Reps. Marcoleta, Barzaga point out ABSCBN’s intricate corporate layering, and how its foreign PDR holders given power of control

Solons quiz ABSCBN counsel responsible for PDRs on how ABSCBN allegedly “circumvented” PHL Constitution on mass media ownership

A combination photo of Cavite Rep. Elpidio Barzaga Jr., and House Deputy Speaker Rodante Marcoleta questioning ABS CBN counsel Atty. Cynthia Del Castillo, former Ateneo law dean, during the June 11, 2020 continuation of House of Representatives hearing on the franchise renewal of ABSCBN.


(Eagle News) – Two lawmakers pointed out how media giant ABS CBN used an “intricate web of corporate layering” as they questioned ABS CBN and their lawyers Thursday, June 11, on how they used the so-called Philippine Depository Receipts (PDRs) to possibly “circumvent” the Constitutional limitation on media ownership to allow foreigners to have a level of control on the network that is not allowed by the Philippine Constitution.

House Deputy Speaker Rep. Rodante Marcoleta and Cavite Rep. Elpidio Barzaga Jr., quizzed ABS CBN Counsel Atty. Cynthia Roxas Del Castillo, the pioneer of the PDRs, and detailed how the the PDRs which ABS CBN issued starting 1999 had given a level of control for even foreign PDR holders on the mass media network.  They said this was against the Constitution, particularly Section 11 Article 16, which limits mass media ownership and management to only Filipino citizens and corporations “wholly-owned and managed by such citizens.”

They also noted that it is the Supreme Court eventually which will decide whether PDRs issued to foreigners by mass media companies in the country violated the Constitution.

-187 million PDRs of ABS CBN owned by foreign nationals-

ABS CBN had so far issued 187 million PDRs to foreign nationals with underlying shares of stocks of also 187 million, according to ABS CBN Corporate Secretary Enrique Quiason during the continuation of the House hearing on ABS CBN’s franchise renewal on Thursday.

At the start of the hearing, no less than ABS CBN President Carlo Katigbak introduced ABS CBN counsel Atty. Del Castillo as the “pioneer of PDRs having been involved in the structure of PDRs used by both as it is used by ABS CBN and GMA,” the head of Securities Law of the law firm Romula Mabanta , and the dean of Ateneo Law School from 1990 to 2000.

Katigbak asked Del Castillo to give a brief manifestation on PDRs which was her expertise, and the ABSCBN Counsel then proceeded to give a lecture on PDRs and started when ABS CBN first issued PDRs in 1999.

She claimed that ABS CBN Corporation owned by the Lopezes had nothing to do with ABS CBN Holdings Incorporated which issued the PDRs to foreigners. She insisted that the foreigners who bought PDRs from ABS CBN holdings cannot participate in the management of ABS CBN Corporation, and cannot exercise any right due to owners or shareholders of  the media corporation.

-ABS CBN counsel who conceptualized PDRs put on the spot-

But during the questioning of House Deputy Speaker Marcoleta, he put Del Castillo on the spot and showed her the ABS CBN’s own admission in its prospectus, particularly on page 29, that ABS CBN had given foreign holders of PDRs so much power that is tantamount to ownership of shares.

The prospectus accompanied the ABS CBN 2014 registration statement.

Before he read ABS CBN’s own prospectus, Marcoleta pointedly told the ABS CBN counsel who had also lawyered for ABS CBN when it first issued its first PDRs in 1999 this: “Ang hindi po ninyo niliwanag yun pong foreign holder, meron siyang karapatan na magdesignate ng Philippine person, tama po ba yun?

Wala pong ganun sa aming PDR instrument, kung siya po ay banyaga, ang kanyang right is ipabenta yung shares, para ang matatanggap… yung proceeds of shares, cash po ang kanyang matatanggap.” Del Castillo said confidently during the continuation of the House of Representatives joint committee hearing on ABS CBN’s franchise renewal.

Ang sabi po ninyo wala sa instrument ninyo… E kung sakali pong maipakita ko sa inyo na nasa inyong instrument,” Marcoleta replied. “Kung sakali lamang po.”

To which Del Castillo said, “Sige po.”

ABS CBN Counsel Atty. Cynthia Roxas Del Castillo, the pioneer of the PDRs, together with ABS CBN President Carlo Katigbak during the June 11, 2020 continuation of the House of Representatives hearing on the ABS CBN franchise renewal (Screengrab from House of Representatives video/Courtesy House of Representatives)

-ABS CBN prospectus, PDR instruments analyzed- 

He then read first the ABS CBN prospectus, that laid the groundwork for PDR holders to be able to appoint a Filipino nominee, and then the PDR instrument itself that showed PDR holders can exercise rights inimical to ownership of shares.

The document further noted that “delivery of shares to non-Philippine persons is not permitted” but that “underlying shares” can only be “delivered to Philippine persons designated by the holder or otherwise sold on its behalf in the open market.”

Binigyan po ninyo siya ng kapangyarihan na magdesignate ng Philippine person. Pag sinabi niyo pong Philippine person attorney, puedeng individual, puedeng corporation,” Marcoleta noted.

