Purisima files raps vs Pichay

MANILA, Philippines -  The Department of Finance (DOF) has filed criminal charges against Local Water Utilities Administration (LWUA) chairman Prospero Pichay Jr. and other ranking officials of the agency for their “highly irregular” and “anomalous” acquisition of a controlling stake in a thrift bank in Cabuyao, Laguna in 2008.

In a separate administrative case, the DOF through Secretary Cesar Purisima also accused Pichay and the others of “grave misconduct” and violation of the General Appropriations Act (GAA) of 2009 for making the transaction without approval from the Bangko Sentral ng Pilipinas.

Pichay, a former Surigao del Sur congressman, was appointed LWUA chairman by former President and now Pampanga Rep. Gloria Macapagal-Arroyo in 2008.

Pichay, in reaction, called the filing of the cases “ill-advised.”

LWUA is a government-owned and controlled corporation mandated by law to promote and oversee the development of water supply systems in areas outside Metro Manila. It has a specialized lending function.

Members of the LWUA Board of Trustees named in the complaint are Renato Velasco, Susana Vargas, Bonifacio Maria Peña Sr. and Daniel Landingin.

The DOF’s case filed with the Justice department stemmed from LWUA’s acquisition of 60 percent of the outstanding shares of Express Savings Bank Inc. in 2008.

Purisima said LWUA under Pichay infused P480 million in taxpayers’ money into the “financially troubled” Express Savings Bank originally owned by the Gatchalian family of the Wellex Group.

“These offenses have arisen from their direct and willful participation in facilitating the highly irregular and anomalous takeover of Express Savings Bank, Inc., 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 DOF said in its 35-page complaint.

“Acting with manifest partiality and evident bad faith, or at the very least, gross inexcusable negligence amounting to fraud, the LWUA Board caused undue injury to the government and gave the Gatchalian family unwarranted benefits and advantage by directing the acquisition of and authorizing payment for the subject shares at a total price of P80 million when the actual book value of the same subject shares at that time was approximately P31 million,” the DOF said.

The DOF said the BSP had advised LWUA in 2008 against establishing a wholly owned banking subsidiary called Water Development Bank, citing a moratorium on the establishment of new banks.

LWUA then decided to just acquire Express Savings Bank “despite the obvious and considerable drawbacks” in having exposure in the cash-strapped institution and “without the requisite prior approvals from Finance, OP (Office of the President) and the Monetary Board.”

Securities and Exchange Commission records showed Express Savings suffered losses of up to P27.87 million from 2005 to 2009. It also had an increasing capital deficiency during the five-year period amounting to P51.77 million. 

The DOF and the OP have supervision over GOCCs, including LWUA.

Any sale or transfer of shares that can result in ownership of more than 20 percent of the voting stock of a bank needs the approval of the Bangko Sentral ng Pilipinas (BSP).

In the administrative case, the DOF said LWUA officials acquired Express Savings Bank “in capricious disregard and blatant violation of existing laws, rules and regulations, and with evident bad faith or gross inexcusable negligence amounting to fraud.”

Ill-advised

Pichay said Purisima was “ill-advised” in filing the charges and urged him to review the documents on the acquisition of Express Savings.

He said LWUA went through the process by first seeking the legal opinion of the Office of the Government Corporate Counsel, which allowed the transaction.

He also claimed LWUA had sought the permission of the Office of the President, which referred the matter to the BSP.

Pichay said that while the BSP disallowed the creation of a new bank, it advised the LWUA to look for an existing bank willing to sell at least 60 percent of its shares. Deputy Gov. Nestor Espenilla gave the advice in a letter.

“On the argument that we bought a losing bank, where is that guy who owns a profitable bank, a bank that is making money, willing to sell it? If that happens, the price would surely be sky high,” Pichay told The STAR.

He called the purchase of Express Savings “very reasonable,” saying the bank turned in an income of P30 million in 2010. Its income is expected to increase by P10 million this year, he said.

“The rationale behind this is that LWUA is a lending institution and we lend to water districts nationwide. We wanted to plow back our revenues to the water districts,” he said.

“I’m sure Secretary Purisima himself is convinced of the soundness of the transaction but unfortunately, I think I’m the latest victim of the campaign to persecute people from the previous administration. I wish they can just let this country move forward,” Pichay said. With Paolo Romero