From the PEP Coalition (Feb. 27, 2009)

The letters recently sent by Pacific Plans to its traditional planholders confirm the worst fears and suspicions of many members in the Coalition — that Onate is only willing to honor what is in the modified rehabilitation plan and nothing more and that this move was merely an exit plan by YGC. The original rehab plan as well as the modified rehab plan were both rejected by the PEP Coalition because it is our contention that Pacific Plans always had the money but was merely made to appear as though it could no longer pay its planholders.

Therefore, the PEP Coalition is taking the necessary steps now to rescind the sale. Below is the announcement by Winnie Bonifacio (Core Member) as well as the letter to the SEC from the PEP Coalition. 

————————————————————————————————————————————–

Attached is the letter we sent to SEC re PPI sale to Onate.  Our lawyers are now preparing the necessary documents to move to rescind the sale.  The sale is an obvious exit plan to protect YGC from meeting its contractual obligations to us when we win the SC case.  Onate can simply file for bankruptcy and say his group does not have the funds to pay us per our plan.  We will be in a better position if PPI remains within the YGC corporate fold which is awash with cash.  RCBC is buying banks left and right while parents and their families continue to languish!!!
   
Note that the SC has already requested for the filing of the Final memorandum from the lawyers which is PREPARATORY TO MAKING A DECISON ON THE CASE.  Pray they decide soon.

We will have a new office up and running by next week in Makati.  We will post the address and number soon. Applications can be processed and updated too. Gilbert will be our man Friday in the office. 


– 
Winnie M. Bonifacio

 

 

Pacific Plans owner warned vs mediocre treatment of victims

GMANews.TV
Feb. 7, 2009

MANILA, Philippines - The Securities and Exchange Commission (SEC) has cautioned the new owner of pre-need firm Pacific Plans against treating victims of the old management as “second-class citizens.”SEC chairwoman Fe Barin said Noel Oñate’s Abundance Providers Investments Corp. should give the victims the same treatment as his firm’s new customers.

He (Oñate) should not give the victims who accepted his offer lesser rights than the new customers, she said in an interview on dzXL radio.

Oñate’s firm earlier offered victims of the old Pacific Plans pre-need mess a buy-back offer that included a 15-percent yearly interest.

The Parents Enabling Parents Coalition said its members are still studying the offer.

“If there are any offers from him it is up to the plan holders to accept that,” Barin said.

Meanwhile, Barin said they continue to monitor the trust funds of other troubled pre-need firms and make sure they rehabilitate properly.

She also said they want to make sure the firms set up trust funds to pay the victimized plan holders. - GMANews.TV

Yuchengco ploy boomerangs

Business Mirror
Written by Omerta / Butch del Castillo
Friday, 06 February 2009 02:23

The Yuchengco family has supposedly sold its problematic preneed company, Pacific Plans Inc. (PPI), to a little-known businessman named Noel C. Onate for P250 million.

Somehow, I sense something fishy about the whole thing. First of all, why would any businessman—unless he is goofy—pay P250 million for a company that owes billions in settlements to more than 35,000 education-plan holders?

Even the timing of the so-called buyout makes the deal strange and mysterious.

Right now, the entire preneed industry is in the doldrums and seems to be in the twilight of its existence. The federation of preneed companies has already yelled for government help in the face of a ballooning deficit in its collective trust fund caused by an unprecedented slump in interest earnings.

Not only that, the industry has been suffering nose-diving sales. The collapse of several big-time preneed companies (among them College Assurance Plan, Platinum Plans, Pacific Plans, The Professional group and, lately, the Legacy group) has left millions of irate plan holders unpaid and in a lynching mood. Consumer confidence in preneed products has been greatly shaken, if not altogether shattered. (The federation’s confession that it has a huge trust-fund deficit, by the way, can only deepen public distrust in preneed products.)

Against this grim industry backdrop, the question is, what emboldened Noel Onate to venture into the preneed business anyway, despite all the odds? Simply put, what’s in it for him? I’ve been seeking answers to these questions because the whole thing just doesn’t make sense.

According to a source who was privy to the deal, the Yuchengcos unloaded Pacific Plans on the advice of a prominent lawyer. The main objective was to provide Pacific Plan’s unpaid plan holders a new “target” in their quest for damages and restitution.

