GSIS says it cancelled Ecobel loan guarantee

The Government Service Insurance System (GSIS) reiterated yesterday its claim that a surety bond issued to Ecobel for a $9.3 million loan from Bear Stearns Co. had actually been cancelled a week before Feb. 19, 1999 when Ecobel repeatedly drew down on the loan.

In a statement, GSIS said that it had canceled the surety bond last Feb. 12, 1999 due to at least six infirmities in the transaction.

First, GSIS said that the Philippine Veterans Bank (PVB), the designated obligee of the surety bond, has never assigned nor transferred any bond in favor of Bear Stearns as the new obligee.

Neither the state pension fund nor the PVB, according to the GSIS, was signatory to the loan agreement between Ecobel and the lenders despite the fact that GSIS is the guarantor and the PVB is the designated conduit bank through which the terms of the bond was granted.

Second, GSIS said there was no payment on the part of Ecobel of the required premium on the surety bond. Ecobel, GSIS said, only attempted to make the premium payment after the cancellation of the bond.

Third, no mortgage document was executed in favor of the GSIS. The certificate of title of one of the collateral submitted by Ecobel in support of the bond was found to be not genuine.

The state pension fund also said the loan was not registered with the Bangko Sentral ng Pilipinas. It also claimed that the lenders did not exercise due diligence since they did not verify the corporate authority of the GSIS officials who supposedly issued the certification to the effect that the surety bond "may be transferred to Bear Stearns Co.

Lastly, the state pension fund claimed that at the time of the drawdown, the lenders did not verify with either the GSIS home office (as guarantor) or PVB (as conduit bank) on the actual status of the surety bond.