Eh bakit ngayon tatalikuran ninyo at sasabihin ninyong wala silang karapatan na magdesignate? Ito po yung napakalaking kapanhyarihan na binigay ninyo sa kanya,” he said.

“Magiging isang instrument po ito para icircumvent ang Saligang Batas sa dami po ng kapangyarihang binigay ninyo,” the congressman added.

Marcoleta then read ABS CBN Holdings Corporation’s s own PDR instrument.

Kung babasahin po ninyo itong instrument na binigay nyo. Ang title nga po nito e, Philippine Deposit Receipt instrument ABS CBN Holdings Corporation. Dito pa nga po, may karapatan yung holder,” he then stopped what he was saying as the ABS CBN side conferred with each other regarding the document he had read.

Nakita po ninyo, meron nga po,” he said.

Opo, meron pong nakasulat dito,” the ABS CBN counsel replied.

“Dapat alam po ninyo ito. Kayo ang nagpasimula nito,” Marcoleta told Del Castillo.

Marcoleta then noted how ABS CBN Holdings Corporation gave the power to “vary and modify the rights of the holder” of the PDR. This, he said, was an even greater power that is very disturbing.

“By way of extraordinary resolution, the PDR holder, can vary and modify the rights depending on several eventualities. Ito po ba sinuri ng Securities and Exchange Commission?” he said.

-SEC disclaimer noted-

Marcoleta pointed out that the SEC had even had made a disclaimer on ABS CBN’s prospectus accompanying its registration papers that any misrepresentation on the ABS CBN’s registration papers is a criminal offense and should be reported immediately to the SEC.

He said that it was therefore wrong to say that just because SEC had approved the sale of PDR’s that there was already a conclusion that there was no violation of the Constitution .

He then pointed out the three attributes of ownership — possession, enjoyment, disposition — that are present with PDR holders of ABS CBN.

Marcoleta said that the PDR was an example of “corporate control enhancing mechanism”.  He also pointed out how ABSCBN Corporation, and ABS CBN Holdings Corporation were both owned by Lopezes.


Rep. Barzaga, who was next after Marcoleta, then asked the ABS CBN counsel, Atty. Del Castillo, on ABS CBN Corporation and ABS CBN Holdings Corporation.  He noted how both their owners are one and the same.

Del Castillo said that they conceptualized the PDRs in 1999 when the Asian financial crisis was wreaking havoc on the economy.

The ABS CBN Corporate Secretary Enrique Quiason also noted that 62.6 percent of total outstanding PDRs of ABS-CBN were owned by foreigners as of March 31, 2020.

This corresponded to 187,080,141 PDRs, he said.

Barzaga, upon questioning the ABS CBN counsel, pointed out how the 132 million PDRs bought by the foreign private equity fund, Capital International Private Equity Fund (CIPEF), which is owned by the foreign company, Capital International Incorporated., have corresponding or underlying common shares of stocks.

“We have the constitutional provision regarding 100 percent Filipino ownership,” he said.

Barzaga also cited Section 2 of Presidential Decree 1018 which also required 100 percent Filipino ownership requirement of mass media in the country.  He also cited Republic Act 7042, Foreign Investments Act, which requires that companies engaged in mass communication, should be 100 percent Filipino.

He also explained how the foreign holders of PDR exercise a form of control over ABS CBN since their 187 million PDRs they bought and the corresponding shares are “under a pledge”.  The corresponding 187 million shares of stock cannot be sold by ABS CBN even to Filipinos because they are “covered by a pledge” according to ABS CBN Corporate Secretary Quiason.

“Because it is covered by a pledge, the hands of ABS CBN Holding is tied by that pledge,” Barzaga said.

“Hindi nila puedeng ibenta yan. Yang 187 million shares of stock, kahit na pag-aari ng ABS-CBN Holdings, sapagkat ito ay covered ng PDRs na binili ng mga foreigners, tama ba?” Barzaga asked the ABS CBN counsel, to which Del Castillo agreed.

Barzaga then points to the attributes of ownership, restriction on the right to dispose.

“If there is restriction, then to a certain extent there is control, and the control comes from the investment made by the foreigners representing the PDRs which they have purchased,” he said,

“Itong sinasabi natin, corporate layering, at ito ang Latin maxim ni Deputy speaker Marcoleta that, ‘What cannot be done directly, cannot be done indirectly,” Barzaga said.

He said that he sees a violation on this, since ABS CBN was the one responsible for this corporate layering.

“Ang gumawa nito ay ABSCBN. Definitely there will be a violation,” he added.

Earlier, Barzaga also questioned the circumstances behing the incorporation of ABS CBN Holdings Corporation in 1999.

Other lawmakers during the hearing also had their time to question ABS CBN and other resource persons.

The hearings were held jointly by the House Committee on Legislative Franchises, and the Committee on Good Government and Public Accountability.

The hearings on the ABS CBN franchise renewal were a contentious issue, not only among lawmakers, but the public as well who viewed the hearings live via social media platforms.

(Eagle News Service)