Ombudsman suspends GSIS chief, six others over P1.45-B investment

Metro Manila, Philippines - The Office of the Ombudsman ordered the preventive suspension of Government Service Insurance System (GSIS) President and general manager Jose Arnulfo Veloso and six other executives over the alleged questionable purchase of over a billion pesos in shares from a listed renewable energy company without following internal and market processes

It said the purchase of P1.45 billion in preferred shares from Alternergy Holdings Corporation in 2023 was not approved by the GSIS board, the shares were unlisted at the date of purchase, and violations of stock market requirements.

The Ombudsman preventively suspended the GSIS officials for six months, without pay, as they were administratively charged for alleged grave misconduct, gross neglect of duty, and violation of reasonable office rules and regulations in connection with the investment.

Other officials named in the seven-page order dated July 11, but released to the media Tuesday, July 22, were:

+ Michael Praxedes, executive vice president

+ Jason Teng, executive vice president

+ Aaron Samuel Chan, vice president

+ Mary Abigail Cruz-Francisco, vice president

+ Jaime Leon Warren, officer II

+ Alfredo Pablo, Acting officer IV

The Ombudsman said it found “sufficient grounds” to approve the preventive suspension order “considering that there is strong evidence showing their guilt,” the charges against them may warrant removal from service, and a bid to preserve documents and evidence pertaining to the case, among other reasons.

It said the order was “immediately executory.”

On January 30, the anti-graft body’s investigation revealed that the perpetual preferred shares bought by GSIS from Alternergy in November 2023 allegedly violated the provisions of the 2022 GSIS Investment Policy Guidelines and supposedly without the required approval of its board of trustees.

Alternergy was founded by former Energy Secretary Vicente Perez Jr.

The GSIS subscribed to 100 million perpetual preferred shares at P14.50 per share.

According to its investigation, the Ombudsman said it found that the perpetual preferred shares were “not listed with the Philippine Stock Exchange on the dates of the execution of the agreement and the payment of subscription.”

It also said that the investment was “non-compliant” with the minimum market capitalization - a requirement to determine eligibility for listing in the stock exchange and inclusion in market indices. The purchase also “exceeded” the free float market capitalization cap, a method used by the Philippine Stock Exchange to determine market capitalization based on the “public float” — or outstanding tradable shares not held by strategic or non-public entities like controlling shareholders, directors, or officers — rather than the total outstanding shares of a company.

The Ombudsman noted that the preferred shares were bought without the endorsement from necessary committees for the approval of the board of trustees.

The subscription agreement was signed by both parties in November 2023. A month later, the Ombudsman said Teng certified the disbursement voucher that the price to be paid to Alternergy was an “expense/cash advance necessary, lawful and incurred under his direct supervision,” with complete and proper supporting documents.

It said the disbursement voucher showed Veloso approved the payment.

Meanwhile, Warren and Pablo issued the payment instruction to Cruz-Francisco for the payment. Cruz-Francisco and Praxedes signed the letter of authority sent to the Land Bank of the Philippines, requesting the government-owned bank to debit the total price to Alternergy.

The Ombudsman said Chan “justified the purchase of shares despite non-compliance with the rules.”

The GSIS officials have yet to issue a comment.

But the GSIS Board of Trustees designated Juliet Bautista, executive vice president for support services, as officer-in-charge of the government-run entity during a special board meeting on Monday.

“The GSIS Board underscores that safeguarding the institution’s integrity and protecting members’ funds remain its highest priorities,” the GSIS said in a statement. “Investments in governance reforms and strong internal controls are ongoing to further reinforce system resilience and transparency.”