In short, the Yuchengcos wanted to “buy” peace of mind. Apparently, they assumed that by divesting from PPI, the irate plan holders would be training their guns on the new owners. The Yuchengcos are figuratively black and blue, and have grown quite weary from all kinds of flak they’ve been getting ever since Pacific Plans defaulted on its obligations to its plan holders about three years ago.

The once-revered Yuchengco name was dragged through the mud even as that family sought a moratorium on payments under a rehabilitation plan.

But, as it turned out, the “strategic” move was ill-advised. It only compounded their headache. The “victims” of Pacific Plans were not to be so easily sidetracked.

When the announcement of the sale came, the Parents Enabling Parents (PEP) Coalition, headed by Philip Piccio, was furious. Here was unmistakable proof, Piccio said, that the Yuchengcos were trying to slip away from their obligation to settle the claims of PPI’s 35,000 plan holders.

Piccio announced that the PEP Coalition would file a slew of large-scale estafa cases against Alfonso Yuchengco (patriarch of the Yuchengco group) and Helen Yuchengco-Dee starting next week in different provinces all over the country where its aggrieved members reside. The sale of the company—if there was an actual sale and not a simulated one—would not absolve the Yuchengcos from their liability. In fact, the deal only bolsters the parents’ claim of bad faith on the part of the Yuchengcos, that they intend to turn their backs on their contractual commitments to the plan holders.

PEP Coalition members have expressed the suspicion that the sale to Onate’s group (Abundance Providers and Investments) is merely a simulated transfer of the ownership of Pacific Plans. On paper, however, it is a done deal between GPL Holdings (represented by Samuel V. Torres) and Abundance Providers. No document detailing the assets and liabilities of Pacific Plans has so far been made public. Only the copy of the deed of sale has been made available.

But assuming, without granting, that Onate has stepped into the picture only to serve as “foil” for the Yuchengcos, it would make more sense if the P250-million payment was made to Onate, instead of the other way around.

To the PEP Coalition—which said it was giving Onate’s group the benefit of the doubt—Onate simply doesn’t come across as a businessman with enough assets to make good on the company’s total liabilities. That is why it won’t ever let go of the Yuchengcos in its quest for justice.

Planholders welcome new PPI owner’s strategy

Manila Bulletin
Feb. 5, 2009

Planholders of Pacific Plans Inc. (PPI) warmly received the business plan and action plans presented by new owner Noel Onate, pointing out that it places them in better footing than planholders of other pre-need firms that have folded up.

“We are happy to have heard from Mr. Onate that he intends to comply with the company’s obligations and he presented a good strategy for the company’s turnaround under his 10 point plan,” said Dave Diwa, chairman of Coordinating Alliance for Reform and Empowerment in the Pre-need Industry or CARE.

Diwa said Onate’s offer of a buyback is welcome and he is glad that this will help planholder recover their investments. “This is definitely better than what’s happening with Legacy since this is a commitment to pay back planholders,” he said.

CARE is a group composed mainly of small planholders and supports the firm’s rehabilitation plan. He said he is glad that Onate has committed to comply with his obligations under the rehabilitation plan.

“We are pinning our hopes on Mr. Onate. We saw the light at the end of the tunnel because of him,” said planholder Luz de Leon who noted Onate’s “sincerity and passion to uplift the planholders.”

She said they now have peace of mind because of the assurances of Onate and after seeing his vision for the company as contained in his 10 point plan.

Meanwhile, Securities and Exchange Commission chairperson Fe Barin said the commission will not stand in the way of Onate’s offer to buy back the plans with interest since the sale contract is between PPI and the planholders.

“As long as it does not place the planholders in a lesser situation than before the sale. Its up to the planholders to accept the offer,” she said in a radio interview yesterday.

New Pacific Plans management unveils 10-point action plan

Philstar.com
By Zinnia B. Dela Peña Updated February 05, 2009 12:00 AM

The new management of Pacific Plans Inc. (PPI), led by investment banker and Asian Spirit Airlines co-founder Noel Oñate, has unveiled a 10-point action plan aimed at steering the cash-strapped pre-need firm to a greener future amid a deepening global financial crisis.

