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By Daxim L. Lucas, Senior Reporter
Conclusion
The loan paper trail involving Banco
Filipino, Filipino Vastland, BF Life Insurance Corp., and BF General
Insurance Co., Inc. raises some questions that are of interest to
bank depositors and insurance policy holders.
Apart from a potential conflict of interest
situation in the loan extended by Banco Filipino to Filipino Vastland,
the funds paid by the insurance policy holders of BF Life and BF Gen
also became involved in the transaction.
BF Gen documents as of July 17, 2002 showed that
the firm lent 21 transfer certificates of title (TCTs) with numbers
54945-54965 to Filipino Vastland to be used as loan collateral.
These represented properties in Almanza, Pamplona, and Merville
Subdivision in Las Piñas City.
Documents obtained by The Times showed minor
discrepancies like inventory notation claiming that TCTs covering
8,772 square meters were given to Maxy S. Abad while the tally from
the list showed a total of 8,854 square meters.
Whichever is correct, these TCTs lent out made
up about 42 percent of BF Gen’s real estate inventory as stated in
the list. They were valued at P13,300 per square meter making up an
aggregate value of at least P118.4 million out of a total portfolio
worth P216.7 million.
It is important to note that the transfer of the
TCTs was approved by the board of BF Gen of which Abad was a part,
to the real estate firm which Abad concurrently headed.
A thorough check with the Insurance Commission
(IC) showed that regulators have cleared only the financial
statements from 2000 for both BF Life and BF Gen.
IC officials said that they are still in the
process of verifying the audited financial statements for 2001
submitted by BF Life while BF Gen has yet to submit its financial
statements for that same year.
As of end-2000, BF Life had only P178.1 million
in admitted assets and a negative capital base of P119.2 million. BF
Gen, on the other hand, had P237.8 million and stockholders’
equity of P70.1 million in the same period.
The IC’s official synopsis of their annual
statements said BF Life’s capital impairment of P202.1 million and
margin of solvency deficiency of P199 million “were subsequently
covered up in full.”
BF Gen, on the other hand, reported in 2000 that
it held real estate assets worth only P181.5 million.
On Aug. 27, 2002, the IC sent a letter to then
BF Gen president Joseph C. Velhagen ordering the firm to produce
documentation that would support the periodic verification process
of its financial statements.
In the letter, Insurance Commissioner Eduardo T.
Malinis ordered BF Gen to submit an original copy of its 2001
financial statements, the owner’s copy of the TCT nos.
54945-54965.
The firm was given 10 days to comply with the
order.
Today — over four months after the deadline
— BF Gen has yet to fully comply with the requirements, according
to IC officials, including the order to present the original TCTs
for verification.
The separate inventory list obtained by The
Times showed that these same TCTs being demanded for by IC to
support BF Gen’s real estate holding claims were already “given
to Mr. Abad per his instruction used as collateral for Vastland
loan.” They were subsequently deposited at the Banco Filipino’s
loan department.
With Banco Filipino’s dacion en pago
settlement of the Filipino Vastland loan, these TCTs will not be
permanently located in the bank’s vaults.
The IC also ordered BF Gen to submit original
certificates and/or other documents to support the “unaccounted
shares of stock” in Banco Filipino numbering 5,303 shares, one
share in Casino Español, and 1,200 series V shares of the
Philippine Long Distance Telephone Co.
While BF Gen had yet to submit its latest
financial statements and BF Life’s most recent statements are
still being verified, officials at the IC opined that should
regulators classify these TCTs as “non-admitted,” either
insurance firm may become asset deficient.
“What we will simply do is not to include
these assets in their final tallies if indeed they cannot present
the TCTs,” an IC official said, requesting anonymity.
As such, the shareholders of the insurance firms
would be required by regulators to infuse additional assets to cover
all its liabilities to policy holders, the official said.
In a separate interview, Malinis said the law
mandates all insurance firms to submit their annual financial
statements by April 30 of the following year.
“Otherwise, they will have to pay a fine for
every week of delay,” he said.
He declined to reveal whether BF Life or BF Gen
had already been fined for the delays, saying that an assessment of
both insurance firms was still ongoing.
The IC chief said several insurance firms have
already been sanctioned with license revocation in the last two to
three years, but admitted that neither BF Life nor BF Gen has yet to
be punished for delays in fully disclosing their financial
positions.
