The Meralco Fiasco

Written on Sunday, June 1st, 2008 at 10:46 am | by butch

Egg on Winston Garcia’s chubby face, is how the government’s attempt to wrest control of Meralco from the Lopezes turned out.

It was poorly conceived and executed in the first place, driven purely by President’s Arroyo’s objective of playing the populist card, without regard to whether it would really succeed.

With Winston Garcia as frontman for the effort , it was doomed further. He lacks the requisite credibility to lead such an undertaking, which would require a person of known probity and integrity, not to mention a thorough understanding of corporate strategy. But being the head of the Government Service Insurance System, the owner of the largest block of shares held by the government, GMA had no option but to let him run with the ball. Which he fumbled.

In the weeks leading up to the shareholders meeting last May 27, Garcia engaged in the corporate equivalent of “trash-talking”, trying to psych out the opponent. In this he succeeded, as the Lopez camp apparently took his motormouth pronouncements seriously. But it eventually backfired, as it also does on the basketball court, since it only stiffened the resolve of the opposing team to resist the assault with all the resources at its disposal.

The solicitation of proxy votes by the GSIS appeared to be haphazard and half-heartedly done. There was no effort at subterfuge or even discretion, as Garcia kept squawking to the media about how the GSIS was actively seeking proxies against the Lopezes. In a corporation where you hold the minority shares, your only chance of unseating the majority bloc would be to solicit enough proxies from the uncommitted shareholders to tip the balance in your favor. This is done, commonsensically, in a silent and unobtrusive manner in order not to telegraph your moves to the other team. Instead, Garcia laid out the whole game plan for all to see. To be sure, he got maximum media mileage, but not much else. He even mentioned that he had a scheme to spring a “surprise” during the annual stockholders’ meeting, which turned out to be a dud (as in, it landed with a thud).

Comes the big day, the GSIS didn’t have enough proxies, but it had “A Plan”. But this plan didn’t seem to involve ensuring that Garcia would at least be accompanied by a significant number of GSIS supporters in order to counter the opposing side’s expected show of force. Thus, the meeting’s venue, the Meralco Theater, was packed almost to the rafters with Meralco partisans. To be fair, the Lopezes had control of the place. But some planning should have been made to assure that the GSIS had its own cheering section. As it happened, Garcia was booed and heckled at almost every turn. Even the audio system went out as he rose to speak, and he had to switch from mike to mike. Talk about playing before a hometown crowd.

When the GSIS’ much ballyhooed secret weapon was finally unveiled, it was in the form of a cease and desist order (CDO) from the Securities and Exchange Commission (SEC) which was intended to prevent the board from counting what the GSIS claimed were tainted proxies in favor of the Lopez group. The board majority, acting through assistant corporate secretary Antonio Rosete, practically tore up the CDO in the face of the SEC representative, Atty. Hubert Guevara, a Director of Compliance and Enforcement at the SEC, citing no less than ten supposedly fatal infirmities and declaring the CDO “null and void”. In an Inquirer report:

Assistant corporate secretary Rosete and the incumbent board members came out of a conference with their lawyers, armed with a statement that obviously shocked both Garcia and Guevara.

“After a review of the order, we deem such order null and void,” Rosete said, pointing out 10 reasons for this conclusion, including that the order did not have the official seal of the SEC and was signed by only one commissioner, Jesus Martinez.

“Upon verification, we have received information that this order was issued without the benefit of a commission meeting, and that we are not aware of any complaint filed with the Compliance and Enforcement Division of the SEC,” Rosete said.

He added that Martinez, although designated officer in charge in the absence of SEC Chairperson Fe Barin, had “no authority to issue this order on his own.”

The fact that Martinez was the only signatory to the order, Rosete said, made it violative of due process as Martinez, in effect, “predetermined the validity of the GSIS proxies without proper investigation.”

Rosete said neither Meralco nor any of its directors were not given notice of the order, denying them the opportunity to be heard—another violation of due process.

Also, since the matter between the GSIS and the Lopezes of Meralco was an intra-corporate matter, the regular courts and not the SEC had jurisdiction over it, he said.

He also said the GSIS was guilty of forum shopping as it also filed a similar complaint with the Pasay City Regional Trial Court. A GSIS lawyer later said that the complaint was subsequently dropped.
Rosete then declared that Meralco would push through with the election despite the SEC order.

