Wednesday, May 27, 2009

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?

No comments:

Post a Comment