The state-owned Philippine Deposit Insurance Corp. has filed criminal charges against the former chair and officers of the closed Export and Industry Bank, alleging that they engaged in an unsafe and unsound business practice that put the bank at a disadvantage.
In a statement, PDIC said investigations by its legal team found out that EIB spent P4.8 million in so-called success fee, P3 million of which was disbursed to a certain company named AO Capital Partners Ltd., which is engaged in investment banking. The chair of this company, Jaime Gonzales, was the same person who served as chair of EIB then, the state-owned insurer noted.
A person familiar with EIB case said the bank paid the success fee to AO Capital Partners for its services in finding a “white knight” that would invest in the troubled bank. The bank badly needed an investor to help prevent an imminent closure due to its financial troubles.
But the source said EIB should not have paid any success fee because it failed to get an investor. Since the bulk of the fee went to a company whose chair was the same person who served as chair of EIB, the bank was liable for unsafe and unsound banking practices.
PDIC said the persons charged before the justice department violated provisions of the General Banking Law, which requires banks to refrain from transactions that are disadvantageous to their financial standing. The law recognizes that banks have a duty to observe safe and sound banking practices for the sake of their depositors and creditors.
Besides Gonzales, other bank officers charged before the Department of Justice were former presidents Juan Victor Tanjuatco and Nilo Pacheco, former vice president and chief financial officer Teresita de Ocampo, former senior vice president and treasury head Alex Luis Pesigan, and former vice president for risk management Adeline Grimares.
Finance Secretary Cesar Purisima, who also sits as chair of PDIC, said the filing of the case was important as this would send the right signal to banks on their obligation to conduct their business “in a manner that is above board and that does not place at risk the interest of stakeholders, more so of depositors.”
“We intend to pursue the full application of justice in this case and, most importantly, we intend to uphold the faith of the Filipino people in a government that will protect them from malicious corporate interests,” Purisima said in the statement.
EIB was ordered closed by the Monetary Board of the Bangko Sentral ng Pilipinas in April last year due to insolvency. Last month, the BSP gave PDIC the go-ahead to proceed with the liquidation of EIB following failed attempts to bid it out to potential investors.
PDIC set a bidding of EIB’s assets in October last year, but the bidding failed as none of the pre-qualified investors appeared on the bidding day. PDIC made a second attempt to sell the bank’s assets by scheduling another bidding last March. However, no party submitted documentary requirements to be able to participate in the bidding. According to the latest valuation, PDIC said the bank’s realizable assets amounted to P13.65 billion, but its liabilities were way higher at P24.67 billion.