Garcia stood up, grabbed a microphone and called the meeting “bogus,” as it was held “in defiance of an SEC order.

The board then proceeded to count the ballots cast, with the questioned proxies, and formalized the election of a new 11-member board, including Mr. Garcia and three others to represent the government.

The elected nominees of the Lopez group were Manuel Lopez, Felipe Alfonso, Jesus Francisco, Christian Monsod and Cesar Virata. Former Chief Justice Artemio Panganiban was the Lopez nominee for for independent director. Banker Vicente Panlilio was given the other remaining seat for independent director.

Needless to say, the Lopezes remained in full control of the process and the final outcome.

To rub salt on the GSIS’ wounds, Meralco promptly went to Court of Appeals and asked for the issuance of a temporary restraining order (TRO) to enjoin the SEC and the GSIS from implementing the undated CDO served during the stockholders’ meeting. Less than 24 hours later, faster than you could say “systems loss”, the CA issued the TRO. It was, to use a Tagalog colloquialism a “mag-asawang sampal” (double slap) to the face of the GSIS.

To be sure, some good has come out this sordid mess. The many questionable Meralco practices of entering sweetheart deals with related companies, passing off operating losses to unsuspecting consumers and its many inefficiencies have now been brought to the public’s attention. As pointed out by Neal Cruz:

The Lopezes may still control Meralco, but they will be less cocksure now, their shenanigans having been exposed, their activities under scrutiny, and the laws and rules under which they have abused their privilege with impunity being reviewed. Most of all, the eyes of the public have been opened to the fact that for decades power consumers were being abused by Meralco. Customers now know that they are not getting the true worth of the money they are paying Meralco. Most of it is lost in the “systems losses,” in Meralco’s own electric consumption, in Meralco’s income tax payments, in the fat pensions of Meralco executives, in the overpricing of electricity and supplies bought from Meralco’s sister companies—all of which are charged to its customers. Each consumer’s power consumption bill is doubled because of these pass-on charges.

Also, Meralco subscribers now know that the biggest power distribution company in the country owes them billions of pesos that should be given back to them as refunds, as directed by the Supreme Court. And that they cannot now be forced to pay deposits for electric meters. It is our hope that we now have more enlightened and vigilant electric consumers.

I discussed this length to point out the seeming ineptitude of the GSIS in handling the whole affair. It was almost as if the whole undertaking was carried out in such a way as to ensure its failure from the very start. After all, GMA only wanted to score “pogi-points” as an alleged champion of the masses. That accomplished, there’s really no need for members of the old boys’ club to bicker, as there are enough spoils for everyone.

My fear that is that this is all a “moro-moro”, corporate affairs as theatre, solely for public consumption, where, behind the curtains, it’ll be business as usual. At the next board meeting, behind closed doors, after a group hug and high fives, Mr. Garcia and the Lopezes will have a hearty laugh at the expense of the long-suffering Filipino people. As by then, Arroyo would have brought her (unloaded ) guns to bear on the telecoms and the manufactured issue of “free texting”, thereby pushing the Meralco issue from the front pages.

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About The Author: butch is a lawyer by profession and blogs as The Warrior Lawyer.

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Comments

3 Responses to “The Meralco Fiasco”

  1. cvj on June 1st, 2008 11:37 am

    If it wants to get genuine populist appeal, i think the GMA camp needs to enlist the help of Noli de Castro to front for them. The Arroyos just come off as too fake for that purpose.

  2. Manuel L. Quezon III: The Daily Dose » Blog Archive » Mindanao hitting the fan? on June 3rd, 2008 2:29 pm

    […] The point I previously made about the middle class being antagonized along with big business is underlined by this entry in Zone of Solitude. See Iris Cecilia Gonzales for her account of the stockholder’s meeting. And The Meralco Fiasco in FilipinoVoices.com. […]

  3. Nick on June 3rd, 2008 8:21 pm

    I’m not really sure it was a moro moro kind of situation or escalation. It seems, that there really is bad blood between The Arroyo regime and The Lopezes.

    I think, in the end, it was more of the populist card being played by Arroyo. I’ll have more on this in a later article, if ever I have time to finish it of course. But this is just the buttering up of a public that needs buttering.. Arroyo is cunning, no need to think that this was just a ploy, there is method in her madness..

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