Probable Cause to be Suspicious of our Courts

Nothing has been heard about Celso de los Angeles. It would seem that he has died, not of throat cancer, which everyone is a doubting Thomas, but of newsworthiness. Media has inexplicably stopped reporting of his status, as a patient and as a respondent. One is tempted to draw two conclusions: that Celso is now old news and not worthy of media coverage, and, he has paid off any or all newshounds who have attempted to follow up what is happening to him and his cases.

Except for the DOJ's announcement of finding probable cause for the filing of estafa against Celso and two of his minions, there has been no further news. And to think that several cases were lodged against him, not only by Senator Mar Roxas but by groups of victims of his preneed scams. What about the multitude of cases filed by the BSP and PDIC? Sad to say, nothing to report about.

Earlier, we mentioned that there may be two possible conclusions re the virtual dearth of news, but there is another reason. It has always been believed that Celso was backed by powerful personalities, very high up in politics. One is Speaker Nograles, who has admitted to investing or depositing about P20 million pesos in Legacy accounts. He also acknowledged that Celso is a partymate. The other personality is not a politician, but is the most powerful civilian in the Philippines. He can easily whisper "back off" to any government agency, and one can be sure that it would. And that would explain why the DOJ downgraded the syndicated estafa originally filed by Senator Roxas, to the watered-down case of simple estafa. Expect DOJ to do these to all the cases filed under it, and that would explain why it ordered all cases to be consolidated for filing in one court: the Makati RTC.

Remember the reason why the Legacy banks were able to continue operations inspite of BSP investigations and closure orders? TROs issued by the lower courts which enabled Celso to collect and embezzle an additional P1.4 billion in bank deposits. Do you expect the courts to pull the rug under Celso, and treat him like the criminal that he is? Your guess is as good as ours.

Hallelujah! Or is it too Early to Celebrate?

Por fin, after waiting for months, or to be exact, 8 months after the first filing of cases against Celso and his cohorts, the DOJ issued a resolution last Friday finding "probable cause" of estafa against Celso de los Angeles and two of his officers. If you think this is a cause of celebration, first read on and then decide whether you should upraise your hands in praise or clench them into fists of rage.

In the original case filed by Sen. Mar Roxas, the respondents were Celso and 19 board members and directors of the defunct Legacy Consolidated Plans Inc. However, only De los Angeles and his employees, Christine Limpin & Edgardo Marasigan were included in the DOJ resolution announced last week. Limpin was Legacy's SVP for legal, while Marasigan was the corporate secretary.

For reducing the case respondents to 3 from the original 20, the DOJ resolution is a watered-down version of the syndicated estafa case filed by the senator. A syndicated estafa is committed by a syndicate or at least 5 people and is a non-bailable offense. Since the DOJ resolution covers only 3 respondents, the case is effectively downgraded into a simple estafa, which is a bailable offense.

Remember the pledge of DOJ Secretary Agnes Devanadera? who upon assuming the mantle of leadership, that she would revitalize the department and work for the speedy disposition of cases, specifically mentioning among other, Celso and the legacy cases. Well, she followed up on her promise but as expected, bending backwards to accommodate the powerful perpetuators. Now, she can say that she is true to her word, but she is also true to her profession as a government official who protects the powerful at the expense of the hapless victims. Devanadera is the mirror image of Ombudsman Gutierrez, who if not sitting on high-profile cases, files cases that are lame and full-of-holes.

And they are women. Isn't justice depicted as a woman who holds scales? These two could have risen above personal loyalties and monetary incentives(?) to become women of substance. But the same thing could have been said of their boss who is a woman. Perhaps, Cory Aquino was who she was because she had a hero of a husband. So does this mean that the three other women in power now, have zeros for husbands?

Day of Reckoning

If you read the pinoy money talk fora, it seems that PDIC payments have slowed down. A lot of member-depositors are complaining of delays inspite of the submission of requirements e.i. affidavits. Depositors had executed affidavits, paid the notarial fees, personally traveled to the PDIC Makati office, expecting to receive check/s through the mail in reasonable time. But if you read the complaints, some have been waiting futilely for six or seven weeks.

What else can you expect from a government agency that has practically tied up its funds on long-term investments in the commercial banks. PDIC has no money: in fact, its president has practically admitted to media when he said that his company does not project to earn any profit this fiscal year considering the number of banks that have closed since December, 2008. He did not say it, but PDIC will lose money this year. In the meantime, hundreds of thousands of depositors of the closed banks are kept waiting and hoping, but only a few checks are mailed out by the PDIC. Those checks are intended to prop up the illusion that PDIC is fulfilling its obligations.

It would be most interesting to see how PDIC could make its statutory obligation to pay all valid claims within six months from the date of filing. We know of several claimants who filed on March 23, 2009, and September 23 would be the day of reckoning.

Banality of Evil

While reading last month's Newsweek, we chanced upon an article that mentioned "the banality of evil," a phrase coined by Hannah Arendt who watched the trial in Israel of the infamous Nazi, Adolf Eichmann. In her book, she theorized that the great evils in history generally, and the Holocaust in particular, were not executed by fanatics or sociopaths but rather by ordinary people who accepted the premises of their state and therefore participated with the view that their actions were normal.

That is how one may explain the actions and deeds (misdeeds) of our leaders and officials in government who wantonly and brazenly cheat, lie, and steal. In a nation that prides itself as the only Catholic country in Southeast Asia, we are certainly one of the most corrupt, if not the most corrupt. The Political and Economic Risk Consultancy (PERC) survey in 2008 placed our country as the most corrupt, only to be displaced by Indonesia as no.1 in its 2009 survey. And the PERC surveys cover 14 Asian countries plus Australia.

No wonder then that individuals like Baladjay, Tibayan, Mateo, Hao and the most recent monster, Celso de los Angeles, thrive in a country like ours. The two million peso question: Would this scam artists have prospered without the blessings of powerful politicians and government officials? We would have to say that there was no way for Celso and his ilk to have flourished for years without the connivance of the powers-that-be. In Celso's case, SEC and BSP have been implicated. The conduct of evil is now so normal in our society that men have come to accept evil as not unusual; in fact, it seems that doing good is getting to be the exception to the rule of evil.

But if these shenanigans and criminal acts are done by Catholics, does this mean that they do not believe that what they are doing (have done) is against God? We are of the opinion that they know that it is a crime to lie, cheat, steal and scam, but simply find ways to justify it. And this miscreants believe that all they have to do is repent before they die, and they will be forgiven by God.

But what about the thousands and thousands of lives and families ruined by their acts and now have to live in poverty and misery? Eichmann was kidnapped by the Israelites so as to be tried for his crimes while he was alive: he was convicted and hanged in 1962. Sometimes, we wish that the NPAs and Abu Sayyafs would kidnap corrupt governments officials, politicians and criminals like Celso and Hao, and let pay them for their crimes as Eichmann did.

Victims are victimized not once, but twice!

It's been almost a month since anything has been written about Celso and his hospitalization in St. Luke's hospital. Is he still in the hospital and sick? is he in the hospital and not sick? or is he not even inside the hospital? What do you think?

We remember a report that exposed Rosario Baladjay's celebration of her birthday outside her Makati City jail in 2004, wherein people saw her wearing the finest jewelry in her party attended by outsiders, and possibly the jail warden. As mentioned in my previous post, Baladjay is now in the correctional institute, but we are sure that she still continues to be able to go in and out of the prison walls. Where else would she put to good (?) use her ill-gotten wealth estimated at no less than P20 billion. While we were researching on the status of Multitel and the futile efforts of investors to get back even a portion of their investments, we came across fora that chronicled the unkept promises of Baladjay to return their money. Do you know that these investors chipped in money to send a doctor to New York based on Baladjay authorizing this doctor to withdraw $300 million from her supposed account in Citibank. Of course, when the doctor and his Filipino hosts met the citibankers, they were told that no such account existed. We cannot fathom why Baladjay to the end continued to dupe her investors, holding up hope to these desperate people who would be willing to listen to anything if it promised the recovery of even a portion of their hardearned money.

We know what Celso has been saying to his preneed investors: in September, 2008, he told investors holding bounced checks that there would be a 3-month delay before he could make good those check with an addition 3% for their troubles, and then when he closed his companies, he told them that all the assets would be liquidated and the proceeds would be enough to settle all the pending claims. We all know what came of all that talk- zilch, nada, nothing! And just like the case of Baladjay, makes you wonder why scammers and estafadors seem to enjoy shafting and duping their victims, not only once but as many times as possible.

This kind of behavior can only point to one fact: that de los Angeles and Baladjay are not only criminals but also sociopaths.

Land of the Rising Scam

Celso de los Angeles is just the latest in a Who's Who gallery of Filipino rogues and scoundrels that have fleeced Filipinos of their money and savings. He is not the first but he seems to be the one who has practically perfected the art.

The pyramid scam hogged the headlines in 2002 when investment firms, most of them not even registered with the SEC, swindled more than a million investors of an estimated P100 billion. Companies such as Multitel, MMG Holdings, Tibayan Group of Companies, Glasgow and Maria Theresa Santos Trading duped people into investing P10,000-P300,000 with promised 10-15 percent annual returns.

Multitel, owned and operated by the pyramid queen Rosario Baladjay,used counselors who recruited investors. Successful recruitments meant a 1 to 20 percent commission for the counselors, who also brought in subcounselors. Celso used marketing agents who inveigled preneed planholders to convert their plans into DYM certificates and convinced savers to deposit in the Legacy rural banks. While Baladjay's scheme ran for three years (1999 to 2002), Celso's flourished for a record 11 years (1997 to 2008). But in three years, Baladjay amassed a whopping P20 billion while Celso "only" siphoned off a conservative P14 billion.

In 2008, a racket which spun off from Multitel also stole P2 billion-worth of investments from its victims. Cyrus Yap Hao, who worked with Baladjay in Multitel, introduced his own pyramid scheme through a company called Royal Manchester Five. FrancsSwiss also solicited investments ranging from $1,000-$10,000 with payment done online through the different websites of FrancSwiss, duping investors of another $150 million.

Baladjay was convicted in 2003 based on numerous estafa cases, and so was Maria Theresa Santos. Both are believed to be incarcerated in the Correction Institute for Women. Eric Mateo of Mateo Trading was arrested in early 2008 while Hao left the country in March 2008 but he was eventually nabbed by the NBI, but Jesus Tibayan is still at-large. Nobody knows any recents news about Mateo, Hao and Tibayan, but a recent balitapinoy.com news reports has given us a clue:

MANILA, July 2 — Acting Department of Justice (DOJ) Secretary and concurrent Solicitor General Agnes Devanadera ordered on Thursday DOJ prosecutors to fast-track the investigation of all financial and business scam cases awaiting resolution.
Correlating the unresolved cases in the DOJ and other prosecution offices to the recent conviction of former NASDAQ chairman Bernard Madoff, "this will generate the feeling of impatience to the general public and the complainants of the business and financial cases," Devanadera pointed out.

The Acting DOJ chief ordered Acting Chief State Prosecutor Severino Gana, Jr. to direct Asst. Chief State Prosecutors Miguel Gudio and Leah Armamento and City Prosecutor Emilie delos Santos to speed up the investigation of such cases similar to a Ponzi scheme committed by Madoff.

"Let us show immediate results," Devanadera stressed as she urged DOJ prosecutors for the successful prosecution of the accused. (PNA)

Two million-peso questions: Does Devanedera's memo indicate that the former Secretary of Justice sat on these cases? Any bets that this new directive will cover Celso?

Schemes to Keep Celso Away from the Courts

Have you read the news report about a DOJ hearing that was moved to August 4 because of the belated swearing-in of a PDIC lawyer? The case was filed by PDIC against Celso in behalf of 10 investors who lost P56 million to Celso's scheme. Although it is not clear to us how and why PDIC is involved in a case which does not concern legitimate bank deposits, it seems that PDIC is doing the right thing since we presume that PDIC will pay the huge court docket fees which have been a deterrent to victims who would like to seek justice against Celso. With this move, PDIC is signalling that it is serious in prosecuting Celso and his cohorts.

Cagayan de Oro (CDO) preneed victims, who have some money left, have filed two cases (with one more on the way as of this writing) of syndicated estafa against Celso, and was the reason why Celso was served two warrants of arrest while in the hospital. Last month, we heard that Cebu victims had planned to file a similar case but could not come up with the costly filing fees. If you remember, there was talk that Senator Mar Roxas would ask the DOJ and the courts to waive filing fees for Legacy victims, but obviously, this did not prosper. Then the DOJ inexplicably came out with a ruling that all Legacy cases, except for CDO, should all be consolidated for filing in Makati courts, even though most victims were located in the Visayas and Mindanao. This deterred a lot of victims who would have to undergo the time-consuming, expensive and long-distance court cases that would be heard in the Makati courts. Thank God that the CDO cases were filed before the DOJ ruling came out; otherwise, up to this date, not a single warrant of arrest would have been served to Celso.

But what happened to all those ballyhooed cases that BSP and PDIC filed much earlier? Nothing, so far. It is ironic that cases filed by private individuals shelling out the last of their private funds, resulted in immediate action by the courts, while cases filed in Makati courts by government agencies (the sames ones who as regulators allowed and tolerated Celso's fraudulent schemes) have not even gone beyond a first hearing at the DOJ. Do you know that the Aug. 4 would be closed-door, with the media kept out of the proceedings? Seems to prove the theory that there are powerful individuals behind Celso: who would do anything to keep Celso's mouth shut until death (if he really has cancer) causes him to bring those names with him to the grave. There a lot of people who would like to see Celso buried together with those nameless ones, who have for too long plundered the government coffers, and now the savings of the poor.

Postponing Delaying Insurance Corp

A claimant reported that in a July 21 afternoon visit to the PDIC office, one of so many unproductive follow-ups on the status of his claims, he saw an old woman creating a drama scene: berating and shouting at the staff. She could not understand why PDIC was insisting that her children, who were in Singapore, and her friends, had to personally appear to file claims. The old woman just wanted that she alone (not even her husband who she claimed was sick) could do the filing for all of them.

The informant could not help but notice that the old woman was clutching a bunch of yellow claim slips, leading the former to think that "she might have invited the entire barangay to deposit (sic) in Legacy banks" and doubt "whether those were real persons or just fictitious names as the number of claims filed by her is questionably humongous."

If an ordinary depositor would have cause to think that this woman is really the owner of most of those deposits, then imagine what the PDIC would conclude, especially since their charter specifically provides that in determining the amount due to a depositor, "there shall be added together all deposits in the bank
maintained in the same right and capacity for his benefit either in his own name or in the name of others." It is a foregone conclusion that the old woman will not get her way and that even if she presented all her friends, there is no guarantee that PDIC will pay all the claims. Remember the PDIC lawyer? He said that they have ways and means to go beyond what the personal info sheets indicate for the deposits in order to find out who really is the beneficial owner of questionable accounts.

It is understandable that cases of using dummies and preneed check conversions are delaying the validation of accounts, and therefore holding up (some people say grinding down) the payout of claims. However, it has been almost eight months since the closure of banks and checks are just trickling in. It is almost inconceivable that a claimant is paid for one account, while other accounts (in the same bank) opened at the same time as that paid account is still being verified- same situation for his family members who opened accounts together with the paid claimant. There have been more instances where PDIC has required affidavits of one sort or another, than cases of actual payments made. We personally know of one family who received one check for one account but was asked to submit affidavits for 15 accounts, all in the same bank.

Claimants, even those who have been partially paid, have come to the realization that even though PDIC wants to pay valid depositors, it does not have enough liquid funds. It relies on its monthly assessment collections, which average about P600 million a month, net of taxes, to fund its issued checks. So if its payables for all the 13 Legacy banks is about P10 billion (not including the claims for the closed 13 non-Legacy banks), then expect that payouts will drag out for the next 14 months. But wait! Isn't PDIC mandated by its charter to pay within 6 months from the date of filing? It has to, and therefore expect PDIC to soon issue bonds to raise money or finally force PBCom to sell it shares in order to get back its P7.64 billion investment in the bank. If it cannot raise funds soon enough, then the acronym PDIC will come to mean: Postponing Delaying Insurance Corp.

Divine Retribution

The doctors say that Celso requires a total of 27 radiotherapy sessions, and therefore would need more than 20 days stay in St. Luke's hospital (this hospital has gained a reputation as the sanctuary of fugitives and scammers and should be called St. Locos). Celso is allegedly suffering from diabetes and hypertension, diseases that in combination with a cancer would spell a short short life for the patient. Of course, the question is: Does he really have cancer? I mean cancer of the throat because we already know that he has cancer of morals, aside from having the diseases of greed and lust.

In this age of photoshop, it is very easy to be skeptical of pictures. All those pics of Celso with tubes in his trachea and stomach are met with doubt, notwithstanding the pronouncements of his doctors and the PNP physician. However, we believe that Celso may actually have cancer, considering that we have noted that malefactors and scoundrels have been felled by dread diseases. Recall that the late SEC commissioner Jesus Martinez, accused of graft and protecting Celso, died of cancer. Before that, FG had to be operated for aortic aneurysm. And just recently, PGMA reportedly had to undergo an operation to remove cysts from her breast/s. Malacanang had taken great pains to announce that the tumors were benign, but if we are to be consistent with our theory... What about JocJoc? Well, if our theory of divine retribution will hold true to form, it is just a matter of time.

Celso is a Negotiable Criminal

Legacy bank-issued CTDs are definitely non-negotiable instruments but Celso's detention in a prison cell is obviously negotiable. All that Celso had to do was get himself admitted in St. Luke's hospital (which would be easy enough), get diagnosed as one with a dread disease, and then undergo medical treatment. And that is what Celso did: if we are to believe news reports, he was a patient in St. Luke's, was undergoing chemotherapy, and then inexplicably obtained medical clearance from his doctor to leave the hospital.

What was so important for Celso to leave the confines of the hospital and go to Sto. Domingo to assume his duties as mayor? Would someone undergoing treatment for cancer risk the long travel from metro manila to Sto. Domingo, a town in Bicol to report to the municipal office? I don't think so... Celso had to go to that town to do something. Hide more documents? Retrieve cash from his safe to pay off his protectors? Well, it must have been important, to risk his health and expose him to arrest. And if we believe again the news reports, Celso collapsed while in town, and had to be returned to St. Luke's.

Pictures show Celso with tubes in his throat and stomach, to underpin his lawyer's claim that though a warrant of arrest has been served to him, he cannot be moved from the hospital. Then a PNP doctor is brought in, and confirms that Celso has to stay put in the hospital to undergo 20 sessions of radiotherapy. Celso must have brought back cash from his house in Sto. Domingo and dispensed them freely, and obviously, successfully. Of course, Celso is not used to giving out cash: he was used to issuing CTDs that were not actually funded. Now that his banks are closed, and his credibility shot, he has to pay cash to get his way.

However, thinking about it, we would gladly see Celso in the hospital getting all the treatments to get him healthy, fit enough to serve his sentence in jail. Death would be too easy for this criminal, but the question is: would our (flawed) criminal justice system dish out the long prison sentence that Celso deserves? Rethinking, I guess death is a surer sentence.

Legacy CTDs are non- negotiable instruments. Period.

We were able to have an hour's chat with a PDIC lawyer and relayed to him a recent case of denial of an acquaintance of a DEADBOL member. The woman, a San Miguel retiree, had deposited in Dynamic bank (the one legacy bank where PDIC had admitted that its verification process had stalled due to the magnitude of missing documents). She had recently received a letter from PDIC stating that one of her claims for a 250k time deposit was denied because it was not listed in the bank's master list. The PDIC denial letter referenced Sec. 4 (g) which provided that "no owner/holder of any negotiable certificate of deposit shall be recognized as a depositor entitled to the rights provided in this Act unless his name is registered as owner/holder thereof in the books of the issuing bank. (As amended by R.A. 9302, 12 August 2004)."

We told him in no uncertain terms that certificates of time deposits issued by the defunct Legacy banks were not negotiable instruments. We provided him the legal references including excerpts from Supreme Court cases and specifically cited a passage by the esteemed Professor of Law, Atty Timoteo Aquino, who in his book stated that ‘The rule has always been that the instrument in order to be considered negotiable must contain the so called “words of negotiability” – i.e., must be payable to “order” or “bearer.” These words serve as an expression of consent that the instrument may be transferred by negotiation. This consent is indispensable since the maker assumes greater risk under a negotiable instrument than under a non-negotiable one.’ Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the requisites for an instrument to become negotiable and it is clearly spelled out in requirement d) Must be payable to order or to bearer.