In a dialogue with PPI investors late Tuesday afternoon, Oñate sought the cooperation and participation of planholders to enable the formerly Yuchengco-owned pre-need company to get back on its feet again.

“We are committed to having an open mind not only in this dialogue but in the way we manage the corporation. We can only ask the same from all our planholders. As we take a first step away from acrimony and hate, let us always remember that innovative solutions can only be developed when everyone has an open mind and an attentive ear, “ said Oñate.

Under a 10-point program aimed at restoring PPI’s soundness and viability, new management has committed to honor legal obligations for open-ended or traditional educational plans. Upon the maturity of the securities comprising the trust assets covering these plans presently valued at P2.3 billion next year, PPI, which will be renamed Abundance Providers Investment Corp. (APIC) shall pay off the traditional planholders their proportionate share in the trust assets in dollars which is projected to appreciate in the coming months.

In anticipation of an improving business climate, the new management will re-engineer its offerings , possibly with terms of three to five years that will allow for more effective liability-directed investment management of corporate assets.

“These new offerings will take into account all-weather hurdle rates with prices adjusted given current market conditions. At present, we have already discontinued the sale of products in our inventory that are priced using high hurdle rate assumptions of up to 18 percent and we will just continue servicing them,” Oñate said.

With the expected improvement of the economy, PPI will conduct an aggressive marketing campaign to sell new offerings and push its fixed-value educational,

pension and memorial plans. To support this move, the company will put up new branch offices in the Visayas and Mindanao.

PPI is currently studying ways to further streamline operations and generate savings on operational costs. It is also exploring cross-selling opportunities of other products to optimize the value of the firm’s 10,000-strong nationwide sales force.

The company has likewise committed to infuse professional management into PPI and put a cap on the salaries of corporate officers. It has committed not to distribute any dividends to its shareholders.

Aside from this, PPI’s new management is looking at transferring the trust funds to other trustee banks.

Oñate pointed out that the trust fund assets of PPI are sufficient to service obligations to planholders. “We will ensure that the trust funds with present consolidated value of P12.5 billion are prudently managed with focus on maximizing their proceeds,” he said.

Since acquiring PPI, Oñate’s group has been conducting a series of key meetings to implement a complete management transition.

“Our plan to turn around PPI is a work in progress. This is only the first in a series of dialogues we are having with our planholders. We want them to be our partner in finding ways to turn around this company” added APIC director Rita Linda Jimeno.

Solons say heads should roll over pre-need mess

The Daily Tribune
Feb. 4, 2009
By Angie M. Rosales

Senators yesterday urged President Arroyo to let the ax fall where it may on government officials after what was des-cribed as a failure of regulators to arrest the collapse of some pre-need companies that has affected millions of Filipino plan holders.

Senate President Juan Ponce Enrile and Sen. Manuel “Mar” Roxas II both urged the government to terminate Securities and Exchange Commission (SEC) chairwoman Fe Barin for failing to protect the interest of plan holders.

Malacañang, however, made it clear that Barin will not be replaced.

Barin, during yesterday’s Senate hearing on the moribund pre-need sector, said the SEC needed new laws to add teeth to the agency’s efforts to improve its regulation of the industry.

“It’s time some heads should roll. That’s a given. The bureaucracy is too big for one person to handle. You just have to chop some people in order to wake them up,” Enrile said.

Enrile included in his call for a revamp, officials from the Bangko Sentral ng Pilipinas (BSP), some of whom were accused by Celso de los Angeles, owner of the troubled Legacy group of banks and pre-need firms as extorting from him and harassing him in the past.

“It’s not right that they should adopt a lackadaisical attitude in their work. They had seen the problem. Why did they not solve it?” he asked.

“If she cannot handle her job then she should resign. If she’s inutile in running the organization on the basis of what she has done. I’ve been a bureaucrat myself. I use the people in my organization to handle more critical things than just handling the SEC,” Enrile said, adding that it is about time the President and the government start firing some people in order to wake them up to do their jobs.”

Justice Secretary Raul Gonzalez, meanwhile, gave his ten cents worth on the problem in the pre-need industry, saying companies can legally avoid paying plan holders by declaring bankcruptcy.

