Gatchalian, Pichay charged with graft, malversation over P80-M bank deal

The Office of the Ombudsman has filed criminal charges against Sen. Sherwin Gatchalian, former Surigao del Sur Rep. Prospero Pichay, and 24 other individuals in connection with the alleged anomalous acquisition of a thrift bank by the Local Water Utilities Administration (LWUA) in 2009.

In eight separate case information sheets filed with the Sandiganbayan, the Ombudsman charged Pichay, a former chairman of LWUA, 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, one count of violation of Republic Act 8791 or General Banking Law of 2000 and one count of violation of the Manual of Regulation for Banks (MORB).

Gatchalian, meanwhile, was charged with one count of each of graft, malversation and violation of the MORB.

Aside from Pichay and Gatchalian, also named respondents in the graft, malversation and violation of the MORB charges were:

• Former LWUA officials Eduardo Bangayan, Aurelio Puentevella, Enrique Senen Montilla III, Wilfredo Feleo Jr. and Daniel Landingin
• WELLEX Group Inc. (WGI) corporate executives Dee Hua Gatchalian, William Gatchalian, Kenneth Gatchalian and Yolanda Dela Cruz
• Forum Pacific Inc. (FPI) executives Elvira Ting, 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

Meanwhile, former LWUA executives Bangayan, Puentevella, Montilla, Feleo and Daniel Landingin were named as co-accused of Pichay in the case of violation of RA 8791.

In exchange for the respondents’ provisional liberty from the cases, the Ombudsman, through its prosecutorial arm, Office of the Special Prosecutor (OSP), has recommended P30,000 bail bond for each count of graft, P40,000 bail bond for each count of malversation, P20,000 bail bond for each count of violation of RA 8791 and P20,000 bail bond for each count of violation of the MORB.

Based on the information of the cases, between May to October 2009, the LWUA, then headed by Pichay, purchased the majority shares of ESBI in the amount of P80.003 million.

The ESBI is a local thrift bank based in Laguna jointly owned by the FPI and the Gatchalians' WGI. Gatchalian was WGI's executive vice president when the offense was allegedly committed.

The Ombudsman said the LWUA’s purchase of ESBI’s 445,377 shares, which represented more than 60 percent of the total shares of the company, was made without the necessary approval of the Monetary Board (MB) of the Bangko Sentral ng Pilipinas, Department of Finance (DOF) and the Office of the President (OP).

The Ombudsman further said the acquisition of ESBI by LWUA was made despite negative audit findings on the bank “as its total liabilities exceeded its total assets”.

The Ombudsman said based on an audit made by private firm Jose U. Pontiveros and Associates (JPA), the ESBI was “insolvent” after suffering substantial net losses and capital deficits for five straight years, or from 2005 to 2009.

It added that JPA’s audit showed that ESBI had negative asset value of P12.932 as of March 2009 and debts amounting P20.842 million.

Instead of cancelling the acquisition deal, the Ombudsman said, Pichay and the other members of the Board approved the transfer of almost P700 million of LWUA funds to ESBI supposedly to increase the bank’s authorized capital stock.

The Ombudsman said the fund transfer was again made without the required approval of the BSP’s Monetary Board.

It added that the acquisition deal has caused undue injury to the government as the shares purchased by LWUA is deemed “worthless” as the MB has already placed the ESBI under “receivership” status due to its inability to pay its liabilities and to operate without incurring losses.

The Ombudsman said the MB has also already admitted that the “financial health” of ESBI can no longer be restored “despite being given considerable time to address its financial problems”.

The Ombudsman said the Philippine Deposit Insurance Corporation (PDIC) is now in the process of liquidating the bank’s assets.

Gatchalian, Pichay see acquittal

In a statement, Gatchalian said he is confident of his acquittal, as the cases against him are “baseless.”

“I am ready to fully cooperate with court processes in hopes of obtaining a speedy acquittal from these baseless charges,” Gatchalian said.

“During my 15-year career in public service, I have never had any allegations of corruption or abuse of power thrown my way. I am confident that the Sandiganbayan will vindicate my honor and put this issue to rest, once and for all," he added.

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

He further said that he never took part in the management and day-to-day operations of ESBI or even in the talks for its sale to LWUA.

"Ironically, the Office of the Ombudsman has wasted much more taxpayer money than this by devoting countless man-hours to this fruitless investigation…The Ombudsman has such little evidence against me that they have actually started creating facts out of thin air," Gatchalian said.

Meanwhile, in a phone interview with GMA News Online, Pichay also expressed confidence that the cases will be dismissed by the anti-graft court as they were supposedly “politically motivated.”

“That is politically motivated…I am very confident that I will be exonerated. The complaint is a plain stupidity,” Pichay said.

Pichay maintained that there was nothing irregular with LWUA’s acquisition of ESBI, claiming that he has documents showing that it has the approval of the BSP.

“I have documents to prove that the Central Bank has written us, recommending us na bilin na. Sabi nila ‘ (BSP) bilin nyo na ‘yan, kasi baka isara na namin. May mga letter ang Central Bank sa amin, which I will present in court in due time. The Central bank recommended us to buy it (ESBI) and even to deposit funds,” Pichay said.

Pichay also said that while ESBI was “financially distressed” when LWUA acquired it, the bank’s financially status supposedly started to improve a year after the acquisition.

“Walang nagbebenta ng bangko kung kumikita ang bangko. Ang binebenta ay usually yung distressed bank. But what I am saying is that after we acquired it (ESBI), it started to earn income,” Pichay said. —KBK, GMA News