The Office of the Ombudsman has approved the filing of graft and malversation charges against former officials of the Local Water Utilities Administration (LWUA) and members of the influential Gatchalian family in Valenzuela for the irregular acquisition of an insolvent bank in 2009.
In a press conference, Assistant Ombudsman Asryman Rafanan said it found probable cause to indict for graft and malversation against former LWUA board chairman Prospero Pichay Jr. (who is also former Surigao Del Sur Representative) and six other dismissed LWUA officials—Eduardo Bangayan, Aurelio Puentevella, Enrique Senen G. Montilla III, Wilfredo M. Feleo, Daniel A. Landingin, and Arnaldo Espinas.
Prospero Pichay. FILE PHOTO
They stand accused of approving the irregular acquisition of the bankrupt Express Savings Bank Inc. (ESBI) owned by the Gatchalians, the plastic tycoons in Valenzuela city, and the Forum Pacific Inc. (FPI).
Rafanan said the fact that a water administration body is dealing with bank acquisitions raises a red flag already that guided the Ombudsman’s investigation.
“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,” Rafanan said.
He added that although the ESBI was supposedly bought by the LWUA to finance water services, the transaction still violated the restrictions in bank acquisition.
The Ombudsman also recommended the filing of graft and malversation against almost all the members of the Gatchalian family—Wellex Group Inc. executives led by its owner, so-called “Plastic King,” William T. Gatchalian, his wife Dee Hua Gatchalian, and his sons Valenzuela Representative Sherwin T. Gatchalian, Alay Buhay Representative Weslie T. Gatchalian and Kenneth Gatchalian, Elvira A. Ting, and Yolanda de la Cruz; FPI executives Weslie Gatchalian, Arthur R. Ponsaran, Geronimo Velasco Jr., Peter Salud, Rogelio D. Garcia, Lamberto Mercado Jr., Joaquin Obieta and Evelyn de la Rosa; and ESBI executives George Chua, Gregorio Ipong, Generoso Tulagan, Wilfred Billena, and Edita Bueno.
All of them stand accused of three counts of graft and three counts of malversation, as well as violation of the General Banking Law and the Manual Regulation for Banks.
Pichay and other LWUA officials approved the acquisition of the insolvent bank in 2009 despite audit findings that show that the bank suffered net losses and capital deficits for five straight years from 2005 to 2009.
The acquisition took the effect of a financial rescue, as the LWUA officials bought 445,377 ESBI shares worth P101.363 million from the Gatchalian group that gave the agency 60-percent equity in the bankrupt bank.
Pichay and the other officials later injected P780 million LWUA funds to the bank to increase its authorized capital stock.
The Gatchalians of Wellex and other owners of the bank were also paid P80 million in the acquisition.
The LWUA made the acquisition and transactions despite warnings by the Bangko Sentral ng Pilipinas (BSP), the Monetary Board of the BSP, and Department of Finance (DOF) about the ESBI’s fragile financial condition following a due diligence review that showed high liquidity and credit risks.
The acquisition was also made without the requisite regulatory approvals from the BSP, its Monetary Board, the DOF and the Office of the President.
In a statement, Ombudsman Conchita Carpio Morales said “in view of the bank’s precarious financial standing at the time of the sale, the windfall received by private respondents must be deemed unwarranted benefit, advantage or preference.”
“(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 Wellex Group are now worthless, ESBI having been shuttered due to severe financial distress… (and that) the government effectively lost at least P80.003 million in this questionable acquisition alone.”
In a statement, Wellex Group lawyer Lamberto Mercado Jr. said the Gatchalians did not benefit from the sale of the ESBI shares, adding that the case was politically driven.
While the ESBI shares were bought at 340.23 per share in 1996, it was sold to LWUA at 179.63 per share in 2009. This means the Gatchalians lost P200 million in the sale, Mercado said.
He added that the Gatchalians were being dragged into the political mudslinging by the current administration especially as Pichay is a known ally of former President Gloria Arroyo.
“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 Pichay is known to be very close to detained former President Arroyo,” Mercado said.
“(P)rivate respondents never benefitted at all from the sale, as there is no proof that they personally or actually received any part of the consideration for the subject shares,” he added.
The Gatchalian sons who ran for public office were under the local party composed of Liberal Party and Nationalist People’s Coalition members. But Congressman Sherwin Gatchalian is being eyed as the senatorial bet of the rival political party United Nationalist Alliance. AU
Originally posted as of 3:14 PM | Friday, April 17, 2015
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