Punzi's Corner Blog: Some comments on the Pacific Plans fiasco

Thursday, April 28, 2005
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Some comments on the Pacific Plans fiasco

I've been following the Pacific Plan fiasco intently, both in the media treatment (which I think is already thinning) and in the claimants' blogs.

Of course, there are a lot of emotions involved. This is not like the Pepsi 349 case because the claimants here have already invested time, effort and of course, money so their children are assured of enough tuition money when time comes. In the Pepsi 349 case, there is no initial investment from the claimants apart from the emotional kind. I am already a father for more than seven years. I'm already fuming mad when someone bullies Bea in school. Just imagine if someone bullies their children out of a future through absolutely no fault of their own. I was sold a Pacific Plan some two years ago but decided to discontinue it, simply because I do not believe in fixed value educational plan. Might as well call it an annuity.

I believe in the traditional educational plan, but with the skyrocketting tuition fees brought about by derregulation, I don't believe pre-need companies can deliver on their promises unless the claimants pay huge premiums up front.

As a lawyer, I therefore have the following comments on this:

1. For the claimants, PARTICIPATE vigrously in the rehabilitation case. There is a big difference between rehabilitation and insolvency. Rehabilitation simply means that the company is in trouble but not bankrupt (yet). Hence, there is still a chance that the company may honor your claims IN FULL.

Dissect the reasons why PPI needs rehabilitation. Participate in the selection of a receiver. Dissect the rehabilitation plan if it is truly feasible. Otherwise, push for insolvency immediately and you will get more than what they are offering you right now. Much more.

And you can only do that if you participate in the proceedings.

I cannot say much more since I need to see the petition, the plans PPI sold and other pertinent documents to make a more detailed comment.

2. If the rehabilitation was caused by mismanagement, PROSECUTE the guilty persons to the full extent of the law. In this regard, I find the PPI line that the increased tuition fees depleted their trust funds rather odd. Trust funds, by nature, cannot be touched by the company that keeps it. It is, by nature, kept “in trust” for somebody else, namely the claimants.

Of course someone will contest this by saying that I oversimplify PPI’s situation. So it’s for you to find out if I’m correct or not.

3. There should be reforms in the pre-need industry. I think pre-need companies should at the very least buy insurance so that things like these never happen. Insurance companies, by law, do this by a system of reinsurance. Something similar should be done by these pre-need companies.

Here I find the silence of Congress peculiar. This is the perfect occasion for an inquiry in aid of legislation. Right now, they are more concerned with the complaint of Ana Leah Javier against their own rather than the future of their constituents’ children. Remember this when the next election comes.

4. DO NOT LET UP. They are relying on the Filipino’s short term memory and hoping that this will die down with the next big issue. You know how the media plays and how they’re playing you (for fools). Do not allow that to happen. For the PPI claimants’ bloggers, continue to do what you do. Remember who you’re fighting for.

5. Finally, this may sound trivial but for a company supposedly in trouble, PPI’s lawyer can still afford a Nokia 9500, Nokia’s top-of-the-line phone. Its materialistic of course, but I can usually judge a person accurately by their celfones and watches. I’m usually correct. For a troubled corporation, their lawyer is still enjoying the good life, unless it can be explained by some other reason.

Good Luck!

7 Objection(s):

At 3:58 PM, yusop said...: Hi Punzi. I just wonder if like in banks, rehabilitation is still feasible when confidence becomes non-existent. In the banking industry, bank runs mow down the troubled institution the minute rumors of its insolvency permeate. Wouldn't Pacific Plans just be better off returning the premiums paid by its subscribers, or at least a part of it? Could this be possible, asking for a return since subscribers may not retain any confidence in it, and may opt to discontinue patronizing the product.
At 4:43 PM, Punzi said...: Well this is one kind of corporation, like banks and insurance companies, where trust is key. Of course, the claimants can treat themselves as ordinary creditors and simply seek the return of their premiums. That;s completely up to them. And PPI is precisely relying upon this "divide and conquer" strategy to deal with the claimants.

This case, however, is a little bit more complicated and emotionally charged than that. There is no PDIC, like in banks and reinsurance and the Insurance Commission, like in insurance companies. Once the trust funds have been touched, there should be hell to pay. I will not be shocked to see the whole YGC empire collapse because of their callousness.

The best thing YGC can do at this point is to bail PPI out and not merely rely on the legal procedures. That even shows they care and not blinded by sheer greed.

I have always advised my clients against resorting to these dire remedies for debt relief. While you get the debt relief, your business name is tarnished forever and as the Holywood saying goes, "You'll never get to work in this town again!"
At 6:01 PM, Anonymous said...: FYI, we still have our 349 bottle cap. Keepin' it just in case. ;)

- Gian
At 6:07 PM, Punzi said...: Hold on to that. I have good sources that say if the 349 Coalition wins, PepsiCo USA will pay...
At 5:25 PM, Unknown said...: No. It seems that they do not plan to honor the obligations in full. Instead, they will replace the contract will something else.
At 4:48 PM, Punzi said...: For those of you who are wondering what Sef was saying, here's the comment I posted in his PPI blog:

There is a big difference between what PPI is saying and what it is doing. If PPI is going to invoke the fortuitous events clause in their contracts, they should have filed a rescission case. This is a case you file, in layman's terms, "cancel" your contracts with plan holders.

What PPI filed is a rehabilitation petition. This means, PPI will still honor its obligations but they need to "lay off it a while" so they can recover. Add to that all what you said and surely PPI cannot rely on the fortuitous event clause in their contracts.

We normally do not advise our clients to undergo rehabilitation or insolvency unless it is the last resort because while it gives you partial or total debt relief, it renders your business reputation and credit rating dead for all intents and purposes. "You cannot work in this town again."

An ordinary person who has his car or house forclosed cannot get a loan ever again because these banks and other creditors have a network to check your credit risk or rating. Just imagine what this PPI thing will do to the credit rating of its stockholders.

The best thing YGC can do is to rescue PPI because this will snowball and affect the entire empire. And theoretically, YGC's credit rating will plummet, if not here, abroad. And I've heard AY is going to do just that.

Whoever advised PPI to do this made a great blunder.

Just my two cents...
At 1:52 AM, Anonymous said...: Hey Atty. Punzi,

In my point of view, Pacific Plans is reduced to cheap highway robber for deceiving their clients. Making the plan holder carry the burden of a management mistake is not worth the consumer's trust. After watching the plan holders and Pacific Plans mgt from TFC cable, I'd say what else is new... even in Marcos time this has already happened. However, I'd say I'm glad to see the coverage exposing Pacific Plans. The people who were affected should not give up!