CA junks plea for hold-departure orders on Araneta, Berenguer

The Court of Appeals has denied the petition of the Philippine Deposit Insurance Corp. to nullify the decision of the Makati City regional trial court that junked the government’s motion for the issuance of hold-departure orders against businessman Benito Ramon Araneta and former LBC Development Bank president Ma. Eliza Berenguer, who are both facing a P230-million estafa case.

In a 14-page decision dated June 15, the appellate court’s Eighth Division also affirmed the decision of Makati RTC Branch 143 Judge Maximo de Leon in October last year to dismiss the motion for inhibition filed by PDIC against him and to proceed with the arraignment of the defendants.

“In conclusion, we find that the [Judge de Leon] did not exercise grave abuse of discretion amounting to lack or excess of jurisdiction in conducting the arraignment of the private respondents, in denying the petitioner’s motion for hold departure and motion to inhibit,” stated the decision written by Justice Isaias Dicdican.

The ruling, which were concurred to by the other division members Justices Elihu Ybanez and Victoria Isabel Paredes, also dismissed PDIC’s plea for the issuance of a temporary restraining order or a writ of preliminary injunction to stop the judge from conducting proceedings with the case.

The Department of Justice ordered Araneta and Berenguer indicted in March 2014 for allegedly misappropriating P229.5 million from the defunct thrift bank’s fund from 2006 to 2008.

In its complaint with the DOJ, the PDIC also alleged that the respondents took advantage of their positions and connived to deceive regulators and the depositing public into believing that the bank had sufficient capital to continue operations.

The fraudulent loans helped trigger the bank’s collapse. LBC was placed under receivership by the PDIC in September 2011 upon the order of the Monetary Board.

In its appeal, the PDIC argued that it was not duly notified that the RTC had issued an order setting the arraignment of Araneta, thus, it was not able to move for its suspension. It added that Berenguer’s arraignment, on the other hand, was railroaded considering that the judge had yet to rule on the motion for inhibition.

The PDIC also objected to the arraignments of the two as it would render its motion for consideration pending before the DOJ seeking the reversal of the dismissal of the complaint in so far as the other respondents in the case were concerned.

The PDIC also claimed that its motion for HDO should have been granted considering that Araneta and Berenguer were both flight risks.

In denying PDIC’s motion, the Court of Appeals said it was imperative for the RTC to hold the arraignments of the respondents in line with their right to a speedy disposition of cases under Section 16, Article III of the 1987 Constitution.

The appeals tribunal also pointed out that the PDIC failed to substantiate its claims that the respondents were flight risks.

PDIC investigators earlier uncovered the alleged diversion of the LBC’s funds to finance loan payments to itself, a fraudulent banking practice known as “workout” scheme or “funding arrangement.”

The investigators found out that banks’ earlier granted millions of pesos in loans in favor of Araneta and several companies who have accounts with the bank. The loans came from bank’s savings deposits from the general public.

To cover the amounts due from the borrowers, the defendants allegedly made it appear that the loans were being paid when in fact, the bank’s funds were only being transferred to the accounts of Araneta and the other borrowers via third-party banks through checks deposited to LBC.

During the preliminary investigation conducted by the DOJ, Berenguer and Araneta claimed the transactions were valid as the later had issued promissory notes. They, however, were unable to produce the promissory notes.

Araneta and Berenguer were charged several counts of estafa under Section 1, paragraph 2, of Presidential Decree No. 1689, which imposes the penalty of reclusion temporal to reclusion perpetua (12 to 30 years imprisonment) for fraud committed with more than P100,000.

The charges against the other borrowers were dropped as the PDIC was unable to proof that there was conspiracy between them, Araneta and Berenguer.

Araneta was arrested in August 2014. The defunct bank was owned by his cousin Carlos whose family controls the courier company LBC Express Corp., after which the bank was named.