In the absence of the actual denial letter, the PDIC lawyer surmised that it may have been a promissory note or another paper, but not a CTD. And that PDIC uses different templates for different cases. However, the deadbol member clarified the matter with the claimant, and affirmed that the denial letter was in a general format: it stated CTD and PDIC (office of Atty Elaine Deticio) and the CTD number was handwritten on the blank portion in the letter.

If true, then PDIC will surely lose any legal case that based its denial on the negotiability of a Legacy bank CTD. However, the good news is that a denied claimant can seek reconsideration with the PDIC claims settlement office, and that PDIC is willing to consider other evidences of funds inflow, provided by the claimant. It is best to remind everybody concerned that in 2000, there was a precedent wherein PDIC accepted and paid out CTD claims of deposits made to the Rural Bank of San Miguel, even those without supporting bank records. If a bank depositor is sure that his or her money was actually deposited in the banks, then he or she is practically in almost-solid ground. We say almost, because this is the Philippines, and one can never be sure.

Mayor Celso is back.

Have you heard that Celso de los Angeles has reported back for duty as mayor of his small town in Bicol? Yes, just last week, radio broadcasters were matter-of-factly relaying this development in the life of Philippines' counterpart of Madoff. But unlike the latter who in less than six months of his indictment was sentenced to 150 years of life imprisonment, Celso has not even appeared in court for a first hearing. Sure, BSP and PDIC have announced five or six cases of syndicated estafa and other violations against Celso but none have prospered beyond the initial filings.

Even ex-billionaire Stanford has already been indicted, less than a month after his arrest. If one recalls, Stanford disappeared and was in hiding for months before his arrest. Here, all Celso had to do was show up for a few moro-moro senate and congressional hearings, and then admit himself in St. Lukes hospital for a supposed biopsy and subsequent diagnosis of throat cancer. Why hide when one can lie in comfort in a 5-star room. The hospital is known as a refuge of criminals who want to escape the public eye and warrants of arrest, and everybody expected Celso to follow suit, and indeed he did. We talked with a top PDIC lawyer who has made it his cause to prosecute Celso, and he said that he could only say with 70% certainty that Celso actually has cancer. Either way, Celso got his wish and the villain has crept back out of the hole, and is worming himself back to politics. I would not be surprised if he continues on with his plan to run for governor of the province in May, 2010.

Justice in this country practically does not exist. How can it? We heard the admission of Sec. of Justice, Agnes Devenadera,that the DOJ has pending cases of over 11,000. And to become part of that backlog, one has to spend a fortune to file a case. Pre-need victims of Cebu have been unable to file a P190 million syndicated estafa suit against Celso because of the petitioners' failure to post 1.9 million pesos of filing fees, and because of this, Celso's lawyer has asked the court to dismiss the case. What a travesty of justice!

In the Philippines, the wheels of the gods grind exceeding slow, and that is all what happens, nothing after that.

Checks or Affidavits in the Mail? That is the Question

Remember Mrs. Lego? She just called yesterday to inform me that hallelujah! she received two mails the other Friday. One mail had a check containing P100,000, representing a time deposit that would have matured last January, 2009, if only it hadn't been overtaken by events.

The other mail was for her daughter's CTD, which contained a letter requiring her personal appearance at the PDIC office, something to do with a Legacy loan that she had incurred. Found out that her CTD was surrendered when she applied for that loan, and when she filed a claim, she had attached the acknowledgment receipt in lieu of the surrendered CTD. PDIC tracked the loan, and have asked the daughter to do an accounting of her monthly payments she had made as loan repayments. Fair enough!

There are some DEADBOL members that are receiving mails, some enclosed with checks but most with affidavits that have to be signed and notarized. A check with PDIC's documentary requirements revealed that affidavits of ownership or co-ownership, as the case may be, are solicited only when signature cards are missing or the signature in the card does not tally with the signature in the claim form. This is a valid requirement if it is not abused. However, we know of one family who received 15 letters, and all contained affidavits: it is statistically impossible that everyone of those accounts had missing signature cards or non-tallying signatures. All members of the family had personally visited the bank, filled up the specimen signature cards, and were old enough that their signatures are not expected to change through the years.

One cannot help but be suspicious that this is just another ploy of PDIC to further delay the payment of valid claims by stringing out the verification process.

Who is the real villain? BSP or PDIC

The consultant pointed out that BSP has come out with relatively clean hands from the Legacy debacle. He said that PDIC is being vilified by the bank depositors but forget that PDIC, under its 2004 charter, could only examine the banks if directed by the Monetary Board. However a close perusal of charter's Sec. 8, article 8 shows that PDIC could on its own initiate and "conduct examination of banks with prior approval of the Monetary Board. That, to avoid overlapping of efforts, the examination shall maximize the efficient use of the relevant reports, information, and findings of the Bangko Sentral which it shall make available to the Corporation."

Here's the rub- the BSP had primary responsibility to monitor these banks, and in fact if reports are to believed, had started its investigation of Legacy banks as early as 2001. Why did it take 7 years before it concluded that these banks were conducting unsafe and unsound banking practices? If we are to believe the allegations of ex-PDIC President Ricardo Tan that it had conducted its own investigations of these same banks in 2005 where it found anomalies and irregularities, then why didn't BSP move earlier against these banks? From the aforementioned article above, BSP would have shared its 2001-2004 findings with the PDIC, and since both investigations lead to the same conclusion, then why didn't the BSP and for that matter, the PDIC file charges against the bank officers?

The consultant offered a juicy tidbit: when the combined SEC and NBI teams raided the Makati offices of the Legacy Consolidated Plans, they found several boxes of documents belonging to the Legacy banks. The PDIC got wind of this development, and requested that it be turned over to them. The SEC refused, and the PDIC had to go to court to compel the SEC for the turnover of the documents to them. Can you imagine that? SEC not cooperating with PDIC. BSP turning down PDIC's loan request of P14 billion. And who ends up the loser and victim of this inter-agency intramurals? As usual, the depositors. No wonder Celso and his ilk were and are able to milk the public: these gov't agencies cannot get their act together.

But wait... isn't that the SEC whose commissioner was tagged as having received almost P7 million worth of goodies from CGA? We heard from the grapevine that during the height of senate and congressional investigations of the Legacy mess and SEC Commissioner Jesus Martinez, big boss caused the family of Martinez to be billeted in Hongkong, shades of Jun Lozada. Rumor has it that the family of the commissioner was held hostage so as not to implicate the boss of Celso and Speaker. Jesus Martinez kept his mouth shut until death shut him up for good (or bad). If this rumor is true, then this explains why Celso is scot-free while his US counterparts- Bernie Madoff and Robert Allen Stanford- have been indicted for numerous charges, and more importantly, been stripped of their assets.

A Matter of Miscommunication?

Had a long teletalk with a close consultant of Jose Nograles, PDIC President and these are the details we gleaned from our discussions:

a. PDIC is singling out Davao as the nest of depositors who "because of greed" invested their money in legacy banks even though there wasn't any single legacy bank in Davao. We immediately corrected the use of the word invest since this implies the possibility of loss or gain from putting in one's money in a venture or financial instrument. We told him that investment is different from deposit which gives a fixed return on one's money placement, and the fixed return is called interest rate per annum. And when we talk about Legacy banks, we talk about deposits. The consultant gave me the impression that PDIC will resist paying these Davao depositors, and other such depositors;
b. Based on his talks with Joepot, the consultant sees no problem with depositors who opened multiple accounts within the maximum deposit insurance and PDIC-insured account configurations especially when joint accounts and ITF accounts are made with qualified beneficiaries- persons within the 3rd degree of consanguinity; and
c. That mailing of checks had one objective of making life difficult for depositors who opened dummy accounts using employees, friends, etc. Now it will be up to the dummy who gets issued a check in his/her name to give up what the check represents- a big amount to a driver, maid, or even a friend in need. It will be more problematic for the real owner of the funds to trace a former employee, so as to deposit the check made in the latter's name.

We also mentioned PDIC's limiting the use of a SPA to those living abroad and medically incapacitated. The consultant was surprised to find out that PDIC turned down depositors (who were temporarily in Manila to file claims) from having the PDIC officer attest to their appearance with their valid IDs. This process would have enabled these depositors to execute an SPA while in the Philippines. But no, the PDIC insisted that these depositors go back to their respective countries and execute the SPAs in the nearest Philippine consulate, which is sometimes several hours and hundreds of miles away. Talk about mindless bureaucracy, and making life tough for the depositors, who are the raison d'etre of PDIC.

The consultant believes that miscommunication is the root cause of the image problem of PDIC; and that PDIC intends to pay legitimate depositors. When asked why it is taking too long, he said that the processing and verification of 135,000 accounts in Legacy banks and thousands more of non-Legacy bank accounts is causing the delay. We believe otherwise: our previous posts on the topic establishes the fact that PDIC is illiquid and is relying on its monthly assessment collections to pay the depositors.

We are of the opinion that if only PDIC had acknowledged its insolvency, and admitted that the situation became worse by the subsequent failure of more than a dozen non-Legacy banks, then depositors would understand. They only needed assurance that their deposits would eventually be paid. The scare tactic of calling tens of thousands of accounts as dubious due to lack of or missing bank documents did not help the situation, it only cause anxiety and anguish, leading to the formation of DEADBOL (go here to register).

Be a Good Regulator

PDIC, BSP, and various banking associations recently inked a memo of agreement for the launch of the “Be a Wise Saver” program, which aims to improve depositor awareness in light of the recent string of bank failures.

According to PDIC President Jose Nograles, the campaign has something to do with the recent closure of the controversial Legacy banks. He said the Legacy issue started because depositors believed in something that is “too good to be true,” a scenario that PDIC hopes to avoid in the near future.“We learned from the Legacy mess. We have to make sure now that the depositors are well-informed. They have to know who they’re dealing with,” he said.

What!!! that is like advising people not to buy generic drugs because they are made by Filipino and Indian companies, don’t be fooled into buying these low-cost drugs because you are not sure of its quality. Buy the branded drugs: even though much more expensive, at least you are sure of its efficacy.

Don’t deposit in the rural banks, especially those that give high interest rates because they are not well-capitalized and are prone to fail. Deposit in the big commercial banks though they give very low interest rates: at least you are sure they won’t go under.

Question: Drugs are regulated by the BFAD; do you mean that even though these generic drugs are approved and monitored by the BFAD, they could be adulterated or even detrimental to one’s health?

