In the Matter of Pacific Global Medical Center, Inc.

October 11, 2012 SEC CDO CASE NO. 09-12-007 IN THE MATTER OF PACIFIC GLOBAL MEDICAL CENTER, INC. ENFORCEMENT AND PROSECUTION DEPARTMENT , movant . ORDER Pending consideration by the Commission is a Motion for Issuance of a Cease and Desist Order (CDO), dated 12 September 2012, by the Enforcement and Prosecution Department (EPD) of this Commission against Pacific Global Medical Center, Inc. Pacific Global Medical Center, Inc. is a corporation duly registered with the SEC under Company Registration Number CS2010016266. Its primary purpose, as stated in its Amended Articles of Incorporation, is: "To establish, operate, own, manage and maintain a hospital or hospitals, medical and clinical laboratories and such other enterprises which may have similar or analogous undertakings or dedicated to services in connection therewith, subject to the condition that purely professional medical and surgical services shall be performed by duly qualified physicians or surgeons who may or may not be connected with the corporation and whose services shall be freely and individually contracted by the patients." In its Motion for Issuance of Cease and Desist Order, the EPD alleged that on 15 November 2011, an advertisement was published in the Philippine Daily Inquirer announcing an investment opportunity in the Pacific Global Medical Center located at Mindanao Avenue, Quezon City. 1 Upon verification with the Corporation Finance Department (CFD), the EPD discovered that Pacific Global Medical Center, Inc. is not a registered issuer of securities under Sections 8 and 12 of the Securities Regulation Code and, therefore, not licensed to issue or offer securities to the public. 2 AECIaD As a consequence thereof, the EPD sent an investigating team on 2 May 2012 to the project site of Pacific Global Medical Center, Inc., located at Mindanao Avenue, Quezon City, to conduct an ocular inspection of the said project and a surveillance operation of the activities of the corporation. 3 The investigators discovered a building complex being constructed at the project site. Placed in front of the said site was a large banner containing the name of the structure being built, which is Pacific Global Medical Center, and beneath it were the words "INVEST NOW" and the telephone number 930-0004. On the same date, the investigators met Ms. Joyce T. Ablang, who manned an office of Pacific Global Medical Center, Inc., which was located about one hundred (100) meters from the project cite. In their interview with Ms. Ablang, the investigators were able to gather the following information: (i) investment in Pacific Global is open not only to doctors but also to the general public; (ii) the minimum investment is Three Hundred Forty Thousand Pesos (P340,000.00), which is the price of one (1) block of common shares equivalent to forty (40) shares of stock; (iii) the certificates evidencing this block of shares will be issued and signed by Pacific Global's corporate secretary; (iv) the stockholders are not entitled to any percentage of the profits of the hospital but their shares will earn dividends; (v) there is a limit in the number of doctors who will be accepted as investors, but there is no limit on investors from the general public; and (v) as of 2 May 2012, Pacific Global had three hundred fifteen (315) investors. The investigators also received from Ms. Ablang brochures 4 containing information about Pacific Global Medical Center. Attached thereto were two (2) sheets of paper 5 enumerating the privileges for medical stockholders, benefits of medical and non-medical stockholders, requirements to be a stockholder, and payment scheme. The sheets of papers also stated that among the requirements to become a stockholder is for one to purchase at least one (1) block of common shares (40 shares) of stock and that the one-time payment scheme would involve a cash payment of Three Hundred Forty Thousand Pesos (P340,000.00). On 10 May 2012, a Notice of Conference 6 was served on Dr. Juan A. Lagunzad, President of Pacific Global, and on Mr. Jose A. Bacud, Jr., its Chairman, requiring their appearance before the Commission on 18 May 2012. However, Dr. Lagunzad and Mr. Bacud failed to appear on the day of the conference. SCEDaT On 28 June 2012, Subpoenas Duces Tecum Ad Testificandum 7 were served on Dr. Lagunzad and Mr. Bacud, directing them to personally appear before the Commission on 5 July 2012. On 5 July 2012, Atty. Generoso Yu, Pacific Global's authorized representative, 8 appeared on behalf of the corporation. Atty. Yu brought the Stock and Transfer Book of Pacific Global which, upon perusal, did not contain any entry. 9 Another conference was set on 12 July 2012 and was reset to 16 July 2012. On 16 July 2012, Dr. Lagunzad, Mr. Bacud, Ricardo Anastacio, Roman V. Santos, and Corazon E. Plopenio, all of Pacific Global, and Atty. Generoso Yu appeared before the EPD Hearing Officers. The parties claimed that there was a mere mistake in the advertisement and that they did not intend to sell stocks to the public. However, when they were confronted with the payment schemes indicated in the sheets of paper attached to the brochure, they confirmed that the prices refer to common shares of stock of Pacific Global Medical Center, Inc. The summoned parties failed to bring the documents stated in the subpoena, and instead submitted the same on 24 July 2012 and 31 July 2012. Upon inspection, the STB now contained entries and a list of stockholders of Pacific Global Medical Center, Inc. The now-accomplished STB revealed that only one thousand four hundred (1,400) founders shares were fully subscribed and only one hundred twenty-three thousand, two hundred (123,200) of the four hundred seventy-eight thousand, eight hundred (478,800) common shares were subscribed by the founders. Securities are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instrument, whether written or electronic in character. 10 It includes shares of stock, bonds, debentures, notes, evidences of indebtedness, asset-backed securities. 