In The Matter of Diamond Star Global Foundation, Inc.

[SEC-SICD * ADMINISTRATIVE CASE NO. 08-99-0005. April 13, 2000.] IN THE MATTER OF DIAMOND STAR GLOBAL FOUNDATION, INC. D E C I S I O N Before this Office is a Petition ,dated 09 August 1999, filed by the Prosecution and Enforcement Department of the Securities and Exchange Commission for the revocation of the corporate franchise granted to DIAMOND STAR GLOBAL FOUNDATION, INC. (DSGFI),a non-stock corporation registered in accordance with Philippine laws under SEC Registration Certificate No. D-1999-00007, dated 08 January 1999. The subject corporation filed its Answer on 14 October 1999 and the above-entitled case was set for preliminary conference on 15 November 1999. Notices of the said conference were sent and duly received by the parties. On the scheduled preliminary conference, only the petitioner appeared, and the same was reset to 07 December 1999. The respondent failed to appear at the preliminary conference for the second time on 07 December 1999, and the petitioner moved that the respondent be conditionally declared in default pending the receipt by this Commission of the registered mail return card, evidencing respondent's receipt of the preliminary conference notice. On 04 January 2000, the respondent was declared as in default pursuant to Section 3, Rule V of the New Rules of Procedure of the Securities and Exchange Commission. Upon leave of this Office, the petitioner presented its evidence ex parte. In support-of its petition, the petitioner submitted a position paper and several documentary evidences, to wit: the Petition itself; the Certificate of Incorporation and Articles of Incorporation of DSGFI; a Memorandum, dated 27 April 1999 to the SEC Chairman by the SEC-Davao Extension Office (SEC-DEO) fact-finding body; a Cease and Desist Order, dated 27 May 1999, issued by the SEC En Banc; a Joint Affidavit executed by Calixto Albert, Rhemia Guianan and Marina Paciol. A thorough evaluation and scrutiny of the said evidences unveils no doubt that: The subject corporation was organized purportedly as a philantrophic organization with a promise and assurance of assistance to the indigent, the poor and less fortunate Filipinos, the second article of its Articles of Incorporation provides: SEHACI "SECOND: That the purpose or purposes for which such corporation is incorporated are: 1 To uplift the socio-economic condition of the Filipino people, viz: a. To extend assistance to the poor and the less fortunate so with the indigent cultural minority constituency, b. To faithfully support the hungry and the thirsty, clothe the naked, heal the sick, and such other primordial needs of the poorest countrymen, so with the other brethren throughout the world. (Matthew 25:31-40) 2 To conduct seminars, conferences, symposia, fora and the like to keep the public informed and aware of events and programs which will be beneficial for them. 3 To conduct medical and dental reach-out programs to heal the sick among the poorest and those who cannot avail of proper medication. 4 To institute technological and mechanical facilities to accommodate and employ those who are unemployed, and to technically educate the youth, the hope of the fatherland, so that they could serve their communities better. 5 To establish and support spiritual drive to faithfully prepare the people in their quest to know God and His light heavenward for life eternal. 6 To support other financial and industrial institutions for a better Filipino and a prosperous Philippines." However, upon investigation conducted by the SEC Davao Extension Office (SEC-DEO) it was revealed that DSGFI's modus operandi is the recruitment of members who are promised a future participation in the distribution of the alleged vast estate of one Atty. Filomeno Amisola Traya. These hopeful persons and other prospective members are recruited by coordinators of the subject corporation who exact Twenty (P20.00) Pesos from each applicant allegedly for the latter's identification card. Nevertheless, the SEC-DEO received complaints that some DSGFI coordinators are charging as much as Five Hundred (P500.00) Pesos for the said members' ID Card. On 23 February 1999, a conference was held between DSGFI and SEC-DEO, and an agreement was reached that: DSGFI shall stop the canvassing of members and return the P20.00 exacted from each member; The founder, Delma Estrella-Traya shall close the foundation; and DSGFI shall publicize in the media the intentions to close shop and to return the membership fees it had collected. However, on 20 April 1999, a SEC monitoring team discovered that DSGFI, in contravention of the 23 February 1999 agreement, resumed its canvassing activities. In view thereof, the SEC-DEO's fact-finding body recommended the issuance of a Cease and Desist Order against the subject corporation. STHAID On 27 May 1999, the Securities and Exchange Commission issued an Order, the dispositive portion of which reads: "WHEREFORE, premises considered, this Commission hereby directs DIAMOND STAR GLOBAL FOUNDATION, INC.,its officers, trustees, agents representatives and all other persons and entities claiming and acting under their authority to CEASE