Last April 5, the corporate watchdog filed a criminal complaint with the Department of Justice against Tan and other individuals associated with MFT and Foundry Ventures I for engaging in illegal investment activities.
The SEC also filed charges against external auditor PwC Philippines, also known as Isla Lipana & Co., and two of its accountants.
PwC Philippines is the domestic affiliate of PwC, one of the “Big Four’" auditors that dominate the global accounting industry. It also named two Isla Lipana auditors in the criminal complaint.
Independent auditors are responsible for reviewing financial statements before these are presented to the public. Their endorsement plays an important role in influencing investment decisions.
The SEC said PwC Philippines was the auditor of MFT and Foundry Ventures from 2018 to 2021.
Roderick Danao, chair of PwC Philippines, told InsiderPh his firm will fully cooperate with the investigation but he noted that the SEC complaint contained serious errors and the accounting firm was not involved in any illicit activities.
He said the entity called MFT Group was their sole client and they had no involvement with Tan’s other firms such as Foundry Ventures, as the SEC had alleged.
“We dont audit any of the other companies owned by Mica, especially Foundry Ventures, the one the SEC said issued all these [illegal] investments,” he added.
The SEC’s complaint alleged that Isla Lipana colluded with the MFT Group in presenting financial statements containing significant misrepresentations.
After poring through the group’s financial filings, the regulator said MFT failed to properly account for investors’ money, since these were not recognized in the company’s books.
MFT also declared dividend revenues from 2018 to 2021 without any basis to do so, the SEC said. This was despite its related companies not having any dividends, insufficient retained earnings and, in some cases, a deficit.
According to the SEC, PwC Philippines issued unqualified opinions for the years 2020 to 2021, implying the group’s finances were fairly presented.
The independent auditor raised questions during 2018 and 2019 on certain aspects of the company’s financial accounts but these did not extend to MFT’s anomalous dividend declarations—a major component of the financial irregularities that occurred.
“Considering that this discrepancy happened over the years, and given its significant impact on the financial position of the MFT Group, the same cannot be considered an isolated event,” a portion of the complaint showed.
“The fact that respondent auditors repeatedly engaged themselves in this kind of irregularity is a clear indication of its intention to conceal the actual financial status of the MFT Group, to the prejudice of its investors,” it added.
Last week, the SEC said it permanently enacted a cease and desist order against MFT and its affiliates. This was after the MFT Group was found to be illegally soliciting investments under the guise of loan contracts.
In the criminal complaint, the SEC said the activities of MFT and Foundry Ventures are “of the nature of a Ponzi scheme”.
A Ponzi scheme is an operation that masquerades as a legitimate business but pays so-called profits using funds collected from new investors.
The Millennial Tan became a symbol for young entrepreneurs during MFT's prepandemic expansion into sectors like food, financial services, and healthcare.
The group reportedly controlled assets worth over P3 billion in 2018. Its investments included Saladstop! Vietnam, Mondial Kidney Care Center, and Mimi & Bros restaurant, its website showed.
Tan also served as a judge on the reality TV show The Final Pitch, patterned after the popular US series Shark Tank, where entrepreneurs pitch their ideas to successful business figures in hopes of securing a lucrative investment.
Tan was named in the complaint, alongside Eduardo Tan, Florita Tan, Enrique Eduardo Tan, Charles Edward Tan, Christian Konstantin Agbayani, Mario dela Fuente, Philip Tan, Jenna Fuentes, Ronaldo Nery, Halmond Parker R. Ong, Chiqui T. Tan, Jose Donnie B. Montelibano, Romarico S. Ruiz, Arlene M. Navarro A.K.A. Arlene Mauricio, Maria Beatriz Dolores R. Tomas, Mary Ruth A. Oquendo, Joanne A. Cabaero, Thuy Nguyen, Roxanne “Roxy” G. Agbayani,
Luis Gabriel R. Cancio, Jr., Noel M. Olan, Joselito “Jr” D. Hernandez, Jr., Christian M. Olan, Tito T. Cosejo, Jr., Christian De Vera, Jose Carlos R. Cancio A.K.A. Carlos Cancio, Mae Tan, Martin Choi, Reanne Po, Marta Gilda M. Poursabouri, Alan Madlangbayan, Mildred Madlangbayan Jeruz Madlangbayan, and Rosanna Vidal.
Also named in the complaint were Isla Lipana and auditors Geraldine Hammond-Apostol and Ruth F. Blasco, an SEC official told InsiderPH.
In a joint statement on Monday, MFT Group and The Foundry denied violating the law and said it was not afforded due process before the DOJ complaint was filed.
The companies also fired back with accusations of their own.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
