plans because they believed they can work it... in fact, in its simplest form, without the probabilities, it's something like:

present tuition (1+tuition increase) divided by (1+ interest rates)

current tuition: 1000
Tuition increase: 20%
yield 10%

So the trust fund must have:

1000 x 1.20 / 1.1 = 1090.91

So for this very simplistic case, the plan price must be 1090.91 and with that, you can pay the tuition in a year's time even if tuition increases by 20% and the yield is only 10%.

Of course, there are annuity formulae and more complicated stuff like probabilities and surrender gains, but the point is that present values can always be computed even if the tuition increase is greater than the yields as long as these are not perpetuities...

But you know, in a way, Mr. Banal, you are right that Pacific Plans made a mistake... but not in the ways that you imagine. Their mistake lies more in the PROCESS AND RISK MANAGEMENT PART! BECAUSE PACIFIC PLANS ENCOURAGED THE HOARDING OF TRADPLANS BY THE AGENCY FORCE (AND BY WHO ELSE, WE DON'T KNOW), THERE WERE MINIMAL TO NO SURRENDERS AT ALL! So there is very little to no attrition of planholders that subsidizes the persisting planholders, which is the hallmark of the pre-need industry.

Indeed, these are modeling errors and risk management errors, so it's rather disingenuous to blame it all on the tuition fee increases. Let's not blame the tuition fees, LET'S BLAME PACIFIC PLANS for mismanagement and now, potential fraud!

At Sunday, May 08, 2005 9:58:00 AM, Anonymous Anonymous said...

a rejoinder to the blogger above:

POSSIBLE FRAUD? It is FRAUD! Just by the creation of Lifetime Plans and transfering the profitable plans from PPI to Lifetime.

If you used a time-line analysis, you'd see it clearly that these actions are pre-meditated. Can you imagine why all the officers of Pacific would suddenly resign en masse and lo and behold became the officers of Life time?

Even if it is outright murder- how do we let the courts see our point of view- is another question. Knwoing how powerfully connected the Yuchengcos are.

Therefore, using the regular channels to resolve our problems would not be enough (taking them to court). Use your imagination and let's work together in bringing them to their knees!

At least the Pepsi Numbers Scam has finally reach a conclusion in the Courts of Appeal wherein the court ordered pepsi to payout victims in m illions of pesos- after several years. Not only that am sure Pepsi will elevate the case to the Supreme Court which will again take- 10 years?

At Sunday, May 08, 2005 11:19:00 AM, Anonymous actus said...


It should be pretty clear that the time for talk is over... time to escalate the fight!

At Sunday, May 08, 2005 11:57:00 AM, Anonymous Anonymous said...


We wll be having our 2nd general assembly on Saturday, May 14 2005 8am at St. Pauls-Pasig Gym.

Included in the AGENDA is the signature campaign for PGMA and the Pre-Need Industry. Updates regarding our case will be given.

Please DO COME and STAND AS ONE!!!

At Sunday, May 08, 2005 1:55:00 PM, Anonymous Anonymous said...

knowing now how big a cheater they were (ppi), and how many unavailed plans were bought in the secondary market, it is possible that these plans were initiated by ppi themselves to be sold to the unawaring market with the end plan that these would never be of use anyway, they sold it at a very high price and now would redeem them at a very low price, kayang-kaya gawin nito ng ppi, they have planned all of these long time ago

At Sunday, May 08, 2005 6:51:00 PM, Anonymous Anonymous said...

To everybody and to "law is my hobby"

I am not a lawyer, too. But this fraud of PPI forced me to read legal books to "count the ways" the Yuchengco's defrauded me of college education of our children:

Let me direct you to pages 368 to 370 0f Bar Review Materials in Commercial Law by Miravite: (material typed verbatim as follows)

1) Doctrine of Piercing the Veil of Corporate Fiction.

When Applied"

1) When used as a cloak to cover fraud, illegality or resulting in injustice (Soriano vs CA 174 SCRA 195) when necessary to achieve equity or to protect creditors/

2) When two factories are made to appear as one and used as a device to defeat the ends of law, or as a shield to confuse legitimate issues (Reynolds vs. CA, 169 SCRA 220),

3) When the parent corporation assumes complete control of its subsidiary's business (Phil. Veterans Integrated Investment vs. CA 181 SCRA 178).

