Editorial of People's Journal. It's obvious that they are talking about our fave bad MNC, Nestle.

The buck stops here

Wednesday, 25 August 2010 18:55

There are numerous instances when erring employees make appalling decisions that put the reputation of the entire company in jeopardy. Even worse, there are instances when embezzlement or fraud is committed while serving in an official capacity. During times like these, it would be so easy for a company to put the entire blame on the erring employee. But those who value “relationships more than contracts” — as the world’s greatest investor, Warren Buffet, put it — take command responsibility and find ways to rectify the situation. Often, this comes at their own expense, but the welfare of their customers and business partners comes first. There is actually a legal principle which applies to situations such as these, namely the rule of “apparent authority.” Apparent authority states that a principal is responsible for the acts of an agent where the principal, by his words or conduct, suggests to a third person that the agent may act on the principal’s behalf, and where the third person believes in the authority of the agent (for instance, by virtue of a high-ranking position, long employment history, and representations such as official calling cards, letterheads, etc.) On the other hand, there are other firms that refuse to acknowledge this doctrine, and continue to avoid accountability at all costs. One such corporation, a giant multinational engaged in food and beverage products, has gained notoriety in the business community. It finally reached a point wherein the country’s largest bank eventually sued the MNC for its passive involvement in a billion-peso scam. Unlike other cases where victims were not financially crippled by acts of fraud, the scheme perpetrated by the multinational’s regional sales manager left several of their Central Luzon distributors entirely bankrupt. Indeed, entire families found themselves mired in insurmountable debt. Conceitedly, the company has absolved itself of all blame, notwithstanding the fact that management was fully aware of the problem yet still urged banks to lend money to the Central Luzon distributors (thus the lawsuit). More disturbingly, a very similar case occurred not too long ago, wherein another one of their sales managers ran away with approximately P100 million and left the distributor holding the bag. Let us recall that one of the cornerstones of President Aquino’s economic agenda is to boost the growth of small and medium enterprises and promote entrepreneurship. Accordingly, companies need to be reminded that the buck does not always stop before it reaches them.

Bad MNC strikes again! by Ducky Paredes

HOW do you protect yourself from fraud and devious financial schemes if, in spite of all the sworn documents they signed, the presumably respectable parties to whom you had extended a series of loans, deliberately deceive you?

This is a lesson in doing business with entities larger than yourself or your company. What you will read about is a clear case of duplicity, prevarication and unethical conduct by an MNC and its regional sales manager.

The complainant is a leading Philippine bank that extended hundreds of millions in various loans and credit facilities to a local firm, Interbrand Logistics and Distribution, Inc., a top distributor of the MNC. The respondents include the MNC that produces and markets a wide range of food and beverage products. It operates on a global scale, with 2009 sales running above $100 billion.

The bank granted the loans after satisfying itself about the borrower’s credit worthiness and the viability of its business as exclusive distributor of the MNC’s products in Quezon City, Tarlac and Bulacan. The bank checked with the MNC and was advised that indeed, the borrower was "one of its top distributors in the country; that it meets its sales targets; and that its payment record is satisfactory."

Due to this favorable endorsement, the bank granted Interbrand in May 2006 credit facilities of P80 million and a Bills Purchase Line of P10 million. Interbrand availed of this facility in various amounts starting July 2006. It signed a Facility Agreement and issued promissory notes to the bank, to be redeemed upon maturity. It backed up its promise to pay by executing, in favor of the bank, a chattel mortgage over its merchandise inventories.

To further secure the prompt observance of the terms of the agreement, the President/Chief Executive Officer and a director of Interbrand also executed a Continuing Suretyship to answer for the loans.

The credit facility was renewed from year to year, after the bank had reviewed and reassessed the performance of the borrower. As part of due diligence, and prior to renewal, the bank always checked with the MNC about the financial status of Interbrand, and each time, the MNC would give a favorable endorsement.

The bank also conducted random checks with the MNC in between renewals to monitor the borrower’s creditworthiness and its status as distributor. One such random inquiry was made in June 2009. In its complaint, the bank claims that in reply, the MNC’s Head of Distribution Management told the bank that Interbrand remained as its No. 1 distributor in the Philippines. Even when MNC knew that this was no longer the case.

