MANILA, Philippines - The Government Service Insurance System accused businessman Manuel V. Pangilinan of shortchanging Manila Electric Co.’s shareholders by skirting the tender offer rule after sealing a deal that effectively increased the PLDT group’s stake in the country’s biggest power utility.

In an interview Monday, GSIS president and general manager Winston Garcia said the scheme by which Pangilinan gained control over a small but crucial stake in Meralco “can be construed as an attempt to defraud the investing public.”

He said the state pension fund would go to court to compel Pangilinan-run Metro Pacific Investment Corp. and PLDT to buy out the GSIS’ estimated 4-percent stake in Meralco.

“That’s a clear case of large-scale estafa,” Garcia claimed of last week’s deal where PLDT extended the Lopez-run First Philippine Holdings Corp. an P11.2-billion loan in exchange for control—but not ownership—of a 6.7-percent stake in Meralco. “This is a white-collar crime.”

Sister firms PLDT and MPIC own a combined 34.7 percent of Meralco, and purchasing outright the Lopez stake would have put the group above the 35-percent tender offer threshold. Under the law, investors who acquire at least 35 percent of any firm must offer to buy out the rest of that company’s shareholders under the same terms of their most recent purchase that put them above the threshold.

At P300 a share, a tender offer for the remaining 65.3 percent of Meralco would cost P218 billion, an amount that would cripple any takeover attempt.

Garcia—who is also a lawyer—pointed out that Pangilinan’s group could not hide behind the structure of their deal with the Lopez family where the ownership of the shares have not actually been transferred yet.

“They make it appear as if it is a loan,” said the GSIS chief, who has long been a corporate nemesis of the Lopez family. “They are doing indirectly what the law prohibits them directly. For all intents and purposes, that was a sale.”

Garcia said he also plans to hale to court the board of directors of First Philippine Holdings Corp.—where GSIS also owns shares—for making decisions that are prejudicial to the interests of shareholders.

“Why did they accept a loan from PLDT when there is a cash offer on the table?” he said, referring to the offer of Henry Sy Jr. to acquire the Lopez family’s remaining 13.4-percent stake in Meralco at P300 a share. “I will sue the entire board of directors of First Holdings.”