The mere fact that the businerss of two or more corporations are interrelated is not a justification for disregarding the separation personalities, absent a sufficient showing that the corporate entity was purposely used as shield to defraud creditors and third persons of their rightrs. (Umali et al vs. CA et al, G.R. 895 Sept 13, 1990)

Bar Question: (B) What is the doctrine of "piercing the veil of corporate entity" and in what cases did the Supreme Court apply the said docrine (1985 Bar, 10 B)

Answer: (b) The doctrine of pierceing the veil of corporate fiction allows the state to direct for certain justifiable reasons, the fiction of a juridical personalaity for the corporation, separate and distinct from the persons compising it.

The Supreme Court aplies this doctrine in the following cases and instances:

(1) when the corporation was used as an alter ego or business conduit for the sole benefit of the stockholders

(2) When one corporation is a mere subsidiary, instrumentality or department of another corporation

(3) When the corporation is used as a shield to an end subversive to justice

(4) when the corporation is used to perpetuate fraud or confuse legitimate issues

(5) when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime.

Bar Question: What facts and circumstances must be proved in order that the stockholders may be held liable for the obligations contracted by the corporation (1962 BAR VIIa)

Answer: While a corporation has a personality separate and distinct from the stockholders composing ig, this veil of corporate fiction may be disregarded, and the stockholffer and the corporation considered as one person, in the following instances:

1, when the stockholders created a corporation to evade taxes, violate laws, commit fraud, evade just obligations, and

2. when the corporation is owned by the stockholders and his dummies and/or the immediate members of his family.

In page 368 of the same book, you will read:

where a second corporation was created as a means to prevent a first corporation from paying obligations to employees, the view of corporate fiction must be pierced (NAFLU vs. OPLE 143 SCRA 124)

In page 369: c) Consequences if veil is pierced. The consequences where the veil is pierced are
(1) if only one corporation is involveld, to disregard its existence as an association of persons, and
(2) if two corporations participate, to merge them, and consider them only as one entity (Remo vs. IAC 172 SCRA 405).

At Sunday, May 08, 2005 8:04:00 PM, Anonymous Anonymous said...

250 millon is peanuts compared to their obligation of 6 billon.that's a good PR move

At Sunday, May 08, 2005 10:10:00 PM, Anonymous Gerry said...

BY this time everyone knows PPI committed FRAUD against us, planholders. We have the law with us and against them. So what do we do now? If we file a suit it might take years with the system of justice in our country. We need to have other options while the suit is filed. We cannot wait as long as the 349's of pepsi. Can any one suggest something?

At Monday, May 09, 2005 12:32:00 AM, Anonymous Anonymous said...

Filling a case does take years. Most specially if it is a mere civil case. It's faster if it is a criminal case- FRAUD!

However, will it be fast enough to hook up the directors to jail before they croak? A million peso question indeed! It seems the YGC is prepared for the long haul. If you depend solely on legal battle- may be in for a rude awakening since they have the bases covered.

a parallel action should be enforce to put pressure on the whole YGC.

Ask 5 of your friends and /or relatives to start boycott YGC group of comapnies- start it with RCBC and Malayan Insurance.

Refuse to accept payments made with RCBC checks or other monetary instruments of YGC.

Please post here the complete list of Yucengco affiliated companies. i.e. PLDT? (still a large stockholder?) if they are, switch to Globe. Then ask 5 to 10 people to do the same.

You have to stay focus. They (YGC) are in effect just rolling out what they had planned before hand. I wouldn't be surprise if the Makati RTC will bring about an approval for the rehab program by June 4 or days within that date. Not our fault, they are more systematic and chose their field of battle.

Make sure the attacks are above board to avoid legal complications. Calling for BOYCOTT is not illegal!

To answer the other blogger: Pressure GMA? You forgot she called Ambassador Yuchengco as Uncle Al and the daughters- as very close friends of hers. Why do you think she has remained quiet all this time? Is this comment seditious? Not if you use a question. It's not even libelous! Bwa-ha-ha!

