565 Phil. 744
NACHURA, J.:
Acting on the referral, respondent, through its Chairperson, Senator Edgardo J. Angara, set the initial hearing on February 28, 2005 to investigate, in aid of legislation, the subject matter of the speech and resolution filed by Senator Enrile.RESOLUTION
DIRECTING THE COMMITTEE ON BANKS, FINANCIAL INSTITUTIONS AND CURRENCIES, TO CONDUCT AN INQUIRY, IN AID OF LEGISLATION, INTO THE ILLEGAL SALE OF UNREGISTERED AND HIGH-RISK SECURITIES BY STANDARD CHARTERED BANK, WHICH RESULTED IN BILLIONS OF PESOS OF LOSSES TO THE INVESTING PUBLIC
WHEREAS, Republic Act No. 7721, otherwise known as the "Law Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines,” was approved on May 18, 1994 to promote greater participation of foreign banks in the Philippine Banking Industry that will stimulate economic growth and serve as a channel for the flow of funds into the economy;
WHEREAS, to promote greater competition in the Philippine Banking Industry, foreign banks were accorded the same privileges, allowed to perform the same functions and subjected to the same limitations under relevant banking laws imposed upon domestic banks;
WHEREAS, Standard Chartered Bank was among the foreign banks granted the privilege to do business in our country under Republic Act No. 7721;
WHEREAS, there are complaints against Standard Chartered Bank whose actions have reportedly defrauded hundreds of Filipino investors of billions of pesos through the sale of unregistered securities in the form of high- risk mutual funds falsely advertised and marketed as safe investment havens;
WHEREAS, there are reports that Standard Chartered Bank clearly knew that its actions were violative of Philippine banking and securities laws but cleverly disguised its illegal acts through the use of pro-forma agreements containing waivers of liability in favor of the bank;
WHEREAS, there are reports that in the early stages of conducting these questionable activities, the Bangko Sentral ng Pilipinas warned and eventually fined Standard Chartered Bank a measly P30,000 for violating Philippine banking laws;
WHEREAS, the particular operations of Standard Chartered Bank may constitute "conducting business in an unsafe and unsound manner,” punishable under Section 37 of Republic Act No. 7653 and should have drawn the higher penalty of revocation of its quasi-banking license;
WHEREAS, Republic Act No. 8791 or the "General Banking Act of 2000" deems a particular act or omission as conducting business in an unsafe and unsound manner as follows:"Section 56.2 The act or omission has resulted or may result in material loss or damage or abnormal risk to the institution's depositors, creditors, investors, stockholders or to the Bangko Sentral or to the public in general."WHEREAS, the sale of unregistered securities is also a clear violation of Republic Act No. 8799 or "The Securities Regulation Code of 2000" which states:"Section 8.1 Securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission. Prior to such sale, information on the securities, in such form and with such substance as the Commission may prescribe, shall be made available to each prospective purchaser."WHEREAS, the Securities and Exchange Commission (SEC) reportedly issued a Cease-and-Desist Order (CDO) against Standard Chartered Bank for the sale of these unregistered securities but the case was reportedly settled administratively and dismissed after Standard Chartered Bank paid a fine of P7 Million;
WHEREAS, the SEC reportedly made an official finding that Standard Chartered Bank actively engaged in promoting and marketing the so-called "Global Third Party Mutual Funds” to the investing public and even set revenue quotas for the sale of these funds;
WHEREAS, existing laws including the Securities Regulation Code seem to be inadequate in preventing the sale of unregistered securities and in effectively enforcing the registration rules intended to protect the investing public from fraudulent practices;
WHEREAS, the regulatory intervention by the SEC and BSP likewise appears inadequate in preventing the conduct of proscribed activities in a manner that would protect the investing public;
WHEREAS, there is a need for remedial legislation to address the situation, having in mind the imposition of proportionate penalties to offending entities and their directors, officers and representatives among other additional regulatory measures;
Now, therefore, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, to direct the Committee on Banks, Currencies, and Financial Institutions, to conduct an inquiry, in aid of legislation, into the reported sale of unregistered and high-risk securities by Standard Chartered Bank which resulted in billions of losses to the investing public.
Petitioners argue that respondent has no jurisdiction to conduct the inquiry because its subject matter is the very same subject matter of the following cases, to wit:I.
THE COMMITTEE ACTED WITHOUT JURISDICTION AND/OR ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN CONDUCTING AN INVESTIGATION, PURPORTEDLY IN AID OF LEGISLATION, BUT IN REALITY PROBING INTO THE ISSUE OF WHETHER THE STANDARD CHARTERED BANK HAD SOLD UNREGISTERED FOREIGN SECURITIES IN THE PHILIPPINES. SAID ISSUE HAS LONG BEEN THE SUBJECT OF CRIMINAL AND CIVIL ACTIONS NOW PENDING BEFORE THE COURT OF APPEALS, REGIONAL TRIAL COURT OF PASIG CITY, METROPOLITAN TRIAL COURT OF MAKATI CITY AND THE PROSECUTOR'S OFFICE OF MAKATI CITY.II.
