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.

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?).

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

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.