At Monday, May 09, 2005 2:18:00 AM, Anonymous Anonymous said...

As I read The Sunday Times (may 8, 2005) headline "PPI plan holders walk out" I say to myself "Here they go again, they are like broken record by repeating what has been written and said on many occasions. Now at this wee hour of the morning,( can't sleep with this problem given to me by PPI) I ask myself this question: WHY ARE THEY SO ONE TRACKED MINDED IN WRITING AND SAYING THE SAME THINGS?

You'll agree that what Banal wrote is a mirror of what PPI is saying, exorbitant tuition fees, protecting other plan holderS as the reason for creating Lifetime PLans, Inc. etc. etc....

And so I read the papers again, and focus on the portion on the questionnaire suppossedly to be distributed to YGC employees who are also PPI plan holders!

I do not know if my conclusion is correct: PPI will not hide itself from Lifetime --PPI will not fight the doctrine of alter ego or corporate fiction, but PPI will say that they never hide the fact that LIfetime was created to protect fixed value plan holders., and that is the best they could.

If this is correct, then it is very important for all PEPTRAD plan holders to advice Pacific Plans Inc.(in writing) of their objection to the offer to convert traditional education plans to fixed value plan. The letter they sent is a legal document, and we must answer their offer also in writing. Hand deliver it and ask whoever will receive your letter to officially receive it, or send thru registered letter with return receipt.

If we don't write them this letter, we're opening ourselves with estoppel, or don't you think this could give PPI opportunity to manufacture answers to their questionnaires?(see page A10 of May 8 issue of The Sunday Times) and maybe do you think PPI could submit these fabricated answers to a court? saying that: (1)they can claim you said As a plan holder, you find PPI has done its best to explain the situation(2)they can claim you said as a plan holder, that you believe PPI's effort to explain are adquate and enought that (3) they can claim you said as a plan holder you understand that PPI has done its best to provide a solution and that (4)they can claim ou said as a plan holder you understand why it is correct to rehabilitate PPI. WE NEED TO FIGHT THIS FRAUD, AND WE CAN FIGHT BY SENDING OUR LETTER OF OBJECTION TO THEIR OFFER.

Guys, i know i can go back to my regular sleep habit only when we have succesfully stopped rehabilitation, and when I get paid full tuition fees of my child.



At Monday, May 09, 2005 7:48:00 AM, Anonymous Anonymous said...

The following was in the Manila Standard last Friday. For what it's worth.

Yuchengco’s gesture

By Jojo Robles

The octogenarian tycoon dipped into his deep pockets and came out with P250 million to save the reputation — and perhaps the entire fortune — that he had spent his entire life to build. Whether this would mollify those who have been figuratively storming the tycoon’s financial fortress in the weeks past remains to be seen.

Ambassador Alfonso Yuchengco had apparently had enough of the legalistic strategy taken early on by defenders of his family’s beleaguered Pacific Plans Inc. in deciding to make the unusual move of personally offering to bail out the ailing preneed. Though details of the personal bailout proposal are still forthcoming, it seems clear that the Yuchengco patriarch is truly willing to part with the cash.

It is no secret that the family’s wealth was built upon trust — its core businesses, after all, are banking and insurance, two sectors where people willingly part with their money in exchange for future security. In both industries, the Yuchengcos’ Rizal Commercial Banking Corp. and Malayan and Great Pacific Life insurance companies are acknowledged leaders.

It’s a matter of trust, as Billy Joel sang. And trust can only partly be restored — as the Yuchengcos found out painfully in the PPI debacle — by taking refuge in the law.

Some may argue that to an Al Yuchengco, P250 million is a pittance, especially when his whole humongous wealth could be on the line. Why not pay off all the outstanding payments, due and future, to all the 34,000 PPI plan holders? What’s several hundred million more, if it would mean the restoration of the investing public’s trust in a name that heretofore had always stood for stability and security?

Indeed, as many have pointed out, Yuchengco and his family have a moral, not just a legal, obligation to the people who bought into their preened offerings, including those who believed PPI and other preneed companies that offered to pay future school fees, no matter how high they got in the future.

