Claim: Rappler violated the Constitution
A column in The Manila Times, written by Antonio Contreras, details one of Rappler’s lawsuits involving Omidyar Network regarding foreign ownership. The article states that Rappler Holdings Corp. (RHC), the owner of Rappler, has been giving Philippine Depositary Receipts (PDRs) to Omidyar Network Fund LLC, a US-based offshore fund created by eBay founder Pierre Omidyar and his wife. The Securities and Exchange Commission (SEC) deemed this to be fraudulent due to the amount of control that this agreement grants Omidyar.
The article argues that the agreement between RHC and Omidyar accords Omidyar a large percentage of control. Provisions include having a two-thirds approval vote among PRC holders before actions can be taken that infringe on the interests and rights of Omidyar, which can also influence the kinds of corporate policies that are created. This goes against the provisions in the constitution against foreign equity, specifically Section 71.2 of the Securities Regulation Code, as well as the Anti-Dummy Law or the Commonwealth Act No. 108, which was meant to prevent ceding control over to foreign enterprises. The Constitution requires that media companies should have zero foreign control and/or ownership to protect the country’s best interest.
Although the article is factual, it lacks context.
The Facts: Philippine Depositary Receipts or PDRs “are an investment instrument that allows domestic and foreign investors to place funds in a local firm.”
According to the SEC, RHC sold 7,217,257 PDRs to Omidyar Network Fund LLC. In January 2018, the SEC ruled for the revocation of Rappler’s Certificates of Incorporation, essentially ordering for the shut down of the news site. The Court of Appeals (CA) sided with SEC’s findings that Rappler’s issuance of Philippine Depositary Receipts (PDRs) to foreign investor Omidyar amounted to some form of foreign control that violated the restrictions stipulated in the Constitution.
Rappler argued that Omidyar remains a ‘silent’ investor, and that it does not give any control to the foreign enterprise. This arrangement was also accepted by the SEC b in 2015.
Omidyar has since donated its PDRs to 14 of Rappler’s Filipino managers in 2018. Following this, the CA has ordered the SEC to re-evaluate their case as the legal grounds of SEC’s findings have thus been ‘removed’.
Why we fact-checked this: Rappler has been frequently targeted by pro-Duterte supporters and organizations, as well as by Duterte himself since the start of his administration. Journalists, news outlets, and broadcast networks, such as ABS-CBN, have been threatened and outright suppressed by the state due to their critical investigations into the numerous human rights abuses and administrative failures during Duterte’s 6-year authoritarian term. We, at Baguio Chronicle, stand with Rappler in upholding truth, justice, and defending press freedom in the country.