“I will now look into that. The problem with this pre-need firms is that we have to reckon with the SEC in the rehabilitation aspect because under the law, when (a firm goes) bankrupt you can suspend payment because you’re not liquid, you can suspend payment under the Civil Code but we cannot make use of that all the time and use the small people.”

Roxas, whose committee on trade and commerce had been tasked as the lead panel to inquire into the current state of pre-need industry in the country, echoed the proposition of Enrile, as he called on Barin’s resignation along with other SEC officials.

“They should resign now. Or being appointees of (Pres.) GMA (Arroyo), they should be sacked,” he said.

“It is very clear they cannot do their job of protecting the interests of the plan holders,” he said. With the closure of several companies and the SEC useless all these times, we can now say it is a conspirator in the scheme to defraud plan holders because it favored the interests of the companies over the plan holders, he added.

Roxas said immediate action should be done to protect the welfare of pre-need plan holders. Immediate action should be done, including mandating pre-need companies to put in more money in their trust funds.

He said the assets of Legacy Consolidated Inc. should immediately be kept intact and attached to the plan holders’ trust fund.

He noted that Legacy group owner De los Angeles was already able to sell a P55-million property in Ayala, Alabang before the company filed for corporate dissolution last Dec. 2.

“The sheriff should already take custody of all these properties so we can ensure that these are not squandered and are used for the needs of plan holders. If SEC acted immediately, all these assets could have been attached and preserved already for the sake of the plan holders,” he stressed.

Committee records show that Legacy Consolidated Inc. first informed the SEC about its financial difficulties as early as 2007. Legacy was able to continue selling pre-need plans until end of November 2008, right before it filed for dissolution.

He also said that a larger portion of premium payments should be invested first in the trust fund before using these for commissions and other expenses.

“They said we have to balance between regulation and capital formation. We encourage capital formation provided that the people operate within the law and not to injure their beneficiaries. The moment the people will be injured, government must step in and act to solve the problem,” he said.

Enrile specifically mentioned Jose Aquino, director of the non-traditional securities and exchange department of the SEC as a primary candidate for dismissal.

“You see that guy Aquino yesterday, he is ignorant about his job,” said Enrile.

The upper chamber chief also mentioned Deputy Governor Nestor Espenilla, Jr. of the BSP.

“I need not say it but as a matter of common sense, in the case of Bangko Sentral’s Mr. Espenilla, as you see on television last night, he was arguing if they are really violating the law. But the question is does he really own a rural bank?”

“Does the violation of these people negate the fact that you own a rural bank? He should answer the question. He should deny the ownership of the rural bank if indeed he is not (the owner). That is in conflict of his interest as a bureaucrat supervising the banking system and at the same time owning a bank,” he said.

Under the insurance code of the Philippines, insolvency is the last resort for pre-need companies failing to pay its plan holders. Other measures include rehabilitation, merger or consolidation and conservatorship.

“Maybe this thing needs remedial legislation because if payments are suspended, preference of credits as provided for under article 2241-2245. Legislation is to see to it that this rehabilitation should be done fast otherwise the process will take 10 years “Gonzalez added.

Pre need plans returned to the news after Legacy Plans and its affiliated other companies and its rural banking subsidiaries closed shop. Another firm, Pacific Plans, part of the Yuchengco group, was recently sold to a group headed by Noel Onate for Php250MM. In the past, you had CAP, Platinum Plans and other pre-need companies declaring insolvency and bankruptcy.

The pre-need education plans were hit hard by the government’s decision during the term of President Fidel Ramos to liberalize the education industry by lifting all ceilings for tuition fee increase.

Before this there had been a 15 percent tuition fee cap on tuition increase . Aside from the lifted tuition cap, interest rates in fixed income investments also plummeted and affected the income gains from these investments.

Nacionalista Party President Senator Manny Villar cited the need to review regulatory policies in order to prevent further collapse of the distressed pre-need industry.

“Reforms should be urgently implemented so this situation will not happen again and turn into a vicious cycle. Many thought that industry players and the regulators themselves would have learned their lessons from the experience of the College Assurance Plans (CAP) and Pacific Plans a few years ago. And yet it happened again with Legacy Consolidated Plans,” said Villar.