THE COMMITTEE ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION BY CONDUCTING AN INVESTIGATION, PURPORTEDLY “IN AID OF LEGISLATION,” BUT IN REALITY IN “AID OF COLLECTION” BY A HANDFUL OF TWO (2) CLIENTS OF STANDARD CHARTERED BANK OF LOSSES WHICH WERE FOR THEIR ACCOUNT AND RISK. AT ANY RATE, SUCH COLLECTION IS WITHIN THE PROVINCE OF THE COURT RATHER THAN OF THE LEGISLATURE.III.
THE COMMITTEE ACTED WITHOUT JURISDICTION AND/OR ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN COMPELLING PETITIONERS, SOME OF WHOM ARE RESPONDENTS IN THE PENDING CRIMINAL AND CIVIL ACTIONS BROUGHT BY SAID CLIENTS, IN VIOLATION OF PETITIONERS’ RIGHT AGAINST SELF-INCRIMINATION AND RIGHT TO PURSUE AND DEFEND THEIR CAUSE IN COURT RATHER THAN ENGAGE IN TRIAL BY PUBLICITY – A CLEAR VIOLATION OF DUE PROCESS, RIGHT TO PRIVACY AND TO TRAVEL.IV.
THE COMMITTEE ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION BY DISREGARDING ITS OWN RULES.[5]
(a) CA-G.R. SP No. 85078, entitled “Manuel V. Baviera vs. Hon. Esperanza P. Rosario, et al., pending before the 9th Division of the Court of Appeals. In the petition, Mr. Baviera seeks to annul and set aside the dismissal by the Department of Justice of his complaint against Standard Chartered Bank and its officers accusing them of SELLING UNREGISTERED FOREIGN SECURITIES IN VIOLATION OF P.D. NO. 1869 (SYNDICATED ESTAFA) AND ARTICLE 315 OF THE REVISED PENAL CODE.Citing Bengzon, Jr. v. Senate Blue Ribbon Committee,[7] the petitioners claim that since the issue of whether or not SCB-Philippines illegally sold unregistered foreign securities is already preempted by the courts that took cognizance of the foregoing cases, the respondent, by this investigation, would encroach upon the judicial powers vested solely in these courts.
(b) CA-G.R. SP No. 86200, entitled “Manuel V. Baviera vs. Hon. Rafael Buenaventura, et al.”, pending before the 15th Division of the Court of Appeals. In the petition, Mr. Baviera seeks to annul and set aside the termination for lack of probable cause by the Anti-Money Laundering Council (“AMLC”) of the investigation of Standard Chartered Bank for money laundering activities BY SELLING UNREGISTERED FOREIGN SECURITIES.
(c) CA-G.R. SP No. 87328, entitled “Manuel V. Baviera vs. Hon. Esperanza Paglinawan Rozario, et al.,” pending before the 16th Division of the Court of Appeals. The petition seeks to annul and set aside the dismissal by the Department of Justice of Mr. Baviera's complaint accusing SCB and its officers of violation of the Securities Regulation Code by SELLING UNREGISTERED FOREIGN SECURITIES.
(d) Civil Case No. 70173, entitled “Mr. Noel G. Sanchez, et al. vs. Standard Chartered Bank,” pending before Branch 155 of the Regional Trial Court of Pasig City. Plaintiff seeks damages and recovery of their investment accusing the bank of SELLING UNREGISTERED FOREIGN SECURITIES.
(e) Criminal Case No. 332034, entitled “People of the Philippines vs. Manuel V. Baviera,” pending before Branch 64 of the Metropolitan Trial Court of Makati City. Petitioner Morris is the private complainant in this information for extortion or blackmail against Mr. Baviera for demanding the payment of US$2 Million with the threat to EXPOSE THE BANK'S “LARGE SCALE SCAM” CONSISTING [OF] ILLEGAL SELLING OF UNREGISTERED FOREIGN SECURITIES BY THE BANK, before various government offices, such as the Department of Justice, the BIR, Bangko Sentral ng Pilipinas, Regional Trial Courts, and both houses of Congress.
(f) Criminal Case No. 331395, entitled “People of the Philippines vs. Manuel V. Baviera,” pending before Branch 64 of the Metropolitan Trial Court of Makati City. Petitioners Victor and Chona Reyes are the private complainants in this information for perjury committed by Mr. Baviera in securing a hold departure order against the petitioners herein from the Department of Justice for their alleged involvement in syndicated estafa and swindling BY SELLING UNREGISTERED FOREIGN SECURITIES.
