Uniwide’s quest for justice based on recently obtained documents
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ll deeds—noble or evil—will be revealed at some point. This is how the wheels of justice grind, when the good is rewarded and the bad condemned. For Uniwide Group founder Jimmy Gow and the company’s current president, Dr. Jesus L. Arranza, the quest for justice has begun, their crusade bolstered by recently unearthed official documents that hint at something sinister behind the fall of the No. 1 retail chain in the country in just one year—in 1997, when all its assets valued at P30 billion were wiped out and its value of stocks falling to below P1 from more than P7 apiece. Even the Ecology Bank, which was majority owned by Gow with 35 branches, was taken by a creditor bank without paying a single centavo. That the Uniwide Holdings Inc. (UHI) financial advisor and chief financial officer were preparing to put the company under receivership in 1998, leading to the firm’s liquidation years later, remained a mystery to those who witnessed its grandeur. Gow, after repeatedly reading and analyzing official documents related to the company that were released after a trial court ordered UHI’s liquidation in 2016, couldn’t help but come to the realization that—probably—Uniwide and its 27,000 stockholders were a victim of organized fraud. “I couldn’t help but ask myself, ‘was there a conspiracy among the people I trust—my banker, my financial advisor, my chief financial officer, my auditor, my lawyer, and those that the company had dealings with?’ Worse, the way the supposed rehabilitation of Uniwide was conducted and regulated, I think the design was more to liquidate than to help the company get back on its feet,” Gow stressed. It is worth noting that Uniwide Sales Warehouse Club reached its peak in net sales at P14.7 billion in 1997 and was the undisputed go-to outlet of sari-sari (small community) stores. Uniwide Holdings, on the other hand, just received a fresh P4.3-billion funding from its initial public offering (IPO) in August 1996. However, Gow recalled that in 1998, his chief financial officer Jaime I. Cagangis and financial advisor Equitable Bank led by George Go and Cesar Buenaventura, were already preparing to put Uniwide Holdings under receivership. “These are the issues that I want to be clarified--how come Uniwide Holdings, which just got P4.3 billion in IPO proceeds in 1996 (the money supposedly deposited at Equitable Bank) and had no debts, was being placed under receivership already one year later? Remember, it was Uniwide Warehouse Club which had debts, and it was a separate company from Uniwide Holdings,” Gow emphasized. Also, Gow wondered why all these companies were included: Uniwide Sales Inc., Naic Resources and Development Corp., First Paragon Corp. and Uniwide Warehouse Club Inc. The Securities and Exchange Commission (SEC), meanwhile, appeared to have been remiss of its duties, Gow noted, as the regulator did not even carefully check the
records, especially the necessary approvals from Uniwide Holdings Board of Directors and its 27,000 stockholders. “There were no records on the stockholders’ approval on everything that happened.” As a matter of fact, then-SEC Chairman Perfecto Yasay approved it in just a week. “The speed to which it was approved was amazingly fast.”
Like no other
Uniwide Sales Warehouse Club, in its prime, was unmatched in terms of store sizes (minimum of 1 hectare per store), number of customers, checkout counters (around 60 per store), inventory and sales. Uniwide was a household name back then, much like today’s Puregold, Shopwise, SM and Robinsons Supermarkets — almost everyone was in Uniwide because goods ranging from plates to canned goods to fresh meat, fish and fruits were more affordable versus competitors. The warehouse club was so popular that in 1988, Uniwide had to initiate measures to somehow limit the traffic in some of its stores during its annual promotional season. It was even criticized in the media one time in 1991, when it held a midnight sale that lasted up to 4 a.m. because it caused major traffic jams in Metro Manila. According to the Rehabilitation Plan prepared by Buenaventura Filamor Echauz (BFE), the Uniwide Group employed around 3,560 people, and its operations concentrated in Metro Manila, Laguna, Cavite and Tarlac. It already had 11 stores in 1991 and was so in-demand that banks saw the potential of doing business with the company, and lent the firm money without collateral. Its operations then was simple, there was Gow the owner, Efren Yap as general manager, a few store managers, and thousands of employees. Its transactions with suppliers were heavily based on cash. With gross sales reaching between P15 billion and P20 billion annually in the 1990s, Gow decided that it was time to expand its business and add more stores in the Philippines to further cement the company’s leadership in the retail space. He also started buying properties because he was getting good deals, as he was always ready to pay in cash.
