ESTAFA charges were filed against 88 bank depositors before the Department of Justice for allegedly conspiring to commit deposit insurance fraud against the Philippine government of over P97 million.

In a complaint filed by the Philippine Deposit Insurance Corp. (PDIC), it accused spouses Manu and Champa Gidwani and 86 other alleged “depositors” to have gravely misrepresented themselves to be insured depositors of various closed Legacy banks.

Based on investigations conducted, Gidwani and several other respondents falsified commercial and official documents in conspiracy with each other.

PDIC alleges that the fraudulent scheme involved “[the] respondents’ acts of misrepresenting themselves to be the owners of certain deposits; filing claims for deposit insurance and; receiving deposit insurance payments from the PDIC when they are not the true owners of the said deposit accounts maintained with the Legacy banks.”

The spouses allegedly maintained 471 accounts in various Legacy banks of about P118.19 million, which were simultaneously opened and funded through checks issued by only one individual or through fund transfers from a single account.

Ten of the respondents who placed a combined P20.96 million in deposits, however, were found to be employees or household help of the Gidwani couple.

Based on the PDIC Charter: “all deposits in a bank maintained in the same right and capacity of the depositor for his benefit either in his own name or in the name of others shall be consolidated into one deposit account entitled to the maximum deposit insurance coverage. At the time of the closure of the Legacy banks, the maximum deposit insurance coverage was P250,000.”

In view of its functions as co-regulator of banks, deposit insurer and receiver/liquidator of closed banks, PDIC is authorized to conduct investigations and file necessary cases against erring bank officials and unscrupulous individuals.

“PDIC vigorously pursues legal action against these parties that circumvent the deposit insurance scheme for their personal benefit,” a statement issued by PDIC stated.

“The quest for justice against erring depositors is an important undertaking of PDIC to protect the Deposit Insurance Fund, PDIC’s funding source for payment of insured deposits.”

Legacy banks, a group of 12 affiliated banks, were ordered closed by the Monetary Board almost simultaneously in December 2008.

The closure cost the PDIC Deposit Insurance Fund an estimated P12 billion in deposit insurance payments.

The Rural Bank of Polangui, another Legacy bank based in Albay, was ordered closed on February 26, 2010.

According to PDIC, “the Legacy banks’ failure is touted as the largest financial scam in the banking system.”

“It was found out that the deposit insurance fraud was made possible when a bank with a branch in the Visayas region accepted 683 “crossed checks” issued by PDIC as deposit insurance payments to 86 individuals who misrepresented themselves as owners of accounts in various Legacy banks in conspiracy with Manu and Champa Gidwani.”

In a statement, PDIC stated: “the bank allowed the deposit of the said ‘crossed checks’ to a single account despite PDIC’s specific instruction that the checks should be “For Payees Account Only.””

Republic Act 8791 or the general banking law provides that “the bank’s failure to heed warnings and admonitions of the supervisory and regulatory authorities was tantamount to conducting business in an unsafe and unsound manner.”

On June 29, 2010, PDIC issued its Bulletin No. 2010-14 reminding “all member-banks to strictly observe the provisions of the manual of regulations for banks on second-endorsed checks in relation to payments approved by PDIC for deposit insurance claims.”

Established on June 22, 1963 by the general banking law, PDIC provides protection to depositors and help maintain stability in the financial system by providing permanent and continuing deposit insurance.”

Effective June 1, 2009, the maximum deposit insurance coverage is P500,000 a depositor. All deposit accounts by a depositor in a closed bank maintained in the same right and capacity shall be added together. A joint account shall be insured separately from any individually owned deposit account.