Multinational Telecom Investors Corporation

SECURITIES AND EXCHANGE COMMISSION SEC Building, EDSA, Grecnhilis Republic of the Philippines Mandaluyong City BALAYAN 100 In the Matter of MULTINATIONAL TELECOM INVESTORS CORPORATION CED CASE NO. 01-2596 ENFORCEMENT DEPARTMENT, COMPLIANCE AND Movant. CEASE AND DESIST ORDER Before us is an Urgent Motion for Issuance of Cease and Desist Order filed by the Compliance and Enforcement Departinent ("CED") of this Commission against Multinational Teleccri Investors Corporation ("Multitel".) A copy of the said Motion, its Annexes and other supporting documents, is attached and made an integral part hereof as Annex "A". Multitel was registered with this Commission on March 7, 1988 under Registration No. 149102 under the name Ariolite Enterprises International Corporation. On August 14, 2000, this Commission approved the change of its corporate name to Multinational Telecom Investors Corporation as well as the amendment of its primary purpose, to wit: without however engaging in pawnbrokering "To engage in business as lending investors under PD 114 and financing under RA 5930. provided that borrowing shall not be sourced from not more than 19 lenders." On March 8, 2001, the Compliance and Enforcement Department of this Commission issued a Cease and Desist Order ("CDO") against Multitel after an audit revealed that Multitel has 238 investors with an aggregate exposure of Pll.1-M, in contravention of the limitation stated in its primary purpose, and after certification from the Corporation Finance Department of this Commission that Multitel failed to file a Registration Statement or any Notice/Appiication for Confirmation of Availability of Exemption from Registration before issuing securities to the public, in violation of the Securities Regulation Code. This CDo was made permanent cn May V i 7, 2001 in an Order that denied Multitel's Urgent Motion to Lift Cease and Desist Order. On June 19, 2001, we issued an Order lifting the CD0 against Multitel after we took cognizance of a duly notarized certification from Multitel that it had officially reduced the number of its lenders to 10 Nonetheless, we made the lifting of the CDO subject to the audit findings of the Inspection and Surveillance Division of the CED to be undertaken within two weeks from the issuance of our Order. On August 6, 2001, an Order was issued by the CED creating and authorizing an audit team to examine the books of accounts, financial records and other pertinent documents .of Multitel in compliance with our Order of June 19, 2001. Subsequently, the CED issued another Order dated September 4, 200l to examine the books and records of Everflow Group of Companies, Inc. ("Everflow"), Partners in Progress Holdings, Inc. ("Partners") and Sage Management Corporation ("Sage"), which are all listed as investors of Multitel. An cxamination of the books and records of Multitel and the above-rnentioned companies revealed that: G Multitel has twelve listed investors narnely, Everflow, Partners, Sage, CUP Multi-Purpose Cooperative, Inc., Multilink Multi-Purpose Cooperative, Inc., Star Enterprics Multi-Purpose Cooperative, Inc., Oceanic Employces Multi-Purpose Cooperative, Inc., Bethel Multi-Purpose Cooperative, Inc., Goodwill Development Cooperative, Inc.. Handog sa Pag-unlad Multi-Purpose Cooperative, Inc., One-Heart Multi-Purpose Cooperative, Inc. and Telecoms Multi-Purpose "Lenders"! Cooperative, Inc. (collectively, the b Multitel does not allow individual investors to invest directly. Instead, individual investments in Multitel are coursed through the Lenders to make it appear that Muititel's investors do not exceed 19. The Lenders accept investments in Multitel from and for the account of their individual clients to whom they issue receipts of investments or fund receipts as evidence of indebtedness. Thereafter, the Lenders remit their collections to Multitel, which then issues postdated checks directly to the individuad investors. C In Multitel's schedule of placement payables, Everflow's investment amounted to P440,000.00 and US$3,400.00 as of August 6, 200l, while Sage's totaled P275,000.00 and Us$2,500.00 as of the same date. However, no investment accounts were iodged in the August 200l Interim Balance Sheets of both Everflow and Sage to reflect their supposed investments in Multitel. d Everfiow, Partners and Sage are not licensed by the Bangko Sentral ng Pilipinas (BSP) to engage in deposit taking.Neither do their Iespective Articles O Incorporation aliow them to accept deposits from the investing public. In an ocular inspection of the Multitel office on October 15, 2001, the CED examiners confirmed that Multitel is cngaged in deposit taking, although said function is not within its primary purpose and despite the absence of a BsP license. Based on the foregoing, it is evident that Multitel, despite its rcpresentations to the contrary, as well as the Lenders and its associates, have been flagraritly violating the Securities Regulation Code ("SRC") and the Corporatior. Code ("CC"), including: 2 SRe Rule io-i(4)(c), which provides that any person claiming exemptive relief from the securities registration requirement pursuant to SRC Section 10.l(k) (private placement) should sell to no more than 19 non-gualified buvers (i.e., not a bank, registered investment house, insurance company, pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or managed by a bank or in trust functions, investment company, or such other other persons authorized by the Bangko Sentral to engage person as the Cornmission may by rule determine as sophistication, net worth, knowledge, and experience in financial and business matters, or arnount of assets qualified buyers, on the basis of such factors as financial under management) Under the same Rulc, if a corporation, partnership or acquiring the securities offered and is not a qualificd other entity that is organized for the specific purpose oi huyer under th: SRc,then each beneficiel owner of eguiy securities in said corporation, partnership or entity should be counted as a separate buyer. Considering that the Lenders are not qualified buyers, each of the investors, for whose accounts the Lenders rnade placements with Mulitel, shouid be counted as a separate buyer, thereby bringing the total investors in Multitel to more than the allowable number under the Rue b Cc, Section 45, which provides that "no corporation shall possess or exercise any corporate powers except those-conferred by this Code or by its articles of incorporation and except such as are necessary incidentel to the exercise of the powers so conferred". Not one among Multitel, Everflow, Partners or Sage is licensed to engage in deposit taking. Despite this, they have been found ro perform such function, in contravention of the limitation in their respective prirnary purposes as approved h: this Commission. C SRC Rule 10-1(4)(h), w-hich provides that "securities sold in any such transaction may only be sold to persons purchasing for their own aceount". As shown by the discrepaucies in Multitel's schedule of payments of payables and the Interim Balance Sheets of Everflow and Sage, it is manifest that the latter are mere conduits of Multitel, in violation of the aforequoted Rule. Considering the foregoing offenses and Muititel's propensity to conceal the same, there is an imperative to issue a Cease and Desist Order against Multitel in order to prevent further violations, which we have every reason to be beliove are still being committed, and to protect the investing pubiic from Multitel's machinations. We therefore rule to grant the Urgent Motion of the CED. WHEREFORE, pursuant to the authority vested in the Commission, Multinational Telecom: Investors Corporation, its officers, directors, agents, representatives, conduits, assigns, and any and ali persons ciaiming and aeting for and ir their behalf and under their authority are hereby ordered to immediately CEASE AND DESIST from further accepting investments from the public. In accordance with the provisions of Section 64.3 of Republic Act No. 8799, otherwise known as the Securities Regulation Code, the parties subject of this Cease and Desist Order may file a request for the lifting thereof within five days from receipt hereof. SO ORDERED. Mandaluyong City, Metro Manila. January 15, 2002. For the Commission: En Banc: AV Iw MA.JUANITA E. CUETC Conmissioner I+**+ * * .*..I,.