Senator-elect Sherwin Gatchalian and more than 20 others are facing charges before the Sandiganbayan for the P780-million acquisition by the Local Water Utilities Administration (LWUA) of a local thrift bank reportedly owned by Gatchalian’s family in 2009, the Office of the Ombudsman said in a statement on Wednesday, June 1.
The Ombudsman said there was probable cause to indict Gatchalian, former officials of the LWUA, corporate executives of WELLEX Group Inc. (WGI), and Forum Pacific Inc. (FPI) over the acquisition of the “troubled” Express Savings Bank Inc. (ESBI) based in Laguna.
Also facing indictment are:
* 7 former LWUA officials: Prospero Pichay Jr., Eduardo Bangayan, Aurelio Puentevella, Enrique Senen Montilla III, Wilfredo Feleo, Daniel Landingin, Arnaldo Espinas
* 6 WGI executives: (Senator-elect) Sherwin Gatchalian, Dee Hua Gatchalian, William Gatchalian, Elvira Ting, Kenneth Gatchalian and Yolanda Dela Cruz
*8 FPI executives: Peter Salud, Geronimo Velasco Jr., Weslie Gatchalian, Rogelio Garcia, Lamberto Mercado Jr., Evelyn dela Rosa, Arthur Ponsaran, and Joaquin Obieta
* 5 ESBI executives: George Chua, Gregorio Ipong, Generoso Tulagan, Wilfred Billena and Edita Bueno
All face three counts of violation of the anti-graft act, three counts of malversation, and violation of Republic Act No. 8791 (General Banking Law of 2000) and the Manual of Regulation for Banks.
“(I)n 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,” Ombudsman Conchita Morales said.
She added the respondents “defied banking laws and regulations in purchasing ESBI shares.”
Investigation showed that on March 24, 2009, the LWUA Board composed of Pichay, Bangayan, Montilla, Puentevella and Landingin passed Resolution No. 56 approving the acquisition of ESBI without the requisite regulatory approvals from the Monetary Board.
The acquisition also defied the opinion of the Office of the Government Corporate Counsel which said that the deal would be subject to review by the Department of Finance (DOF) and approval by the Office of the President, including compliance with applicable banking laws, rules and regulations.
Also, the DOF objected to the acquisition as it went against the rationalization and streamlining of the government corporate sector and that the financial health of the thrift bank must be closely examined and validated.
Worse, Pichay and company approved the acquisition despite substantial negative audit findings uncovered during the due diligence stage, the Ombudsman said.
“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,” it said.
The Ombudsman also noted Pichay and company approved the transfer of almost P780 million of LWUA funds to ESBI to increase the bank’s authorized capital stock, without regulatory approval from the MB.
Some P80 million was paid to Gatchalian and company as bank owners.
ESBI was placed under receivership in July 2011, with the Philippine Deposit Insurance Corporation (PDIC) now liquidating the bank’s assets.
“(T)he 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,” Morales said.
Worse, Morales said, “government effectively lost at least P80,003,070.51 in this questionable acquisition alone.”