Stealing Steel Corporation of the Philippines

Despite the government’s aggressive campaign to attract investors to the Philippines and the various reforms initiated purportedly to fight red tape and corruption in the bureaucracy, doing business in the Philippines remains very difficult because of the frequent meddling by the courts even at the expense of public interest.

And by all indications, while the war against corruption is now being won in the government bureaucracy, the judiciary seems to be losing the battle even after the impeachment of former Chief Justice Renato Corona who was dragged into various allegations of corruption and other indiscretions.

Take the case of the Steel Corporation of the Philippines, the country’s only remaining fully integrated steel plant, which was forcible brought to corporate rehabilitation in 2006 by Banco de Oro (BDO) upon orders by the court. This is now the reason why the local steel industry in the Philippines is now practically dead and much of the country’s steel supply are now smuggled and unrated Chinese steel.

The action for a corporate rehabilitation against SCP came despite the pendency of several appeals at the Court of Appeals and the Supreme Court. For some strange reasons, the rehab court has all of a sudden, issued an order on 19 September 2012 converting the rehabilitation proceedings into one of liquidation based on the outdated, erroneous, and speculative report of the rehab receiver.

Moreso, this action of the rehab court being presided over by Judge Ruben Galvez of the Batangas Regional Trial Court’s Fourth Judicial Region, Branch 3 was in utter disregard of judicial courtesy and of SCP’s ’s fundamental right to due process.

The local steel industry is already in pain because while the Philippines is so rich with high grade iron ores and other minerals needed the production of steel, many local steel plants have shut down especially during the onslaught of the Asian Financial Crisis in 1997. Despite the financial challenges, SCP struggle to survive only to be placed under rehab proceedings and without any due process, be converted into one of liquidation upon the mere recommendation of the rehab receiver, whose appointment, experience and qualifications are questionable?

Isn’t in more prudent that all efforts should be focused on the rehabilitation of SCP instead of being quickly dissolved especially if the owners and investors are more than willing to to save their own company? Why is it that the rehab court under Galvez is too much in a hurry to practically erase the SCP on the face of the planet?

For one, the appointed rehab receiver, Atty. Norma Singson-De Leon, based her recommendation to liquidate SCP on information which are false, grossly inaccurate and pure hearsay, and on conclusions which are erroneous, reckless, illogical, unfounded and prejudiced. She never truly intended to rehabilitate SCP but was just fishing for evidence to support her premeditated objective of liquidating SCP.

Contrary to the rehab receiver’s findings, SCP handily passed the balance sheet and cash flow tests of solvency prescribed under both the old and new law of corporate rehabilitation. Based on its audited financial statements for 2011, its total assets exceeded its total liabilities by php5.3 billion (“balance sheet test”) and its current assets exceeded its current liabilities by php2.9 billion (“cash flow test”).

It is clear that the Rehab Receiver never truly intended to rehabilitate SCP but was just fishing for evidence to support her premeditated objective of liquidating SCP.

For whatever reason, it is reeks with anomaly for a Rehab Receiver to be rushing SCP’s liquidation instead of allowing first for its rehabilitation. Besides, it is obvious that the rehab receiver is clearly unqualified for a heavy manufacturing company like SCP having had only two previous experiences for companies which are less than 10% the size of SCP. It also turned out that SCP’s rehab receiver has been discharged twice as rehab receiver by two rehab courts in the past.

Judge Galvez’s court violated the right of SCP and other interested parties to due process as he did not exert any effort to hear the side, not only of SCP, but also those of the creditors and the other interested parties before ordering its liquidation. How can Judge Galvez even issue the liquidation order against SCP on the basis of the mere say-so of an inexperienced rehab receiver, without giving all affected parties their day in court and without the implementing rules and regulations?

Why is he in a rush to liquidate a company which is the country’s last stand against the invasion of substandard and China-made steel?

While there are pending petitioned before the Supreme Court and the Court of Appeals, Judge Galvez seemed to be too over-eager to implement the recommendation of Singson-De Leon even if it means that this would pre-empt the ruling of both superior courts.

It simply ignored the doctrine of judicial courtesy which requires that lower courts must await the decision of higher courts on matters related to cases before it. Otherwise, the appeals may be rendered moot and academic, and useless, resulting in judicial anarchy. Moreso, why can’t the rehab court wait for the decisions of the higher courts as it has always done in the past instead of risking being cited in contempt?

In ordering the liquidation of SCP, the Galvez court may have committed contempt of court by preempting the pending decisions of the Court of Appeals and the Supreme Court. Disregarding the superiority of the CA and the SC as arbiters of the SCP’s case is tantamount to abuse of discretion and does not sit well with the judiciary’s earnest struggle to regain the people’s trust and confidence which was somehow eroded by the painful Corona impeachment trial.

SCP is the last fully integrated steel plant still standing in the country and it must be saved from predatory takeover attempts by those casting a moist eye on its business for their own selfish interests. Because BDO failed to take over SCP after forcibly bringing it to corporate rehabilitation, fear are rife that it now wants to do it again by using the liquidation order as an excuse to use SCP funds to selectively buy back its debts held by the other creditors to complete the takeover.

This would not only allow an easier takeover but it would be a lot cheaper for BDO to possess SCP through liquidation.

Clearly, the rehab receiver and the judge handling SCP’s case had no interest to save the company at all and it looks like they are not doing this out of patriotism. Someone must be moving heaven and earth to make sure the SCP fails in its bid for rehabilitation. Like vultures, they are just waiting for SCP to fall before feasting on its carcass. ffs and their cohorts for a number of hours before finally deciding to release them,” it added.

And right now, there’s no clear path where this proceedings will go as the irregularities of the decision are visibly seen. There seems to have a lack of unambiguous guidelines and logical sense in rushing to make judgment to liquidate the only remaining steel plant in the Philippines. Perhaps, we can only speculate that there’s some hidden interest behind all of these despite clear evidence based on SCP’s recent financial statements that it is viable for rehabilitation. In the end, bureaucracy is still much evident and has slowly creeping to rot the judiciary system that you can no longer see the goddess once renowned to represent the objectivity of truth, fairness and impartiality.