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Ombudsman indicts Win Gatchalian, ex-LWUA chief Pichay over P80-M bank deal


The Office of the Ombudsman has ordered the filing of criminal charges against senator-elect Sherwin Gatchalian, former Local Water Utilities Administration (LWUA) chairman of the board Prospero Pichay Jr. and 24 other former government officials and private individuals for alleged anomalous acquisition of a thrift bank by LWUA in 2009.

In a resolution recently signed by Ombudsman Conchita Carpio-Morales, Gatchalian, Pichay and the other respondents were ordered charged before the Sandiganbayan with three counts of violation of Section 3(e) of Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act, three counts of Malversation of Public Funds as defined under Article 217 of the Revised Penal Code, and violation of Republic Act 8791 or General Banking Law of 2000 and the Manual of Regulation for Banks.

Aside from Gatchalian and Pichay also ordered charged with the same offenses were the following individuals:

  • Former LWUA officials Eduardo Bangayan, Aurelio Puentevella, Enrique Senen Montilla III, Wilfredo Feleo, Daniel Landingin, Arnaldo Espinas
  • WELLEX Group Inc. (WGI) corporate executives Dee Hua Gatchalian, William Gatchalian, Elvira Ting, Kenneth Gatchalian and Yolanda Dela Cruz
  • Forum Pacific Inc. (FPI) executives Peter Salud, Geronimo Velasco, Jr., Weslie Gatchalian, Rogelio Garcia, Lamberto Mercado, Jr., Evelyn dela Rosa, Arthur Ponsaran, and Joaquin Obieta
  • Express Savings Bank Inc. (ESBI) executives George Chua, Gregorio Ipong, Generoso Tulagan, Wilfred Billena and Edita Bueno

The charges stemmed from the acquisition by the LWUA of ESBI, a local thrift bank based in Laguna jointly owned by the FPI and the Gatchalians' WGI in a deal worth P80 million.

Gatchalian was an executive of WGI at the time of the acquisition.

Based on the Ombudsman's investigation, the LWUA Board led by Pichay passed a resolution on March 24, 2009 approving the acquisition of ESBI without the requisite regulatory approvals from the Monetary Board (MB) of the Bangko Sentral ng Pilipinas, Department of Finance (DOF) and the Office of the President (OP).

The Ombudsman also said that the acquisition was made despite a legal opinion rendered by the Office of the Government Corporate Counsel, which stated that the deal must be subjected to a review by DOF and approved by the OP in accordance with banking laws and regulations.

The Ombudsman further alleged that the LWUA Board pushed through with the acquisition even after the DOF has formally objected to it, stating that it was inconsistent with the ongoing rationalization and streamlining of the government corporate sector.

It also said that the acquisition was made despite negative audit findings on the banks.

The Ombudsman said that based on an audit made by a private firm, the ESBI was “insolvent” after suffering substantial net losses and capital deficits for five straight years from 2005 to 2009.

Instead, the Ombudsman said, Pichay and the other members of the Board approved the transfer of almost P780 million of LWUA funds to ESBI supposedly to increase the bank’s authorized capital stock.

“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,” the Ombudsman’s resolution read.

“[The] respondents defied banking laws and regulations in purchasing ESBI shares,” it added.

The Ombudsman said the fund transfer was made, again, without the required approval of the Monetary Board (MB).

The Ombudsman said that aside from the fund transfer, a separate amount of P80,003,070 was also paid to the Gatchalians for the bank acquisition.

“The government effectively lost at least P80,003,070.51 in this questionable acquisition alone,” the Ombudsman said.

The Ombudsman said that based on records, the MB in July 2011 placed ESBI under receivership “due to severe financial distress”, with the Philippine Deposit Insurance Corporation presently in the process of liquidating the bank’s assets.

“The 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 WGI are now worthless, ESBI having been shuttered due to severe financial distress,” the Ombudsman said in its resolution.

Just last month, the Ombudsman has also ordered the filing of graft charges against Pichay and three other LWUA officials over the agency's alleged anomalous sponsorhip of a chess tournament in 2010 amounting P1.5 million.

In a statement, Gatchalian said he is confident that the charges against him and his family will eventually be dismissed.

"We will face this baseless case head-on because we have nothing to hide. I have never been charged for graft and corruption as proven by my almost 15 years of public service, marked by transparency and good governance," Gatchalian said.

"My name and reputation have never been tarnished by any acts of graft and corruption. The truth will eventually come out and redeem my good name,” he added.

Gatchalian, a former three-term mayor of Valenzuela City, pointed out that he only has 14 shares in ESBI worth P2,500 or P178.57 per share.

Gatchalian further said that he did not take part in the management and day-to-day operations of ESBI or even in the talks for its sale to LWUA. —ALG, GMA News

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