AND DESIST from further recruiting members and canvassing, offering, distributing, disposing and/or selling ID cards or similar documents signifying interest or participation in a non-existent estate partition scheme, and engaging in any activity in relation to said public offering, immediately upon receipt of this ORDER. The SEC Davao Extension Office is directed to ensure strict compliance with this Order and is hereby authorized to conduct further hearing and determine whether the Cease and Desist Order should be made permanent. In the meantime, let a petition for the revocation of the corporate franchise of DIAMOND STAR GLOBAL Foundation, INC. be instituted by the Prosecution and Enforcement Department for violation of laws enforced and administered by the Commission, specifically PD 902-A as Amended, and the pertinent provisions of BP 178 (Revised Securities Act). SO ORDERED." The present case poses the following issues for resolution: 1. Whether or not the respondent foundation's claim of a vast amount of wealth to be distributed to the Filipino people constitutes serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or to the general public; and 2. Whether or not the said commission of serious misrepresentation warrants the revocation of the corporate franchise of Diamond Star Global Foundation, Inc. The petition is impressed with merit. The subject corporation, its responsible officers and trustees failed to present any evidence whatsoever, to prove the actual existence of the fabled and incredibly vast wealth being offered or presented as the source of the funds for loan and/or financial assistance which they promised to prospective members upon payment of the Twenty (P20.00) Pesos membership fee. The records divulge that this alleged Estrella wealth has no material existence whatsoever and is merely a fictional contrivance in support of the scheme or modus operandi adopted by the subject corporation. As a consequence thereof, some 1.5 to 3 million Filipinos are anxiously waiting for the promised distribution of the undeterminable "Don Estrella" fortune which will provide them with the much needed seed money to counter the rising cost of living during these critical times, but alas, their waiting will only be in vain for these millions of our countrymen had pinned their hope for economic alleviation on nothing but a chimerical yarn created by the responsible founders, officers, trustees and agents of Diamond Star Global Foundation, Inc. The misrepresentations committed by DSGFI and its responsible founders, officers and trustees are reprehensible indeed, but what is more abominable is that the modus operandi of DSGFI targets as quarry the poor and marginalized of our countrymen, giving millions of them false and unattainable hopes of instant fortune in exchange for a seemingly paltry amount. Moreover, considering the number of people that had been victimized by the scheming DSGFI honcho Delma Estrella-Traya and her cohorts, the great extent of the effect of the serious misrepresentation cannot be diminished. This monstrous chicanery reflects on the moral depravity of the people behind DSGFI and those perpetrating this debauched modus operandi ,and to allow this organized scam to persist would be an offense of the government to its people as it is tantamount to suffering a disease pervade the body of our society. Accordingly, such acts of the officers and trustees of the subject corporation constitutes serious misrepresentation as to what the corporation can do or is doing to the damage and prejudice of the public, in direct violation of paragraph L (2) * Section 6 of Presidential Decree No. 902-A, as amended by Presidential Decree No. 1758. Moreover, the act of issuing membership cards signifying interest or participation in a non-existent estate-partition scheme which allegedly enable the bearer to obtain financial assistance from DSGFI in the amount of One Million (P1,000,000.00) Pesos, violates Batas Pambansa Blg. 178, the Revised Securities Act, which govern and penalizes issuance of securities to the public without prior registration with the Securities and Exchange Commission. A Commission of serious misrepresentation is a ground for the revocation of the corporate franchise of an erring corporation. Paragraph L (2) * Section 6 of Presidential Decree No. 902-A, as amended, provides: "SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall posses the following powers: xxx xxx xxx 1) To suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following. xxx xxx xxx 2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public. xxx xxx xxx WHEREFORE, upon the premises, the corporate franchise and SEC Registration Certificate No. D-1999-00007 of DIAMOND STAR GLOBAL FOUNDATION, INC. is hereby REVOKED from date hereof and its Corporate Officers/Board of Trustees/Members are by these presents ordered to desist from using the name DIAMOND STAR GLOBAL FOUNDATION, INC. in all their business dealings under pain of imposition of other sanctions provided in Section 6 of Presidential Decree No. 902-A, as amended. SO ORDERED. (SGD.) NATHANIEL A. LOBIGAS Hearing Officer * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .