14 DBP execs face graft complaint over P717M ‘wash sale’

Union members and officials of the Development Bank of the Philippines on Friday filed a graft complaint against 14 DBP executives over the alleged “white wash” sale of securities that incurred P717 million in losses to government.

DBP Employees Union President Rudelito Tirado Jr. and Association of the DBP Career Officials President Francis Romulo Badilla filed the complaint for four counts of graft, violations of the Securities Regulation Code, as well as the Government-Owned and Controlled Corporation (GOCC) Governance Act, against the following executives and senior officials:

Board Chairman Jose Nuñez Jr.; Board vice-chairman and President Gil Buenaventura; Board directors Jose Luis Vera, Cecilio Lorenzo, Alberto Aldaba Lim, Lydia Echauz, Reynaldo Geronimo, Vaughn Montes, and Daniel Laogan; Executive vice president Fe Susan Prado; Senior vice president Fritzie Tangkia-Fabricante; Senior vice president treasurer and group head Mariquita Agena; Rustum Corpuz, Senior Associate Vice President (SAVP) Head of the Department of Asset and Liability Management; and Francis Delos Reyes, SAVP Head of the Local Bond Trading Unit.

The respondents were accused of graft for causing undue injury to government when the DBP Treasury Group entered into a sale of P14.3 billion government securities to a private company First Metro Investment Corp. (FMIC) at a loss on various dates in 2014.

The Treasury Group afterwards bought all the securities on the same date at the same price from FMIC, resulting in actual losses amounting to P717 million.

In an interview, Badilla said it is likely that a party benefitted from the transaction and has asked the Ombudsman to investigate further.

“We have a reason to believe that merong kumita. Hindi lang namin ma-establish right now. Logic will show that kapag may perang nawala, may napuntahan ang pera. Obviously, may nakinabang (We have reason to believe someone profited. We just couldn’t establish who right now. Logs will show that if monet got lost, it must have gone to someone) ,” Badilla said.

“Ang laki ng losses ng DBP. Pera ito ng taumbayan (DBP incurred big losses. This is people’s money),” Tirado added.

The complainants in a statement said the transaction – known as the illegal “wash sale” – caused the net income of the bank to drop to P4.5 billion in 2014 from P5.6 billion in 2013.

“The DBP Board of Directors and senior management officials approved the illegal sale and purchase of the government securities holdings by the DBP Treasury Group with FMIC despite their knowledge that such kind of transactions described as a ‘wash sale’ is prohibited by the Bangko Sentral ng Pilipinas and is deemed illegal and unsound trade practice under the Securities Regulation Code,” their statement read.

The executives and officials were also accused of administrative charges because the heads of the DBP Financial Sector, Asset and Liability Department and Local Bond Trading Unit were allowed to get involved in the transaction despite having no professional licenses.

“They were hired by the DBP Board and management despite the fact that they did not have the requisite Civil Service eligibility at the time of their hiring,” the complainants said.

The complainants based their charge on a Commission on Audit report which bared the series of illegal bond-trading activity by DBP in wash sales to avoid further losses. The report said 28 transactions were made from Jan. 29 to March 3, 2014 involving 20- and 25-year fixed rate treasury notes totalling P14.3 billion.

In a wash sale scheme, securities were sold and purchased later on when these have depreciated in a bid to avoid further losses and to make their books look better.

The central bank prohibits wash sale because it distorts the market and taint benchmark interest rates. AU