The Securities and Exchange Commission (SEC) has initiated criminal proceedings against Maria Francesca “Mica” Tan as well as other officers of the MFT Group of Companies and Foundry Ventures Inc. for their alleged involvement in illegal investment activities and fabrication of financial statements.
A probe by the SEC revealed widespread misrepresentation in the MFT Group’s audited financial statements from 2018 to 2021.
Investigators identified 17 instances where the company had falsified information. This falsification included fake dividend income being included in the reports, making it appear that MFT Group was more profitable than it actually was.
The SEC has also implicated Isla Lipana, the independent auditor of the MFT Group, for “colluding with their fraudulent activities by making it appear that the financial statements of the company were fairly presented despite inconsistencies and inaccuracies.”
“Isla Lipana issued an unqualified opinion for the years 2020 and 2021, indicating that the AFS of the MFT Group are fairly presented in all material respects and in accordance with the identified financial reporting framework,” the SEC said.
The SEC investigation stemmed from complaints filed by investors who participated in the MFT Group’s investment scheme, which later evolved into Foundry Ventures. These companies allegedly promised guaranteed returns of 12 percent to 18 percent on investments, classified as interest income.
The scheme involved issuing post-dated checks as monthly interest payments and promissory notes or borrower-lender agreements to investors.
The SEC considers these instruments “investment contracts” under Republic Act No. 8799, or The Securities Regulation Code (SRC), suggesting the activities may have constituted a Ponzi scheme. Such schemes rely on new investor funds to pay returns to existing investors.
According to the SEC, the funds received by the MFT Group from its investors should have been accounted for either as part of the company’s liabilities (creditor’s equity) or share capital (stockholder’s equity). This aligns with the accounting principle stating that any increase in an entity’s assets must be matched by a corresponding increase in its liabilities, capital, or both.
Upon conducting a financial review, it was found that the amount reflected in the AFS of the subject company did not correspond to the investments made by the investors in either equity or liabilities of the company. This clearly indicates that the funds received through the representations of the MFT Group of Companies were not properly recorded in the company’s books.
In January this year, the SEC issued a cease and desist order against MFT Group and Foundry Ventures for soliciting investments without the necessary license. This order became permanent in April. Despite the order, the companies allegedly continued their operations.
The Commission cited SRC Rule 68 ,which states that the management of the reporting company bears primary responsibility for the financial statements submitted to the SEC.
Section 54 of the SRC grants the SEC the authority to levy administrative penalties on any individual who provides false information regarding a significant fact in reports, applications, accounts, records, or documents mandated by law to be submitted to the Commission.
The imposition of administrative penalties does not preclude the possibility of criminal charges being filed against those accountable for the breach.
“Considering that this discrepancy happened over the years, and given its significant impact on the financial position of the MFT Group, the same cannot be considered an isolated event. The fact that respondent auditors repeatedly engaged themselves in this kind of irregularity is a clear indication of its intention to conceal the actual financial status of the MFT Group, to the prejudice of its investors,” the SEC said.
In addition to Tan, those implicated in the complaint include Eduardo Tan, Florita Tan, Enrique Eduardo Tan, Charles Edward Tan, Christian Konstantin Agbayani, Mario dela Fuente, Philip Tan, Jenna Fuentes, Ronaldo Nery, Halmond Parker R. Ong, Chiqui T. Tan, Jose Donnie B. Montelibano, Romarico S. Ruiz, Arlene M. Navarro A.K.A. Arlene Mauricio, Maria Beatriz Dolores R. Tomas, Mary Ruth A. Oquendo, Joanne A. Cabaero, Thuy Nguyen, Roxanne “Roxy” G. Agbayani, Luis Gabriel R. Cancio Jr., Noel M. Olan, Joselito “Jr” D. Hernandez Jr., Christian M. Olan, Tito T. Cosejo, Jr., Christian De Vera, Jose Carlos R. Cancio A.K.A. Carlos Cancio, Mae Tan, Martin Choi, Reanne Po, Marta Gilda M. Poursabouri, Alan Madlangbayan, Mildred Madlangbayan Jeruz Madlangbayan, and Rosanna Vidal.
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