Question: Rural banks are regulated by the BSP and the PDIC; do you mean that even though these banks are supervised and monitored by the BSP and PDIC; are you telling me that they are conducting unsafe and unsound banking practices?

Answer: Helloooo! This is the Philippines. Regulators here don’t do nothing, until it is too late.

An Overseas Letter from a Fil-Am Retiree

I am not at all exaggerating about my present financial condition . the family has exhausted all its savings waiting for six months now for return of insurance claims . All my credit card companies are starting to call now due last months statements remains unpaid . While we are now just paying our utility bills and the biggest one the home amortization and subsistence (food & groceries).... My only income now is $1,003 SSS monthly retirement check and the home amortization alone is $2,411.00 monthly .

If no insurance money will come in the next month , the family will have no recourse but to default in our home amortization payments.

Yours truly,

Sad to say, but true. While PGMA, cabinet secretaries, congressmen, and their families are now junketing in Japan and Brazil, Filipinos here and abroad are paying the price for our governement's incompetence and apathy for the ordinary people. This is exactly the reason why DEADBOL (go here to register) was organized: to light a fire under the a**es of our public servants and put fire in the bellies of the oppressed.

The Postman now works for the PDIC

Good news for some! HC is the first depositor we know who confirmed that PDIC mailed him three checks in payment for all three of his RBOP time deposits. Vicky, a fellow member-depositor who works in Angola, had earlier received two checks, representing her share of two joint accounts in RBOP wherein her mother was her co-account holder. David, a foreigner-member living in Cebu, reported today that he and his wife were paid for their respective shares of joint accounts and one single account worth P100,000, that represented some of his accounts in Bank of East Asia. Update: the next day, his adult stepdaughter received from the mail a check for P250,000, also for a BEA deposit.

Here is what we can deduce from the experiences of these lucky depositors (we say lucky because there are a lot out there, including yours truly, who have not even seen the shadow of a mailed envelope:
1. RBOP's time deposit accounts, inspite of the bank's notoriety as the main hub for Celso's fraudulent activities, have been verified and some account holders are now being paid. So this means that depositors of other banks are getting paid and one example is David's BEA accounts;
2. Except for HC's case (his accounts totaled about P500,000), the other two were only paid a fraction of their total deposits. David received less than 15% of his deposits. PDIC advised him to submit a notarized affidavit of disinterest persons if he wanted to be paid for one of his individual accounts, and all because his middle initial was spelled out in the CTD, but not in the signature card. Vicky's mother has to file a notarized affidavit of co-ownership before her mother's share would be paid out. PDIC is making the depositors jump through hoops. So the strategy is pay a little and then dangle the possibility of getting paid for the other accounts, but only after undertaking another set of tasks and processes. If PDIC is relying on its monthly assessment collections to fund its payments, then this strategy is logical.
3. All three actively worked for the recovery of their accounts: HC wrote a presidentiable who endorsed his letter to PDIC; Vicky got herself interviewed by GMA-7 TV; and David keeps on writing to, commenting in and posting to any blog or online medium. Oh yes, David also wrote a letter to the same presidentiable who must have endorsed it to PDIC.

Bad news for others! We called Mrs Lego yesterday night and again this afternoon, and she gave us the same news- no mail received as yet. Poor woman, she has futilely visited twice her city's postal office. She told me that she called the PDIC office and they told her that she should be receiving her check within a week. Mrs. Lego told them that it has been exactly a week since she had "rallied" in their Makati office, but still no letter. She said that if by tomorrow she has not yet received that much-awaited letter containing a check, she would pay PDIC a visit the next day and plead, beg, cry, and shout (again). The waiting saga of this 64 yo woman continues....

Goodfellas of the Philippines

Remember the movie Goodfellas (1990) starring Robert de Niro, Ray Llota, Joe Pesci. It was a true mobster story about three mafia gangsters. In one segment of the movie, restaurant owner Sonny tries to collect 7,000 dollars of unpaid bills from Tommie, a dangerous, disruptive and volatile criminal, who gets so angry that he breaks a glass bottle on Sonny’s forehead. In the next scene, a scared Sonny complains to Paulie, the local Mafia boss overlord. Although unaware of how to run a restaurant, Paulie promises to offer protection by becoming a partner. “Sonny is now committed and beholden to Paulie. Now Sonny’s got Paulie as a partner. Any problems, he goes to Paulie. Trouble with a bill, he can go to Paulie. Trouble with the cops, deliveries, Tommy, he can call Paulie. But now the guy's got to come up with Paulie's money every week. No matter what. Business bad? F--k you, pay me. Oh, you had a fire? F--k you, pay me. The place got hit by lightning, huh? F--k you, pay me. Also, Paulie could do anything. Especially run up bills on the joint's credit. And why not? Nobody's gonna pay for it anyway. And as soon as the deliveries are made in the front door, you move the stuff out the back and sell it at a discount. You take a two hundred dollar case of booze and you sell it for a hundred. It doesn't matter. It's all profit. And then finally, when there's nothing left, when you can't borrow another buck from the bank or buy another case of booze, you bust the joint out. You light a match.” And the restaurant is set on fire by Paulie’s hoodlums and burns down.

Sounds familiar? You bet it does. If we go by LAV’s June 12 comment in Ricky Carandang’s blog and KBP Cebu Chairman Leo Lastimosa's statement, they both say that Speaker Nograles, Butch Pichay, and other powerful people were partners of Celso de los Angeles. Here is a possible scenario: Celso runs to Prospero Nograles and company when BSP in 2003, according to Celso, starts harassing and extorting from him (remember his accusation against ex-BSP Deputy Governor Alberto Reyes and his brother, Efren Reyes). In the next scene, a scared Celso complains to Noggie, who probably gets the go-signal from his big boss. Although unaware of how to run banks, Noggie and company promises to offer protection by becoming partners. Celso is now committed and beholden to Noggie and company. Now Celso has got Noggie as a partner. Any problem, he goes to Noggie and his boss. Trouble with PDIC? Big boss says back off to Ricardo Tan, PDIC president who initiated a PDIC investigation in 2005. Tan doesn’t back off, and he gets replaced by another (who dies while holding office). Trouble with BSP? Big boss says back off and BSP backs off (according to Alberto Reyes, BSP had started its investigation of legacy banks as early as 2003 but takes five years to act on its findings). But now Celso’s got to pay his new partners. Noggie is now more powerful: not only is his brother-in-law working for the BSP, but his younger brother is PDIC president. Business bad because of financial crisis? F--k you, pay me. Launder money for them, pay their campaign expenses using legacy funds, use legacy offices and staff for their election campaigns, etc. Create so many fictitious loans using bloated collateral to siphon off money deposited by trusting and unsuspecting depositors. Come up with ghost applicants for motorcycle loans and receive hundreds of motorcycles. Print out so many CTDs assigned to the new partner’s dummies. It doesn’t matter. It’s all profit. And then finally, when there's nothing left, when you can't borrow another buck from the bank or get more legitimate deposits, you bust the banks out. Declare bank holidays. Is this a true story, too?

That one possible scenario. Here in another possible rundown: Celso himself gets tired of the payouts to and extortions from his new partners, and he himself gives up and closes all his business in one go. Celso is an AIM MBA graduate- he knows the value of banks. He would let go of his other businesses like the preneed, real estate, and credit card companies but given a choice, keep the banks. Only if he was cornered and desperate would he give up his banks, all 13 of them. He must have said, “What the f—ck!” and without giving notice to his partners, closed the whole shebang. And that explains how Noggie ended up holding P18 million of investments and CTDs (unfunded?).

Rallying Inside a Makati Office

We were excited to hear Mrs. A. Lego's (she agreed to the use of her family name) account of her scheduled visit to PDIC SSS bldg. so I called her up today. She told us that she, again with her daughter, arrived inside the PDIC office at around 3.30 pm. She noted that the Makati rally (against ConAss) was building up all around, and here she was ready to conduct her own rally inside the PDIC premises.

As usual, she ended up in front of the information counter. She forgot to ask about Atty Elaine and talked with a customer assistance officer who told her to wait for a letter. She countered that she would not leave the office until she got her check, while waiving her ultrasound findings and her husband's senior's medicine booklet. The officer got her yellow slips, and told her to wait while he checked the status of her claims. He returned with the news that a check would soon be mailed to her, but for only one claim, the P100,000 time deposit that had matured last January, 2009. She requested that the claim of her husband be included, but was told that they could only settle one claim. She asked why they could not give her the check over-the-counter; she was told that checks are mailed. So Mrs. Lego is giving the PDIC until Tuesday next week to make good its promise.

Mrs. Lego's experience with PDIC provides us with two learning points:
a. If you are willing to create a scene in the PDIC office, and do it frequently, you may get a check mailed to you;
b. PDIC cannot pay all claims at the same time- Mrs. Lego and her children had a total of six CTDs but only one could be settled. This just confirms our contention that PDIC is insolvent despite its P61.5 billion DIF, and is settling claims based on its monthly collections from the banks. Using the verification process as an excuse is just that, a subterfuge to stall and delay paying legitimate claims.

Wouldn't it be interesting to know if or when Mrs. Lego actually receives her first check? Subaybayan...

How Many Visits Will It Take?

Mrs. AL called us up yesterday night , and she was so hyper. She said that she, together with her daughter, had just come from visiting PDIC SSS bldg office that afternoon. She admitted to creating a scene. She was crying and shouting in the information counter, first requesting, then demanding the release of a least one check. She has six time deposits, ranging from 50k to 100k, and she could not understand why it is taking PDIC so long to settle her claims.

She has a tumor in her breast, and needs a biopsy. She is now feeling pain in the other breast. Her husband recently suffered a third stroke, and manhid na daw ang left side of his face. Her son has a tricyle that is in danger of being repossessed because he is 3 months late in his amortizations. She has two daughters with kids who are late in their enrollment because of lack of funds.

Mrs. Al brought her ultrasound findings and the senior's card of her husband to show that it was filled up with entries of medicines purchased for his condition. She said that she would not leave the PDIC office until she got answers, and a check. The clerk told her that he would check the status of her claims but came back and told her that the computer system was down. Mrs. AL said that she resumed her crying but got a headache, which forced her to leave the PDIC office, but with a promise that she would be back.

