How Legacy Group lured depositors
By CARMELA FONBUENA, abs-cbnNEWS.com/Newsbreak | 03/13/2009 1:18 AM
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By now, those who have been following the congressional hearings and court cases on the Legacy Group mess are aware of how its owner, Celso delos Angeles, allegedly misused depositors money leading to the collapse of 12 rural banks and 3 pre-need firms.
In an attempt to save their necks, Delos Angeles’s alleged accomplices—Namnama Pasetes-Santos and Carolina Hiñola—on Monday testified before the senators how Delos Angeles siphoned depositors’ money to finance his extravagant lifestyle and to pay off government officials for protection.
The two women surfaced—to pass all blames to Delos Angeles—after the Bangko Sentral ng Pilipinas (BSP) filed the first case of syndicated estafa holding them responsible—along with Delos Angeles and other Legacy executives—for the financial mess.
The BSP describe the Legacy Group as a “swindling syndicate.” Syndicated estafa is a non-bailable offense. Hold departure orders have also been issued against them.
Despite their initial testimonies in the media, however, the BSP still included Pasetes-Santos and Hiñola in the second syndicated estafa case. In both BSP cases, affidavits of rural bank presidents showed how the two women fronted for Delos Angeles and ran the operations of the Legacy Group.
“Ms. Pasetes and Ms. Hiñola would explain to me that those were directives of Mr. Celso delos Angeles, thus, I have no other choice but to follow their instructions because Mr. Delos Angeles is the titular head of the bank,” Mabini Sanico, president of Legacy Group’s First Interstate Bank in Leyte, said in an affidavit.
Celso’s brainchild
BSP’s first case against the Legacy Group detailed how it used various schemes to siphon depositors’ funds into corporations controlled by Delos Angeles but at the same hide the cash discrepancy in the banks’ financial books.
The schemes “Motorcyle Loan Program” and “Investments Loan” program enticed “fake borrowers” to sign loan documents in exchange for commissions. They made it appear that funds were withdrawn by the “fake borrowers” but the proceeds are actually deposited to another account controlled by Delos Angeles.
The 12 Legacy banks had an estimated P24 billion total deposit liabilities in December when they closed one by one. Out of this, only P14 billion will be returned to depositors whose bank accounts were P250,000 and below. This will be shouldered by the taxpayers through the state-owned Philippine Deposit Insurance Corporation.
What the first BSP case failed to explain was how the Legacy banks attracted so many depositors in the first place.
The second case of syndicated estafa filed by the BSP on March 6 supplied the missing picture. Affidavits of First Interstate Bank president Mabini Sanico and Legacy Consolidated Plans Inc (LCPI) vice president for marketing Myrna Castillo Axalan detailed how the Legacy Group lured depositors.
They detailed various “extraordinary exorbitant schemes” that the Legacy Group used to attract depositors.” Among them are the following:
- Double your money in three years
- Double your money in five years
- Double your money in six years
- Hybrid five years
- Hybrid six years
- 3-Year-Buy-Back
Axalan testified that Delos Angeles claimed to have “personally designed” these schemes.
“Mr. Delos Angeles would also categorically and clearly declare during the presentation at the marketing committee meetings that said Legacy products or programs were his very own creations and invvoations,” Axalan said in his affidavits.
Pasetes-Santos and Hiñola were always present in those meetings, Axalan said.
Exorbitant schemes
In the double your money schemes, the deposits would yield 100 percent after three to six years, depending on the scheme. It was offered in all rural banks affiliated with the Legacy Group. Depositors were issued a Certificate of Time Deposit in return.
The "hybrid five years" scheme, on the other hand, offered 20 percent per annum interest. The initial 20 percent was given upfront to the depositor as initial yield. Thereafter, the depositors were given monthly interests equivalent to 20 percent interest per annum. On the fifth year, the depositors were given back their principal deposit.
Axalan also detailed the “3-Year-Buy-Back” scheme. “Deposits of investor will double in three years and then the investors will receive 12 post dated checks as payment of the investment made on a quarterly basis in an amount that is double the amount of the original investment,” she explained in her affidavit.
The schemes were so attractive that the First Interstate Bank in Leyte was able to attract depositors even outside the Samar and Leyte areas.
“Because of these extraordinary exorbitant yields, it was very easy for us to entice and induce depositors," bank president Mabini Sanico said.
“Without the depositors personally appearing before us, it is only the agents who transmitted the deposits to us, together with the depositors’ application from, specimen signatures and other documents," he added.
As of September 30, 2008, Sanico said the First Interstate Bank was able to accumulate P467 million in total deposits. But in truth, the bank was already operating at negative networth of P239 million. When the closed on Dec. 12, 2008, the bank only had about P1 million cash on hand.
Bank Agents
To encourage the LCPI bank agents to convince people to avail of the exorbitant investment schemes, the Legacy Group offered them six percent to 10 percent commission upfront based on gross deposit per depositor.
This enticed the bank agents to convince even friends and relatives.
“I never really questioned or doubted his (Delos Angeles) innovative products, even if its returns were unbelievable considering that they were unusually high,” Axalan said.
Other employees seemed to know that their operations were not sustainable.
“We were also aware that as a marketing strategy of Legacy, depositors had already been advised by its marketing people to limit and/or split their deposits to P250,000 so that they would be covered by PDIC insurance,” said a joint affidavit of five employees of Rural Bank of Darbci Inc. in General Santos.
The affidavit was made by Joey Corpus (loans officer), Alexander Doctor (compliance officer), Phoebe Babor (cashier), Jacqueline Araneta (accountant/bookkeeper), and Edmund Teves (loans clerk).
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