Appellate court reinstates estafa case vs executives of UrbanBank

REPORT FROM BUSINESSWORLD THE COURT OF APPEALS has ordered a Makati regional trial court to revive a P4.5-billion estafa case against the officers of the closed Urban Bank. In a 16-page decision penned by Associate Justice Remedios A. Salazar-Fernando, the seventh division of the appellate court said the former bank officers should not be allowed to get away without explaining the allegedly ano-malous transactions. "The bank is under obligation to treat the accounts of its depositors with utmost care, always having in mind the fiduciary nature of their relationship," the court said. "[The officers of Urban Bank] should not be allowed to go scot-free without shedding light on the anomalous transactions involving billions of pesos that led to [the bank’s] closure and even to the alleged suicide of accused [Teodoro C. Borlongan]," it added. Mr. Borlongan, who died in 2005, was the former president of the bank and was named one of the respondents in the case. The others were Arsenio Bartolome III, Corazon M. Bejasa, Nida S. Santos, Milagros Santiago, Rowena Punsalan, Chulla Formanes, Loida O. Payonga and Amalia Ordas. The issue stemmed from several complaints lodged before the Department of Justice in September 2000. Depositors and stakeholders asked state prosecutors to file criminal charges against the officials for allegedly releasing in a short time large sums of money to buy "substandard receivables" from subsidiary Urban Corporation Investments, Inc. This came at a time when the bank was facing liquidity problems, the complainants said. Such fraudulent transactions eventually led to the bank’s closure, they added. Government prosecutors eventually indicted the bank executives in three separate cases before the Makati court in December 2000. The case did not undergo trial and the bank officers escaped arraignment, with the court taking six years to rule on their motion to quash the charges. In June 2006, the trial court, which had consolidated the cases, ruled in favor of the respondents, who said they had never pocketed the money or misappropriated the funds for their own benefit. In reinstating the case, the appellate court said: "The court is not prejudging the guilt or innocence of the private respondents. For as long as the information is valid on its face, and there is no showing of manifest error or grave abuse of discretion on the part of the prosecutors, the state should be afforded the opportunity to ventilate this case, even if only to restore the public’s trust and confidence in our banking system." "This can be done only in a full-blown trial on the merits where evidentiary matter can be presented and considered," it added. Urban Bank and its two subsidiaries were closed by the central bank and Philippine Deposit Insurance Corp. on April 26, 2000. The bank subsequently merged with Export and Industry Bank (Exportbank) in 2002. BusinessWorld tried to contact the officials, most of whom had transferred to the surviving entity, but an Exportbank public relations officer said the executives had resigned. — Ira P. Pedrasa/BusinessWorld