Supreme Court justice a party to unpaid P20-million loan
AT A GLANCE:
- Presbitero Velasco co-signed a questionable P20-million loan for a company with P250,000 capital in 1997, when he was justice undersecretary
- RJL Resources, the borrower, used two properties in Bulacan, worth P20 million, as collateral
- Orient Bank, the lender, eventually collapsed, weighed down by P3.3 billion in emergency advances from the Bangko Sentral ng Pilipinas
- It turns out that the collateral was fraudulent, as the land was covered by the government's agrarian reform program
- Velasco, now Supreme Court justice, and the other borrowers, face liabilities
MANILA, Philippines – In 1997, when Presbitero Velasco was justice undersecretary, he and 3 others took out a P20-million bank loan for RJL Resources, a company that was into the export-import business. This, however, was no ordinary transaction.
First, Orient Bank, which gave out the loan, was bleeding profusely. The Bangko Sentral ng Pilipinas (BSP) had to grant the bank emergency advances that would later balloon to P3.34 billion. Orient Bank eventually collapsed and declared a bank holiday in February 1998. Months later, the BSP shut it down.
Second, RJL Resources’ subscribed capital was only P250,000, disproportionate to its multi-million peso loan. In its financial statement for 1997, the company did not even declare this debt. And it did not, from 1996-2014, file any General Information Sheet with the Securities and Exchange Commission.
Third, Velasco was not listed among RJL Resources’ stockholders or directors. His relationship to the company remains unclear. (We e-mailed him questions, through Supreme Court spokesperson Theodore Te, but he has not replied. Te informed us that Velasco is on medical leave.)
Fourth, as justice undersecretary then, his salary was not a match to the multi-million-peso loan. As of 2010, when government salaries were upgraded, the monthly pay of a department undersecretary ranged from P78,946 to P85,230 or about a million pesos a year.
One thing is clear, though: Jose Go, the owner of Orient Bank, was a client of Velasco’s when he was in law practice. “We play golf. He’s a former client,” Velasco, who was already with the Supreme Court, said in an interview in 2009 for the book, Shadow of Doubt.
Almost 20 years later, questions still linger:
- Why would Orient Bank, which was already buried under a multi-billion-peso loss, still lend money?
- Why did Velasco, who was a ranking government official, sign in on the loan for a company that seemed to be inactive?
- What was Velasco’s relationship with RJL Resources?
Today, this loan haunts Velasco, who has risen to the highest court of the land. The BSP unearthed these facts in its bid to foreclose a property owned by Go, the Evercrest Golf Club Resort, and have Velasco inhibit himself in this case pending before the Court’s Third Division, which he heads.
The BSP provided the Court promissory notes co-signed by Velasco, bank disclosure statements on loan transactions also co-signed by Velasco, and incorporation papers and the 1996-1997 financial statement of RJL Resources.
After news reports on the BSP’s “motion to inhibit” came out, Velasco wrote the members of the Third Division saying he was heeding the call for his inhibition because of his “previous membership” in Evercrest Golf Club Resort.
Before this, Velasco did not inhibit in cases involving Go and his businesses. We found 3 wherein Velasco did not recuse himself. At the time of the first two cases, Velasco was new in the Court. (He was appointed March 18, 2006.)
It was an even vote. In a case where Gotesco Investments and Jose Go were respondents, Velasco voted in favor of Go. In the other, where Gotesco Properties was the petitioner, he voted with the majority against Go.
Recently, in March this year, Velasco penned the decision in a case where Gotesco was involved. We asked a government lawyer familiar with some of the Go cases to review the ruling. The lawyer said Velasco’s decision supported Gotesco’s claim in another case that foreclosure of its 6-hectare Ever Ortigas Commercial Complex property – mortgaged to the Philippine National Bank – was invalid.
Till today, the loan of RJL Resources remains unpaid.
As collateral for the loan, the company assigned titles to its two properties in Bulacan, both worth P20 million, to Orient Bank, BSP reports show. In 1999, more than a year after Orient Bank closed down, the BSP took over the land in Bulacan, which was foreclosed. The sole bidder was BSP.
RJL Resources, however, went to court and filed a complaint versus Orient Bank and the BSP, asking to nullify the foreclosure of its properties. The parties later agreed to a compromise, which the Regional Trial Court in Pasig approved. RJL Resources offered to settle its loan through dacion en pago or payment in kind. The Register of Deeds in Bulacan was to transfer the titles in the name of BSP.
But, as it turns out, almost 20 years later, the land titles were cancelled and new ones were issued to the Philippine government. The properties, the BSP belatedly found out, were under the agrarian reform program and are now covered by Certificates of Land Ownership Award.
That leaves the BSP with an empty bag. But the BSP “can run after the borrower and co-signors,” Lala Rimando, a former banker and now an editor at Forbes Philippines, said. A lawyer (not from the BSP) who has banks as former clients shared this view: “In case of default, the borrowers are directly liable.”
The Negotiable Instruments Law is clear on this. Section 66 says that endorsers of loans face a liability: they have to pay up. “…if it be dishonored…he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it.”
That includes Velasco. The 3 others who signed the promissory notes were: Pablo Lopez, Lilia Lopez, and Vitaliana Maranan. They were not listed among RJL Resources’ officers, another red flag that Orient Bank apparently glossed over in approving the loan.
Based on Velasco’s Statement of Assets, Liabilities and Net Worth for 2014, he is the second “poorest” among the 15 justices, with a net worth of P12.2 million. He declared the acquisition cost of his real properties at P1.3 million and personal properties at P10.8 million. He has no liabilities.
We asked lawyers outside the BSP if there are other liabilities for borrowers who give questionable land titles as collateral. “That's fraud,” another government lawyer said.
Conflict of interest
One more thing caught the attention of BSP. The lawyer for RJL Resources against Orient Bank and BSP was Acerey Pacheco, the same lawyer for Jose Go in other cases.
Pacheco used to work in Velasco’s old law firm. Before he was appointed RTC judge in Marikina in 2011, Pacheco held office at the Ever-Gotesco Corporation Center in Manila.
“There is a clear conflict of interest,” the private lawyer we consulted said. “Unless disclosed to both parties, it would be a ground for disbarment.”
During the time that Go had cases pending in the courts, a former official of the judiciary told us that judges and justices held some of their golf tournaments in Evercrest Golf Club in Nasugbu, Batangas.
The saga of Go’s court cases gives a glimpse into the ties that bind erring businessmen and officers of the law. – Rappler.com