Bangko Sentral uncovers P7.8 billion in fake Legacy loans

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has uncovered at least P7.8 billion in fake and questionable loans extended by the shuttered Legacy group of 12 rural banks to sister companies.

Briefing congressmen on their initial findings, BSP director Chuchi Fonacier said the Legacy group of companies “siphoned off” the banks’ deposits through the “round-tripping of funds” by way of fraudulent loans.

She said 10 of the 12 banks extended P3.7 billion in motorcycle loans to more than 44,000 borrowers who, upon verification by BSP examiners, turned out to be mostly fictitious.

She said the Legacy banks paid the P3.7 billion to sister firm Legacy Motors.

Fonacier said more than 1,000 borrowers in Tuy and Lian in Batangas could not be located.

She pointed out that of the few who were not fictitious, many told BSP personnel that their names were only used and that they did not get the motorcycles for which they supposedly applied for loans.

She added that some Batangas borrowers claimed not knowing how to use motorcycles since their livelihood is not in transportation but in fishing.

She revealed that another set of questionable loans amounting to P1.4 billion was extended by three Legacy banks to borrowers who were paid a commission of one percent of the loan value.

She said the borrowers executed an authorization allowing the Legacy banks to remit their loans to another Legacy firm whose principal investor is Celso de los Angeles, who has confessed to founding and owning the Legacy group of banks and other companies.

To mislead BSP auditors, Fonacier said De los Angeles’ banks “window-dressed” their books of accounts by selling their fake and questionable loans to real estate companies also owned by De los Angeles.

She said these companies paid the banks real estate properties that were grossly overvalued.

“One property valued at only P2 million was made to appear that it was worth P2 billion,” she told stunned members of the House committee on banks.

She said BSP examiners have so far uncovered P7.8 billion in questionable loans that have been window-dressed.

Congressmen lamented that based on BSP’s initial audit of the Legacy banks, their deposits have been clearly dissipated.

And yet, it is taxpayers, through the state-owned Philippine Deposit Insurance Corp. (PDIC), who will bail out De los Angeles and his companies by paying their depositors.

Rep.Elpidio Barzaga Jr. said there was fraud on the part of depositors who agreed to split their funds from the start so they would be covered by the deposit insurance law.