“They have not been sanctioned yet,” he
said, adding that their assessment was still ongoing.
Other IC officials contacted by The Times said
regulators were unable to fully concentrate on the insurance firms
they are assigned to monitor because the regulator is undermanned.
“Often, it takes more than 10 days for
insurance firms to comply with our deadlines,” another official
said. “Our people have other accounts to handle simultaneously.”
As a general rule, however, Malinis said
insurance firms that fail to comply with IC deadlines for 30, 60 or
90 days may be sanctioned by regulators.
Depending on the severity of the violations,
Malinis explained that the sanctions may range from simple
reprimands, suspensions of licenses or outright revocation for the
most serious offenses.
According to Banco Filipino, its loan to
Filipino Vastland did not violate central bank prohibitions against
related interest lending.
In an interview with The Times last Monday,
Banco Filipino Senior Vice President Ramon M. Arcenas said
Filipino Vastland President Maxy S. Abad was “not related in any
way” to the bank when the loan was granted in three tranches from
August to October 2001.
Arcenas represented the bank in his capacity as
an official attached to its executive office.
He claimed that Abad was elected to the bank’s
board of directors only on Jan. 16, 2002 or about two and a half
months after the last loan tranche was released.
If so, banking observers opine that the
P148-million loan would have escaped the prohibitions on lending to
directors, officers, shareholders, and related interests (DOSRI).
As of presstime, Banco Filipino officials have
yet to provide documented proof that Abad indeed came on board after
the loan was granted.
Assuming that Abad became a director only a
short time after the loan was granted, it is clear that he was with
Banco Filipino when its board of directors agreed to foreclose the
collateral of Filipino Vastland, which he had headed.
“It raises a question of ethics,” a central
bank official said, requesting anonymity. “There may be a conflict
of interest situation although it is really a gray area depending on
who’s doing the explaining.”
Arcenas said the transaction was not illegal
especially since regulators at the Bangko Sentral ng Pilipinas have
not raised any issues after their periodic examinations.
Officials at the central bank have been hesitant
to speak about Banco Filipino on the record fearing a repeat of the
multi-year lawsuit which the regulator lost only a few years ago.
The suit resulted in the Supreme Court allowing
Banco Filipino to pursue P18.8 billion in claims from the old
Central Bank of the Philippines, which the court ruled what was then
one of the country’s largest banks with “grave abuse of
discretion.”
BSP officials believe that Banco Filipino’s
damages should be claimed from the Central Bank-Board of Liquidators
which is the legal successor to all of the old Central Bank’s
liabilities.
Arcenas said, however, that Banco Filipino
believes that BSP should assume the liabilities to the bank.
Banco Filipino’s claims are weighing heavily
on the regulatory agency which is capitalized at only P10 billion.
A central bank official summarized regulators’
attitude toward the entire Banco Filipino issue: “BSP is being
very careful about any adverse findings (during annual bank audits)
because there is a long history here of litigation and they are
sending signals about their P18-billion claim already.”
Meanwhile, Arcenas protested the inclusion of
Tomas B. Gomez III’s resignation letter from BF Homes, Inc. in
1998 saying the issue did not involve Banco Filipino, despite the
firms sharing common board directors.
In his resignation letter, Gomez decried alleged
“illegal” activities in the company that also “border on the
criminal.”
Arcenas said Gomez’s resignation spawned from
an intra-corporate dispute he had with BF officials Stephen N.
Sarino and Senior Vice President James Barbers.
“It had nothing to do with Banco Filipino,”
he said.
The Banco Filipino official also revealed that
Velhagen — who headed BF Life and BF Gen and was part of the board
which approved the transfer of properties to Filipino Vastland —
had already been ousted from both insurance firms, apparently a
casualty of the long-running Aguirre family dispute that is
threatening to upset the stability of the BF group of companies.
Regulators’ questions about some of these
firms remain unanswered to this day.
Calls made by The Times to BF Life and BF
Gen’s new chief, Alfredo B. Jimenez, Jr., to help shed light on
the issue went unreturned and interview requests also went
unsatisfied as of presstime.
Among the pending questions include the quality
of securities — if any — the insurance firms got in return for
lending out their assets to Filipino Vastland.
With only broad denials and lacking firmer
details, many of the questions remain as well.
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