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

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.