Up to now, PPI still has a boatload of questions to answer, even if Yuchengco offers to pay every single policy holder every last centavo that the schools charge the beneficiaries of its doomed open-ended plans. And, in time, the company and its investors and officials will have to answer them all, in court, in the media, everywhere where people complain — rightly or wrongly — about having been duped by the company.

But the gesture of the taipan is a step in the right direction, no matter how small and insufficient it may seem to some. Trust that has been lost can be regained — it just takes a lot of hard work, sincerity and some very real money.

And Al Yuchengco certainly understands that, else he would have just sat tight and let his lawyers run the show.

* * *

That said, the 780,000 plan holders of College Assurance Plans could learn from the concerted actions done by the Pacific Plans beneficiaries and exert similar (if not more) pressure on the leading and now profusely bleeding preneed company that also offered to take care of their future educational needs.

If the Yuchengco patriarch’s personal bailout proposal proves anything, it’s that even the biggest companies are susceptible to changes in the public’s perception. And because a lot more people have a lot more invested in CAP, every one of them needs to take up their case in every available forum, if they want even just their money back.

Some have argued that the Yuchengcos have a lot more to lose, face-wise and financially, over the PPI debacle than the owners of CAP have in their own lukewarm bid to regain the confidence of the public. But no company or businessman should be immune to all the weapons that an aggrieved populace has at its disposal — and no one will begrudge them the use of any of these, given their situation.

If the owners of CAP will not be shamed into putting up the money that they promised, or even just to return the money they received, plus the appropriate interest as the law provides (as PPI earlier offered), then there are other ways to make them pay.

This is where the government should step in, in defense of the mostly poor people who invested in CAP. A truly responsive government would not leave the fate of CAP’s beneficiaries to the regulators and the courts — it would take an active hand in seeing to it that those who abused the trust of many are punished, their assets sold off to pay their obligations, if need be.

The government needs to make an example out of CAP, whose bouncing check payments and empty promises of future solvency have become as predictable as the opening of every school year in the month of June.

Let the chips fall where they may. And let those who would attempt to scam us in similar ways in the future be warned.

At Monday, May 09, 2005 8:06:00 AM, Anonymous Anonymous said...

Again, don't wait for the government to move for us. You have to assume that the government is only there to collect taxes and other things to make life miserable.

Don't be surprised if instead of helping the victims of failed or troubled, they, the government will side with CAP and more surely with the Yuchengco's Pacific Plans.

Forgive me for being so presumptious. But that's all I can do, looking at PGMA who hasn't said a word about this "quick sand" we are in. Perhaps she does it in order not to offend the Yuhengcos!

Keep our feet on the ground and find our ways in getting back at our TORMENTOR!We can only depend on each other to look for a solution! The time to act is NOW!

At Monday, May 09, 2005 8:56:00 AM, Anonymous Anonymous said...

Atty Jeanette Tecson (ateneo law '91) disgraced herself and her profession for fibbing. The PICC meeting was a strictly-PPI employees- and-agents affair, oh come on! The Education Act of 1982 is a force majeure?, oh oh oh come on now! let us ask the 2nd year law students - they can discuss force majeure more credibly than Ms. Tecson.

Is she a lawyer or spin doctor? Truly, there is a thin line between being lawyer and mercenary...

At Monday, May 09, 2005 3:19:00 PM, Anonymous Anonymous said...

The key to the planholders' success in enforcing their claims is "vigilance".

It is this "vigilance" that drives Yuchengco to make concessions, or appear to make concessions.

But the planholders must be relentless and must not show sigs of complacency. Meaning, they should continue to keep the matter in the public's consciousness and vigorously object to the petition for rehabilitation the grant of which shall freeze their urgent claims.

Needless to say, the Yuchengcos are pulling a lot of stops to gild their mistake, so to speak. Is this the reason why no administative and/or criminal cases have yet been filed against the possible culprits? We have also heard that it is employing ASB top executives who botched millions in investments and got away with it, perhaps, in the hope that it could follow suit.

Carry on the fight!

At Monday, May 09, 2005 7:01:00 PM, Anonymous Anonymous said...

Judge Romeo Barza, the judge presiding over the rehab case is a former partner of Carpio Villaraza Barza Cruz and Rosell law office.

He is the president of the Philippine Judges Association.

Check this out:

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