Going public
“In 1992, Cabangis, who was then
at SGV as partner, approached me and told me to make Uniwide a listed company. He told me that he can raise more than P4 billion in the listing proceedings, and that he will resign from SGV to lead the company as CFO, provided that I pay him P5 million a year,” Gow said in a mix of English and Filipino. Gow agreed, seeing the potential that P4 billion of fresh capital can create for such a popular company among Filipinos. Thus, Uniwide Holdings was incorporated. Cabangis, who showed genuine concern and interest to help the company grow, was placed at the helm. He brought in about 100 people, including the comptroller, vice president for finance, asset manager and board of directors. UHI, according to BFE, served as the holding company for the real estate and franchising operations of the Uniwide Group. The retailing operations, on the other hand, were with the Uniwide Sales Warehouse Club Inc. (USWCI), which is 100-percent owned by the Gow Family. UHI’s Board of Directors included Gow and his daughter Cherrie, Cabangis, Dr. Bernardo M. Villegas and Cesar Virata. UHI was incorporated on Sept. 15, 1994, initially with an authorized common stock worth P500 million, which was later raised to P5 billion at a par value of P1 apiece. There were 27,000 investors that subscribed to the UHI’s IPO in 1996, raising P4.3 billion in new capital. Stocks were offered at P4.80 apiece, and then quickly rose to the P5-level. Only 35 percent of the total outstanding shares was floated to the public, with the rest still held by the Gow Family-controlled companies, including Uniwide Sales Inc. (USI), which owned approximately 50 percent of UHI. Gow personally owned 2 percent of UHI. Proceeds from the IPO were deposited in Equitable Bank, Gow said.
Financial crisis
The BFE report showed that the Uniwide Group’s assets as of May 31, 1999 were valued at P19.9 billion, while current liabilities, loans payable and other liabilities only amounted to P11.1 billion. In that period, Uniwide’s bank debts totaled around P6.95 billion. “The firm thus had adequate assets to cover liabilities,” the BFE noted.
But BFE said Uniwide’s performance was affected by the Asian financial crisis. In the first five months of 1999, it had a net operating loss of P383 million on total revenues of P2.7 billion. The financial advisor noted that this was due to low sales volume and reduced franchise fees and rents. Gow, however, stressed that what really caused the big drop in sales was the considerably low store inventory, reportedly due to the decision of Cabangis to stop paying the suppliers properly. Arranza, who was a long-time supplier of coconut oil to Uniwide outlets, recalled that he was invited to a meeting among the worried suppliers. Arranza said majority of the suppliers started to cut their deliveries to Uniwide because they were no longer being paid the same way the company was settling its dues before the crisis. The suppliers decided then that they will only make another delivery to Uniwide stores once the previous delivery has been fully paid. This meant that the worry was only on the matter of cash flow and not insolvency. Gow said he could not understand why Cabangis allowed this to happen when Uniwide was still generating enough sales. Also, the proceeds from the IPO were in the bank. According to the report of SGV, the IPO proceeds were deposited in a custodian bank it did not name. Gow surmised that this custodian bank was probably Equitable Bank, as he had been dealing with the financial institution for 35 years already at that time. Also, all the money that was pouring in from the IPO was being deposited to Equitable. Conspicuously, the IPO proceeds deposited in this custodian bank just disappeared in Uniwide’s financial books in 1997. This was also evident in the audit prepared by SGV submitted to the SEC in April 1998. Gow said Cabangis could have easily solved the liquidity shortfall, which, BFE noted, was impeding
the Uniwide Group’s operations that time.
day-to-day
The banks
Behind the scenes, Gow said Cabangis, his financial advisors Go and Buenaventura, and the creditor banks were already making deals. Whereas before the banks were happily dangling loans to Uniwide without collateral, they started to demand something to cover the new loans and debts accumulated by the company over time. This was when the banks started getting Uniwide properties and shareholdings. Gow cited the case of Land Bank of the Philippines. Gow narrated that Cabangis allowed Land Bank to get P3.8 billion worth of assets and shares of stocks for Uniwide’s P500-million debts. “All banks got this similar deal, they got my properties as collateral; all these without my knowledge. Even my board of directors did not know this. Bernie Villegas, a member of the board, admitted this to me, and without the stockholders’ knowledge; nobody knew,” Gow said. Equitable Bank (EBC), meanwhile, acquired his Ecology Bank that had 35 branches that time, Gow added. Uniwide owed EBC P1.73 billion. Gow said EBC did not even assign a single centavo value for the Ecology Bank. It also secured leasehold rights on several properties and the Uniwide Family Store. Gow said Equitable had full knowledge of Uniwide’s assets because Cabangis made Go and Buenaventura the financial advisors of the company. BFE’s rehab plan stated that Uniwide also owed these financial institutions: RCBC (P1.34 billion), UCPB (P995.5 million), PNB (P772 million), BPI (P610 million), International Exchange Bank (P100 million), Allied Bank (P262.5 million), ING (P100 million), Asian Bank (P200 million), East West (P100 million), East Asia (P44.59 million), Metrobank (P53.5 million), PB Com (P48.5 million).