MANILA, Philippines—The Department of Finance has filed criminal and administrative charges against Local Water Utilities Administration chair (LWUA) Prospero A. Pichay and four board members for the “highly irregular” and “anomalous” infusion of P480 million in taxpayers’ money into a Laguna thrift bank.
Also named in the pleadings were LWUA trustees Renato S. Velasco, Susana D. Vargas, Bonifacio Maria M. Peña, Sr. and Daniel I. Landingin.
Signed by Finance Secretary Cesar V. Purisima, the criminal complaint was filed before the Department of Justice while the administrative complaint was lodged at the Office of the President.
Purisima said the five violated the Manual Regulations for Banks, Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act, and Article 217 of the Revised Penal Code.
He said the five have been charged for allowing LWUA to acquire 60 percent of the outstanding shares of stock of Express Savings Bank Inc. in 2008 at P80 million.
Purisima said that LWUA in 2009 also infused P400 million into the bank based in Cabuyao town.
“These offenses have arisen from their direct and willful participation in facilitating the highly irregular and anomalous takeover…of Express Savings Bank — a financially troubled bank undergoing rehabilitation — in wanton violation of pertinent banking laws and rules and at a gross disadvantage to LWUA and the national government,” the finance chief said.
LWUA had wanted to put up in 2008 a Water Development Bank, but was unable to do so because the Bangko Sentral ng Pilipinas put a moratorium on the creation of new banks.
Instead, LWUA bought 445,337 shares — which at 60 percent meant a controlling stake — in Express Savings Bank, originally controlled by the Gatchalian family through The Wellex Group.
The purchase of shares and the infusion happened “despite the obvious and considerable drawbacks” in investing in the bank, Purisima said.
Citing records from the Securities and Exchange Commission, Purisima said Express Savings suffered losses of up to P27.87 million from 2005 to 2009.
In the same period, the bank’s capital deficiency ballooned to P51.77 million.
Purisima added that the acquisition took place without the requisite prior approvals from the DoF, Office of the President and Monetary Board. The DoF and OP have supervisory authority over all state firms, including LWUA.
Under Section X126.2 of the Manual Regulations for Banks, any sale or transfer of shares that will result in the ownership of more than 20 percent of the voting stock of a bank must have prior approval of the Monetary Board.
In the administrative complaint, the DoF asked for the dismissal of the five officials for alleged grave misconduct and violation of the General Appropriations Act (GAA) of 2009.
The DoF said the LWUA trustees acquired the bank shares “in capricious disregard and blatant violation of existing laws…and with evident bad faith or gross inexcusable negligence amounting to fraud.”
The DoF also said that spending P400 million of LWUA’s budget for capital infusion violated a prohibition of the 2009 GAA against state funds being invested in “non-government securities.”