11 Based on the foregoing definition, the common shares of stock of Pacific Global are securities within the purview of the Securities Regulation Code (SRC). SCADIT Section 8.1 of the SRC provides that securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission. In connection therewith, Section 12.1 of the SRC states that all securities required to be registered under Subsection 8.1 shall be registered through the filing by the issuer in the main office of the Commission, of a sworn registration statement with respect to such securities, in such form and containing such information and documents as the Commission shall prescribe. As securities, the common shares of stock of Pacific Global must have been registered before being offered or sold to the general public, in compliance with Sections 8.1 and 12.1 of the SRC. It must be noted, however, that according to the 12 January 2012 Certification issued by the CFD, Pacific Global Medical Center, Inc. is not a registered issuer of securities under Sections 8 and 12 of the SRC and, therefore, not licensed to issue or offer securities to the public. Moreover, the Bonds and Equities Division of the CFD, in its 9 July 2012 Memorandum, affirmed that as of the date of the said Memorandum, Pacific Global Medical Center, Inc. is not a registered issuer of securities under Sections 8 and 12 of the SRC and has not filed an application for registration of securities. Do the acts performed by Pacific Global Medical Center, Inc. and its agents constitute public offering? SRC Rule 3, paragraph 1, subparagraph N provides: "Public offering means a random or indiscriminate offering of securities in general to anyone who will buy, whether solicited or unsolicited. Any solicitation or presentation of securities for sale through any of the following modes shall be presumed to be a public offering: i. publication in a newspaper , magazine or printed reading material which is distributed within the Philippines or any part thereof ; ii. presentation in any public or commercial place; iii. advertisement or announcement in any radio or television, or in any online or e-mail system; or iv. distribution and/or making available flyers, brochures or any offering material in a public or commercial place , or mailing the same to prospective purchasers." (Emphasis supplied) There is ample evidence to show that Pacific Global Medical Center, Inc. is engaged in the offer for sale of securities without proper registration. The advertisement published in the Philippine Daily Inquirer announcing an investment opportunity in the Pacific Global Medical Center falls within the ambit of SRC Rule 3, paragraph 1, subparagraph N, item (i), while the distribution of brochures by Ms. Joyce T. Ablang at Pacific Global Medical Center's office is covered by SRC Rule 3, paragraph 1, subparagraph N, item (iv). AEaSTC The SRC is explicit that securities must be registered with the SEC before being offered or sold to the public in order to afford the latter protection from investing in worthless securities as provided in Section 8 of the said law. It is clear from the foregoing that, unless restrained, the acts of Pacific Global Medical Center, Inc. will operate as a fraud on investors or may cause grave or irreparable injury or prejudice to the investing public; hence, the issuance of the cease and desist order. The strict regulation of securities is founded on the premise that the capital markets depend on the investing public's level of confidence in the system. 12 WHEREFORE, premises considered, there being a prima facie evidence that respondent Pacific Global Medical Center, Inc. is engaged in the unauthorized offer for sale of securities, the respondent, its officers, directors, representatives, salesmen, agents and any and all persons claiming and acting for and in its behalf, are hereby ordered to immediately CEASE and DESIST, 13 UNDER PAIN OF CONTEMPT, from further engaging in the business of offering for sale or selling securities until they have complied with the requirements of law and its implementing rules and regulations. Pursuant to Section 10.3 of the 2006 Rules of Procedure of the SEC, in relation to Section 64.3 of the SRC, respondent Pacific Global Medical Center, Inc. may file a formal request to lift the Cease and Desist Order within a non-extendible period of five (5) business days from receipt hereof. The Enforcement and Prosecution Department is hereby DIRECTED to: (a) serve this Order on the President, General Manager, Corporate Secretary, Treasurer or In-House Counsel of Pacific Global Medical Center, Inc. (b) post copies of the Order at the entrance of the main office and/or branches, if any, of Pacific Global Medical Center, Inc. Let a copy of this Order be also posted in the Commission's website and published in a national newspaper of general circulation. Let a copy of this Order be furnished the Company Registration and Monitoring Department, the Corporation Finance Department and the Economic Research and Information Department for their information and appropriate action. FAIL NOT UNDER PENALTY OF LAW. SO ORDERED. ESHAIC Mandaluyong City, October 11, 2012. (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) RAUL J. PALABRICA Commissioner (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ELADIO M. JALA Commissioner Footnotes 1. Paragraph 6, Motion for Issuance of Cease and Desist Order, dated 12 September 2012; Photocopy of the advertisement in the Philippine Daily Inquirer, Annex "D" of the Motion. 2. Certification, dated 12 January 2012, from the Corporation Finance Department, Annex "E" of the Motion for Issuance of Cease and Desist Order. 3. Annex "F" of the Motion. 4. Annex "G" of the Motion. 5. Annex "H" of the Motion. 6. Annex "J" of the Motion. 7. Annex "K" of the Motion. 8. Secretary's Certificate, Annex "L" of the Motion. 9. Paragraph 24 of the Motion. 10. Section 3, Securities Regulation Code (SRC). 11. Section 3 (a), SRC. 12. Power Homes Unlimited Corporation vs. Securities and Exchange Commission and Manero , G.R. No. 164182, 26 February 2008. 13. Section 64. Cease and Desist Order. 64.1. The Commission, after proper investigation or verification, motu proprio , or upon verified complaint by any aggrieved party, may issue a cease and desist order without the necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public.