We advised her to take it easy, that a headache could be a symptom of an impending stroke. It would not help any if she got a stroke, and if she survived it, she would be in the same condition like her poor husband. She said that is the reason why she left the PDIC office, in order to calm down. We suggested to her that the next time she goes back to the PDIC office, she should look for Atty Elaine Deticio, AVP for Claims, instead of talking to a clerk or desk staff. In our one and only meeting with Atty Elaine, she struck us as a sensible and professional individual who listened and cared, not only for the depositors but also for her staff. We cannot wait to hear from Mrs AL the next time we talk, and find out how she fared with a ranking PDIC officer, especially with Atty Elaine.

We can only imagine the tens of thousands of depositors who are in similar straits like Mrs AL who cannot understand why PDIC is taking its sweet time to return to return to them their hard-earned money to them. Mrs. AL knows that PDIC is not handling government funds, but money specifically intended to protect depositors like her. If there was such a thing as a small depositor (which there isn't per PDIC charter), then 65-year-old Mrs AL would be the epitome. And PDIC is the anithesis of an ideal insurer.

Figures don't Lie, but Liars Figure.

Remember Mrs. AL, the 64-year-old seamstress who went to PDIC SSS building on May 15 to beg for the release of a check to pay for a breast biopsy? She filed claims for six time deposits last March 24, 2009.

Well, she went back to the same PDIC office on Friday, May 30 to plead her case. Once again, she brought her ultrasound findings, and only got as far as the information counter. Once again, the poor woman was told to wait for a letter that would inform her of the status of her claims; the clerk told her that's the way it is. It has been almost ten long weeks since she filed her claims.

Mrs. AL is very desperate. Aside from her required biopsy, her 67-year-old husband Mr. RL suffered his third stroke last Sunday. When before he could talk though garbled, now he is mute. He needs to see a doctor, but his wife worries that the doctor would prescribe treatment that they can scarcely afford. It is a daily struggle for her to put food on the table and buy their maintenance medicines. She cannot understand why PDIC is taking so long to give her back her hard-earned money: they cannot even give her P50,000 which is the value of one of her CTDs.

It is therefore hilarious to read Mr. Nograles press release urging 34,000 account holders to file claims to speed up the processing of their claims. It is impossible to imagine that six months have already passed, but there are still a large 25% of the total accounts that remain unclaimed. And he wants more claims to be filed when PDIC has a hard time processing claims that were earlier filed. What game is he playing? The age-old game of Charade.

What is puzzling is his announcement that 51,847 accounts were already verified and are eligible for claims: of this number, 17,359 filed for claims, and 13,970 were already paid. Well, all these statistics mean nothing to Mr. and Mrs. RL who are in dire need of money- their money. Borrowing again the words of Disraeli and popularized by Mark Twain when statistics were used to bolster an argument: "There are three kinds of lies: lies,damned lies, and statistics."

And all that Mr. Nograles is trumpeting is this sad fact: that only those accounts below P15,000 have been paid out. Ask Mrs. AL and we are sure that she will agree to this Mark Twain quotation: figures don't lie, but liars figure!

DEADBOL Plans to Sue PDIC

PDIC and BSP allowed Legacy to Swindle Depositors

The second DEADBOL meeting was attended by a prospective member, who aside from having time deposits in legacy banks, was a VP-Marketing for legacy bank products. Gi had worked for legacy since 2002 and had more information regarding Celso and the legacy operations.

She confirmed that Celso or CGA paid CTDs to his employees as separation pay, but unlike her subordinate who was led to believe that the banks would be kept open, she was called in the early afternoon of December 4,2009 by the cashier of Dynamic Bank that the banks would be declaring holidays. That during Sat, Dec. 6 and Sun, Dec. 7, bank employees were working overtime inside Rural Bank of Paranaque (RBOP) offices doing cleanup operations (she didn't know what that meant). Bank clerks were also typing the CTDs for separated legacy employees, including themselves.

We were puzzled when Gi said that a lot of time deposits in RBOP were owned by depositors located in Cebu, Gen. Santos, and especially Davao. She explained to us that there wasn't any legacy bank in Davao- constraining so many Davaoenos to course their deposits mainly through legacy offices in Davao. There were also depositors who did not want to travel long distances to open new accounts, so they placed their money through the nearest legacy offices. These "remote" depositors were issued legacy ORs, aside from CTDs which were delivered by the respective banks several days later. We then asked ourselves the obvious question: is it possible that these banks actually received the funds or did they issue the CTDs even if unfunded? It turned out that the answer to these questions did not matter. Gi recounted that she had a client who had been a depositor of the defunct CGA-owned Center bank (closed in 2006). He had personally opened his first P100,000 account but when the PDIC maximum was increased to P250,000, he deposited another P100,000, but through the legacy Makati office. PDIC honored the first account but denied his claim for the second, for the reason that the legacy office remitted the day's collections as an aggregate amount, without a breakdown of the names of the depositors. These transactions were done daily by the legacy offices, making it difficult for PDIC to ascertain who owns what, especially if legacy offices did not deposit collections daily or if the deposited funds did not match office collections.

What hit us is that CGA knew that these remote deposits would not be acceptable to PDIC, but still continued on with this scheme, but on a grander scale: from a one-unit bank to 12 banks with more than 109 branches. His greed knew no bounds, creating hundred, perhaps thousands of despairing depositors with probably no chance of getting back their hard-earned money. After this mind-boggling insight, we were hit by another lightning bolt of an idea: the PDIC allowed legacy offices to continue collecting remote deposits. It is quite impossible that PDIC or the BSP had not heard that legacy offices continued to receive money meant as bank deposits, but had obviously tolerated its practice. PDIC had not issued any circular or memo warning depositors to avoid this kind of remote banking which would not be covered by PDIC insurance, and we are sure that the BSP or PDIC had not issued any cease-and-desist order to the legacy banks and offices.

These insights lead to one inescapable conclusion- that Celso could not have pulled off his "business model" without collusion from these so-called regulatory bodies. Was this the organized syndicate that BSP Deputy Gov. Nestor Espenilla, Jr. was alluding to "that from day one was created to exploit human nature and weak links in the legal, regulatory, and enforcement framework of our banking and financial system.”

The irony of it all is that Davao is the bulwark of Speaker Prospero Nograles. Did he imagine that his kababayans would be the biggest victims of this innovative scheme to swindle depositors? Has his younger brother, PDIC President Jose Nograles, come to realize that most of the claimants of these remote deposits are Davaoenos?

New CTD variations

We always thought that there was only one kind of certificate of time deposit (CTD); the one issued by a bank when you deposit your money for a fixed period and the same one that you would present to the bank on or after the termination date. With the closure of the legacy banks, and the PDIC reasons for the delay in its settlement of claims, we realized that there are two kinds of CTDs, with various configurations, when it comes to claiming with the PDIC:

First is the CTD where actual money was deposited into the bank, but classified by PDIC as:
a. Verified CTD: supported by all six documents that the closed bank should have in its files;
b. Incomplete CTD: supported by at least one of the six documentary requirements of the PDIC; and
c. Fraudulent CTD (according to PDIC) with no single supporting bank document. However it is a valid CTD, except the bank has no record at all of the transaction.

Second kind is the CTD where no money was deposited into the bank, but the bank still issued a certificate upon orders of Celso so as to placate irate and anxious creditors:
a. In exchange for a bounced check/s issued for promised returns on legacy buyback investment schemes;
b. As separation pay for legacy employees;
c. As payment of all kinds of overdue (current included?) accounts due suppliers, partners, etc.

There is no question that the second kind of CTDs has no chance of being paid by PDIC. However, there is a big possibility that Prosperous Nograles is (was because PDIC has already paid) holding his uncollected P18 million in CTDs (issued so as to pacify and appease the angry Speaker). And if the older Nograles had those CTDs, do you think his younger brother wouldn't ensure that he gets paid by PDIC? Your guess would be as good as ours.

Obviously, funded CTD type a has no problem, but we guess this would be the exception since most legacy banks, according to the younger Nograles, had missing documentation. Most deposits would then fall into funded types b and c. If PDIC fails to pay these funded deposits, DEADBOL is ready to go to court and show the world, not only that these deposits are valid and legitimate, but PDIC failed in its avowed mandate and mission to protect bank depositors who entrusted their hard-earned money and assets into the banks.

USA's FDIC proudly states in all its sites and articles that "Since the FDIC was founded in the 1930s, no one has ever lost a penny of FDIC-insured funds." PDIC will never ever be able to boast of this accomplishment.

DEADBOL (Depositors Enabling All Depositors of Banks of Legacy vs PDIC) had its first organizational meeting two days ago. Though only a handful of members showed up, it was expected since organizing a new group may seem simple, but is definitely difficult. Furthermore, many members live outside of Metro Manila. However, it was all worth it because we learned so many new things from one member.

She was a former marketing staff assigned in the legacy preneed office located along Quezon Ave. During the course of our discussion, she divulged the following:
a. Even up to December 8, 2009, all of the staff assigned in her office were advised that though other legacy companies would close, the rural banks would remain open. That CGA (pronounced siga), the company code of Celso G. de los Angeles, would fight to keep the banks open;
b. They were given separation pay, but in the form of CTDs from RBOP. It was Edwin of RBOP Ortigas who personally delivered those worthless CTDs late in the evening to their office where everybody was waiting. Even separation pays in the amount of P10,000 were given as bank certificates, which our member acknowledges as practically uncollectible from PDIC;
c. That many marketing officers and agents, like her, had invested a lot of money in the pnbb buyback plans;
d. That their office was raided by a joint team of NBI/SEC, as were the offices in Scout Borromeo, QC and World Center Bldg, Makati. However, she said that the Vernida 1V Condominium at 128 LP Leviste St., Salcedo Village, Makati City offices was not raided: she found this lapse very mysterious and illogical since all of the files and documents were moved there to the 6th floor. She said that truckloads of files were brought to the building which she knows is owned by CGA.

She also mentioned that in the first week of December, she was assigned to encode the engine nos. of motorcycles, the products of Legacy Motors. She asked her boss where the motorcycles were, since she had not seen them, and she was told that the motorcycles, more than a hundred in number, had already been delivered to Prospero Nograles, the Speaker.

Prosperous Nograles admitted that he still had a collectible investment of about P18 million in legacy. So did this amount include the value of the motorcycles in his possession? Was he just an investor or was he more than that?

