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Meralco proceeds with voting defies SEC order

Posted on May 30, 2008

PHILIPPINE NEWS SERVICE — MANILA Electric Co. defied a Securities and Exchange Commission order yesterday and elected a new board.

At a contentious stockholders’ meeting at the power distributor’s Ortigas head office, the company’s board declared the SEC cease-and-desist order ‘‘null and void’’ before proceeding with the election.

SEC corporate secretary Gerardo Lukban said the commission would likely cite Meralco for contempt.

The commission, acting on a complaint filed by the Government Service Insurance System, had ordered Meralco to refrain from recognizing and counting proxies in favor of the group led by its chief executive, Manolo Lopez.

The GSIS, which owns 25 percent of Meralco, has led a campaign to oust the company’s top managers, saying inefficiency and questionable practices has kept the cost of electricity high.

Executive Secretary Eduardo Ermita said Meralco’s defiance of the SEC was regrettable, but made clear the Palace had no hand in issuing the cease-and-desist order.

“If there’s a legitimate cease-and-desist order, let them be answerable to the SEC,’’ Ermita said.

GSIS chief Winston Garcia said he would ask the SEC to invalidate the stockholders’ meeting and election and find the responsible officials in contempt.

“I ask this bogus meeting be stopped and let the SEC supervise the meeting,’’ he said yesterday amid jeers from the crowd. ‘‘The defiance of the SEC order to supervise the event is what made this meeting illegal.’’

In a statement, Garcia said he ‘‘was nearly lynched’’ when he entered the Meralco compound.

The crowd that packed the 1,000-seat Meralco Theater booed almost all of Garcia’s statements, and cheered when Lopez and company president Jesus Francisco made their presentation to stockholders.

Even the aisles were filled.

At one point, Garcia addressed Lopez: ‘‘Your employees are not taught good manners. They have forgotten civility.’’

But Lopez denied that the theater was packed with employees.

One man in the theater stood up and shouted that he was a stockholder, not an employee, and others followed suit, causing the crowd to cheer again.

TV cameramen and press photographers were not allowed to record the event.

The crowd also went wild and applauded when the board declared as not valid the SEC order to invalidate the proxies in favor of the Lopez group.

At a press conference held during a break in the stockholders’ meeting, Garcia said he remained optimistic about wresting control from the Lopez group.

“Today is the beginning of the end of Mr. Manolo Lopez,” Garcia said. “Whatever defiance Meralco might show this morning will not last.”

He added that once the government and its allies wrested control, the company would immediately cut power rates by P1 to P2 per kilowatt-hour by buying electricity from less expensive producers.

Garcia said Meralco was buying 55 percent of its power from Lopez-owned companies, which charged more than the state-owned National Power Corp.

The SEC order was signed by Jesus Enrique Martinez, officer-in-charge, and delivered by Hubert Guevara, director of the commission’s Compliance and Enforcement Department.

The order gave Guevara and two other SEC representatives the power to supervise the stockholders’ meeting “with full powers to ensure the holding of a credible, transparent and peaceful election of directors.”

But Lopez patriarch Oscar Lopez said the GSIS complaint was “a low blow” and put into question the SEC’s integrity.

After deliberating for more than an hour, the board rejected the order because it did not have a docket number, was undated, did not bear the official SEC seal, and was signed by only one commissioner who had no authority to issue the order.

Meralco’s acting secretary Anthony Rosete also complained that the company and its directors were not served notice or given the opportunity to be heard.

He added that the election and proxy votes were intra-corporate issues over which the commission had no jurisdiction.

But Guevara said the SEC was not at the meeting to stop the election of a new board.

“We are not here to stop the meeting of Meralco,” he said. “Your company can proceed with the election subject to the actions of the commission later on.”

He said the commission would meet Friday to decide the validity of the Lopez proxies.

Over Garcia’s objections, voting began after 1 p.m. and tabulation followed afterwards.

The nominees to the 2008 to 2009 board were Manuel Lopez, Alfonso, Francisco, Peter Garrucho Jr., Christian Monsod, Cesar Virata, Bernardino Abes, Winston Garcia, Generoso Tulagan, Daisy Arce, Jeremy Parungan and Eusebio Tanco.

Artemio Panganiban and Vicente Panlilio were nominated as independent directors.

Lopez, Alfonso, Francisco, Garrucho, Monsod and Virata were nominated by management while Abes, Garcia and Tulagan were nominated by the GSIS.

Arce, Parungan and Tanco were nominated by Philippine First Insurance Co. Inc.

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