Another trade check was made on the borrower in September 2009 when its credit facility again came up for renewal. Reportedly, the MNC once more gave the usual positive assessment.

These favorable endorsements led the bank to renew Interbrand’s credit facility, allowing the latter to secure a series of 19 loans totaling P123.25 million in the second half of 2009. On January 13 of this year, Interbrand availed of still another loan, amounting to P6 million, backing this up with another promissory note.

But just two days after getting this latest loan, Interbrand defaulted on a P5.3 million borrowing that was due on January 15, 2009. Reminders and demands for payments were given to the borrower but it failed to settle its accountabilities.

In the course of its investigation, the bank discovered what appears to be a horror story, with both Interbrand and the bank ending up terribly scarred – financially and otherwise.

It turns out that the MNC, through its Regional Sales Manager (ASM), had been pulling out inventory from Interbrand’s warehouse. These were then delivered to some of the MNC’s key accounts that were urgently asking for additional product deliveries. In exchange, the ASM would issue credit memos that Interbrand could use, in lieu of cash, to purchase MNC products.

On various dates in May 2009, the multinational company, through its ASM, pulled out some P114 million worth of products from Interbrand’s warehouse. However, the ASM only issued P58 million worth of credit memos. The balance of P56 million was left unsecured.

When Interbrand tried to use the P58 million in credit memos to pay for the purchase of MNC products, the MNC refused to honor these, claiming that the credit memos were forgeries. It also denied having pulled out the P56 million worth of products not covered by the credit memos.

Oddly enough, the MNC reportedly acknowledged during a meeting with the bank that its ASM had, in fact, issued the P58 million in credit memos to Interbrand but it claimed that these were forgeries and were unauthorized.

Confronted about the false information he provided, MNC’s Head of Distribution Management allegedly told the bank that the company prohibits them from disclosing such information about its distributors.

Clearly, a trusting Interbrand is the victim of a huge scam. It was played for a fool by the MNC and its ASM. The trusting bank was also misled into thinking that everything was hunky-dory even when the MNC already knew that its ASM was a crook.

Interbrand went belly up because of the MNC’s collusion with its crooked ASM. Of course, this does not absolve Interbrand of responsibility over its unpaid accounts. According to the bank, Interbrand became aware of its money troubles as early as mid-2009, yet it knowingly failed to advise its creditor of its dire financial status. And it continued to avail of the credit facility, although it knew that it no longer had the capability to pay the loans.

In its complaint, the bank said Interbrand and its officials, as well as the MNC, deliberately concealed information vital to the decision about the credit facility to protect their own business interests. It said the defendants "acted in utmost bad faith and in wanton, fraudulent, reckless, oppressive and malevolent manner."

The bank also accused the MNC of having "knowingly made a false representation with intent to mislead the Bank into renewing Interbrand’s credit facilities and allowing Interbrand to make further availments under the same to finance the purchase of (its) products which would eventually lead to (its) benefit."

It asked the court to order Interbrand, its four officials and the MNC, to pay the bank P109.792 million in damages as of March 22, 2010 plus interests, penalties and other charges; at least P1 million in exemplary damages; more than P28.448 million in attorney’s fees and litigation expenses; and from Interbrand and its four officials, P30,497.85 in liquidated damages as of March 22, 2010.

Hopefully, Interbrand, as primary victim, has also sued MNC for all it is worth!

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Readers who missed a column can access www.duckyparedes.com/blogs. This is updated daily. Your reactions are welcome at duckyparedes@yahoo.com

Go DTI! Cheers to Director Subido!

Man in the Mirror

FROM THE STANDS By Domini M. Torrevillas (The Philippine Star) Updated August 19,

Ten days from now, Michael Jackson — the often misunderstood, yet ultimately revered King of Pop — would have turned 52 years old. While I am nowhere near being a die-hard MJ fanatic, I admit that I always found his music unique and awe-inspiring. Add his talented songwriting to his otherworldly dance moves, singular vocals, and the most technically-magnificent stage productions ever made, and one can easily argue that Jackson was the most influential entertainer of the 20th century.