And to top it off, she mentioned that every month, in the legacy office, she regularly saw a sealed envelope from Ponce Enrile Reyes & Manalastas Law Offices. We checked the office of this law firm, also known as PECABAR, and viola! its address is the 3rd floor, Vernida IV Bldg, the same office of Legacy where all the files are stored. And guess who is the senior partner of PECABAR? Of course, Senate President Juan Ponce Enrile. So many questions have been answered in this meeting.

The Legacy Bank Mess: Tragedies and Broken Lives (Part 7)

Mrs. AL, a 64-year-old woman, tearfully narrated how on Friday, May 15 she went to the PDIC Makati office begging and crying for the release of her checks. She got the standard reply: wait for our letter or call advising you of the status of your claims. She had six time deposits ranging from P50,000 to P100,000 per CTD, in her name, her husband’s name, and four of her children’s. They were depositors of the Rural Bank of Paranaque (RBOP) since 2002. Her 67-year-old husband is stroke-incapacitated, and the interest payments from their time deposits were their major source of income. She worked as a seamstress, working up to midnight. They had filed claims last March 24, 2009. She is scheduled for a breast biopsy: she is not only frightened that she may have cancer, but scared that she would not have money to pay the medical and surgical costs. Her husband needs his medicines. After almost two months of waiting, they are desperate.

Distraught would be a good way to describe two ladies, Mrs. P and Mrs. M. Both retired, they too were RBOP depositors. ”Nagkakasakit na nga kami sa kakaisip, (we're getting sick just thinking about this),” they said. Family members, including Mrs. P’s daughter who lives abroad, had placed their savings in the bank. These ladies don't belong to the “small depositors” category (below P100,000) whose claims the PDIC said it would service first. After all, both were successful professionals during their active years: one was an IT executive for a universal bank and the other a top marketing director of a distribution firm. They decided to invest their money in the rural bank because aside from having been around for decades, it offered double-your-money-in-six-years schemes. They figured it was prudent- there were no risks because the bank, as all banks are, was under the regulation and supervision of the BSP and PDIC and in a worse scenario case, their deposits were insured with the PDIC.

Vicky and Irene, long-time family friends, were also officemates in Angola, an insurgency war-torn country that is 7,000 air miles from the Philippines. They had deposited most of their hard-earned savings in Dynamic bank and RBOP. Irene wrote, “I have been working in Angola since 2003. Now that my work is in jeopardy due to global crisis, I'll be left with empty pocket after all those blood and sweat of hard work abroad!” Vicky, a single mother, has been working in Angola for 15 years running and was looking forward to retirement in a year or two, and finally spend all her time with her children. With the loss of income from those high paying deposits, she is resigned to working in Angola for several more years. However, she is now worried and angry that PDIC, based on Nograles’ press releases, may not pay her time deposits, money that she had slaved and saved for 15 years.

My husband is in US as an immigrant with a low profile job. He went there last year just to renew his greencard, but when RBOP closed down, he was forced to stay there to support me and our two children who are only 5- and 2-year-old girls. We don’t want to leave our country but because of what happened, we lost hope not only in PDIC, but in the government and so we decided to go after US citizenship in the future. CS said, “Our country is hopeless with all the corrupt officials everywhere. I don’t want our children to grow seeing this kind of [moral] environment . Our ROBP CTD was everything we had. And now, all i can do is pray that we can still recover it.”

Joe L. is a naturalized American citizen from California who mortgaged his home and put his entire 401K retirement funds to invest with legacy CTDs. He counted on PDIC’s protection. If PDIC renege on their responsibility he is thinking of bringing the matter to U.S. EMBASSY so they can issue a warning to all Americans to refrain from doing business with all Phillipine banks because Philippine government insurer is corrupt. To him this is not just a domestic issue but economic sabotage.

SB is a Briton who retired in the Philippines, and this is what he wrote: “I borrowed money against my house to pursue 'good' interest rates in what was 'sold' to me as safe deposit instruments. I was never a rich man by UK standards. I used to be secure, but now I am back where i was 20 years ago, struggling… I now face losing the house if I cannot recover a high percentage of the money.” DW, a Briton living in the Visayas who had deposited most of his savings in legacy banks, had lost a substantial part of his passive income with the closure of the banks last December. He has accumulated a huge debt with monthly interest for the hospital and funeral expenses due to the long hospitalization and eventual death of his Filipina mother-in-law. Now he has to postpone heart surgery that he urgently needs. He lamented that “finding money to pay bills and for food and water to live off, let alone pay the hospital, the doctors, the funeral” bills are his priority.

J. Basco encapsulates what most, if not all, of the 60,000 legacy bank depositors with an estimated 135,000 accounts are now thinking and feeling, and we quote him: “Today I asked my sister for a loan to leave this country, legacy has (sic) all I have ever saved, I now leave this country and my wife as a broken man, too old to find work and no trust in anyone, an old fool who trusted the PDIC." There are no categories- sophisticated and unsophisticated, small and big depositors, locals and foreigners- only trusting depositors who had faith and confidence in the banking sytem, who entrusted their hard-earned money into rural banks, regulated by the BSP and PDIC, who guaranteed that their deposits were insured.

A total of 13 legacy banks closed last December, 2008. PDIC could not raise the funds to pay the P14 billion or less (if we eliminate the fictitious and fraudulent accounts) of these rural banks’ insured deposits. Another 2 rural banks in Pampanga and one in Mandaue city closed in January, 2009. This May, two more rural banks were placed under PDIC receivership; its two affiliated rural banks have been redflagged by the BSP. There are another two rural banks in Cebu that have not paid the interests due on time deposits, and may be candidates for receivership. Its depositors would soon join the swelling ranks of the great unpaid, which will inexorably lead to the erosion and possible collapse of public confidence in the rural banking system.

Why are the banks failing? Because BSP and PDIC were remiss in regulating and supervising these banks. Why cannot PDIC pay up? Because it is insolvent. Why is it illiquid? Because most of its funds are tied up in long-terms loans to, non-performing assets from and equity in the commercial banks. Why cannot it borrow? Because BSP refused to lend it more money. Why? That is a question that is simple yet difficult to answer. Perhaps BSP Deputy Gov. Nestor Espenilla, Jr. wanted us to read between the lines when he said in a congressional hearing that “we are dealing here with an organized syndicate that from day one was created to exploit human nature and weak links in the legal, regulatory, and enforcement framework of our banking and financial system.”

Last month, we were passing by a newly constructed mansion sitting in a big corner lot in Molave St, Ayala Alabang; we just could not help but ask its neighbor’s security guard who owned this compound made up of two beautiful houses. The guard said that all he knows is that “a Central Bank official owns it.” There may be no story here, or is there?

The Legacy Bank Mess: Victims Twice Over (Part 6)

In a press conference in March, 2009, Jose Nograles said PDIC suspected that over P6 billion of an estimated total of P14 billion in deposit claims by clients of 12 foreclosed Legacy banks were fraudulent because they lacked supporting documents. This revelation cropped up just several days after BSP rejected his loan proposal of P14 billion: how convenient for the state insurer looking for a way out. He explained that six supporting bank documents are required to validate a deposit but accused legacy bank personnel of hiding and losing these bank documents. He then appealed to them to turn over the documents in their possession or face charges in court.

Nograles has the temerity to ask depositors whose accounts cannot be validated due to incomplete documentation to run after their agents and solicitors. Nograles has the gall to advise powerless depositors to file non-litigable cases against non-banking people when the PDIC itself, after five months of forensic investigations, has not fined or charged any banking officer who they said had hidden pertinent bank records. Under PDIC’s charter, bank officials who refuse to surrender pertinent documents could be fined from P50,000 to P2 million and/or penalized a long jail sentence.

Nograles said missing bank documents could indicate the theft of depositors’ money by bank officials, or that missing records could also indicate the deposit claims were fictitious. Whatever it indicates, bank depositors are entitled to full compensation of their insured and legitimate deposits. Of the six so-called required documents, five of them are under the control of bank personnel. So even if a depositor has only one of them- the Certificate of Time Deposit or passbook- and matching proof of actual funds inflow, then PDIC is bound to return the money of the depositor. In a speech delivered before a joint meeting of the MAP, PCCI and the MBC on August 28, 2000 at the Hotel Intercontinental, then PDIC President Norberto Nazareno shared his experience with the closed Rural Bank of San Miguel (RBSM). As in the case of the legacy banks, Nazareno said that “anomalous accounts, splitting of deposits and the conversion of manager's checks into split accounts have hampered its [PDIC’s] audit and consolidation of the records leading to the delay in the servicing of insured deposits’ of RBSM depositors.” He said, "As we paid the depositors, they come with their certificate of time deposit but we see that is not recorded in the bank's records." He then admitted to having “to pay their insured deposits since the certificates were signed by authorized signatories, but only after they execute affidavits to support our cases against owners and/or managers.” This precedence underscores DEADBOL’s stand that missing documentation of bank records attended by fraud was not and should not be a reason nor an excuse for PDIC to avoid paying the valid claims of legitimate bank depositors holding official certificates of time deposits. If in 2000 the PDIC paid the RBSM depositors under such circumstances, there is no reason why the PDIC of today cannot pay the legacy depositors. Unless, of course, if the PDIC is illiquid and insolvent- which we have already established and proven.

In fact, the younger Nograles’ accusations of fraud and creation of fictitious accounts by legacy bank officers calls into play the well-established principle that records that would otherwise be conclusive evidence may be attacked as fraudulent. Depositors’ records (CTDs, passbooks, canceled checks) should be considered as evidence, as what PDIC’s Nazareno did with RBSM. Even the Federal Insurance Deposit Corp. of the USA recognizes form of documents which would be considered as conclusive proof, in the event of the liquidation of an FDIC-insured bank when the bank's records are either missing, incomplete, or incorrect. In a FIDC Advisory Opinion, the Assistant General Counsel wrote that in such cases “where the records of an insured bank differ from the records of the account holder, ... the FDIC will accept as conclusive the genuine, unaltered records of the account holder, maintained in good faith and in the ordinary course of business.” The UK’s Financial Services Compensation Scheme “give investors the chance to agree the balance of their own account before accepting payment, or ask them to submit any relevant documentary evidence where they believed a discrepancy existed which we would then investigate further.” PDIC, as an insurer, should not be allowed to escape paying the legitimate claims of depositors who relied on its statutory backing of their accounts and on the ability of their banks to fill out deposit records properly.