Villar added that although it should be acknowledged that the present global financial meltdown might have adversely affected the pre-need firms, it cannot however be cited as a major factor. The value of trust funds has been reduced by over 10 percent in yields.

Benjamin B. Pulta

Pre-need plan victims to pursue case despite buy-back offer

GMANews.TV
Feb. 4, 2009

MANILA, Philippines - Parents victimized by a pre-need meltdown mess are keeping their options open on a buy-back offer from the new owner of pre-need firm Pacific Plans.

But Parents Enabling Parents (PEP) Coalition president Philip Piccio said Wednesday they are still bent on pursuing charges against the Yuchengcos, the company’s previous owners.

“On Mr. Oñate’s side, ayaw namin agad husgahan [We don't want to judge Noel Oñate at this time], Piccio said in an interview on dzBB radio.

He said his group will hold meetings to see if they will accept an offer from Oñate’s Abundance Providers Investments Corp. to buy back their plans at 15% yearly interest.

But he admitted accepting the offer may weaken their case against the old owners of Pacific Plans.

So far no one from our group has accepted the offer. It is likely they are thinking about it, he said.

Piccio also admitted the hard times will likely lead some members to accept the offer, saying a 15% interest per year appears attractive.

While Piccio said he will not likely accept the offer as he wants to pursue charges against the Yuchengcos, he will not take it against PEP Coalition members who do.

But he said the sale of Pacific Plans to Oñate’s firm does not absolve the Yuchengcos of liability. PEP Coalition members had lodged estafa charges against the Yuchengcos.

He added that in his case, his child who should have benefited from the plan since 2005 is already a graduate.

At least 34,000 out of Pacific Plans’ 300,000 plan holders are victims of the pre-need mess who had been offered a buy-back plan by the new owner. - GMANews.TV

Pacific Plans owner offers to buy plans

By Doris Dumlao
Philippine Daily Inquirer
First Posted 19:56:00 02/03/2009

MANILA, Philippines — The new owner of Pacific Plans Inc. (PPI), investment banker Noel Oñate, made on Tuesday a bold offer to redeem all the pre-need plans previously sold by the troubled company, promising to return the money to the planholders plus interest.

Oñate and officials of his Abundance Providers Investments Corp. (APIC) met planholders to discuss the buyback offer, which he said was necessary as the “first step away from acrimony and hate.”

“Our dialogue with the planholders made us realize that there are those who have an urgent need for their hard-earned money in these difficult times,” Oñate said at a meeting with planholders at the Manila Polo Club. “In response, we shall offer to planholders to buy back their plans and return what they have paid to PPI plus interest. In that way, no planholder will lose a dime of their investment paid to PPI.”

The meeting included members of the Parents Empowering Parents Coalition, some of whose members have run after the company’s former owner, the Yuchengco family.

“Our plan to turn around PPI is a work in progress,” APIC director Rita Linda Jimeno said. “This is only the first in a series of dialogues we are having with our planholders. We want them to be our partner in finding ways to turn around this company.”

Oñate said his group was committed to having an open mind not only in their dialogue but in the way the corporation would be managed. He called on the planholders to move away from a confrontational and adversarial engagement and move into a more “constructive” and “collaborative” partnership.

The Yuchengcos sold PPI, lock, stock and barrel, for P250 million in December to Oñate, who had cashed out of Asian Spirit, an airline he had co-founded.

PPI, which with about 300,000 planholders is one of the biggest pre-need companies, was hit hard by surging costs of servicing open-ended educational plans when the government liberalized tuition rates in the 1990s. Before that, the government capped tuition increases at 10 percent a year.

At the meeting Tuesday, Oñate discussed what he called the “core business principles” guiding the rehabilitation of PPI and outlined a “10-point action plan” to turn the company around.

In earlier statements, he projected a financial turnaround in two to three years.

“I am an entrepreneur and I am proud to have had some successful ventures in my career,” he said at the meetingTuesday. “From my early days as an investment banker until I started a small airline that pioneered the business model now being used by other thriving budget airlines in our country, I have always believed in thinking outside the box … I believe in looking toward the future instead of dwelling in the past.”

Oñate said he saw an opportunity when he found out that the Yuchengcos were thinking of selling the company.

