THE Philippine Ombudsman is set to indict before the anti-graft court Prospero Pichay Jr. , the former Local Water Utilities Administration chief; Sherwin Gatchalian, a newly proclaimed senator of the republic; his brother Weslie, a nominee of a winning party-list in the House of Representative; and several others in connection with an anomalous P780 million bank acquisition deal.
Ombudsman Conchita Carpio Morales, in a statement, said there is probable cause to indict Pichay, the Gatchalians and others for violation of Republic Acts No. 3019 (Anti-Graft and Corrupt Practices Act), No. 8791 (General Banking Law of 2000) and the Manual of Regulation for Banks for their roles in the LWUA’s 2009 acquisition of the Laguna based Express Savings Bank Inc. (ESBI).
Morales disclosed that on March 24, 2009, the LWUA Board led by Pichay passed Resolution No. 56 (Series of 2009) approving the acquisition of ESBI without the requisite regulatory approvals from the Monetary Board (MB) of the Bangko Sentral ng Pilipinas, Department of Finance (DOF) and the Office of the President (OP).
The acquisition, Morales said, was also made in contravention of the legal opinion rendered by the Office of the Government Corporate Counsel that opined it is subject to review by the DOF and approval by the OP, including compliance with applicable banking laws, rules and regulations.
The DOF also formally objected to the acquisition as it is inconsistent with the ongoing rationalization and streamlining of the government corporate sector and that the financial health of the thrift bank must be closely examined and validated, Morales said.
She added that to compound the problem, Pichay, et al. approved the acquisition despite substantial negative audit findings uncovered during the due diligence stage. Audit findings made by a private firm revealed that the bank was insolvent after suffering substantial net losses and capital deficits for five straight years from 2005 to 2009.
Subsequent to the acquisition, Pichay, et al. approved the transfer of almost
P780 million of LWUA funds to ESBI in order to increase the bank’s authorized capital stock. The transaction between LWUA and ESBI was once again made without the regulatory approval from the MB. A total of P80 million was paid to Gatchalian, et al. as bank owners.
In July 2011, the Monetary Board placed ESBI under receivership, with the Philippine Deposit Insurance Corporation presently in the process of liquidating the bank’s assets.
According to Morales, “in view of the bank’s precarious financial standing at the time of the sale, the windfall received by herein private respondents must be deemed unwarranted benefit, advantage or preference.”
She added that “respondents defied banking laws and regulations in purchasing ESBI shares.”
Morales noted that “the injury suffered by the government due to the respondents’ actions is undeniable, as it deprived the government of the opportunity to use the illegally expended funds to instead fund the agency’s lawful projects, not to mention the shares purchased by LWUA from FPI and WGI are now worthless, ESBI having been shuttered due to severe financial distress” and that the “government effectively lost at least
P80,003,070.51 in this questionable acquisition alone.”
Aside from Pichay, Sherwin and Weslie Gatchlian, the other persons to be indicted are: Eduardo Bangayan, Aurelio Puentevella, Enrique Senen Montilla III, Wilfredo Feleo, Daniel Landingin, Arnaldo Espinas; WGI executives Dee Hua Gatchalian, William Gatchalian, Elvira Ting, Kenneth Gatchalian and Yolanda Dela Cruz; FPI executives Peter Salud, Geronimo Velasco, Jr., Rogelio Garcia, Lamberto Mercado, Jr., Evelyn dela Rosa, Arthur Ponsaran, and Joaquin Obieta; and ESBI executives George Chua, Gregorio Ipong, Generoso Tulagan, Wilfred Billena and Edita Bueno.
Specifically they will be charged with three counts of violation of Section 3(e) of RA. 3019, three counts of malversation, violation of RA 8791 and the Manual of Regulation for Banks.