Nograles tested the heights of absurdity by claiming “The depositors and the PDIC are both victims here.” How could PDIC be a victim when it supervises banks, and can examine and investigate its records? How could it be a victim when it can fine erring bank officers and owners a maximum amount of P2 million? How could it be a victim when it has the legal power to impose prison mayor on banking personnel who violates its rules? PDIC has all these powers when a bank is operational and open to the public. Just imagine what it can do when the bank has closed and is placed under its total control, and yet Nograles has the audacity to preposterously claim that it is a victim, too.

There is no doubt that legacy bank depositors are victims of Celso de los Angeles and his banking minions. However, as events are shaping up, the legacy bank depositors are now being victimized once again, by the younger Nograles of PDIC. He is not only reneging on PDIC’s basic mission of protecting insured depositors, but his press releases and pronouncements seem to blame the legacy depositor for patronizing these banks. Blaming the victim is a common resort of the guilty. And Jose Nograles is certainly guilty. He is guilty of not acting on PDIC’s 2005 findings of anomalies and wrongdoings in the legacy banks. He is guilty of not continuing the examination of bank records to ensure accurate and complete recordkeeping as provided by the PDIC charter. He is guilty of not filing charges against legacy bank officers for hiding bank documents. He is guilty of not ensuring that the cash reserves of the DIF were enough to pay insured deposits of the legacy banks. He is guilty of not being able to borrow funds from the BSP to pay the insured legacy depositors. And because PDIC is insolvent, he is guilty of coming up with all kinds of excuses in order to unconscionably delay and avoid paying legitimate depositors. He is guilty of erosion of public confidence in the rural banking system. And soon, he will be guilty of ruining the lives of people from all walks of life. Part 7 will give real-life examples of how the younger Nograles is trampling the lives of individuals and families.

The Legacy Bank Mess: Every Man for Himself (Part 5)

It took the BSP about two weeks to summarily reject PDIC’s loan request for P14 billion. The two weeks of deliberations were considered unusually long, given that in the past, the central bank normally decided on loan requests before deposit claims were paid out (PDIC had already started servicing savings accounts claims). The central bank must have had strong reasons to disapprove the loan from its erstwhile partner who needed to service the claims of tens of thousands of depositors of 12 nationwide banks when just five months ago, it had agreed to lend P3 billion to pay a few thousand depositors of one local bank.

Could one reason be political? It is a known fact that congressman Luis Villafuerte had failed in his campaign for the speakership of the House. Blogs have posited that the congressman used his wife, who sits in the Monetary Board (MB), to influence its unfavorable decision so as to embarrass Speaker Nograles, who has been identified as a legacy preneed depositor and rumored to be a legacy bank depositor. We have read newspaper articles reporting that congressmen, who had been persuaded by the speaker to put in money in the legacy banks, have threatened to unseat Nograles if they did not get their money back. They may have been assured by the speaker that his younger brother had their backs, guaranteeing immediate settlement of their deposits.

But it is improbable that Mrs. Villafuerte could by herself persuade her fellow board members to put its co-regulator in such an untenable situation unless there were more compelling arguments. And that justification would be prior knowledge: that the younger Nograles had known about the banking anomalies and irregularities unearthed during the 2005 BSP and PDIC investigations but had not acted on them. If the MB had considered the possibility of collusion and obstruction, then it would explain the otherwise inexplicable decision of the BSP to peremptorily turn down PDIC’s loan proposal. Now that we have established that BSP was completely cognizant of PDIC’s lack of liquidity by granting it a P3 billion loan late last year, BSP, if it really wanted to be of help, could have countered with a lesser loan amount, say half or P7 billion. However, it instead chose to turn its back on its erstwhile partner and leave PDIC literally holding the proverbial empty bag.

After more than 45 days of verifying the deposits of all the closed banks, the younger Nograles must have believed that he had enough data for him to go to the central bank and request for P14 billion. If the BSP had granted the loan, then PDIC would by now have paid most if not all of the legitimate deposits. However, the unexpected denial of its loan proposal has led Jose Nograles to likewise turn his back on Celso’s assurances of prompt payment to legacy bank depositors. Instead of doing his job of paying depositors as described by his older brother, the younger Nograles has done a 180 degree turnaround in an obvious attempt to preserve his job as PDIC president. It is now everyman for himself! He is now covering up his inexcusable negligence and dereliction by trying to impress to all and sundry that he is the protector of the DIF. He is now delaying, prolonging and avoiding payment to depositors, the very ones who are supposed to be protected and insured by PDIC and the DIF. When before he was complacent with the Celso de los Angeles, shareholders, silent partners and bank officers, he now acts as the vigilant guardian of the DIF, virtually accusing the depositors of conspiracy with Celso de los Angeles et al. He is blaming and pointing fingers to all and everyone except to himself.

His first move was to change the filing and claiming process. He now requires that a Special Power of Attorney (SPA) can only be executed if the original depositor is out of the country or medically incapacitated, contrary to common, legal, and traditional practice. One can buy or sell millions worth of property based on a notarized SPA for and in behalf of the vendee or the vendor who is healthy and lives next door, but to file for a P100,000 claim, it is disallowed by the PDIC. He now demands that minors 7 years old and above personally appear before PDIC claims officers and affix their signatures when common sense demands and actual banking practices do not require such. Because minors usually cannot sign their names, banks expect their parents or guardians to sign for them; however, PDIC demands that even 8 year olds sign the forms. He has floated the idea of mailing checks payments when everyone knows that postal fraud and malfeasance is not uncommon.

All of these modifications by PDIC of its own rules and practices are time-consuming and entails more costs to the depositors. However, these are inconveniences compared to the anxiety and consternation caused by his pronouncement that most accounts were doubtful because of missing bank records and discrepancies in recording done by accountable bank officers. This has caused bewilderment and trepidation among bank depositors who have no knowledge of banking procedures and certainly no control over what bank officers do or do not do with the funds deposited. What is important to a depositor is that he walks away from the bank with a duly signed and filled up certificate of deposit or passbook. Why is Nograles blaming the victim for acts of omissions and commissions done by the very people his organization the PDIC is supposed to supervise? Even if we already know the answer to that, how is Nograles going about blaming all others except himself and his agency? Part 6 hopes to derail this devious scheme of delaying and avoiding payment of legitimate deposits.

The Legacy Bank Mess: A Parting of Partners (Part 4)

PDIC has a Deposit Insurance Fund (DIF) of 61 billion pesos but has outstanding obligations of P72.5 billion to the BSP. To the layman, it would seem that PDIC is bankrupt. And it may very well be, except for the assurance of Jose Nograles that "All [loans] are in current status and matched with identifiable repayment sources." Most people think that PDIC borrowed all this money from the BSP to supplement and replenish its DIF. It is not so. It is the BSP that initially grants emergency loans to distressed and troubled banks for a period of 90 days, extendable for another 90 days. If the bank is unable to pay these loans within the statutory 180 days, then these loans are transferred to the PDIC, which has less stringent requirements (PDIC accepts real estate properties as collateral). The loans turn into a PDIC assistance when the bank signs an agreement with the state insurer for a rehabilitation plan.

So why didn’t the BSP approve the legacy banks’ request for emergency loans? Because the BSP already knew that based on its (and PDIC'S) 2005 examination of the banks’ books, it did not have the required amount of government securities as collateral. So it allowed all 12 legacy banks to declare bank holidays, and then asked the PDIC to move in early December, 2008 and put the banks under receivership, which it did. Then, late January, 2009, PDIC exercised its charter that allows the insurer to borrow from the central bank to pay claims of depositors of banks placed under its receivership. On February, 2009, BSP disapproves the P14 billion loan request of the PDIC stating that PDIC “have more than enough (DIF) reserves to cover it (deposit claims).” But did it have even enough? Or the question should be, does PDIC have any reserves left?

In 2002, the BSP lent UCPB P25 billion in emergency loans. In 2003, PDIC paid out P8 billion in cash for the bank’s non-performing assets (NPAs). By 2005, PDIC still had P12 billion in loans to the bank. It was only in April, 2009 that PDIC approved the conversion of the P12 billion loan into equity with Nograles noting that the capital notes of PDIC will be converted into convertible preferred notes once the Supreme Court rules on the ownership issue of UCPB. Then in March, 2004, PDIC absorbed the P7.64 billion loan of Philipine Bank of Communications (PBCOM) and converted this into a soft 10-year term loan as part of its “financial enhancement package” where it only charged one percent in interest per year. The pact involves the eventual sale of 67 percent of the bank’s capital stock five years from the infusion of the financial package for the then-bleeding bank. PDIC has a lien on a substantial number of the bank shares: designed this way to make sure that PDIC will be protected in its financial rescue of P7.64 billion, clearly way above the buying offers for the bank’s shares. But now PDIC has a big headache in making its timetable to get its hands on its money it advanced to PBCom because the two warring major shareholders cannot resolve its disputes. In 2006, PDIC paid P3 billion for Export and Industry Bank’s NPAs and granted the bank a six-year term loan of P7 billion, paying PDIC an interest of one percent on the first year of availment and five percent on the next five years. EIB, in turn, used the P7 billion to purchase high-yielding government securities, which will be held in escrow for PDIC. PDIC has tied up P25.6 billion of its DIF as long-term loans and equity into the three banks. Add another 10 billion it paid in cash for the banks’ NPAs, and PDIC has sunk in P35.6 billion of DIF into the three banks.

It is not hard to imagine that it may have tied up the rest of the P61 billion DIF into other banks, considering that as of 2008, PDIC owed the central bank P72.5 billion. The BSP would have known the illiquid position of pdic and that is why in September, 2008, it approved a P3-billion loan for the PDIC to pay insured depositors of the padlocked G7 Bank, a seven-unit rural bank based in Bicol. “The BSP and PDIC are co-regulators. It’s our joint responsibility,” said PDIC president Jose Nograles, when asked about the new loan. But five months later, the BSP disapproved PDIC’s loan proposal that it needed to pay the depositors of 12 banks with more than a 100 branches located all over the country. The BSP maintained that PDIC had acquired “more than enough reserves” to pay P14 billion of insured deposits. PDIC nets about P6 billion cash a year in bank assessments and interest income, and it is therefore impossible for it to have accumulated P14 billion in five short months.

Why had BSP turned down an otherwise routine loan request? Why had it become PDIC’s sole responsibility, and not BSP’s co-responsibility? And faced with this unexpected rebuff and rejection, what is the younger Nograles saying and doing that is now endangering public confidence in pdic and the rural banking industry?

