MANILA, JUNE 4, 2008
(STAR) HIDDEN AGENDA By Mary Ann Ll. Reyes - If there is one thing other than the free text messaging issue that the telecommunications industry is intently monitoring closely, it is the Liberty Group rehabilitation drama.

This drama, featuring Liberty Telecoms Holdings Inc. and its subsidiaries (Liberty Broadcasting Network Inc. and Skyphone Logistics), its creditors led by RCBC, and the National Telecommunications Commission, might appear to be a simple case of creditors seeking to recover what is due them from the Raymund Moreno-owned companies, but in actuality, it is a complicated plot that has different twists and turns and with very serious implications on the industry and the NTC.

Here’s how the story goes.

Last May 15, RCBC filed a motion with the Makati RTC Branch 149 for the termination of rehabilitation proceedings involving the Liberty group and for the liquidation of the three companies under it due to Liberty’s failure to comply with the terms and conditions of the court-approved rehabilitation plan for the company.

According to RCBC, the rehabilitation proceedings are useless on the grounds that LBNI in particular has disposed of its major asset, a 700 Mhz frequency granted by the NTC, which the latter has subsequently awarded to Smart Broadband Inc. (SBI).

LBNI in its rehabilitation petition undertook to use its existing nationwide backbone network, specifically the frequencies allegedly already assigned and allocated to it by the NTC, for the purpose of operating a nationwide voice and data network (WiMax) which shall be the center of its rehabilitation.

According to LBNI’s revised rehabilitation plan, their proposed WiMax network, which is the main product/service in their 10-year rehab plan, shall account for more than 90 percent of their projected total revenue. This will be established on LBNI’s existing backbone network and making use of technology and frequencies (such as their 700 MHz frequency) they claim to have, RCBC noted.

RCBC said that since the proposed WiMax network shall be LBNI’s primary source of revenues, it is axiomatic that the failure of the proposed network necessarily spells the death of its rehabilitation.

Last May 23, the same court granted RCBC’s motion for the issuance of a subpoena duces tecum and ad testificandum and ordered NTC officials to appear before it to shed light on the matter, particularly on why LBNI’s 700 Mhz frequency was awarded to SBI.

The whole telco sector was tuned in. It wanted to find out how the NTC was going to explain the mysterious disappearance of LBNI’s valuable frequency.

But, the Liberty group filed a motion to expunge from the records what it claims are “sham” pleadings of RCBC as well as a motion to quash the subpoenas. According to the group, RCBC’s motions are not “verified”. Citing Balgos’ annotations in his book on the Interim Rules of Procedure on Corporate Rehabilitation, the Liberty group said that in corporate rehabilitation, all pleadings whether initiatory or subsequent or incidental are, as a matter of jurisdictional requirement, verified. Verification is an assurance under oath that the affiant has read the pleading and the factual allegations contained therein are true and correct of his own personal knowledge or based on authentic records.

In opposing Liberty’s motion, RCBC pointed out that nowhere in the Interim Rules does it say that motions, which are not pleadings, must be verified. It adds that there is nothing in the rules that says that the verification requirement, if it indeed applies to motions, is jurisdictional.

The Rules of Court are clear that motions are not pleadings. Section 1, Rule 15 defines a motion as “an application for relief other than by a pleading.” In fact, not all pleadings are required to be verified. But assuming that motions must be verified under the Interim Rules on Corporate Rehabilitation, RCBC pointed out in its opposition that several of Liberty’s submissions to the courts were also not verified.

RCBC added that when Liberty claimed that “it is false that SBI has applied for and reportedly been granted and allocated the 700 Mhz frequency,” such denial amounts to an admission or what in legal parlance is known as “negative pregnant” denials or a denial pregnant with an admission of the substantial facts alleged, thus equivalent to an admission.

But beyond all these legal mumbo-jumbo, the bottomline is even the Interim Rules state that it must be liberally construed. The public, which owns these frequencies, deserves to know what really happened and the NTC owes it an explanation.

Corporate governance

Why Chikka, the pioneering company that brought to the world the first instant messenger, is now down on its knees, reported a whopping P100 million last year and dismissed 30 employees so far this year and plans to axe 100 more before yearend has caught the business world by surprise.

Company stakeholders are blaming the former management team for their lack of transparency and accountability, absence of a sense of fiduciary responsibility, conflict of interest, poor ethical conduct, lack of financial and control discipline, refusal to abide by the code of corporate governance recommended by a consultant in response to SGV’s audit findings late last year, among others.

Chikka’s external auditor SGV last Feb. 11 revealed that the corporation’s cash advances during the past four years accumulated to P11 million, P8 million of which were advanced by former CEO Dennis Mendiola and was never liquidated.

The company’s newly formed audit committee has reportedly discovered numerous related-party transactions, companies being formed allegedly by the former CEO in direct or indirect competition with Chikka, and the use of Chikka’s corporate funds allegedly without board approval to organize these companies.

When these were discovered, members of the board were left with no choice but to remove the CEO. The company’s chief finance officer was also fired. Dennis however remains a member of the board representing Sky Pacific. A new CEO and CFO were named in the persons of former Chikka COO Chito Bustamante and Arnold Ocampo. The board also accommodated Dennis’ request that he be named to a new position called chief imagination officer or CIO.

Whether or not Mendiola is guilty of the accusations is not for us to judge. Maybe, poor financial management including the absence of a formal accounting manual and the lack of a formal policy on cash advances and group disbursements is to blame. Maybe, Chikka grew too fast and it became difficult to handle. Given the former CEO’s impressive credentials, the news is simply shocking and difficult to believe. Dennis must have an explanation and this column is open to it.

Now that the world-famous Chikka has a new set of officers, let’s hope for the best. After all, the country does not deserve another black eye.

Chief News Editor: Sol Jose Vanzi

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