Press Release
December 13, 2011

(DBP behest loan inquiry)

Q: You raised issues regarding the board meetings.... How did these prove that Rey David engaged in insider trading?

Serge: How did they prove? They were bragging! They were bragging that they were pushing up the price, P14, P16, P17, P18, P19. And that Manny Pangilinan was pushing down the price. P18, P17, P16, P15. So that's very obviously price manipulation. Price manipulation is developing a selling pattern that will induce people to buy, or induce people to sell. So when people usually see prices dropping, they start panicking. They said there's somebody who knows something that we don't know. And they want to stop their loss at a certain amount, and they fell. On the other hand, if you see prices going up, then the public seems to think that there's something happening that we don't know about, some smart people are buying up stocks. So this is very classic definition of price manipulation. We are looking at a pattern of buying and selling that would induce people to buy or to sell.

Q: Do you have proof or evidence that Mr. Pangilinan or Mr. Ongpin engaged in price manipulation? Or is this all about DBP only?

Serge: No, it's on the transcript. And we're going to subpoena the records of the DBP brokerage and the Pangilinan brokerage. Fortunately they can be identified. Pangilinan was using Asian Security and DBP was using DBP Daewa Securities.

Q: And Ongpin?

Serge: Ongpin used several brokers, we have identified about 4 or 5.

Q: You don't have evidence yet that Pangilinan or Ongpin engaged in manipulation?

Serge: Not yet. But we have the proof of trading, certified transcripts, people who were around who will verify them talking about manipulating prices. This is what they call testimonial evidence but this is not documentary evidence. Definitely, we will get the documents.

Q: So it's also Pangilinan and Ongpin, not just David?

Serge: Oh yes. Because it was David who implicated them. Sabi ni Bobby, we have to protect the price. So pina-akyat namin sa P19. Then Pangilinan, who is connected with Asia Securities, we know that his exclusive brokerage Asia Sec starting selling down. We There was this really huge difference around the middle of November, around November 15, when the price really went up steeply to about P19, and then suddenly dropped to P14, then it went up again to P19. And this was just about in a matter of days!

Q: Do you have proof that Pangilinan was the client?

Serge: We have to ask Asian Securities who were selling and pushing down the price. We will be able to prove this by the pattern, the prices they were offering for the shares. I would expect Asian Sec was selling. And then you would also tend to notice that on the buying side, it was DBP Daewa and they were offering prices that were steadily escalating, until it again reached P19. As a matter of fact on Dec. 2, Bobby Ongpin through Golden Media bought about 49.5 million shares at a price of about P19.25, which is very high. But if you know that you were going to sell at P21, I'll even buy it at P20.

Q: You mentioned earlier that you would move for the amendment of the Securities Regulation Code...

Serge: Not move. I will be drafting bills that would amend so many provisions of thr Securities Regulation Code, the charter of the Bangko Sentral ng Pilipinas, the General Banking Act, and the charters of the DBP and the Land Bank of the Philippines.

Q: What are the major changes that you would be proposing?

Serge: That will probably be too long to talk about. But definitely we will tighten up on insider trading, penalties. We' re going to give the SEC the power to pursue this by saying that any profits that must be disgorged must not be given to the corporation but to the SEC, as in the case in the US and England. When they catch you engaged in insider trading, they get the profits that you made, it goes to the regulator's fund, not the fund of the corporation because here, you see the anomalous situation that Philex knew that there was a violation of the law, Philex was supposed to sue Ongpin to retrieve those short swing profits and Philex refused to do so. That's the law, but the corporation that was supposed to exercise fiducial responsibility refused to do so. I don't care what their excuse is. The law is the law. And it seems rather funny that the law will say that only the corporation that can sue. So, we want to pattern it after other countries, like Singapore, Hongkong, Australia, United States, the United Kingdom, France, Germany. The best practices in areas where the penalties go to the operator.

Q: How long will it take you to pass that law?

Serge: I don't know. It's very long to pass law in this country. And you know, there's going to be great resistance in this country because insider trading is a way of life. So, therefore, I would expect there would be resistance here, the lower house and even in the Senate. It would take a major push by the Palace, by maybe making it a priority measure, so that there can be financial reform that will cover many of the areas that need to be covered.

And again, the long and the short of this is, we are known as the wild wild west in the financial world, that's why even the best minds in our country have little money, compared to their counterparts in Thailand or Singapore. Even in relation to a percentage of their gross domestic product, maliit talaga because they know that people can get away with crimes here. And this is the reason why also our president, President Noynoy Aquino, has been steadfast in pushing for reforms not only in the criminal justice system, in the judicial system. Now this is an effort on the part of his administration to create reforms in the financial system because the stronger a financial system, the more the more honest it is, the more transparent it is, the more it will attract investors.

Q: The PSE should be liable also?

Serge: The PSE is composed of insider traders. The PSE is controlled by brokers. And in fact, about 25% of the PSE voting stock is controlled by 2 corporations. MVP group and the San Miguel group. That's anomalous. That should not be allowed.

Q: Amendments to the composition of the boards?

Serge: Yes. Definitely. If we don't clean up the PSE and prevent the 'I scratch your back, you scratch my back' type of mentality. They won't get away with what they want to get away with. The foolish part is that, the whole world, the financial communities, know exactly what we are. And we're being blinded by our own peers to the fact that we don't qualify under any merger of honesty, integrity, best practices, financial transparency, we don't qualify under any of those. And we want to qualify. The stronger, the cleaner, the more transparent our financial backbone is, the stronger our financial economy will be.