An Expose of PDIC: The Makings of a Syndicate

Ricardo Tan, former president of PDIC, claimed that sometime in 2005, Nograles had invited him to dinner in Edsa Plaza Shangrila hotel but was surprised by the appearance of Celso de los Angeles. Prospero Nograles, then House majority leader, asked him to go easy on the probe of the Legacy Group because its owner was well connected with top administration officials. This dinner came after PDIC had started its own investigation of the legacy banks. “We conducted a probe based on the complaints of depositors,” Tan said.“What we found were fictitious deposits, [rotating] collateral from one bank to the other, unsafe and unsound [banking practices] and improper documentation.”

The older Nograles kept on coming up with different explanations for that meeting, and noting that if he had wanted to intervene in the Legacy case, he should have talked to the BSP and not PDIC. He is quoted as saying ““The function of PDIC is to pay depositors of banks ordered closed by the central bank which files complaints against erring banks. Filing cases is not the function of PDIC. So why should I talk to him (Ricardo Tan) when it is not his function? His job is to collate assets of closed banks and pay depositors.” Not surprisingly, Celso echoed the same line by saying “Why would I talk to Ric Tan when he was not with the BSP, and I did not have any closed banks at that time?” If Celso could play dumb on the powers of PDIC, Prospero Nograles certainly cannot get away with feigning ignorance. He was the majority leader when RA 9302, the law that restored PDIC’s power to examine and investigate banks, was deliberated on the floor and passed by the House in 2004.

We can therefore logically infer two facts from Tan’s revelations: first, that contrary to the younger Nograles’ protestations in the 2009 congressional hearings, PDIC could and had in fact investigated the legacy banks as early as 2005 and second, that Celso had powerful friends who were obviously interceding and running interference for him. Celso himself disclosed in an interview with Ricky Carandang that that he was “close” to some influential political figures like Vice President Noli De Castro, House Speaker Boy Nograles, former congressman Butch Pichay, and Environment Secretary Lito Atienza. VP Noli acknowledged that Celso was a campaign supporter in his 2004 election run for the VP position. How valuable was he to Noli de Castro? Obviously a big-time contributor- it was De Castro who recommended that De los Angeles be appointed in 2004 as chairman of the National Home Mortgage Corporation. Nograles admitted that he was a legacy preneed investor before 2004 and still had a collectible of P18 million in legacy investments. Legacy bank insiders revealed that the Speaker had availed of the bank’s car promo plan under its 6-year DYM time deposit. The Speaker has admitted to attending parties thrown by Celso. Carol Hinola, former president of the Legacy group, alleged that Congressman Ed Zialcita received a monthly stipend of P100,000 as consultant fees. Patricio Mangubat of the New Philippine Revolution wrote that the Paranaque congressman “is not just a silent investor but a very active one.

Obviously, these powerful friends had to ensure that the golden goose would keep on laying the golden eggs. Having influential partners and backers was not enough to keep the money machine operating. It needed inside men to ensure that BSP, PDIC and SEC would not spoil the party. The critical roles of BSP and PDIC as potential spoilers in the grand scheme are axiomatic; what is not evident is the function of the SEC. Most of the bank depositors confidently deposited their hard-earned money into the legacy rural banks, not only because of the high interest rates offered but because the banks were part of a conglomerate that included supposedly profitable sister companies engaged in preneed plans, motorcycle dealerships, credit cards, etc. Celso and his friends could not allow the SEC to close down these companies and therefore bring down confidence in the legacy “business model” that Celso kept on mentioning during the initial senate hearings. This was the business model that was making it possible for the legacy banks and preneed companies to rake in billions of pesos.

Enter SEC Commissioner Jesus Martinez, close cousin of congressman Zialcita. Hinola had narrated that during lunch on Feb. 14, 2006 at a Japanese restaurant at the Shangri-La hotel in Makati, Martinez, who was accompanied by Zialcita, has asked her “ if we have any problems with the SEC that he [Martinez] could help us with and at that time…” Martinez must have been a big help because Hinola accused him of receiving a Ford expedition in 2007 and a P5 million house in 2008, all courtesy of legacy funds. One potential problem (SEC) dealt with, two (BSP and PDIC) to go.
Very few people are aware that Prospero Nograles has a close relative working in the BSP. His name is Manuel Bendigo and he is the brother of the wife of Nograles. Though the BSP started investigating the legacy banks as early as 2004, it would seem that the legacy banks were always one step ahead of the investigative team. Would it be farfetched to believe that this brother-in-law played a key role in keeping Celso abreast of BSP’s findings and plans? Two down, one to go.

For refusing to play ball and go easy on the legacy probe, Ricardo Tan was replaced as PDIC president by Michael Osmena, who died in office. On December, 2007, Jose Nograles, an unheard-of Senior Vice President of Landbank and more importantly, younger brother of the House of Representatives’ majority leader, was appointed as PDIC president. It would seem that the younger Nograles had two marching orders- the first and immediate priority was to set aside and bury the adverse findings of PDIC’s 2005 investigations of the legacy banks. He obviously accomplished his first mission. Ricardo Tan said in an interview with the Inquirer ““When I left PDIC [in April 2006], our exposure to [De los Angeles’] 12 banks [in terms of insured deposits] was P4 billion,” “Since then, PDIC’s exposure has risen to P14 billion.” What was the new PDIC president’s second mission? That in case the some of the legacy banks failed, PDIC, in compliance with its overall mandate, would pay the depositors promptly and expeditiously. Remember his older brother’s quoted job description of the PDIC president? “His job is to collate assets of closed banks and pay depositors.” A month after the legacy banks’ closure, Celso announces that PDIC will soon be paying the bank depositors. Swift deposit payouts would have avoided unwanted attention into legacy bank anomalies and the criminal negligence of the regulatory agencies. But the syndicate did not take into account the one flaw in its grand plan- PDIC had no money to pay out and the BSP inexplicably refused to lend it money. How and why did this happen to the PDIC that had boasted that it had a DIF of P61.5 billion pesos? Part 4 will reveal the hidden interests of the big financial institutions that caused the drying up of the govt-controlled private funds.

The Legacy Bank Mess: Half-truths are Whole Lies (Part 2)

George Orwell wrote that “We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men.” Ordinary depositors who are alarmed and dismayed by the actions and actuations of PDIC formed a group called DEADBOL (Depositors Enabling All Depositors of Banks of Legacy,). The members call on PDIC to fulfill its overall mandate of protecting depositors. The group demands that PDIC performs its own published mission of adopting “responsive resolution methods” and ensuring “prompt settlement of insured deposit.” So far, five months have passed since the closure of legacy banks, and depositors, who had put their faith in PDIC, are starting to believe and realize that PDIC does not intend to honor its obligations to its insured depositors. PDIC is spouting a lot of half-truths so as to condition the public and we now see that it is DEADBOL’s duty to expose these irresponsible statements of commission or omission, and restate the truth.

Congressmen, senators, and media have the mistaken notion that PDIC is funded by people’s money; PDIC is content for reasons of its own not to disabuse them of this misinformation. PDIC is a government agency that administers a fund that does not use taxpayer’s money. Except for the initial seed money of P3 billion pesos from the government, the Deposit Insurance Fund (DIF) is basically funded from premiums paid by all operating banks. You can be sure that the banks have found out a way to pass on these assessments to the depositors who absorb these hidden costs. To characterize the DIF, which has grown to more than P61 billion pesos, as government funds is a half-truth. That is like saying that SSS and GSIS funds are also owned by the government. Fortunately, the truth is that these funds are private funds but unfortunately, managed by government officials who are driven by dark motives and hidden interests.

On February 9, 2009, PDIC came out with a press release that it is “prioritizing the claims of depositors with regular savings accounts of P100,000 and below in keeping with the state deposit insurer’s mandate to protect small, unsophisticated depositors. “ Nograles further qualified this half-truth by saying that “in keeping with the PDIC’s mandate to protect the small, unsophisticated depositors” and that “stopping the payouts as some quarters have suggested will be prejudicial to small depositors who have valid deposit insurance claims.” Nowhere in the PDIC charter can one find the words “small” and “unsophisticated” but the PDIC president used both words to describe a depositor that his organization is supposed to protect. Now that the maximum insurance coverage is P500,000 per account, will Jose Nograles in servicing future claims say that a 100,000 pesos and below account represents a small depositor; P250,000, medium; and P500,000, big? Does having a small deposit make you an unsophisticated depositor? Where is Nograles getting his lexicon? Yes, we recall Senator Mar Roxas, during a senate hearing on the legacy mess, first using the words sophisticated and unsophisticated to describe both bank depositors and preneed investors. And the younger Nograles latched on to these words, as if to ingratiate himself with the legislative investigators. Labeling is a cognitive distortion which can lead to logical fallacies.

The truth is that the pdic is chartered “to promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits,” regardless of the size of the deposit but up to the statutory insurance coverage per account. It is a fact that this is the first time that PDIC has differentiated and prioritized claims according to the size of the account.

In congressional and senate hearings, Deputy Governor Espenilla, Jr. said that the BSP began investigating the Legacy banks as early as 2005. When a congressman asked Nograles why hadn’t PDIC earlier conducted its own investigation of the legacy banks, we heard Nograles mumble that due to bank secrecy laws, PDIC could only examine individual bank accounts only after a bank has been placed under receivership. This is a half-truth. BSP Governor Tetangco, Jr. in a August, 2005 speech to a financial forum says that he is “happy to report ……, our partnership with local financial regulators (SEC, IC and PDIC), is now fully operational with major projects currently underway. These projects include conglomerate mapping, information sharing, joint examination arrangements, rules harmonization and financial literacy.” The PDIC Forum 2004 proudly announced that RA 9302, the Amended PDIC Charter signed into law on July, 2004, enhanced “PDIC’s capability to minimize risks to the DIF by reinstating its authority to examine banks subject to prior approval of the Monetary Board” and investigate complaints related to unsafe and unsound banking practices. The PDIC newsletter trumpeted that this authority will fortify the financial sytem’s safety net by “allowing prompt remedial intervention.” Dictionaries define prompt as “performed with little or no delay” and remedial as “tending to improve or rectify.” Given then PDIC’s enhanced examination powers, did PDIC examine the books of the banks before the banks actually closed? And if it did, did it delay intervention until it was too late? Part 3 will attempt to provide answers to these burning questions.