In the Matter of Multitel International Holdings, Inc., One Heart Multi-Purpose Cooperative, Inc. and Everflow Group of Companies

December 12, 2002 SEC CED CASE NO. 02-2718 IN THE MATTER OF MULTITEL INTERNATIONAL HOLDINGS, INC., ONEHEART MULTI-PURPOSE COOPERATIVE, INC., and EVERFLOW GROUP OF COMPANIES OMNIBUS ORDER This resolves the Motion to Declare Cease and Desist Order Permanent/Physical Closure of Respondent's Offices/and Comment on Manifestation for Offer of Settlement dated 21 November 2002 filed by the Compliance and Enforcement Department (CED), and the Manifestation/Motion dated 11 October 2002 filed by Everflow Group of Companies. SEcAIC On 10 September 2002, the Commission En Banc issued a Cease and Desist Order (CDO) directing Multitel International Holdings, Inc. (MIHI), its officers, directors, agents, representatives, conduits, assigns and any and all persons claiming to act and/or acting for and in its behalf or under its authority, to immediately cease and desist from accepting investments from the public and to show cause why said CDO should not be made permanent. The CDO covers Oneheart Multipurpose Cooperative, Inc. (Oneheart), Star Enterprise Multi-Purpose Cooperative, Inc. (Star) and Everflow Group of Companies, Inc. (Everflow). MIHI received its copy of the CDO on 16 October 2002. Another copy was personally served on MIHI's legal counsel the next day. On the other hand, Everflow, One-Heart and Star received their respective copies by personal delivery on 7 October 2002. Pursuant to Section 64.3 of the Securities Regulation Code (SRC), respondents may file a request for the lifting of the CDO within a non-extendible period of five (5) days from receipt thereof. On 14 October 2002, Everflow filed a motion seeking to lift the CDO and making a settlement offer. Records indicate that MIHI, up to this date, has not filed any motion for the lifting of the CDO. On 21 November 2002, the CED filed the instant motion praying that the CDO of 10 September 2002 be declared permanent and that Everflow's motion be denied. In essence, CED contends that MIHI has forfeited its right to seek the lifting of CDO as the latter failed to file the necessary motion within the reglementary period. Hence, there is no more legal impediment to declare it permanent. CED also asserts that Everflow cannot move to lift the CDO of 10 September 2002 inasmuch as the CDO of 15 January 2002, which also covers Everflow, has become permanent. Likewise, CED avers that Everflow's offer of settlement should be denied for failure to comply with formal requirements and for being contrary to public interest. CED's contention has factual and legal basis, hence, impressed with merit. Section 64.3 of the SRC provides that "any person against whom a cease and desist order was issued may, within five (5) days from receipt of the order, file a formal request for a lifting thereof." Records show that MIHI did not file with the Commission a motion or a request for the lifting of the CDO issued against it. That can only mean a waiver on MIHI's part to avail itself of such remedy. Furthermore, Article 6, Rule I, Part 3 of SEC Circular No. 4 (2001) provides that if the respondent fails to file a motion to lift CDO within five days from receipt thereof, the Director of CED shall file with the Commission a motion to make the CDO permanent. Thus, in view of the instant motion filed by CED, the CDO issued on 10 September 2002 may now be rendered permanent. We have scrutinized the records of this case and we found that there is sufficient evidence to believe that MIHI continues to solicit, accept and maintain investments from the public, despite the issuance of the CDO on 10 September 2002. The letter from Rosario Baladjay dated 29 October 2002 addressed to all counselors and investors is most telling. In that letter, Baladjay apologized to all counselors and investors for the delay of interests and termination of investments. For those who can't wait, they are advised to place another transaction. Baladjay also announced that the company will have a new name in January or March 2003. Clearly, this is indicative of MIHI's defiance of the Commission's CDO, and its plan to adopt a new name is a subterfuge to evade detection and foil further prosecution. As regards Everflow, it can no longer seek the lifting of the CDO of 10 September 2002. Note that the earlier CDO dated 15 January 2002 was issued against Multinational Telecom Investors Corporation (MTIC) and its conduits. That earlier CDO is also directed against Everflow since it is one of the conduits of MTIC. Records show that a copy of the CDO dated 15 January 2002 was personally served on Everflow on 17 January 2002 at its principal office. Instead of complying with the CDO, Everflow defied the same by continuing to solicit and accept investments from the public, this time, on behalf of MIHI. Similarly, Everflow never sought the lifting of this CDO. Consequently, the CDO of 15 January 2002 was made permanent by the Commission on 24 January 2002. Accordingly, it is now pointless for Everflow to resort to the instant recourse as the earlier CDO, like the CDO of 10 September 2002, also enjoined respondents from accepting investments from the public. Neither can we accept Everflow's Settlement Offer. In its Manifestation and Motion, Everflow declared that it is open to any discussion of any possible settlement. Everflow also manifested that pending any discussion of any settlement, it shall continue to adhere to the purposes for which it was organized and undertake to act in accordance with all the requirements of existing laws. CSAcTa We find these manifestations and undertakings grossly insufficient to warrant consideration. Under SRC Rule 55.1, a settlement offer must be proposed in writing to the CED Director. The settlement offer shall state that it is being made pursuant to Section 55 of the SRC and SRC Rule 55.1. It shall be signed by the person making the offer, not by his counsel, and shall recite or incorporate as part thereof the provisions of paragraphs 3 (d) and (e) of SRC Rule 55.1. Further, Part IV, Rule V, Arts. 1 (b) and 2 (b) of SEC Circular No. 4 (2001) require that the settlement offer should state the offer, whether the same be a definite amount and/or period of suspension, and that such offer, to be acceptable, should not be less than fifteen percent (15%) of the total imposable penalty or damaged caused. Everflow failed to comply with the aforementioned requirements. First, the offer was not directed to the CED Director. Second, no definite amount or period of suspension was proposed. Third, the offer was made by counsel and was not signed by Everflow's authorized representative. Fourth, it failed to incorporate the express waivers required by the above rules. It must be stressed that while an administrative agency may relax its procedural rules in the interest of substantial justice, we cannot do so in this case as Everflow's settlement offer is grossly defective. But there is a more compelling reason to reject Everflow's settlement offer. In our view, it is not to the best interest of the public. Judging from the extent of its operations, Everflow is one of the most active conduits of MTIC and MIHI. As extensively discussed in the CDO of 10 September 2002, Everflow willingly allowed itself to be used as conduit both by MTIC and MIHI, notwithstanding full knowledge that the activities of these entities are tainted with illegality. WHEREFORE, premises considered, the CEASE AND DESIST ORDER of 10 September 2002 against respondent Multitel International Holdings, Inc. is rendered PERMANENT. Everflow's Motion to Lift CDO and Settlement Offer are DENIED for failure to comply with formal requirements and being contrary to public interest. Further, Multitel International Holdings, Inc. and its President and Chief Executive Officer, Rosario Baladjay, are ordered to SHOW CAUSE within ten (10) days from receipt hereof why they should not be cited for CONTEMPT for their unlawful defiance of the Cease and Desist Order of 10 September 2002 as they continue their business operations despite being enjoined by the Commission. SO ORDERED. Mandaluyong City, December 12, 2002. (SGD.) LILIA R. BAUTISTA Chairperson (SGD.) FE ELOISA GLORIA Commissioner (SGD.) JOSELIA J. POBLADOR Commissioner (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) JESUS E.G. MARTINEZ Commissioner