Q: Why did David stay only for 6 months in Philex?

Serge: That was the question I asked him because he was claiming during the first hearing that he was an independent director. If you don't understand what the term means, you're a layman, ang independent dito, he was not elected by nobody, there's no touch of behest. But he was nominated by his own admission by Roberto Ongpin to the Philex board and that was June 2009. Then, I pointed out to him that he and Bobby Ongpin resigned at the same time from Philex board. So I ask him, why did he resign if he was an independent director? Hindi na niya masagot.

Q: Will you invite again Sec Mar Roxas?

Serge: I asked Sec Mar Roxas to monitor the hearing so they can be up to speed. None of his usecs today are the usecs that were there when the MRT transaction was undertaken. So wala siyang tao na may institutional memory and I wanted his usec to be able to, 'Ah ganun pala 'yan.' And then in the future, I will have to be calling for the secretary of the DOTC to get their side because DOTC is the operator of the MRT. It's not the MRT Corporation that operates, because the MRT Corporation has no franchise to operate a public utility. So what they did was built, that's why it's called BLT, their leasing it to DOTC, and DOTC is the one collecting the fares.

Q: They use those to pay for the loans?

Serge: No, they're not paying anything. It's the government that's been paying because the fare collection are too low, it's averaging P12 to P15 for an average trip, 3 stops. But not only that. There's a lot of corruption going on in the fare box. That's controlled by retired general during the time of Gloria. So they did not want to give it up. My understanding is that, 'No, we don't want to buy back. We don't want the government to buy MRT3, kasi mawawala samin 'yung control ng farebox. I think they were reporting only passengers of about 350,000, when actually there are counts that it reach 450,000 to 500,000 a day. So, there's a big leakage there. But what else is new?

Q: Will you still be touching on other Ongpin-related transactions?

Serge: Yes. But you know, these things are so complicated that... gee, just understanding the MRT took me weeks. We will eventually get there because we did indicate that we will look into Petron, Meralco. But don't ask me rush because I am having a hard time to understand the MRT. It might still take me 3 hearings before we can elicit the total information that we need to make a judgement.

Q: ???

Serge: The Philex was a done deal when they signed it in December. It was a done deal in the sense na agreed na, signed na, binayaran na, baka mabulilyaso pa 'yan at bawiin pa ni Manuel Pangilinan because there was an objection from the group of Ms. Vivian Yuchengco, 'sige gawin mo 'yan but you have to offer everybody. But there was a lot of Philex shares na hindi isinama. So, she was trying to block it in the Stock Exchange, 'Hindi, wag mo i-cross iyan'... cross, meaning trade it and cause it to be official registered as sold. Because gusto niya isama din ang mga shares ng iba. Pangilinan was not willing to put our more money, as a matter of fact he even had to borrow $275 million from DBP to close this deal. Because he need an amount about 80%. DBP lent him the money for about 1 year. But the 2 Rivers transaction, which was guarantied by First Pacific. And it collected an interest of 9% and Bobby Ongpin was only paying DBP 6%.

Q: Manny Pangilinan in insider trading?

Serge: Not too sure. In the transactions, he did not say that he was included, but he did say that Manny Pangilinan was pushing down the share prices from P19 to 14, and he did not even say that Manny did tell him this. He said he knows because he knows the broker of Manny Pangilinan, which he always uses Asia Securities. And how they are identified in the Stock Market, kung malalaki ang broker nila.

By best estimates, taking into consideration the affidavit of Mr. Pangilinan, it was laid down on or about November 27. That's when they agreed. Talking about done deal, I can't quite remember how Mr. David phrases it. I was not sure about the particular issue, but if it was...

Q: Any plans to call Pangilinan?

Serge: There's a controversy there. Sen. President Enrile says he is not needed, since this is not an investigation but only in aid of legislation inquiry, he can just execute an affidavit. But Sen. Chiz Escudero, in our hearing yesterday, which was in executive session. Sen. Escudero insisted that MVP be invited.

Q: Anong probable charges na i-file kay Manny Pangilinan, aside from price manipulation?

Serge: I don't think it will be easy to prove that he was manipulating prices because it was Asia Sec that was bringing it down. So, just by deduction, kay Manny 'yan. By logic, si Manny ang gumawa niyan. But you can't prove it. On the other hand, since it was Rey David who was pushing the price, he was the principal involved. Kay Manny, walang direct connect, ang connect diyan, Asian Securities. Pero kay Rey David, he was the principal, he was the one ordering the broker to buy. And he even admitted that he bought at P18.50.

Q: How guilty do you think Rey David is in this whole controversy? How close do you think are you to proving it? Do you think there's a chance he'd turn state witness?

Serge: I don't know if there's a chance he'd turn state witness, that's up to Mr. David and his lawyer. How involved he is? He is the key person, he was the one who made everything worked. Remember, our inquiry is just centered on the transactions of 2 banks, DBP and Land Bank. And so the key figures there will be Rey David and Gilda Pico, and to a lesser extent, sa Land Bank, 'yung chairman, who was Sec. Teves. And in the MRT, it was the secretary of Finance that blessed the whole thing, he was the pope. So, how involved is Rey David? He was very involved. Because everything that we are investigating has to do with DBP loans. The loan to DVRI and Golden Media, the loan to GAS, Petron, Global 5000 who bought their Meralco shares...

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