PDIC files estafa complaint vs. 88 depositors of shuttered Legacy banks

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MANILA, Philippines—The Philippine Deposit Insurance Corp. (PDIC) on Thursday filed before the Department of Justice (DOJ) a complaint for estafa against 88 depositors for allegedly defrauding the government by P9.73 million.

In its complaint, PDIC filed the case against spouses Manu and Champa Gidwani and 86 others who allegedly misrepresented themselves to the government as insured depositors of several closed Legacy banks.

The Legacy banks, which included 12 affiliated banks, were ordered closed by the Monetary Board in December 2008, causing the PDIC Deposit Insurance Fund to make deposit insurance payments worth P12 billion.

Another Legacy Bank, Rural Bank of Polangui in Albay, was ordered closed on Feb. 26, 2010. The Legacy banks’ failure is touted as the largest financial scam in the banking system.

Gidwani and the other respondents allegedly falsified commercial and official documents to be able to file a claim and receive deposit insurance payments from the PDIC.

Investigations showed that a bank from the Visayas accepted 683 crossed checks issued by PDIC as deposit insurance payments to the respondents.

The bank deposited the “crossed checks” to a single account despite PDIC’s specific instruction that the checks should be “For Payees Account Only.”

Under Republic Act No. 8791, or the General Banking Law, the bank’s failure to heed warnings and admonitions of the supervisory and regulatory authorities was tantamount to conducting business in an unsafe and unsound manner.

The PDIC issued on June 29, 2010, Bulletin No. 2010-14 reminding all member-banks to strictly observe the provisions of the manual of regulations for banks on second-endorsed checks in relation to payments approved by PDIC for deposit insurance claims.

The complaint said the Gidwani spouses and the 86 other respondents had maintained 471 accounts in various Legacy banks worth some P118.19 million. These accounts were simultaneously opened and funded through checks issued by only one individual or through fund transfers from a single account.

Further investigation also showed that 10 of the respondents who placed a combined P20.96 million in deposits were found to be employees or household helps of the Gidwani couple.

Under the PDIC charter, all deposits in a bank maintained in the same right and capacity of the depositor for his benefit either in his own name or in the name of others shall be consolidated into one deposit account entitled to the maximum deposit insurance coverage.

At the time of the closure of the Legacy banks, the maximum deposit insurance coverage was P250,000.

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  • carl son

    What fraud is PDIC talking about?  It cannot be argued that all those money belongs to the couple.  They are just claiming what is rightfully theirs.  They were just wise enough to place their deposits in various individual names (their employees) in order to circumvent the insurance coverage limit.  If PDIC calls this a fraudulent act, so, does it mean to say that PDIC is making profit and feasting on the uninsured deposits of depositors which cannot anymore be recovered?  No wonder PDIC is closing banks left and right.  That is why if you have excess money of more than 500T, just keep it in your own vault.  Remember that by depositing your money in banks, you are not actually investing it, but in reality you are just entrusting it to the banks for safekeeping because of the very low interest rate.  So, why entrust your hard earned money for safekeeping to somebody else?  Why not safekeep it for yourself?  Depositing it in alleged big banks is not an absolute guarantee that it will not fold up anytime.  Remember that so called big banks have also big liabilities.  The figures in their Financial Statements are only on papers which can easily be manipulated.  These cannot be relied on with certainty because audit works are in reality a “garbage in garbage out” thing.  Finally, both BSP and PDIC have no capacity to monitor them.

    • muddygoose

      PDIC has every right to protect itself and its funds, basically protecting other insured depositors. Also, it is the Monetary Board that closed down the Legacy banks, not PDIC.

      In another article, this is the reason why Legacy banks were shut down:

      “On Jan. 5, 2009, the BSP filed 49 counts of falsification of public documents against 16 officers, employees and agents of several Legacy banks who allegedly forged documents to support fictitious loans. The BSP said the “loans” were not really applied for by real borrowers but were siphoned off for the personal gain of bank officials.On Feb. 6, the BSP filed 116 counts of falsification of public documents against 18 officers, employees and agents of four Legacy banks.”

      If the Gidwanis knew better, they could have invested their 100+ million or kept it in larger, more stable banks. But I have a feeling that these guys either had a big stake in the large Legacy scam, or they like leveraging small, poorly regulated banks for certain not-so-legitimate financial transactions.

  • http://pulse.yahoo.com/_4R3GZTGML26TV2VGS6RVHP2THM Fred

    Are the Gidwani spouses Filipino? Foreign-sounding kasi.
    Baka nakalabas na ng bansa ang mga yan?

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