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Republic of the Philippines
HOUSE OF REPRESENTATI
Quezon City

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SEVENTEENTH CONGRES
First Regular Session

e ATION UNIT
NOE X SEQ

House Bill No. 2714

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.



After 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.

Very recently, as if there is no end to pre-need tragedies, the case of
Loyola Plans surfaced.

More than 89,000 plan holders were adversely affected after the
financial troubles suffered by Loyola Plans Consolidated. According to the
Insurance Commission, the pre-need company's memorial plans alone have
about 53,000 holders, 23,000 others hold pension plans, while 12,000 have
educational plans. Investigations showed Loyola lacks funds to pay its
customers. The shortfall — P230 million.

Assuming that the planholders would have recourse under the Pre-
Need Code, this law 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
other fraudulent means; d) committing any negligent act or omission
prejudicial or injurious to the planholder; ¢) 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, Prudentiallife or Loyola 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 bi
sought.

is earnestly

ARTHUK C. YAP
Representative


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

House Bill No. e7li

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 PRE-NEED CODE OF
THE PHILIPPINES, AND FOR OTHER 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 2016”.

SECTION 2. Declaration of Policy. — \t 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


1 of Republic Act No. 9829, otherwise known as the Pre-Need Code of the

2 Philippines, is hereby amended, to read as follows:

3 "SEC. 54. Criminal Penalties. - The following acts are
4 criminal in nature:

5 Xxx

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

lL thousand pesos (P500,000.00).

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

20 THE OFFENSE UNDER THIS PARAGRAPH,
21 WHEN COMMITTED BY A SYNDICATE OR IN LARGE
22 SCALE, SHALL BE CONSIDERED AN OFFENSE
23 INVOLVING ECONOMIC SABOTAGE, AND SHALL BE
24 CONSIDERED AS A CAPITAL OFFENSE. IT SHALL BE

25 DEEMED COMMITTED BY A _ SYNDICATE IF


20

21

2

23

24

25

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.

(d) 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 SECOND PARAGRAPH
OF THE PRECEDING PARAGRAPH (c) CANNOT BE
PAID UNDER A PRE-NEED PLAN 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 UNDER
THIS PARAGRAPH AND SHALL ALSO BE HELD
LIABLE FOR THIS OFFENSE.

xxx

SECTION 4. Separability Clause. - \f 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 fifteen (15) days
from its complete publication in the Official Gazette of in a newspaper of

general circulation in the Philippines, whichever comes earlier.

APPROVED.