Surigao del Sur Rep. Prospero Pichay Jr. PHOTO BY VINCE NONATO / INQUIRER
The Sandiganbayan Fourth Division has reset anew the arraignment for graft and violation of bank regulations charges against Surigao del Sur Rep. Prospero Pichay and members of the Gatchalian family in connection with the anomalous buy-out of an insolvent bank.
Pichay and the members of the Gatchalian family – patriarch “Plastics King” business magnate William Gatchalian, the matriarch Dee Hu Gatchalian, and siblings Valenzuela Rep. Weslie Gatchalian and Kenneth Gatchalian – were charged for the anomalous buy-out by the Local Water Utilities Administration (LWUA) of an insolvent bank the Gatchalians co-own.
The anti-graft court on Thursday cancelled the scheduled arraignment and reset it for May 30 due to a pending court resolution on the prosecution’s appeal for the dismissal of some of the charges against the Gatchalians.
READ: Ombudsman prosecutors appeal dismissal of Gatchalian’s LWUA case
This after the court dismissed all the charges against Senator Sherwin Gatchalian as well as all the respondents’ malversation charges in connection with the case.
The court reduced the charges of the Gatchalian family.
READ: Raps lowered vs Pichay, Gatchalians
The Gatchalians each face the remaining charges of one count of violation of Section 3(e) of Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act.
They were charged as executives of Wellex Group Inc., which co-owns the insolvent bank Express Savings Bank Inc. (ESBI) that LWUA acquired.
Pichay as then LWUA chair was charged with three counts of graft, and one count of violation of the Manual of Regulation for Banks (MORB) for leading the purchase by LWUA of the insolvent bank to save it from the brink of bankruptcy.
This is the second time the arraignment had been deferred since the court reduced their charges.
READ: Pichay, Gatchalians’ arraignment for LWUA cases deferred anew
Pichay earlier filed a motion for partial reconsideration seeking to reverse the finding of probable cause against him for graft and violation of the MORB.
Pichay alleged that the MORB only covers banks and not the LWUA.
Pichay also said he could not be indicted for graft because there was no bad faith in the acquisition of the ESBI shares by LWUA in the amount of P400 million.
Pichay said the transaction was approved by the Monetary Board, which opted to remain silent and allowed it to happen.
“LWUA… merely relied on good faith on BSP’s orders and suggestions which gave the impression that LWUA could continue with the ESBI transaction,” Pichay said.
READ: Pichay seeks dismissal of bank buyout case
Pichay added that the his case should be dismissed for inordinate delay because the Ombudsman took six years in disposing of the case—the Ombudsman started its fact-finding in 2010 and ended preliminary investigation May 2016.
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, 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/rga
READ: Gatchalian ‘vindicated, humbled’ by dismissal of LWUA cases