Sandigan dismisses LWUA cases of Sen. Gatchalian

/ 06:04 PM October 19, 2016
Sherwin Gatchalian

Senator Sherwin Gatchalian. MARC JAYSON CAYABYAB/ FILE PHOTO

The Sandiganbayan Fourth Division has dismissed the criminal charges of graft, malversation and violations of bank regulations against Senator Sherwin Gatchalian over the allegedly anomalous buy-out of a bank the family co-owns.

The anti-graft court in a 53-page resolution said there was no probable cause to try Gatchalian over the case.


READ: Second Gatchalian pleads not guilty to bank case raps | Gatchalian seeks dismissal of LWUA case

However, the court also dismissed the malversation cases of Gatchalian’s co-accused: the patriarch “Plastics King” business magnate William Gatchalian, Gatchalian’s mother Dee Hu Gatchalian, and siblings Valenzuela Rep. Weslie Gatchalian and Kenneth Gatchalian.

But the court said it found probable cause to try them for graft and violations of the bank manual.

They were each accused of one count of violation of Section 3(e) of Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act, one count of Malversation of Public Funds as defined under Article 217 of the Revised Penal Code, and one count of violation of the Manual of Regulation for Banks (MORB).

They were charged as executives of Wellex Group Inc., which co-owns the insolvent bank Express Savings Bank Inc. (ESBI).

The court has also dismissed the three counts of malversation against the principal accused, former Local Water Utilities Administration (LWUA) chair now Surigao Del Sur Rep. Prospero Pichay.

But the court found probable cause to try Pichay for graft and violation of banking rules.

Pichay was charged with three counts of graft, and one count of violation of MORB and one count of violation of Republic Act 8791 or General Banking Law of 2000, for leading the purchase by LWUA of the insolvent bank to save it from the brink of bankruptcy.

According to the Ombudsman, 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.

READ: Gatchalians say raps a political vendetta | Gatchalian, Pichay face criminal raps over bank buyout

The LWUA made the acquisition and transactions despite warnings by the Bangko Sentral ng Pilipinas (BSP), the Monetary Board of the BSP, and the 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 ordering the filing of charges to the Sandiganbayan, Ombudsman Conchita Carpio-Morales said “in view of the bank’s precarious financial standing at the time of the sale, the windfall received by herein private respondents must be deemed unwarranted benefit, advantage or preference.” JE

READ: Winning senator Gatchalian indicted over anomalous bank deal.

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TAGS: bank, buy-out, Gatchalian, Graft, Local Water Utilities Administration, LWUA, malversation, Sandiganbayan, Sherwin Gatchalian
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