Sen. Sherwin Gatchalian and Surigao del Norte Rep. Philip Pichay, among others, were charged with multiple counts of malversation, graft and violation of banking laws before the Sandiganbayan on Thursday.
The Ombudsman filed the charges in connection with the sale of the Gatchalian family-owened Express Savings Bank Inc. (ESBI) to the state-run Local Water Utilities Administration (LWUA) seven years ago.
Gatchalian is facing one count of malversation, one count of graft and one count of violating the Manual of Regulation for Banks.
Pichay, the former LWUA chief, was charged with three counts of graft, three counts of malversation, one count of violating the General Banking Law and one count of violating the Manual of Regulation for Banks.
Others who were charged were former LWUA officials Eduardo Bangayan, Aurelio Puentevella, Enrique Senen Montilla 3rd, Wilfredo Feleo, Daniel Landingin and Arnaldo Espinas; WELLEX Group Inc. (WGI) executives Dee Hua Gatchalian, William Gatchalian, Elvira Ting, Kenneth Gatchalian and Yolanda Dela Cruz; FPI executives Peter Salud, Geronimo Velasco Jr., Weslie Gatchalian, 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.
The Ombudsman said the LWUA Board composed of Pichay, Bangayan, Montilla, Puentevella and Landingin passed Resolution 56 approving the acquisition of ESBI on March 24, 2009 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).
In addition, the acquisition was also made in contravention of a legal opinion rendered by the Office of the Government Corporate Counsel that the acquisition was subject to review by the DOF and approval by the OP, including compliance with applicable banking laws, rules and regulations.
Moreover, the Pichay-led LWUA approved the acquisition of ESBI despite substantial negative audit findings uncovered during the due diligence stage and audit findings made by a private firm showing that the bank was insolvent after suffering substantial net losses and capital deficits for five straight years from 2005 to 2009.
As a result, then-LWUA Chairman Pichay approved the transfer of almost P780 million of LWUA funds to ESBI in order to increase the bank’s authorized capital stock–a transaction that was once again made without regulatory approval from the MB.
Of this amount, a total of P80 million was paid to the Gatchalian family as bank owners.
“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,” the Ombudsman’s office said.
“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,” it added.