Win Gatchalian faces criminal raps for P780-million bank deal

MANILA, Philippines — The Office of the Ombudsman announced Wednesday that it has found probable cause to file criminal charges against former Local Water Utilities Administration (LWUA) official Prospero Pichay Jr. and corporate executives of WELLEX Group Inc. (WGI), including Senator-elect Sherwin Gatchalian in connection with the anomalous acquisition of Express Savings Bank Inc. (ESBI) in 2009.

Gatchalian, Pichay and 24 others were indicted for three counts of graft, three counts of malversation and violation of the General Banking Law of 2000 and the Manual of Regulation of Banks.

The charges involve LWUA's acquisition of ESBI, a local thrift bank based in Laguna owned by the Gatchalian family, WGI and Forum Pacific Inc.

The Office of the Ombudsman reported that the LWUA Board approved the acquisition of ESBI in March 2009 without the approval of the Monetary Board of the Bangko Sentral ng Pilipinas, the Department of Finance (DOF) and the Office of the President.

The LWUA Board, then headed by Pichay, approved the acquisition despite audit findings that the bank was insolvent after suffering substantial net losses and capital deficits from 2005 to 2009.

The DOF also objected the acquisition of the bank as it was inconsistent with the rationalization and streamlining of the government corporate sector.

“(I)n view of the bank’s precarious financial standing at the time of the sale, the windfall received by herein private respondents must be deemed unwarranted benefit, advantage or preference," Ombudsman Conchita Carpio-Morales said in a statement.

Morales noted that the government lost at least P80 million in the questionable acquisition of the bank.

"(T)he injury suffered by the government due to the respondents’ actions is undeniable, as it deprived the government of the opportunity to use the illegally expended funds to instead fund the agency’s lawful projects, not to mention the shares purchased by LWUA from FPI and WGI are now worthless, ESBI having been shuttered due to severe financial distress," Morales said.