‘Paper’ carrier probed

Philippine Journal
Tuesday, September 1, 1998

The National Bureau of Investigation (NBI) has started an inquiry of the officers of an upstart Filipino-Japanese cargo airline for probable violation of the Anti-Dummy Law (Presidential Decree 715).

Invited for questioning before the NBI's Anti-Fraud and Computer Crimes Division were Panfilo V. Villaruel Jr. and Leopoldo S. Acot, president and chairman, respectively, of CLA Air Transport, Inc., a newly organized Filipino "flag carrier" suspected of fronting for Japanese interests.

The NBI investigation stemmed from a complaint filed by Philippine Airlines (PAL) against Villaruel and Acot for "conspiring with Japanese investors" to put up a dummy company (CLA) whose foreign ownership ratio exceeds the Constitutional requirement for public utilities.

Earlier, PAL filed charges of grave misconduct and abuse of authority with the Office of the Ombudsman against Transportation Undersecretary Josefina T. Lichauco and former Civil Aeronautics Board executive director Silvestre M. Pascual for designating CLA as an official Philippine flag carrier despite its questionable ownership structure.

Section 11 of Article XII of the Constitution requires public utility operators to be at least 60%-owned by Filipinos.

Ignoring this Constitutional requirement, the CAB, then chaired by Lichauco, granted on March 9, a temporary operating permit to CLA. Even more glaring, it was subsequently designated as a Philippine flag carrier operating scheduled cargo services to Japan.

According to its own documents filed with the Securities and Exchange Commission, CLA is nearly 49%- owned by IASS Company Ltd. of Japan, with the balance nominally held by local firms Philippine Aerospace Development Corp. (PADC) and International Business Aviation Services Philippines Inc. (IBAS). Villaruel and Acot head PADC and IBAS respectively.

In terms of paid-in capital, IASS of Japan controls an overwhelming 81.57% of CLA's shares.
In both instances — subscribed shares and paid-in shares — CLA exceeded the Constitutional limit of 40% foreign ownership, thereby making the CAB's approval of its franchise legally untenable.@