The Office of the Ombudsman has found sufficient grounds to file graft and malversation charges at the anti-graft court Sandiganbayan against former officials of the Local Water Utilities Administration (LWUA) as well as executives of two firms and a bank over the allegedly anomalous acquisition of the bank in 2009.
Among those facing indictment are former LWUA Chairman Prospero Pichay Jr. and Valenzuela City (Metro Manila) Rep. Sherwin Gatchalian, who was recently proclaimed senator and whom the Ombudsman said was then an executive of Wellex Group Inc. (WGI).
The charges, which also include violation of Republic Act 8791 or the General Banking Law of 2000 and the Manual of Regulation for Banks, stemmed from LWUA’s acquisition of the Express Savings Bank Inc. (ESBI)–a local thrift bank based in Laguna that was owned by the Gatchalians, WGI and Forum Pacific Inc. (FPI).
The other former LWUA officials who were named respondents were: Eduardo Bangayan, Aurelio Puentevella, Enrique Senen Montilla 3rd, Wilfredo Feleo, Daniel Landingin and Arnaldo Espinas.
Also included were then-WGI executives Dee Hua Gatchalian, William Gatchalian, Elvira Ting, Kenneth Gatchalian and Yolanda dela Cruz as well as then-FPI executives Peter Salud, Geronimo Velasco Jr., Weslie Gatchalian, Rogelio Garcia, Lamberto Mercado Jr., Evelyn dela Rosa, Arthur Ponsaran and Joaquin Obieta.
Then-ESBI executives George Chua, Gregorio Ipong, Generoso Tulagan, Wilfred Billena and Edita Bueno also face indictment.
In a statement issued on Wednesday, the Ombudsman said the LWUA Board composed of Pichay, Bangayan, Montilla, Puentevella and Landingin passed Resolution 56 on March 24, 2009 approving the acquisition of ESBI allegedly without the required regulatory approvals from the Monetary Board of the Bangko Sentral ng Pilipinas (BSP), Department of Finance (DOF) and the Office of the President (OP).
The bank, according to the Ombudsman’s office, was acquired “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.”
It said the DOF objected to the acquisition because it was supposedly inconsistent with the ongoing rationalization and streamlining of the government corporate sector and because the financial health of the thrift bank must be examined and validated.
“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,” the Ombudsman noted.
After the bank was acquired, the Ombudsman’s office said, Pichay et al. approved the transfer of LWUA funds totaling almost P780 million to ESBI “in order to increase the bank’s authorized capital stock,” also allegedly without the regulatory approval from the central bank’s Monetary Board.
The Ombudsman alleged that P80 million was paid to Gatchalian, et al. as bank owners.
In 2011, the BSP’s Monetary Board placed ESBI under receivership with the Philippine Deposit Insurance Corporation in the process of liquidating the local thrift bank’s assets.
“[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 Carpio Morales said.
Morales added that the “respondents defied banking laws and regulations in purchasing ESBI shares.”
“[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,” she said, noting that the “government effectively lost at least P80,003,070.51 in this questionable acquisition alone.”