Lapu-Lapu City Mayor faces charges for P2.6-B bank loans

MANILA, Philippines—Lapu-Lapu City Mayor Paz Radaza is facing criminal charges in the Department of Justice for taking part in the creation of P2.6 billion in alleged fictitious loans that eventually led to the closure of a bank she headed in 2009.

The Philippine Deposit Insurance Corp. (PDIC) this week said it has filed criminal charges on Jan. 13 against Radaza and businessman Julius Eullaran, a loans manager at the now-shuttered Rural Bank of Subangdaku Inc. (RBSI).

The two were accused of creating fictitious loans and conducting business in an unsafe and unsound manner. The RBSI was placed under the PDIC receivership by the Bangko Sentral ng Pilipinas (BSP) Monetary Board on Jan. 8, 2009.

In its complaint, PDIC alleged that respondents Paz Radaza, then president and member of the RBSI Credit Committee, and Julius Eullaran, RBSI’s bank-wide loans manager, “conspired and caused the creation of 6,051 fictitious loans” worth P2.6 billion from 2004 to 2008.

These loans comprised about 97 percent of all the loans supposedly released by the RSBI head office during the period.

“The complaint further stated that the respondents orchestrated the creation of official receipts and made it appear that payments were being made to the bank when, in fact, no payment was being received,” the PDIC said in a statement.

“These supposed payments were used to provide the purported source of the fictitious loan proceeds,” it added.

The deposit insurer, which serves as the receiver of banks closed down by the BSP, said a sworn affidavit of one of the bank’s former loan officers showed that Eullaran and Radaza ordered their subordinates to create fictitious loans, “no questions asked.”

This claim was supported by the findings of the expert forensic accounting team from Alba Romeo & Co. that PDIC engaged to assist in the investigation.

Results of the forensic investigation showed that 5,470 of the 6,051 fictitious loans did not contain the required credit information.

In addition, 581 of these loans did not have any supporting documents. Consequently, demand letters to the named borrowers of these loans were returned because of unknown addresses or because the borrowers did not exist.

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