(g) I.S. No. 2004-B-2279-80, entitled “Aurelio Litonjua III and Aurelio Litonjua, Jr. vs. Antonette de los Reyes, et al.,” pending before the Office of the Prosecutor, Makati City. This is a criminal complaint accusing SCB and its officers of estafa for SELLING UNREGISTERED FOREIGN SECURITIES.[6]
The Senate or the House of Representatives or any of its respective committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of persons appearing in or affected by such inquiries shall be respected.Accordingly, we stopped the Senate Blue Ribbon Committee from proceeding with the legislative investigation in that case.
WHEREAS, existing laws including the Securities Regulation Code seem to be inadequate in preventing the sale of unregistered securities and in effectively enforcing the registration rules intended to protect the investing public from fraudulent practices;The unmistakable objective of the investigation, as set forth in the said resolution, exposes the error in petitioners’ allegation that the inquiry, as initiated in a privilege speech by the very same Senator Enrile, was simply “to denounce the illegal practice committed by a foreign bank in selling unregistered foreign securities x x x.” This fallacy is made more glaring when we consider that, at the conclusion of his privilege speech, Senator Enrile urged the Senate “to immediately conduct an inquiry, in aid of legislation, so as to prevent the occurrence of a similar fraudulent activity in the future.”
WHEREAS, the regulatory intervention by the SEC and BSP likewise appears inadequate in preventing the conduct of proscribed activities in a manner that would protect the investing public;
WHEREAS, there is a need for remedial legislation to address the situation, having in mind the imposition of proportionate penalties to offending entities and their directors, officers and representatives among other additional regulatory measures; (emphasis supplied)
[T]he power of inquiry – with process to enforce it – is an essential and appropriate auxiliary to the legislative function. A legislative body cannot legislate wisely or effectively in the absence of information respecting the conditions which the legislation is intended to affect or change; and where the legislative body does not itself possess the requisite information – which is not infrequently true – recourse must be had to others who possess it.Neither can the petitioners claim that they were singled out by the respondent Committee. The Court notes that among those invited as resource persons were officials of the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP). These officials were subjected to the same critical scrutiny by the respondent relative to their separate findings on the illegal sale of unregistered foreign securities by SCB-Philippines. It is obvious that the objective of the investigation was the quest for remedies, in terms of legislation, to prevent the recurrence of the allegedly fraudulent activity.
The principle that Congress or any of its bodies has the power to punish recalcitrant witnesses is founded upon reason and policy. Said power must be considered implied or incidental to the exercise of legislative power. How could a legislative body obtain the knowledge and information on which to base intended legislation if it cannot require and compel the disclosure of such knowledge and information, if it is impotent to punish a defiance of its power and authority? When the framers of the Constitution adopted the principle of separation of powers, making each branch supreme within the realm of its respective authority, it must have intended each department’s authority to be full and complete, independently of each other’s authority or power. And how could the authority and power become complete if for every act of refusal, every act of defiance, every act of contumacy against it, the legislative body must resort to the judicial department for the appropriate remedy, because it is impotent by itself to punish or deal therewith, with affronts committed against its authority or dignity.[11]The exercise by Congress or by any of its committees of the power to punish contempt is based on the principle of self- preservation. As the branch of the government vested with the legislative power, independently of the judicial branch, it can assert its authority and punish contumacious acts against it. Such power is sui generis, as it attaches not to the discharge of legislative functions per se, but to the sovereign character of the legislature as one of the three independent and coordinate branches of government.[12]
[An] accused occupies a different tier of protection from an ordinary witness. Whereas an ordinary witness may be compelled to take the witness stand and claim the privilege as each question requiring an incriminating answer is shot at him, an accused may altogether refuse to take the witness stand and refuse to answer any and all questions.[17]Concededly, this right of the accused against self-incrimination is extended to respondents in administrative investigations that partake of the nature of or are analogous to criminal proceedings. The privilege has consistently been held to extend to all proceedings sanctioned by law; and to all cases in which punishment is sought to be visited upon a witness, whether a party or not.[18]
It may be conceded that Congress is without authority to compel disclosures for the purpose of aiding the prosecution of pending suits; but the authority of that body, directly or through its Committees, to require pertinent disclosures in aid of its own constitutional power is not abridged because the information sought to be elicited may also be of use in such suits. x x x It is plain that investigation of the matters involved in suits brought or to be commenced under the Senate resolution directing the institution of suits for the cancellation of the leases might directly aid in respect of legislative action.The prosecution of offenders by the prosecutorial agencies and the trial before the courts is for the punishment of persons who transgress the law. The intent of legislative inquiries, on the other hand, is to arrive at a policy determination, which may or may not be enacted into law.