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By Daxim L. Lucas
, Senior Reporter
Second of three parts
What was unusual about Banco Filipino’s
P148-million loan to Filipino Vastland in 2001 was that the real
estate firm did not even put up its own assets as collateral.
Instead, the firm used the tried and tested
method of using “other people’s money” — or in this case,
other people’s assets — borrowing real-estate properties from
two other firms of the same business group.
The firms that were generous enough to lend
their real estate to Filipino Vastland to collateralize its loan
were BF Life Insurance Corp. and BF General Insurance Co., Inc.
Any pretense as to the independent decision
making process between BF Life and BF Gen were put to rest by the
minutes of the board meetings which were obtained by The Times.
Both board meetings occurred on July 26, 2001 at
Banco Filipino’s headquarters on Paseo de Roxas in Makati City.
According to the minutes of that meeting, the BF Life board meeting
started at five in the afternoon and ended at six in the evening.
There were 10 people present.
A separate copy of the minutes of BF Gen’s
board meeting showed that it started 30 minutes later in the very
same board room and ended at the same time as the BF Life meeting.
As the minutes show, one person left the meeting to be replaced by
two others.
This can only mean that both meetings were being
conducted at the same time and corporate matters to two supposedly
distinct firms were being deliberated on simultaneously.
To be sure, nowhere is it said that board
meetings cannot be held simultaneously. However, the synchronicities
of the meetings and the personalities involves are worth further
examination.
It is also worth mentioning that BF Life and BF
Gen had very similar sets of board directors.
At one point, both insurance firms shared six
directors namely Valentin S. Daez, Jr., Maxy S. Abad, Orlando O.
Samson, Joseph C. Velhagen, Benjamin B. Bernardino (who was also the
corporate secretary), and Albert C. Aguirre as board adviser.
Filipino Vastland treasurer Rosalina E. Tacolod,
who signed on behalf of the firm on Banco Filipino’s three
promissory notes, was also a director for BF Gen — the very same
firm that put up a substantial amount of mortgaged real-estate to
back the loan.
The minutes also provides insights as to the
decision making process that led to the mortgage of assets to
support Filipino Vastland’s loan.
BF Life mortgaged properties enough to cover
P109 million of Filipino Vastland’s loan from Banco Filipino. But
the minutes of the BF Gen board meeting showed no similar approval
for any mortgage of real-estate property.
Instead of a normal board resolution, BF Gen
assistant corporate secretary Dominga G. Garcia had notarized a
secretary’s certificate saying that the BF Gen board had indeed
authorized the mortgage of assets enough to cover a P100-million
Filipino Vastland loan from Banco Filipino.
The certificate said that a “special meeting
of the board of directors” was called on the same day with a
quorum present where the mortgage was approved unanimously.
Notarized a few days later on July 31, 2001, the
Garcia certificate failed to say where the “special meeting” was
held nor who was present in it.
As in the minutes of the BF Life board meeting,
the secretary’s certificate of BF Gen’s “special meeting”
authorized its president and CEO Joseph C. Velhagen to transact this
business on behalf of the insurance firm.
Velhagen was also a director of Banco Filipino,
which was the ultimate destination of the mortgaged assets. In
short, he was a director of both the lender and the source of the
borrower’s collateral assets.
Nowhere in any of the documents The Times
obtained showed what BF Life or BF Gen would get in return for so
generously lending its assets to help Filipino Vastland back its
loan.
Nowhere was it even mentioned how the security
of BF Life’s and BF Gen’s insurance policy holders would be
safeguarded.
As it would later turn out, the security of both
insurance firms’ clients would be severely eroded by the scheme.
Strangely, the section containing details of the
board resolution that approved the mortgage of the insurance
firm’s properties as collateral for Filipino Vastland had a
smaller font size, almost as if they were included as an
afterthought.
The minutes provided another intriguing tidbit
of information. The records say that BF Life chairman Teodoro O.
Arcenas, Jr. “noted the alarming increase in the negative bottom
figures of the income statement” (of the firm) and
“instructed” its treasurer “to infuse additional working
capital from BF Homes to cover up the deficiency in margin of
solvency amounting to more or less P50 million.”
Why would an insurance firm which was
experiencing a net loss of P29.5 million as of the first five months
of 2001 — enough to worry its chairman — lend out several
millions worth of real estate assets to another firm?
Did Filipino Vastland in any way compensate BF
Life and BF Gen for allowing its assets — presumably acquired
using policy holders’ funds — to be used for a loan from Banco
Filipino? Or did both insurance firms simply lend out the assets for
free in a supreme act of goodwill?
If so, what are the implications of these
actions on policy holders of BF Life and BF Gen as the firms’
ability to cover their insurance liabilities had just declined by a
combined P148 million?
Just a little over a year after the loan was
granted, the worst fears of BF Life’s and BF Gen’s policy
holders were realized.
On Oct. 14, 2002, Banco Filipino foreclosed the
collateral used by Filipino Vastland to back its loan.
The circumstances of the loan default and the
details of the subsequent foreclosure remain unclear. All three
promissory notes showed, however, that Filipino Vastland agreed to
pay Banco Filipino the interest and principal portions of the loan
only once a year for the duration of the five-year loans.
It is strange enough that Banco Filipino agreed
to annual payments where the mode is usually monthly, quarterly, or
even semi-annual payments, but what makes it stranger is that the
bank foreclosed the collateral of all three loans when only one
promissory note could have been classified as a non-performing loan
(NPL).
The Bangko Sentral ng Pilipinas (BSP) defines
NPLs as loans whose interest or principal payments have remained
unserviced for at least 90 days.
Loan payments overdue by 30 days are only
classified as “past due.”
A certification from Banco Filipino showed,
however, that the bank opted to foreclose on the entire set of real
estate collateral when interest and principal payments on the
P5-million and P37-million portion had yet to come due five and 11
days later, respectively.
It is unclear whether Filipino Vastland
defaulted on its P106-million loan portion whose interest and
principal portion had fallen due on August 1, 2001.
The Times obtained a copy of a certification
issued by Banco Filipino vice-president Dionisio M. Domingo
attesting that the bank’s board had approved the “proposed
settlement” of the loan.
The transaction is basically a dacion en pago
arrangement where Filipino Vastland extinguished its remaining
liability to Banco Filipino.
The certification, dated Oct. 24, 2002, said the
documentation of the “transaction and release of collateral,”
including 20 transfer certificates of title (TCTs) in the name of BF
Gen and 17 TCTs in the name of BF Life “are now in process” in
favor of the bank.
Bank officials who were shown the pertinent
documents last week all agreed that the transaction, while leaving
many questions unanswered, was not common practice in the industry.
“It’s not clear what their motives are, but
I can say that the moves as documented seem quite irrational on the
part of the lender, the borrower, as well as the firm that lent the
collateral,” a bank official said.
To be continued
First Part
| Conclusion
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