Abra mining firm, execs slapped with criminal raps

In what may be considered the most massive crackdown on stock fraud to date, the Securities and Exchange Commission (SEC) said yesterday it has filed a criminal complaint against Abra Mining & Industrial Corporation (AR), its directors, officers, transfer agent and certain shareholders.

The charges covering the unauthorized and fraudulent trading of shares from 2015 to 2019 were contained in a complaint filed with the Department of Justice (DoJ) on Friday.

The SEC charged the respondents with 441 counts of violations of Sections 8 and 26 of Republic Act 8799, or the Securities Regulation Code (SRC), and Sections 61, 62 and 63 of Republic Act 11232, or the Revised Corporation Code (RCC).

The Philippine Stock Exchange, meanwhile, said the shares of the listed firm will remain suspended and delisting proceedings have been initiated.

The DoJ is expected to institute civil and criminal forfeiture, including asset preservation, and other appropriate actions against the respondents under Republic Act 9160, or the Anti-Money Laundering Act of 2001, as amended.

Incorporated in 1964, the mining firm is engaged in the exploration, development and processing of minerals. It is also engaged in the domestic sale of cement and metal concentrates. It holds mining claims in the Capcapo gold copper project covering 84 parcels of nine-hectare claims with an aggregate area of 756 hectares; the Bucay-Baticang iron sand project; Bucay-Baticang limestone project; Patok gold-silver-copper project; and SanVig alluvial project that covers 2,673 hectares.

The corporate regulator included as respondents AR president James Beloy, corporate secretary Amelia Beloy, and directors Conde Claro Venus, Carmelo Rafael D. Tansengco, Joel Albert G. Beloy and Ma. Belinda T. Gaskell.

Also named respondents are Asian Transfer and Registry Corporation, its chairperson and president Arline Adeva, corporate secretary Premy Ann Beloy and treasurer Joel Albert Beloy, who concurrently serve as directors at AR; assistant corporate secretary Joseph Acuesta, and director Ma. Agnes Hoffman.

The criminal complaint stemmed from discrepancies in the number of AR shares registered with the SEC for public offering, those listed in the Philippine Stock Exchange (PSE), and those lodged with Philippine Depository and Trust Corp. (PDTC).

In its investigation, the SEC Markets and Securities Regulation Department (MSRD) found that the number of AR shares lodged with PDTC totaled 258.957 trillion as of 16 February 2021.

The registration statement covered 95 trillion shares while the number of shares authorized for listing in the PSE totaled 72.9 trillion shares.

AR shares with PDTC also exceeded the issued shares and the outstanding shares indicated in the company’s financial statements.

The discrepancies stemmed from the issuance of AR shares totaling 169.05 trillion under 474 stock certificates in favor of the Collados, Gacelo, Jubileum and Andrei between 2015 and 2019.

In an 8 April decision, the MSRD found the respondents guilty of violating the market rules.

It imposed fines totaling more than P560 million on the respondents, revoked the registration statement and permit to sell securities of AR, and disqualified the officers and directors of AR and Asian Transfer from performing similar functions in SEC-supervised financial intermediaries and issuers of securities.

Unregistered AR shares

In the complaint, the SEC alleged that AR issued more than the number of shares registered with it for public offering.

Section 8.1 of the SRC provides that securities shall not be sold or offered for sale or distribution within the Philippines without a registration statement duly filed with and approved by the SEC.

A company seeking to offer its shares to the public and subsequently make them available for trading in the PSE must first register such shares with the SEC and comply with the listing requirements of the PSE.

“The number of shares lodged or deposited with the PDTC must have been offered to the public and made available for the entire market to be bought and sold,” according to the SEC ruling.

AR was fully cognizant of, acquiesced to and tolerated the over issuance of its shares as the same was contained repeatedly over the years in the reports submitted by the company to the SEC and the Philippine Stock Exchange, according to the SEC decision.

Stock market figures showed that the number of publicly-owned AR shares started to exceed the registered shares on 31 March 2015.

“Evidently, the offering of the unregistered AR shares to the public violated market rules.

“The bigger scheme involves violations of Sections 61 (on consideration for shares of stocks) and Section 63 (on issuance of stock certificates) of the RCC by respondents AR and the Asian Transfer as its stock transfer agent and the subsequent offering and selling of the subject AR shares through the PSE by the Collados,” the ruling stated.

Worthless shares

Under Section 61 of the RCC, stocks shall not be issued for a consideration less than the par or issued price thereof.

Section 63 further provides that no certificate of stock shall be issued to a subscriber until the full amount of the subscription together with interest and expenses, in case of delinquent shares, if any is due, has been paid.

Under Section 62 of the RCC, the stock certificates must be signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation and shall be issued in accordance with the bylaws.

In the case of AR, the MSRD found that the Collados never made full payment of the shares issued to them. Yet, AR proceeded with the issuance of the corresponding stock certificates.