UDB’s battle continues

The Office of the Ombudsman is set to investigate what is claimed to be a baseless and unfair closure of Unitrust Development Bank (UDB) more than a decade ago.

This was after the Presidential Anti-Corruption Commission (PACC) and the Presidential Complaint Center endorsed to the Ombudsman the administrative and criminal complaints filed by UDB major stockholder Francis Yuseco against past and current officials of the Philippine Deposit Insurance Corp. (PDIC) for what is claimed to be the discriminatory application of Republic Act 7653 or the New Central Bank Act and RA 3591 or the PDIC Charter.

While this is unfolding, a hearing has been set by the Regional Trial Court of Makati between Yuseco’s group and the PDIC to determine how much of what remains of the assets of UDB, including unclaimed bank deposits, should go to the Yuseco’s group since all the creditors have already been paid what is due them during the court-administered liquidation. According to Yuseco, they are entitled to at least P441 million, but PDIC claims what remains only amounts to P30 million.

The complaints also alleged that the PDIC is now asking the Makati RTC Branch 137, presided by Judge Ethel Gutay, to allow it to charge to UDB P120 million, consisting of P40 million as receivership expenses. Yuseco claims that as of Sept. 19, 2006, around P15.5 million of these expenses were allocated by PDIC to constitutionally prohibited mid-year and Christmas bonuses, maternity, clothing, travel, rice subsidy, insurance premiums, among others, while the balance of P84 million was appropriated to already prohibited surplus dividends as per final court order.

Why then was UDB ordered closed and liquidated in the first place?

In an interview, Yuseco admitted that in 2001, the bank was suffering from liquidity problems, but remained solvent, with a net capital of P153.4 million as of Jan. 31, 2002 based on UDB’s statement of condition prepared by PDIC itself. The bank was placed under receivership with PDIC as the receiver. He said that during the receivership, UDB remained solvent and, in fact, received fresh funds amounting to $10 million from the First Federal Bank of Taiwan.

He said that PDIC, however, insisted that UDB was already insolvent. In fact, three senior officials swore under oath in 2002 that the bank was insolvent. This was contrary to PDIC’s own board resolution, which explicitly stated that UDB was solvent and that it could be rehabilitated and reopened.

In his complaint before the Office of the Ombudsman, Yuseco said that while PDIC wanted UDB closed, the former went all out to help another bank and even accommodated it with a P7.6 billion liquidity assistance in order to allow it to continue operating.

In several news items published at that time, former PDIC president Michael Osmeña exposed the said anomalous P7.6 billion loan accommodation to the other bank, including the creation of a fictitious P1.5 billion paper profit to justify the grant of the loan.

In its petition for assistance in the liquidation of UDB filed with the Makati RTC in 2005, PDIC claimed that on Jan. 4, 2002, after determining that UDB was insolvent and that its continuance in business would involve probable loss to its depositors, creditors, and the general public, the Monetary Board prohibited UDB from doing business and placed it under receivership by the PDIC.

PDIC said that on Oct. 25, 2002, it recommended that UDB be placed under liquidation. The MB on Jan. 20, 2005 issued a resolution ordering that PDIC proceed with the liquidation of the bank. PDIC then filed a petition with the court for assistance in the liquidation. On July 2012, the RTC’s decision granting the petition became final and executory.

Yuseco, during the interview, said they were never informed of the bank closure, so they were not able to timely exercise their right to question the basis for the closure by way of certiorari – which under the law must be filed by stockholders representing majority of the capital stock within 10 days from receipt by the board of directors of the closed bank of the order directing receivership or liquidation.

In 2010, then Sen. Serge Osmeña, who was not related to PDIC’s Michael Osmeña, during a Senate hearing lambasted the PDIC for propagating its license to steal and for legitimizing plunder for charging constitutionally prohibited double compensation from banks under its receivership.

At that time, Sen. Franklin Drilon also lambasted PDIC for using its code of ethics to justify various perks and huge compensation packages for its executives.

Yuseco said that while there were some in the PDIC who have not been fair to UDB, there are some who should be commended. These include the late Valentin Araneta, former PDIC president, who initiated assisting UDB on its path to reopening, and other rank-and-file employees of the institution, who according to Yuseco, stood firm against the sworn affidavit of certain officials, including the general counsel at that time, which said that UDB was already insolvent. The employees, he said, probably stricken by their conscience, gave UDB copies of the PDIC resolution in 2002 which stated that UDB was solvent, as well as UDB’s statement of condition prepared by PDIC, which showed that UDB still had a net capital of P153.4 million.

He said in his complaint that after UDB refused to be awarded to a then illiquid and capital-deficient bank, a former PDIC president, through a mere marginal note, instructed the PDIC to liquidate UDB.

Inspite having been engaged in court battles with the PDIC for the past 18 years, Yuseco has not lost hope that the Monetary Board can reinstate the license of UDB to engage in banking and that the stockholders be given what rightfully belongs to them.

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