Makati Court Upholds Calata Officers’ Conviction for Market Manipulation

​A Makati City trial court has upheld the conviction of the officers of delisted company Calata Corporation for making misleading statements on its supposed Mactan Leisure City project that led to a surge in the trading of its shares in 2016.

In a consolidated order dated May 19, Branch 148 of the Regional Trial Court of Makati City denied the motion for reconsideration filed by the officers of Calata Corporation seeking their acquittal on two counts of violation of Section 24(d) of Republic Act No. 8799, or the Securities Regulation Code (SRC). 

The court, in its decision on May 31, 2024, sentenced Joseph H. Calata, chairman, president, and chief executive officer of the company, and Jose Marie Fabella, corporate secretary, compliance officer and corporate information officer, to pay fines of P4 million each, or to serve prison time if they fail to pay on account of insolvency, for market manipulation. 

Section 24(d) of the SRC prohibits the making of false or misleading statements on any material, which a person knew or had reasonable ground to believe was false or misleading, for the purpose of inducing investors to buy a security listed or traded on an exchange.

In the order, the court denied Calata officers’ claim that they did not violate Section 24(d) of the SRC and instead violated Section 17 of the same law pertaining to reportorial requirements, which is merely administrative in nature and does not involve penal sanctions.

“The fact that [Calata and Fabella] may have also committed an administrative violation of Section 17 of the SRC is not a bar to prosecution under Section 24 of the [SRC],” the court held, noting that the imposition of administrative sanctions does not preclude the filing of criminal charges. 

It also rejected the claim of Calata Corporation’s officers that there was insufficient evidence to prove their guilt beyond reasonable doubt, given the lack of actual injuries and witnesses testifying that they suffered losses from the alleged misleading disclosures. 

“Actual loss or harm, much less actual public harm, is not an element of the offense. Thus, the Court reiterates that the evidence presented by the prosecution proves beyond a reasonable doubt the criminal liability of the accused,” the court ruled.  

The decisions stemmed from a case buildup led by the SEC due to the surge in the trading volume of Calata’s shares, following its disclosure to the Philippine Stock Exchange on August 23, 2016 referring to its partnership with Sino America Gaming and Macau Resources Group Limited for the development of a USD1.4 billion integrated resort and casino project called Mactan Leisure City. 

In the disclosure, the company claimed the project was expected to start operations in 2020, with projected gross annual revenues of P55.74 billion. This resulted in a surge in the trading volume of its shares by 2,455% on the same day, followed by a 196.41% increase in the next trading day.

The court ruled that the disclosures contained “unfounded promises and exaggerations,” and such information was disclosed despite the absence of a license application with the Philippine Amusement and Gaming Corporation (PAGCOR) for the project. 

The company’s August 26, 2016 disclosure clarifying the partnership agreements for the project was likewise found to be misleading as it did not provide whether an application for an integrated casino permit was already submitted to PAGCOR.

Eight shareholders of Calata Corporation were also previously indicted for market manipulation for employing manipulative devices that induced the public to buy its shares.