ORIGINAL COPY

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

139

House Bill No.

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

EXPLANATORY NOTE

Under the recently enacted Republic Act No. 9829, otherwise known as the Pre-
Need Code of the Philippines, “Pre-need plans” are contracts, agreements, deeds or
plans for the benefit of the planholders which provide for the performance of future
service/s, payment of monetary considerations or delivery of other benefits at the time of
actual need or agreed maturity date, as specified therein, in exchange for cash or
installment amounts with or without interest or insurance coverage and includes life,
pension, education, interment and other plans, instruments, contracts or deeds as may in
the future be determined by the Commission.

For the ordinary consumers, pre-need plans refer mostly to the educational plans
which they obtain for their children. The most notorious of these plans were the “anti-
inflation” plans, which allow planholders to pay at present day cost, the usually
expensive private college education, but for utilization only when their children go to
college, at a much later time.

This “anti-inflation” plans were later on deemed to be not feasible. The simplest
explanation was that there was something inherently wrong with the actuarial
assumptions and computations on such type of pre-need plans.

But this after it victimized, thousands, if not hundreds of thousands, of
planholders.

It was perceived to be the culprit behind the fall of giant pre-need companies, who
were no longer able to sustain the payment of their beneficiaries. However, it was soon
found out the unsound business practices or even malpractices of the pre-need companies
were equally to blame.

Afier several pre-need companies caused the suffering of countless numbers of
families, stifled their dreams, and downright murdered the inherent right of their children
to a better education and future, not a single pre-need company, owner, executive,
officer, or responsible person, has been punished.

Very recently, in September 2009, Congress enacted R. A. 9829 or the Pre-Need
Code. The passage of this law was deemed as the solution to all of the ills and
catastrophes brought about by this problematic industry.


Then the tragedy of Prudentiallife recently surfaced.

Prudentialife Plans, Inc., or PPI, failed to keep itself afloat after losing its license
and permit to sell new plans in 2009. It is now short of at least P10 billion in funds to
cover obligations to some 300,000 clients. It was placed under conservatorship, under the
authority of the Insurance Commission (IC) since September 2010. This was a ycar after
the Securities and Exchange Commission (SEC) stripped it of its license and disallowed
the sale of new plans.

PPI, asked to be allowed to undergo rehabilitation instead of liquidation. It blames
the deterioration of its finances to “an old basket of plans that guaranteed high benefits”
but which were based on “assumptions that were proven then, but were not sustained due
to subsequent events beyond the company's control”.

The end result would be the same. Planholders would not be paid, or at least
would not receive the benefits as stated under their original plan, Again, the planholders
are at the very losing end.

Worse, the planholders would not be able to have recourse under the new Pre
Need Code. This is because any offense, which may have been committed against them,
were done prior to the enactment of the said new law.

Nevertheless, assuming that the planholders would have recourse under this new
law, the Pre-Need Code would not give them the justice that they needed. A mere perusal
of its enumerated criminal offenses would reveal that it provides very light penalties for
very grave offenses. The only offenses punishable under Section 54 of the said Code are:
a) selling or offering to sell, a pre-need plan by unregistered persons; b) an unregistered

pre-need plan; c), a pre-need plan by means of false or misleading representation and
or

other fraudulent means; d) committing any negligent act or omission prejudici
injurious to the planholder; e) any other fraudulent act or omission. These are offenses
penalized by imprisonment ranging from only one (1) year to a maximum of six (6) years
only.

Moreover, the law places to the discretion of the court, the imposition of the
penalty against the officer or officers if a “juridical entity” is responsible for the
violation. This is even if an offense under the Code would surely be done by a juridical
entity because only corporations are allowed to operate as a pre-need company.

Most important, the law does not also provide for the appropriate grave penalty if
it the offense is committed again on massive scale.

What if another College Assurance Plan, Pacific Education Plan, Legacy or
Prudentiallife pre-need disaster occurs?

Surely, even under the Pre-Need Code, no person shall be aptly penalized for such
a dreadful offense.

Under this proposed measure, the Pre-Need Code would be amended to include
the offense of economic sabotage by selling pre need plans by means of false or
misleading representation and other fraudulent means, when it is committed by a
syndicate or in large scale

It shall be deemed committed by a syndicate if carried out by a group of three (3)
‘or more persons conspiring or confederating with one another. It is committed in large
scale if committed against five (5) or more persons individually or as a group.


It will be considered as a non-bailable capital offense. Thus not only would
the offender be meted by life imprisonment if found guilty, a mere finding of prima
facie evidence during preliminary investigation would already land the offender in
jail

And, selling a fraudulent pre-need plan would be very easy to prove. Under this
measure, the failure of a pre-need company to pay for the benefits under the pre-need
plan after its maturity, for any reason whatsoever, whether or not under a plan that is
approved by the IC, shall constitute prima facie evidence of false, misleading
representation or fraud.

The owners, executives and officers of the large corporate pre-need companies
can no longer be reckless because they would also be held criminally liable. This is as
along as they are officers having control, management or direction of the pre-need
company.

Finally, the IC, cannot also collude with the pre-need companies to approve pre-
need plans that are inherently defective. This is because if the beneficiaries cannot be
paid are under a pre-need plan of a company that is approved by the Commission, and
such complainants number more than thirty percent (30%) of all the beneficiaries or
maturing planholders of the pre-need company, the officers of the Commission
responsible for the approval of the said pre-need plan, shall be held liable for negligence
or omission under Paragraph d) of Section 54.