“With trust assets amounting to P12.5 billion, a steady stream of corporate earnings, and a highly professional staff, I saw the intrinsic value in the company and believed that the challenges it faces can be overcome in time,” he said. “I saw the more than 300,000 planholders of Pacific Plans and its nationwide sales force of more than 10,000 committed and motivated agents as a source of its strength.”

Oñate said that under his plan of action the new management would stick to the court- approved rehabilitation plan and continue to honor legal obligations under the plan for open-ended educational plans.

“Upon the maturity of the securities comprising the trust assets covering these plans presently valued at P2.3 billion next year, APIC is committed to pay off the traditional plan holders their proportionate share in the trust assets in US dollars which is projected to appreciate in the coming months,” Oñate said.

“Traditional planholders stand to benefit from a more favorable currency exchange rate anticipated by most financial analysts,” he said.

Other components of the action plan according to APIC:

• APIC will ensure that the trust funds with present consolidated value of P12.5 Billion are prudently managed with focus on maximizing their proceeds;

• In anticipation of an improving business climate, the new management will re-engineer offerings, possibly with terms of three to five years that will allow for more effective liability-directed investment management of corporate assets. (At present, it has already discontinued the sale of products in its inventory that were priced using high hurdle rate assumptions of up to 18 percent but continued servicing them)

• In tandem with an improving economy, APIC will conduct an aggressive marketing campaign to sell new offerings and exert greater effort in pushing fixed-value educational, pension and memorial plans. New branches will be set up in the Visayas and Mindanao;

• To signify a “clean break” from the past, PPI will do business under a new name: Abundance Providers Entrepreneurs Corp. (APEC);

• APIC will explore cross-selling opportunities of other products to optimize the value of a 10,000-strong nationwide sales force;

• It will study ways to further streamline operations and generate savings on our operational costs;

• It will evaluate prospective trustees and consider transferring the trust funds (now with the Yuchengco group’s Rizal Commercial Banking Corp.) to other trustee banks;

• It will continue to infuse professional management into the company and mandate a cap on the salaries of corporate officers;

• While working on the early recovery of the company, it has vowed not to distribute any dividends to shareholders; and,

• It will work closely with regulatory agencies and the Philippine Federation of Preneed Companies (PFPCI) to address industry-wide issues and brace against the impact of the global financial crisis. With editing by INQUIRER.net

Pre-need crisis: Unkindest cut of all

By Raul Pangalangan
Philippine Daily Inquirer
First Posted 00:18:00 01/30/2009

’Tis the “most unkindest cut of all”: to throw to the mercy of the market precisely those parents who were responsible enough to save for the proverbial rainy day. The pre-need crisis has victimized the typical planholder — salaried employees and overseas Filipino workers — and for the government to pretend to be neutral by being legalistic shows that the soft state approach has made for pathetically soft-brained thinking.

The first set of victims consists of those whose pre-need plans have matured but are unable to collect full value on the money they had invested. They purchased the pre-need plan to protect their children’s future from the uncertainties of life, only to discover now that the pre-need company is itself the source of uncertainty.

The second set of victims are those whose plans have not yet matured, but who are forced to keep on paying the regular dues, fully knowing that they may never recover what they invest. They ask themselves: Why throw (our) good money after (someone else’s) bad? Yet if they stop their payments, they will be declared in default and risk penalties or forfeiture of all past payments altogether! They turned to the Securities and Exchange Commission, but I have heard the SEC’s reply on TV: Well, they signed the contract, it contains a default clause, and we must respect the contract. Yet I wonder: Would the SEC worthies invest their own money in the Titanic when the ship is tilting on the horizon, visibly about to capsize, while Celine Dion sings “Your payments will go on and on”?

The SEC, to its credit, had earlier acted as a proper regulator, warning as early as 2000 that the pre-need companies were using creative accounting and faulty financial reporting to cover up their precarious condition. Sadly when the College Assurance Plan scandal erupted in 2004, the SEC shifted its stance, from regulator to court — legal, yes, but timid and imprudent and unfair — and saw itself not as the tribune of the helpless public and the planholders, but rather as the neutral referee between the parents who entrusted their savings and the companies that bungled that trust.

