Honor among Steves
ASIDE from solving the coagulated traffic in Metro Manila, what, boss Rody, do we do about all those surreptitious white collar crimes?
Graft and corruption of course would fall under those crimes, originally defined in 1939 by the sociologist Edwin Sutherland as “crimes committed by persons of respectability and high social status.”
By definition, white collar crimes thus could happen even among honorable and admirable ladies and gentlemen in business, even among the billionaires wallowing in wealth. Well, even in those unscrutinized listed companies in the stock market!
According to this horror story in the market, for instance, one Mister Steve used the typical acquisition scheme as a surefire hush hush way to cheat his own stockholders, i.e. the hapless public.
He did it simply by inflating the buying price that was more bloated than the upper lip of one senator who just had an injection of botulinum toxin like “Botox.”
Mister Steve happened to enjoy full control of the listed company, and so he personally, just by himself, made a deal with owners of a “food chain” for another routine buyout at about P50 million.
He apportioned for himself some P40 million in cash of the “listed” company to pay for the “food chain”—you know, as some sort of “advance.”
With the able assistance of lawyers, Mister Steve formed another entity, known in business as the “holding” company, which became the owner of the newly acquired “food chain.”
Apparently not knowing the meaning of the word “propriety,” or even the word “honesty,” maybe because he miserably failed in English in school, he chose himself and the lawyers to become the controlling stockholders of the holding company.
Unknown to thousands of public investors in the “listed” company, its P40 million in cash, the supposed advance for the “food chain” acquisition, went straight to the new “holding” company to pay for the acquisition.
That the board of the “listed” company, together with the obligatory independent directors, agreed to advance the P40 million to an untested newly formed “holding” company, could be the mystery to rival that on the missing link in the evolution of man.
As it turned, instead of the “listed” company just paying for the “food chain” directly, it had to go through a layer that turned out to be part of the wicked scheme of Mister Steve.
To liquidate the P40 million in cash advance, the “holding” company assigned the controlling ownership of 51 percent in the “food chain” to the “listed” company, which meant that the “holding” company still retained 49 percent ownership.
It did not matter that the “listed” company by itself provided all the cash as partial payment for the “food chain,” which should entitle it to 100 percent ownership of the new business.
In no time, the “holding” company hired a foreign group to value the “food chain” as a business, and the group immediately came up with an amazing valuation of more than P1 billion.
There—from the actual acquisition price of P50 million, the “food chain” suddenly became P1 billion!
Perhaps the foreign group used some sophisticated financial tools, such as throwing darts at some billion-peso figures written on the wall to arrive at some random amounts!
Now, Mister Steve earlier owed the “listed” company another P400 million, and to pay for it, he transferred additional shares in his “food chain” from his “holding” company to his “listed” company.
For the 81-percent ownership, the “listed” company thus had to spend something like P440 million, but the board did not bother check with a third-party valuation company.
In effect, the board allowed Mister Steve to pay for some P440 million in cash advances with the 81 percent ownership in the “food chain” that was bought with the money of the “listed” company.
All this time the SEC and the PSE, or even the external auditors, did just about, well, nothing.
***
And then there was this renewed clamor for better internet service in this country, as studies showed that we had the second slowest broadband connection in Asia (2.8 mbps), not to mention that we had one of the most expensive rates in the whole world, estimated at roughly three times the global average.
Enter the newly minted Department of Information Communications Technology, or the DICT, which for the first time would be activated under the new administration of Duterte Harley.
From what I heard, the administration wanted the new DICT to take as its top priority some measures to answer the clamor for better internet service.
Reports said that the NTC, the National Telecommunications Commission, the police of the telecom sector, would become an agency under the DICT.
The NTC already started an audit of the internet infrastructure of the telecom sector, as part of the study on how the government could complement the infrastructure in the private sector.
Well, the NTC should also prepare something for the new DICT secretary, right?
Anyway, the Asian Development Bank reportedly also wanted to finance government projects for internet service, even before the administration of Duterte Harley could come up with some solid plans.
At the top of its wish list of course could be some drastic measures in Congress, such as another liberalization measure to back up the threat of the new President Duterte Harley that he would open up the telecom sector to foreigners, if need be.
In short, Duterte Harley wanted more competition for the telecom sector.
That would not be cheap, with the sector needing perhaps billions of dollars in fresh investments, which of course only foreign firms could deploy.
A nationwide internet network would require tons of money. South Korea, which had the fastest network in the world at an average speed of 26.7 mbps, even peaking 95.3 mbps, invested some $24 billion for its internet backbone. China already announced plans to invest some $190 billion, while Thailand would increase its investments by $20 billion this year.
In the west, the United States invested more than $7 billion just to provide broadband service to far flung areas, while France shelled out $26 billion for high speed internet throughout the country.
How much did the Philippine government spend so far—zero?
Remember, way back in 2007, the cute administration of Gloria Macapagal Arroyo had this bold plan to invest some measly $329 million on an internet backbone that could have covered the entire archipelago, in partnership with the Chinese company called ZTE, and we all saw what happened to the plan.
Aside from the need for huge investments, however, this country perhaps could use some long overdue updating of its laws on telecommunications.
Today for instance, under the Public Service Act of 1936, that 80-year-old law that Congress somehow forgot to update, if one telco violated the rules, the government could penalize it with a fine of —hold on to your seats—P200 per violation.
While Tarlac Rep. Susan Yap filed a bill seeking to increase the penalty by over a thousandfold, other old laws still cried for amendments, such RA 7925 that categorized the internet as a mere “value-added” service.
Down here it would be known as “dagdag,” and yet its price could kill!
