Former Land Bank head admits buying MRTC shares through firm linked to Ongpin

The head of the Land Bank of the Philippines (LBP) has admitted using a company being linked to businessman Roberto V. Ongpin to buy shares from the Metro Rail Transit Corp. (MRTC).

Testifying before the joint hearing of the Senate blue ribbon committee and the committee on banks on Tuesday, LBP president and chief executive officer Gilda Pico said they had to grant a loan to Global Air Services (GAS) because the bank could not buy the shares directly pending the approval of the Bangko Sentral ng Pilipinas (BSP).

Pico said GAS was 100 percent owned by a certain Presidio Capital, one of the sellers of the MRTC shares.

Asked by Senator Ralph Recto why they gave a loan to GAS when they could just have bought it straight from the shareholders or the bond holders of MRTC, Pico said, it was an option they had to take “because at that time there was an urgency to buy the shares because of the notice of arbitration filed by MRTC on December 4, 2008.”

She explained that since they had not yet received a clarification from the BSP as to “whether we could buy the MRTC shares without the monetary board approval or not,” an option was to give a loan to GAS.

Senate President Juan Ponce-Enrile also wondered why the government granted the loan specifically to GAS.

The LBP chief answered that GAS “was given by one of the sellers, Presidio.”

Former Finance Secretary Margarito Teves, who also testified in the Senate, said he gave the instruction to the LBP and DBP to start the acquisition of MRTC shares in October 2008 because of the “threat of arbitration” from the MRC.

“DOF [Department of Finance] believes that the GFIs [government financial institutions] would be in the best position to acquire MRT interests because the national government at that time was closely watching its fiscal position amid the global financial crisis,” Teves said.

He also cited the notices of arbitration sent by the MRTC, which he said was of “utmost concern” to the government because it might lead to  a downgrade of the country’s credit rating, possible shutdown of MRT system, and possible payment of claims to MRTC amounting to around $2.5 billion related to the arbitration.

The acquisition of MRT shares, according to Teves, resulted in the withdrawal of arbitration cases against the  government.

He said the government also obtained 11 out 15 MRTC board seats after the acquisition.