Members of the state-run Development Bank of the Philippines Board of Directors and DBP’s Risk Oversight Committee (DBP-ROC) are facing a graft complaint before the Office of the Ombudsman over the allegedly questionable sale of the bank’s government security holdings worth P14.3 billion.
The government allegedly suffered P717.07 million in actual losses because of the sale, the complainants said.
“These losses caused the net income of the bank to drop significantly from P5.6 billion posted in 2013 to P4.5 billion last year,” they noted in a statement.
The complainants alleged that the DBP Board of Directors and senior management officials approved the sale and purchase of the government security holdings by the DBP Treasury Group with FMIC despite knowing “that such kind of transaction described as a ‘wash sale’ is prohibited by the Bangko Sentral ng Pilipinas (BSP) and is deemed illegal and unsound trading practice under the SRC.”
SRC is the Securities Regulations Code.
The 19-page complaint, which stemmed from a Commission on Audit report, cited DBP-COA’s Audit Observation Memorandum (AOM) 2014-Tro-01 and said the DBP’s government security [GS] holdings “were sold at various dates at a loss to one and the same counter-party, i.e. the First Metro Investment Corporation [FMIC], and that the same GS series [was]purchased on the same day at the same price and booked under Hold to Maturity (HTM) account when these were sold at a loss which may give an impression of unsound trading practices leading to market manipulation.”
The DBP Employees Union along with the Association of the DBP Career Officials filed the complaint on Friday afternoon for alleged violations of Sections 3(a), 3(e), 3(g) and 3(j) of the anti-graft law; the Securities Regulations Code; Article 244 of the Revised Penal Code (RPC) for alleged unlawful appointments; and Chapter IV Sections 19(b)(d)(e) of the GOCC Governance Act of 2011.
The complainants also charged the DBP executives administratively, also citing the Administrative Code of 1987, Bangko Sentral ng Pilipinas (BSP) Circular Letter 2010-013 and BSP Circulars 626 and 628.
Named respondents were Board Chairman Jose Nuñez Jr.; Board Vice Chairman Gil Buenaventura; Board Directors Jose Luis Vera, Cecilio Lorenzo, Alberto Aldaba Lim, Lydia Echauz, Reynaldo Geronimo, Vaughn Montes and Daniel Laogan; Executive Vice President Fe Susan Prado; Senior Vice President Fritzie Tangkia-Fabricante; SVP Treasurer and Group Head Mariquita Agena; Senior Assistant Vice President Rustum Corpuz, head of the Department of Asset and Liability Management; and SAVP Francis delos Reyes, head of the Local Bond Trading Unit.
Vera is also DBP-ROC vice chairman while Nuñez Jr., Buenaventura, Lorenzo, Lim, Echauz, Geronimo, Montes, Prado and Tangkia-Fabricante are members of DBP-ROC.
“The DBP-COA noted that the ‘strategy’ to shift the GS holdings of DBP from Available-For-Sale to Held-to-Maturity, implemented by the DBP Treasury Trading Group, with FMIC as the only counter-party in the series of buy-and-sell transactions at various dates done within the same day and at the same price, was duly approved by the senior management and board members in the DBP-ROC,” the complainants said.
Based on the complaint, there were 28 GS-AFS sales transactions between DBP and FMIC and 9 “reclassifications” to book the same GS series under the HTM account.
The complainants cited the Management Comments to DBP-COA, saying these showed that the senior management and board members in the DBP-ROC approved the strategy as well as its method of implementation.
“Thus, the Treasury Group engaged the services of FMIC–the willing ‘counter-party’ who effected the ‘reclassification’ via illegal ‘Wash Sale’ transactions resulting in actual government losses of P717.07 million. The DBP-ROC basically transferred the GS holdings from one book to another,” they said.
Also, they alleged that the Treasury Group officers who implemented the “strategy” do not have the required professional licenses as well as qualification standards, competency and experience.
There were other senior management employees of DBP who were also allegedly not qualified for their respective positions, the complainants said, also alleging that these individuals lacked the requisite Civil Service eligibility.
They argued that the sale of the GS holdings of DBP on various dates at a loss to one and the same party, FMIC, violated the SRC.
Section 24.1(a)(i) of the SRC states it unlawful for any person to create a false or misleading appearance of active trading “By effecting any transaction in such security which involved no change in beneficial ownership thereof.”
Prado, Agena and Corpuz Jr., the complainants also alleged, were not registered brokers or dealers with the Securities and Exchange Commission (SEC) thus allegedly violating Sections 28.1 and 28.2, Chapter 8 of the SRC.
“They do not have the required SEC certification to be able to engage in trading of any form of securities,” they further alleged.
When asked if there was anyone who benefited from the allegedly disadvantageous transaction, Francis Romulo Badilla Jr., president of the Association of the DBP Career Officials, told reporters, “We cannot yet establish that because we are asking the Ombudsman to enter to the picture to conduct investigation and to dig deeper kasi alam namin pag may nalugi, may kumita [because one man’s loss is another man’s gain].”