Personally, I am more inclined towards (and familiar with) his classic Motown work with the Jackson Five, as well as earlier albums like “Got to Be There” (1972) and “Off the Wall” (1979). One truly interesting Michael Jackson song, however (and many sources claim that it was the artist’s best-loved work as well), is the relatively recent hit “Man in the Mirror”. Straying from his usual dance-inducing funk, this poignant song was first released as a single in early 1988, off his seventh solo album “Bad”. Owing largely to its powerful message, it has become one of Jackson’s most critically acclaimed songs. Whether in times of difficulty or transition — as our country is undergoing right now — Man in the Mirror’s refrain offers a stirring perspective on how we can best move forward, individually and as a nation:

I’m starting with the man in the mirror

I’m asking him to change his ways

And no message could have been any clearer:

If you want to make the world a better place

Take a look at yourself and then make the change

Undoubtedly, we are experiencing a renewed air of hope brought about by P-Noy’s uncontested victory and the seamless turnover of power. Many of those who were around to witness the EDSA People Power Revolution have drawn positive comparisons between the sentiments then and the sentiments now. Our social consciousness — apathetic at best, thanks to a lifetime of being desensitized by acts of daily corruption — now banks on the promise that this corruption can finally be eradicated.

Given this overwhelmingly positive outlook, the challenge for every Juan dela Cruz is to avoid turning into Juan Tamad, passively waiting for the guava to fall into his mouth. If the promises delivered during the most recent Presidential inauguration and State of the Nation Address have inspired us, we must remember that we each have a role in fulfilling them. While it is true that vision, leadership, and implementation begins from the top, accomplishing all of these ideals is a collective responsibility. If you want to make the world a better place, take a look at yourself and then make the change.

Consider a taxi driver from Tagbilaran City named Iluminado Boc, who returned $17,000 (more than four years worth of his earnings) that was left behind by a passenger. The irony of this situation is that if he had been corrupt, he would no longer be mahirap. But most likely, he looked at his rearview mirror, saw his reflection, and decided that his integrity did not have a dollar equivalent.

Then there is the case of DTI Legal Director Benjamin Subido, who drew the ire of a large multinational corporation engaged in food manufacturing and distribution, for apparently doing his job too efficiently. In line with P-Noy and DTI Secretary Greg Domingo’s mandate to streamline bureaucratic procedures, eliminate red tape, and expedite paperwork, Director Subido acted swiftly on a complaint filed against the MNC. Allegedly, the company had already made arrangements to ensure that this complaint would never see the light of day, so it filed a Motion to Inhibit Subido from the case. Undaunted, Subido pressed on and the company’s Motion was eventually denied.

While these may be exceptional examples of honesty and courage, our daily lives give us enough opportunities to create a ripple effect of optimism. Indeed, the so-called little things — obeying traffic rules, refusing to buy pirated DVDs or illegally downloading content, being on time for all appointments — amount to a lot. As the King of Pop himself says: no message could have been any clearer.

versus

Clash of the Titans

WHAT happens when two “titans”—one of the country’s biggest banks and the other a multinational consumer goods giant—collide? The business community is sitting back to watch the potential fireworks explode.

News about this has been kept to a minimum, but the implications of this skirmish have been dominating coffee shop buzz for weeks now (if you’ve been following Biz Buzz, this issue initially surfaced a few months ago). The bank has included the multinational giant as co-defendant in a P170-million suit.

It seems that the multinational giant had some trouble a while back in Central Luzon, when its regional sales manager (coupled with the multinational’s own carelessness and neglect) was able to scam its area distributors a total amount estimated at close to a billion pesos.

Instead of reporting this to its stakeholders (especially creditor banks), the multinational reportedly chose to keep the entire thing strictly hush-hush. In the meantime, the company continued to provide glowing reviews and endorsements for its cash-strapped Central Luzon distributors to enable them to secure loans. As a result of this false representation, banks continued lending the distributors.

Predictably, this cycle eventually crashed. In its wake were left numerous bankrupt distributors and banks holding the bag. One particular bank conducted its own investigation and learned that the very root of the problem was the multinational’s business practices.

Odds are in favor of the bank as sources point out that it has extraordinary leverage against the multinational: the bank just happens to be owned by the country’s biggest retail operation and can therefore lock out the multinational’s products from all its shelves. Daxim L. Lucas

http://business.inquirer.net/money/topstories/view/20100817-287348/Pure-Foods-stalemate