Gatchalian brothers, Pichay face charges for bank takeover

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Gatchalian brothers, Pichay face charges for bank takeover
The Ombudsman finds probable cause to indict the 3 newly-elected lawmakers – along with 23 others – for the questionable acquisition by LWUA of a Laguna-based thrift bank in 2009

MANILA, Philippines – The Office of the Ombudsman has found probable cause to indict 3 newly-elected legislators and more than 20 others for an anomalous bank takeover in 2009.

In a press release on Wednesday, June 1, the Office of the Ombudsman said it recommends the filing of criminal charges against returning Surigao del Sur Representative Prospero Pichay Jr, newly-elected Senator Sherwin Gatchalian, and newly-elected Valenzuela City Representative Rexlon Gatchalian.

The charges are in connection with the allegedly questionable acquisition by the Local Water Utilities Administration (LWUA) of Laguna-based thrift bank Express Savings Bank Inc (ESBI).

Also included in the case are the following:

  • Former LWUA officials Eduardo Bangayan, Aurelio Puentevella, Enrique Senen Montilla III, Wilfredo Feleo, Daniel Landingin, and Arnaldo Espinas
  • WELLEX Group Incorporated (WGI) executives Dee Hua Gatchalian, William Gatchalian, Elvira Ting, Kenneth Gatchalian, and Yolanda Dela Cruz
  • Forum Pacific Incorporated (FPI) executives Peter Salud, Geronimo Velasco, Jr., Rogelio Garcia, Lamberto Mercado, Jr., Evelyn dela Rosa, Arthur Ponsaran, and Joaquin Obieta
  • Express Savings Bank Incorporated (ESBI) executives George Chua, Gregorio Ipong, Generoso Tulagan, Wilfred Billena, and Edita Bueno

Pichay was former administrator of LWUA, a state firm extending loans to local water districts for the improvement of water supply systems outside Metro Manila.

Meanwhile, Sherwin and Weslie Gatchalian were with WGI and FPI, respectively, which owned ESBI. The thrift bank was bankrupt for 4 years until the LWUA takeover, the Ombudsman said, citing a private firm’s audit findings.

The anomalous purchase happened in March 2009, when the LWUA Board approved the acquisition of ESBI without the go signal from the Monetary Board (MB) of the Bangko Sentral ng Pilipinas, the Department of Finance (DOF), and the Office of the President (OP).

The acquisition was approved despite objections from DOF and the Office of the Government Corporate Counsel.

Before LWUA bought ESBI, some P780 million in LWUA funds was transferred to the Laguna-based thrift bank to increase its capital stock – again without the required approval of the MB.

The Ombudsman said a total of P80 million was paid to the Gatchalians and other bank owners.

In a statement based on their appeal, the WGI said its exectuves “never benefitted at all from the sale, as there is no proof that they personally or actually received any part of the consideration for the subject shares.”

It said its executives shouldn’t be faulted for the “LWUA Board’s apparent failure to secure prior approval for the purchase of the questioned ESBI shares.”

But Ombudsman Conchita Carpio Morales said that the respondents violated banking regulations in purchasing ESBI shares.

“In 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,” she said.

She added that “the 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.”

The indicted officials will face 3 counts of violation of Section 3(e) of the Anti-Graft and Corrupt Practices Act, 3 counts of malversation, and violation of the General Banking Law and the Manual of Regulation for Banks. –

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