An April 6, 2011 press release by the Department of FinanceThe running after erring GOCC officials continues as the Finance department lodged separate complaints against officials of the Local Water Utilities Administration (LWUA).
Criminal and administrative charges have been filed by the Department of Finance against members of LWUA Board of Trustees for their “highly irregular” and “anomalous” acquisition of a controlling stake at a thrift bank in Cabuyao, Laguna.
In separate pleadings, the Finance Department, through Finance Secretary Cesar V. Purisima, sued LWUA Chairman Prospero A. Pichay, Jr., together with other Board of Trustees members Renato S. Velasco, Susana D. Vargas, Bonifacio Maria M. Peña, Sr., and Daniel I. Landingin for violating the Manual Regulations for Banks, Republic Act 3019, or the Anti-Graft and Corrupt Practices Act and Article 217 of the Revised Penal Code.
This was after they allowed LWUA to purchase 60 percent of the outstanding shares of stock of “financially troubled” Express Savings Bank, Inc. and for infusing a capital worth P480 million that was sourced from government coffers.
“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 35-page criminal complaint stated.
The criminal case was filed on Tuesday at the Justice department, while the administrative case was submitted to the Office of the President (OP) on Wednesday.
“This is consistent with the Aquino administration’s promise of cleansing the government of corrupt officials as a way to rationalize GOCC (government-owned and -controlled corporations) operations. Let this serve as a warning to other GOCC officials that the government is serious on eradicating corruption in the bureaucracy and is looking at every agency in its run against offenders,” Purisima said.
The cases stemmed from LWUA’s plan in 2008 to establish a Water Development Bank, a “wholly owned subsidiary” of the government agency, which was stopped by a central bank moratorium in creating new banks.
According tothe complaint, the LWUA then decided to instead acquire Express Savings Bank by purchasing a total of 445,337 shares of stock, corresponding to 60 percent of its total shares, for P80 million in 2008. Thereafter, the LWUA spent another P400 million infusing fresh capital to the bank in 2009.
The purchase and capital infusion happened “despite the obvious and considerable drawbacks” in investing in the Cabuyao bank, the complaint stated.
Records obtained by the Finance department from the Securities and Exchange Commission showed that the bank, which was originally controlled by the Gatchalian family, owner of the Wellex Group, Inc., 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 acquisition, the complaint stated, also took place “without…the requisite prior approvals from Finance, OP and the Monetary Board.”
Finance and OP have supervision over all GOCCs, including LWUA. Meanwhile, under Section X126.2 of the Manual Regulations for Banks, any sale or transfer of shares that will result in “ownership of more than 20% of the voting stock of a bank” shall be undertaken with “prior approval of the Monetary Board.”
For the same acts, Finance also lodged an administrative complaint praying for the dismissal of the five LWUA Board of Trustees members for alleged “grave misconduct” and violations of the General Appropriations Act (GAA) of 2009.
The separate complaint 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.”
It also alleged that spending P400 million of LWUA’s budget for capital infusion was in violation of a provision the GAA that prohibited state funds to be invested in “non-government securities.”
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