SolGen: Case vs ex-DBP execs on Philex deal strong

MANILA, Philippines - The government is confident that businessman Roberto Ongpin, former members of the Development Bank of the Philippines board and several bank officials would be held criminally liable for the supposed irregular P650-million deal with Philex Mining Corp.

“Based on available document, we have a strong case to hold them liable for violation of banking laws and the anti-graft and corrupt practices act,” Solicitor General Joel Cadiz said yesterday.

Cadiz, who was personally instructed by President Aquino to handle the case, has given assurance they would leave no stone unturned in representing the current DBP administration in its case against Ongpin - trade minister during the Marcos years - and others before the Office of the Ombudsman.

He vowed to be “all out” in prosecuting the case and holding accountable the persons responsible for the questionable loans at DBP, particularly the loans granted to Ongpin that were purportedly behest and involving speculative insider trading.

Cadiz is working closely with lawyers Zenaida Ongkiko-Acorda and Jose Manuel Diokno who were earlier deputized by the Office of the Solicitor General to handle the case.

“The real question is whether DBP officials violated banking laws and its own rules to engage in speculation using state funds when the DBP’s thrust is medium and small industries and not to depend on the value of shares,” he said.

Cadiz observed that “the transactions fall squarely in the description of a behest loan by the Supreme Court.”

He said that pursuant to Malacañang’s zero-tolerance policy on grafters “the government will definitely go after those who appear to be the most guilty,” adding that the government may also opt to initiate actions “to forfeit the income derived from the transactions in favor of the government.”

The solicitor general also denied claims that the charge is just witch-hunting on the part of the government in its intensified anti-corruption drive.

“There are diversionary tactics which do not confront the issue frontally. It cannot be called a witch-hunt because clearly something wrong has been done and we are merely correcting it since documents show that the DBP and Ongpin violated the law,” Cadiz said.

“If we do not do anything for fear that we will be accused of persecution then we will have no functioning justice system,” he said.

Cadiz said the loans granted to Ongpin appear to be in the nature of “character loans,” and that the borrower should “not have qualified by any stretch of imagination.”

“We cannot allow that, otherwise rules will be violated on a mere promise that a loan will be paid. They should not have given loans based on speculation. The amount involved is really shocking. We are talking of more than half a billion pesos here,” he said.

According to Cadiz, the P660-million loan to Delta Ventures Resources Inc. (DVRI) may be considered behest since the borrower is undercapitalized, and the loan was under-collateralized.

Other “markers” for a behest loan present in the case are the deviation of use of loan proceeds from the purpose intended and the extraordinary speed in which the loan release was made to a crony.

Ongpin himself admitted that he is a friend of former first gentleman Mike Arroyo.

He said the previous DBP Board approved the loan, notwithstanding the fact that DVRI was undercapitalized with only P625,000 paid up capital with reported losses of P98 million and retained earnings of negative P2.3 million. DVRI loans were under-collateralized, as confirmed by DBP’s internal auditors.

The loan transaction is also apparent that there can be liability for violation of Section 3(e) and (g) of Republic Act 3019.

Violation of Section 3(e) of RA 3019 requires that there be injury caused by giving unwarranted benefits, advantages or preferences to private parties who conspire with public officers. 

In contrast, Section 3(g) does not require the giving of unwarranted benefits, advantages or preferences to private parties, its core element being the engagement in a transaction or contract that is grossly and manifestly disadvantageous to the government.

Cadiz said there is sufficient basis to hold Ongpin and the DBP officials who approved the loans liable for violating Section 3(e) of RA 3019.

And the fact that DBP approved the loan to DVRI, despite its being undercapitalized and under-collateralized should be considered enough ground in holding them liable for violation of Section 3(g) RA 3019.

“The finding of the DBP that DVRI obtained behest loans has basis in fact and law: DVRI was under-collateralized and undercapitalized; Ongpin was known close to the Arroyo administration; and DBP approved the loan in an extraordinary speed,” he said.

Cadiz also lamented that Delta Ventures did not comply with the basic borrowing requirements mandated by banking laws and DBP’s rules.

“In fact, it is surprising that the DBP’s Board even waived the evaluation of Delta Ventures’ financial capacity to repay the loan, which is a basic precondition to the approval of loans,” he said.

He also questioned why DVRI was allowed by the previous DBP board to withdraw its collateral even if the P510 million was still unpaid, thereby leaving loan without collateral during the period when the original collateral was withdrawn.

“There is also diversion of the loan from the original purpose by which it was availed of. This is clearly one indicator of a behest loan,” he said.

Besides, that DBP lost an opportunity trading gain of P412 million based on the findings of the Commission on Audit (COA).

“Even if DBP made money from the sale of DBP’s Philex shares to Delta Ventures, DBP could have made more money had it not hastily sold its 50 million Philex shares to DVRI in November 2009,” Cadiz said.

Last Aug. 5, the DBP filed criminal and administrative cases against its past board led by chairman Patricia Santo Tomas, president Reynaldo David, and Ongpin for over P660 million in loans that the bank had granted to an Ongpin company to finance his acquisition of Philex Mining shares.

The complaint before the Ombudsman also named former DBP chief operating officer Edgardo Garcia and former directors Ramon Durano IV, Alexander Magno, Floro Oliveros, Joseph Pangilinan, Miguel Romero, Franklin Velarde and Renato Velasco among the respondents.

DBP chairman Jose Nuñez and president Francisco del Rosario Jr. claimed that the past board extended two “behest” loans of P150 million and P510 million to an Ongpin company, Delta Ventures Resources Inc., despite its having only P625,000 in paid-up capital.

Delta Ventures used the DBP facility to buy a block of Philex Mining shares at P12.75 a share, flipping them less than a month later at P21 a share to the Metro Pacific Group.