SEC tosses back Legend Int’l Resort rehab issue to DOJ

By Zinnia B. Dela Peña

The Securities and Exchange Commission (SEC) has tossed back to the Department of Justice (DOJ) the issue on which body has jurisdiction over the petition for suspension of debt payments and rehabilitation of Legend International Resorts Ltd. (LIRL).

LIRL is a licensed casino operator within the Subic Special Economic Zone.

The SEC referred the issue to the DOJ following a request filed by the Philippine Amusement and Gaming Corp. (Pagcor) seeking the securities watchdog agency’s comment on which body should hear LIRL’s case.

"Please be further informed that SEC is not in a position to comment on the issue of jurisdiction over the rehabilitation case of LIRL. Such issue involves an interpretation of the law which task properly pertains to the Department of Justice," SEC General Counsel Vernette Umali-Paco said.

Pagcor earlier said it would exercise its rights over businesses engaged in gambling, citing Presidential Decree 1869 which slated that Pagcor has jurisdiction over changes in corporate term, structure, capitalization and other matters concerning the operations of gaming firms. LIRL was licensed by Pagcor to operate a casino in Subic in the early 1990s.

Last year, LIRL filed a petition for suspension of debt payments with the Olongapo Regional Trial Court to prevent creditors from instituting foreclosure proceedings against its assets. Its debts reportedly amount to P7.03 billion, P3.72 billion of which are owed to local creditor banks. LIRL also owes the government about P1 billion, representing the state’s share in the firm’s casino operations.

In disputing Pagcor’s claims, LIRL said: "Even the Supreme Court acknowledges that regular courts have jurisdiction over petitions for rehabilitation filed by a debtor-corporation, even if such corporation is supervised or regulated by government agencies like the Pagcor."

Following the enactment of the Securities Regulation Code in 2000, the quasi-judicial power over petitions for rehabilitation was transferred from the SEC to the regular courts.

LIRL said it filed the petition pursuant to the Supreme Court-approved Interim Rules of Procedure on Corporate Rehabilitation that allows a "debtor" to file such petition with the proper court which in its case is the Olongapo City RTC.

Pagcor, however, has asked the court to terminate the proceedings arguing that the SEC’s quasi-judicial power of petitions for rehabilitation was transferred to Pagcor pursuant to its charter. It pointed out that the subsequent enactment of the SRC did not transfer its quasi-judicial powers over all persons engaged in gambling to the RTC considering that the SRC pertains only to the reorganization of the SEC and does not include Pagcor’s reorganization.

Pagcor explained that the intention of PD 1869 is to remove from the sphere of influence and jurisdiction of the SEC all persons primarily engaged in gambling and to give jurisdiction over such persons to a separate entity.

Meanwhile, LIRL expressed confidence it would be able to repay all its debts given enough time to map out a workable rehabilitation plan. The company said its rehabilitation plan has the support of majority of its creditors.

LIRL is a Malaysian corporation incorporated under the Companies Ordinance of Hong Kong.

Pagcor, on the other hand, was created in 1976 to oversee the operation of gaming casinos, to generate funds for the government’s developmental projects, and to help curb illegal gambling. It is the third biggest source of government funds with annual revenue of P22 billion. In its drive to generate more funds for the government, Pagcor has ventured beyond casino management and is constantly looking for ways to improve its gaming products and maximizing the efficiency of its gaming operations.