2 GSIS execs charged for $10-M loan-guarantee scam

Two former officials of the Government Service Insurance System were indicted in a graft case pending before the Sandiganbayan First Division over a $10-million loan guarantee fraud. In a 28-page resolution promulgated February 14, the graft court granted a motion by government prosecutors seeking the inclusion of Amalio A. Mallari, former GSIS senior vice-president for the General Insurance Group, and Leticia G. Bernardo, former department manager of the GSIS-GIG and chairman of the GSIS underwriting committee, in the amended information for criminal case no. 27474. Josephine Edralin Boright and Estela J. Edralin, executives of Ecobel Land Incorporated, were also named private defendants. The four joined Alex M. Valencerina, GSIS vice-president for the GSIS General Insurance Group, who was charged in the original information on February 18, 2002. Valencerina, now senior vice-president of the government pension fund, sought the dismissal of the case, claiming that investigators erred in evaluating the evidence on record. The court denied his motion. "We find that accused Velencerina’s motion to be excluded or dropped from from the information is bereft of merit. The defenses raised by accused Valencerina are evidentiary matters which are more properly adduced during the course of the trial," the court said. In the same resolution, the court dismissed charges against Fernando U. Campana, GSIS vice-president for international operations at the London representative office, for lack of basis. The amended information alleged that Valencerina, Mallari and Bernardo conspired with the private defendants in the alleged fraudulent release of a surety bond to Ecobel worth $10 million in March 1998. Prosecutors said the approval was irregular because of several infirmities in Ecobel’s application including insufficient collateral, non-payment of premium prior to the issuance of the surety bond, and failure to submit a loan agreement with the Philippine Veterans Bank, its supposed obligee. Liability on the part of the GSIS officials rests on the processing and subsequent release of the surety bond despite the absence of a counter bond that would have protected the government pension firm and their failure to secure prior approval by the GSIS Board of Trustees of Ecobel’s application before issuance of the bond. At the same time, it was noted that there was no clearance from the Central Bank, a requirement for a foreign-denominated bond, the collateral was not verified, and there was insufficient evaluation of Ecobel’s character, capital and capacity to pay as well as the supporting documents it submitted. Despite these deficiencies, Ecobel was issued a surety bond for $10 million on March 11, 1998. Almost a year later, Ecobel paid its first premium to GSIS on February 9, 1999, with a Far East Bank check dated February 26, 1999. Three days later, on February 12, 1999, GSIS gave Ecobel a notice that its premium payment was disregarded and the surety bond was revoked because it was discovered that the title on one of its property collateral was spurious. However, using the invalid surety bond, Ecobel was able to obtain an actual drawdown from London-base lending firm, Bear and Stearns International Ltd. for the full $10 million on February 19, 1999. GSIS issued a second notice of the revocation to Ecobel on February 24, 1999. On April 19, 1999, Ecobel posted its premium payment to Campana at the GSIS-London office for $330,004. The court held that Campana cannot be faulted for accepting the payment despite the earlier revocation of the surety bond because Valencerina did not inform him about it beforehand. “Accused-movant Campana was only informed by accused Valencerina that the GSIS Head Office in Manila had not reconsidered its decision to cancel (Ecobel’s) surety bond only on May 14, 1999," the resolution noted. Because of the said transaction, prosecutors noted that GSIS and the government are now exposed to a possible lawsuit from the foreign lender in the amount of the actual drawdown totaling $10 million. - GMANews.TV