Former Local Water Utilities Administration (LWUA) Chairman Prospero Pichay Jr. and 21 others are in hot water in connection with the LWUA’s allegedly “questionable” acquisition of a bank in 2009.
The Office of the Ombudsman threw out the charges for plunder and violation of five other sections of the anti-graft law for insufficiency of evidence.
However, it found sufficient ground to charge former officials of LWUA, corporate executives of Wellex Group Inc. (WGI), Forum Pacific Inc. (FPI) and Express Savings Bank Inc. (ESBI) for three counts of malversation, three counts of violation of section 3(e) of the anti-graft law, as well as violation of the General Banking Law and the Manual of Regulation for Banks.
Aside from Pichay Jr., the following former LWUA officials who face indictment are Eduardo Bangayan, Aurelio Puentevella, Enrique Senen Montilla 3rd, Wilfredo Feleo, Daniel Landingin, Arnaldo Espinas.
Likewise facing charges are WGI executives Dee Hua Gatchalian, William Gatchalian, Elvira Ting, Sherwin Gatchalian, 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 matter is under appeal.
Assistant Ombudsman Asryman Rafanan said that if the filing of the charges before the Sandiganbayan pushes through, the prosecutor may move for the suspension of incumbent public officials pending litigation under Section 13 of the anti-graft law.
Sherwin Gatchalian is currently a representative of Valenzuela while Weslie Gatchalian is a representative from Alay Buhay partylist.
Asked of the acquisition of a bank is part of LWUA’s mandate, Rafanan said, “Part of the mandate of LWUA is to oversee the management and operations of the systems of water distribution. It becomes highly questionable for LWUA to be in the business of buying banks.”
The case stemmed from LWUA’s acquisition of ESBI, a Laguna-based thrift bank owned by the Gatchalians, FPI and WGI.
Pichay, Bangayan, Montilla, Peuntevella and Landingin – who comprised the LWUA Board at the time – allegedly approved the acquisition of ESBI on March 24, 2009 without without the required regulatory approvals from the Monetary Board of the Bangko Sentral ng Pilipinas, Department of Finance (DOF) and the Office of the President (OP).
“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 office said in a statement.
After the bank was acquired, almost P780 million in LWUA funds were transferred to ESBI to increase its authorized capital stock which the anti-graft office said was likewise without the approval of the central bank’s monetary board.
A total of P80 million was paid to the bank owners, it said.
In its Joint Resolution, the office said that the windfall received by private respondents must be deemed unwarranted benefit, advantage or preference considering the bank’s “precarious financial standing” during its sale.
The monetary board placed ESBI under receivership in 2011 with its assets being liquidated by the Philippine Deposit Insurance Corporation (PDIC).
“[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,” the office said.
The government lost at least P80,003,070.51 in the acquisition alone, it noted.
Meanwhile, Wellex Group Inc. said in a statement that the private respondents never benefited from the sale because “there is no proof that they personally or actually received any part of the consideration for the subject shares.”
“FPI’s, WGI’s and the other private respondents’ personal stake holdings in ESBI were purely for investment. They are sellers in good faith. It is unfortunate, though, that FPI and WGI was sucked into the whirlpool of political vendetta against known political allies of the previous administration since former LWUA Chairman Prospero Pichay is known to be very close to detained former President Gloria Macapagal-Arroyo,” it said.
The firm also pointed out that it was LWUA board which had the duty to secure approval from the DOF, OP and the central bank for the acquisition of ESBI shares.
“In fact, public respondents warranted in writing that they have obtained such approvals from the appropriate government agencies. Hence, the selling of the shares of FPI and WGI to LWUA was done in good faith,” Wellex said, adding that the LWUA Board’s alleged failure to secure the required approvals should not prejudice FPI and WGI.
In the related administrative case, the Ombudsman’s office dismissed from the service Espinas, Chua, Ipong, Billena, Bueno and Tulagan after it found them liable for grave misconduct and conduct prejudicial to the best interest of the service.