Fourth of a Series

Part 1:The Indonesian billionaires behind the ‘MVP Group’

Part 2: Indonesian tycoon skirts Charter limits through corporate layers

Part 3: Closet billionaires . . . or corporate dummies?

I reported Monday the strangest thing about the Indonesian Salim-owned conglomerate in the Philippines, aka the “MVP Group,” after the initials of Manuel V. Pangilinan, the group’s top executive who many people had thought was its controlling stockholder: That is the fact that a firm, heretofore kept from public eye, Pacific Enterprise Management Holdings Inc. (PEMH), is the 60-40 partner of billionaire Anthoni Salim in a shell company, Enterprise Investment Holdings.

This firm is the first of several corporate layers that create the legal fiction that Salim’s investment vehicles in public utility firms – among them Philippine Long Distance Telephone Co., Meralco, Maynilad Water Services and several others under his holding company Metro Pacific Investment Corp. – are Philippine firms. (See “Closet billionaires or corporate dummies ” June 22, 2015).

This is despite the fact that through the layering scheme, Salim’s effective ownership in the investing firms increases to 78 to 92 percent in the companies that control public utilities such as PLDT and Meralco, as well the holding firm, Metro Pacific Investment Corp.

That of the Filipino firm PEMH, on the other hand, is reduced to 21.6 percent in the investing corporate vehicle in Metro Pacific Investments, and 13 percent and 8 percent, respectively, in the two shell companies that hold the PLDT shares.

What is surprising is that instead of getting other Filipino tycoons – such as, for instance, John Gokongwei, who had helped Salim in a Singapore deal and in disposing of Fort Bonifacio; or the Ayalas, with whom he recently partnered for multi-billion infrastructure projects – Salim chose as his partners, other than Pangilinan, third-tier executives from his conglomerate, who don’t seem to be capitalists at all. If they are real owners of those shares, that is.

Nearly as big as Pangilinan’s 29 percent holding in this firm are two equal stakes of 24.4 percent each held by Alfredo Panlilio, Meralco senior vice president for corporate communications, and one Victorico Vargas, president of Maynilad Water Services. Panlilio also happens to be president of the PEMH, which puts him in an awkward position, with his boss at Meralco technically being just his employee.

The minority investors in PEMH who have 11.1 percent each are Rene Bañez and Ma. Lourdes Rausa-Chan, ironically I would say, PLDT’s past and present chief governance officers.

Why them?

Why did Salim or Pangilinan choose these particular people as Filipino partners in a key corporate entity of the conglomerate’s ownership labyrinth?

Why not the group’s top executives since 1998, such as PLDT President Napoleon Nazareno, Ray Espinosa, the conglomerate’s legal brains in charge of Salim’s media empire and chair of the Philippine Star; Orlando Vea, who founded Smart, or even my old colleague, Smart PR Ramon Isberto, whose loyalty to the conglomerate borders on the religious.

Why not former Chief Justice Artemio Panganiban, who’s been a PLDT director ever since he retired from the High Court and gives the Salim-controlled firm a sheen of constitutional loyalty? Why not Foreign Affairs Secretary del Rosario, who had helped Pangilinan and Salim get into the Philippine business world in the 1980s, and who had even been First Pacific director for many years and resigned only when he was appointed to his current post?

I won’t be too surprised if it turns out Bañez is, indeed, a stockholder of PEMH. He was head of the Bureau of Internal Revenue in the administrations of both Fidel Ramos and Gloria Macapagal-Arroyo, and until 2013 had been in charge of PLDT’s compliance with government laws and regulations. Is he with PEMH for his vast government connections?

I don’t wonder, though, why Rausa-Chan is a stockholder of PEMH, if she really is, that is. Since 1998 when Salim acquired the firm, she has been PLDT’s corporate secretary. In the Philippines, that is one of the most powerful corporate positions given its private, direct knowledge of all of a company’s secrets.

However, I can’t figure out why Panlilio and this Vargas should be the biggest stockholders, after Pangilinan, of PEMH, if that is really true. I hope readers of this column can enlighten me on this matter.

Both are known to be the athletic type, and are Pangilinan’s representatives in the Philippine sports world. The conglomerate has the country’s biggest patron of sports, a very clever move that has boosted Pangilinan’s prestige. No other tycoon has been as involved as a patron of sports as Pangilinan has been.

Sports writers refer to Panlilio and Vargas as Pangilinan’s “sports brain trusts.” They are the top officials of the MVP Sports Foundation, the Samahang Basketbol ng Pilipinas, and the Philippine Basketball Association (PBA). Panlilio is also treasurer of the National Golf Association, while Vargas is president of the Amateur Boxing Association of the Philippines and a member of the Philippine Olympic Commission, as well as the International Basketball Federation.

I don’t see, though, how involvement in sports enterprises could be a criterion for Salim’s choice of partners for his conglomerate.

I had been hoping that Pangilinan and his colleagues would respond to my column on Monday, June 22, with a logical explanation as to why they aren’t really merely dummies of the Indonesian tycoon, and that they really own the shares in PEMH as reported in their filings with the Securities and Exchange Commission. If they, indeed, own the shares, they would be multi-billionaires and the country’s smartest investors ever.

Not a word, though, from them nor any of their representatives, especially from their corporate secretary, Alex Erlito Fider, who swore “under the penalty of perjury” that the General Information Sheet he submitted to the SEC, which lists the five as the firm’s stockholders, is “true and correct.”

Instead, a reader alerted me to the act that the filings of Salim’s Hong Kong-based First Pacific Co. Ltd. to regulatory bodies in the region and in the US report that its economic interest in PLDT totals 25.6 percent and in Metro Pacific Investments, 55.8 percent. Hong Kong regulatory bodies strictly require accurate reports of ownership of a listed firm as First Pacific Co. Ltd.

But such equity holdings are on the assumption that PEMH is owned, not by the five Filipino stockholders, but by First Pacific. In that case, it would mean the Filipinos are merely dummies.

If PEMH is what it claims to be, as owned by the five Filipinos, First Pacific would report its economic interests in PLDT to amount to only 23.4 percent (and not 25.6 percent), with the Filipino PEMH holding 2.2 percent.

In the case of MPIC, it would, instead, report that its equity interest was equivalent to 43.7 percent – not 55.8 percent – with the Filipino entity PEMH owning a 12.1 percent stake.

DISCREPANCIES IN FIRST PACIFIC’S REPORTS?
(IN PERCENT)

I’m sure PEMH stockholders can explain that they haven’t really violated that old Anti-Dummy Law of 1936 (amended by Presidential Decree No.715), the monetary penalties for which are certainly small, but involve up to 15 years of imprisonment.

I can’t wait to hear their explanation.

It would also be helpful, if they want to prove that they are the real stockholders of PEMH, for them and for the corporate secretary to show us copies of their receipt of billions of pesos in dividends from such firms as PLDT and Meralco, being the companies’ indirect investors who should be receiving their share of profits.

On the other hand, if they aren’t really the stockholders of PEMH, they would be people actually representing another entity, or under the control of another entity, which is the definition of a “puppet.”

Unless they can prove otherwise, they would be Salim’s MVPs, his Most Valuable Puppets.

Part 1: The Indonesian billionaires behind the ‘MVP Group’

Part 2: Indonesian tycoon skirts Charter limits through corporate layers

Part 3: Closet billionaires . . . or corporate dummies?