These pre-need companies have long run amok and committed not just grave
crimes against their thousands of planholders, but economic sabotage against the State. It
is high time to write finis to this.

It is in this view that the immediate passage of the bill is earnestly sought.

ARTHUR CYVAP.
Representative


nv

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONG
First Regular Session

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

AN ACT

DEFINING THE OFFENSE OF ECONOMIC SABOTAGE
THROUGH THE SOLICITING, SELLING OR OFFERING TO
SELL A PRE-NEED PLAN BY MEANS OF FALSE OR
MISLEADING REPRESENTATION AND OTHER FRAUDULENT
MEANS, AMENDING FOR THE PURPOSE SECTION 54 OF
REPUBLIC ACT NO. 9829, OTHERWISE KNOWN AS THE PR
NEED CODE OF THE PHILIPPINES, AND FOR OTI
PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled.
SECTION 1. Short Title. — This Act shall be known as the “Pre-Need Economic
Sabotage Act of 2013”.
SECTION 2. Declaration of Policy. ~ It is hereby declared the policy of the State
to regulate the establishment of pre-need companies and to prevent practices prejudicial
to public interest and provide for the utmost protection of planholders.
SECTION 3. Amendment of Section 54 of Republic Act No. 9829, Otherwise
Known as the Pre-Need Code of the Philippines. — Section 54 of Republic Act No.
9829, otherwise known as the Pre-Need Code of the Philippines, is hereby amended, to

read as follows:

"SEC. 54. Criminal Penalties. — The following acts are criminal in
nature:

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(c) Soliciting, selling or offering to sell a pre-need plan by means
of false or misleading representation and other fraudulent means shall be
penalized by imprisonment of six (6) years and one (1) day to twelve (12)
years and a fine in the amount of Fifty thousand pesos (P50,000.00) to
Five hundred thousand pesos (P500,000.00)..

THE FAILURE OF A PRE-NEED COMPANY TO PAY FOR
THE BENEFITS UNDER THE PRE-NEED PLAN AFTER ITS
MATURITY, FOR ANY REASON WHATSOEVER, WHETHER
OR NOT UNDER A PLAN THAT IS APPROVED BY THE
COMMISSION UNDER THIS ACT, SHALL CONSTITUTE PRIMA.
FACIE EVIDENCE OF FALSE, — MISLEADING
REPRESENTATION OR FRAUD.

THE OFFENSE UNDER THIS PARAGRAPH, WHEN
COMMITTED BY A SYNDICATE OR IN LARGE SCALE, SHALL
BE CONSIDERED AN OFFENSE INVOLVING ECONOMIC
SABOTAGE, AND SHALL BE CONSIDERED AS A CAPITAL
OFFENSE. IT SHALL BE DEEMED COMMITTED BY A
SYNDICATE IF CARRIED OUT BY A GROUP OF THREE (3) OR
MORE PERSONS CONSPIRING OR CONFEDERATING WITH
ONE ANOTHER. IT IS DEEMED COMMITTED IN LARGE
SCALE IF COMMITTED AGAINST FIVE (5) OR MORE
PERSONS INDIVIDUALLY OR AS A GROUP.

THE PERSONS CRIMINALLY LIABLE FOR THIS
OFFENSE ARE THE OFFICERS HAVING CONTROL,
MANAGEMENT OR DIRECTION OF THE PRE-NEED
COMPANY, EVEN IF SUCH BE A JURIDICAL ENTITY.

(@) Any negligent act or omission that is prejudicial or injurious to

the planholder shall be penalized by imprisonment of one (1) year and one


(1) day to six (6) years and a fine in the amount of Fifty thousand pesos
(P50,000.00) to Five hundred thousand pesos (P500,000.00).
IF THE BENEFICIARIES OR — MATURING

PLANHOLDERS UNDER THE §$

ECOND PARAGRAPH OF THE
PRECEDING PARAGRAPH (c) CANNOT BE PAID UNDER A

PRE-NEED

LAN OF A COMPANY THAT IS APPROVED OR
REGISTERED BY THE COMMISSION, AND SUCH
COMPLAINANTS NUMBER MORE THAN THIRTY PERCENT
(30%) OF ALL THE BENEFICIARIES OR MATURING
PLANHOLDERS OF THE PRE-NEED COMPANY, THE
OFFICERS OF THE COMMISSION RESPONSIBLE FOR THE
APPROVAL OR REGISTRATION OF THE SAID PRE-NEED

PLAN UNDER THIS ACT, SHALL BE CONSIDERED TO BE

GUILTY OF NEGLIGENCE OR OMMISSION

DER THI
PARAGRAPH AND SHALL ALSO BE HELD LIABLE FOR THIS
OFFENSE.

Xxx.”

SECTION 4. Separability Clause. - If any provision of this Act, or any parts
thereof, is declared unconstitutional, the same shall not affect the validity and effectivity
of the other portions,

SECTION 5. Repealing Clause. - All laws, executive orders, presidential
decrees, proclamations, rules, regulations, issuances and enactments of parts thereof

inconsistent with this Act are hereby repealed or modified accordingly.

SECTION 6. Effectivity. - This Act shall take effect fifleen (15) days from its
complete publication in the Official Gazette of in a newspaper of general circulation in

the Philippines, whichever comes earlier.

APPROVED.