No, the SEC or, for that matter, the entire executive and legislative branches of government, should openly be partisan to protect the innocent public. Fortunately, as the global economic meltdown hit our shores, these agencies have finally abandoned their passivity and begun some proactive measures. The SEC has issued new regulations to enable pre-need companies to diversify its investments options and while increasing their reserve requirement of liquid assets to meet their obligations. The Congress is deliberating on a Pre-need Industry Code to strengthen state regulation over the industry, protect planholders from the company’s insolvency, and deter predatory practices by the corporate officers.

These measures will help the planholders with companies who are still solvent but otherwise in risk of insolvency. They cannot help those parents who hold education plans with companies that are now bankrupt. Their only salvation lies either in market-based rescue or a government-funded bailout.

Note the purchase of the besieged Pacific Plans Inc. (PPI) by an intrepid entrepreneur and investment banker, Noel Oñate, with assurances that the takeover will have “no effect on the existing rehabilitation of PPI.” This is a market-based solution that doesn’t entail any government subsidy, relying instead on the risk-taking instincts of an investor and without prejudicing any vested claims by the planholders.

On the other hand, talk has began about a government — and taxpayer-funded—bailout. The barest minimum for any bailout program is that it shouldn’t put tax money in the hands of the same irresponsible corporate officers who squandered the planholders’ hard-earned savings; indeed we must hold them to account. It should also put a cap on executive pay, perks and golden parachutes. The distressed companies deserve as much sympathy as those Detroit bigwigs who went to the US Congress to ask them to rescue the automotive industry — and flew to Washington, D.C. in their private jets.

Moreover, there should be sufficient safeguards against questionable accounting practices, especially transfer pricing, that have enabled distressed conglomerates to move profits to their favored corporate shells (to keep the wealth within the family, so to speak) while shifting losses to their pre-need affiliates (to let the planholders take the flak).

The recent revelations [read story] about politicians’ intervention in the now bankrupt Legacy group of banks and pre-need companies should warn us about a more familiar risk. Ricardo Tan, former president of Philippine Deposit Insurance Corp., says PDIC, which insures our bank deposits, was early on alarmed at their exposure to the Legacy group and, upon inquiry, found “fictitious deposits, [rotating] collateral from one bank to the other, unsafe and unsound [banking practices] and improper documentation.”

Tan revealed that at the height of his investigation, now Speaker Prospero Nograles invited him to a dinner with the founder of the Legacy group, Celso de los Angeles Jr., now a town mayor in Albay province. Nograles allegedly asked him to go easy on De los Angeles who had ties to several administration allies, including Vice President Noli de Castro. Worse, Tan actually filed a complaint with now Ombudsman Agnes Devanadera. But, Tan laments, “Nothing happened. The case didn’t move.”

Yes, for the sake of the parents-planholders, we do need a bailout but only under strict safeguards. A bailout without safeguards is worse than no bailout at all.

* * *

Comments to passionforreason@gmail.com

New Pacific Plans owner gets federation board seat

The Manila Times
Jan. 28, 2009

AFTER acquiring Yuchengco group’s ailing Pacific Plans Inc., businessman Noel Oñate was elected into the board of the Philippine Federation of Pre-need Plan Companies on Tuesday.

Oñate, whose Abundance Providers and Investments Corp. recently bought Pacific Plans, was elected during the federation’s board elections and replaced Maribel Obidos.

In a statement, Oñate vowed to do whatever he can to help the industry get back on its feet in these trying times as the preneed industry undergoes a crisis.

The preneed industry is currently reeling from the effects of the global financial crisis that led to massive reductions in preneed firms’ capital and trust funds, leaving some firms on the brink of collapse.

Despite the crisis, Oñate said the industry remains resilient and a potential lucrative business if given the opportunity to re-engineer its offerings and operations.

In a related development, Oñate appointed Ronaldo Geron, as a new legal counsel to represent Pacific Plans in the rehabilitation court.

The new owner said Pacific Plans can recover with a good business plan, an improvement of the global financial market over time and good conservative management of the trust fund assets.

In addition, the company will bounce back with proactive planholder management, which invites and encourages dialogue and participation in company initiatives that would redound to the health of both the company and the stakeholders it serves.
– Chino S. Leyco