In its fourth syndicated estafa case against Legacy Group owner Celso de los Angeles and five other company executives, the Bangko Sentral ng Pilipinas said not only were depositors’ funds misused, government banks were also tapped for questionable transactions.
In its affidavit filed before the Department of Justice last week, the BSP cited a multi-layered transaction that, in essence, involved connivance between De los Angeles and an employee of the state-owned Land Bank of the Philippines to acquire a P70 million loan through a third party. BSP said the proceeds of the loan from the government bank ended up in companies controlled by De los Angeles.
BSP’s latest case focused on transactions between Rural Bank Darbci and two state-owned development banks, Land Bank and Planters Development Bank, eventually leading to the collapse of the General Santos-based rural bank.
Land Bank is a government-owned and controlled bank, which is mandated to focus on serving the needs of farmers and fishermen. It is the fourth largest bank in the Philippines. Planters Bank, on the other hand, is one of the country’s thrift banks focused on providing financing to small and medium enterprises.
It started in October 2006, when Dolefil Agrarian Reform Beneficiaries Cooperative acquired the P70 million loan from Land Bank. The farmers’ cooperative is a group of agrarian reform beneficiaries who are contract growers of Dole in southern Mindanao. Most of the group’s members are clients of the Rural Bank of Darbci.
According to the BSP affidavit, De los Angeles learned about intentions of the Dolefil cooperative to apply for a loan with Darbci rural bank. He reportedly arranged for a meeting with Dolefil head Jesus Pedregosa and enticed the latter to obtain the loan from Land Bank with his assistance.
Dolefil was going to invest the P70 million loan in the rural bank as its capital contribution before Darbci bank itself loans the group the money. In return, Dolefil became a 49 percent shareholder of the bank.
At the time, the BSP has required the Darbci rural bank to increase its capital base because it was insufficient.
Upon release of the loan proceeds from Land Bank, Darbci then turned around and deposited the P70 million capital infusion back to Land Bank. Through an investment management account (IMA), Darbci effectively hired Land Bank investment unit to manage the funds.
However, in a span of only eight months, the account was squeezed dry. BSP said that in three tranches, the rural bank president William Escalante—upon the instruction of De Los Angeles’s associate—withdrew the total deposit and interest.
The amounts of P9 million, P26.9 million, and P35 million were withdrawn in February, March, and June 2007, respectively. The IMA account was subsequently closed.
How did Land Bank allow the loan, which ended up in the IMA account, to be lost in a smoke?
Facilitating the loan and investment transactions at the Land Bank was trust officer Eduardo Chavez. He used to be a Rural Bank of Darbci employee.
BSP said Chavez helped arrange the loan to Dolefil while knowingly opening the IMA account for and in behalf of Rural Bank of Darbci.
The BSP traced at least two IMA account withdrawals where the funds ended up with companies controlled by De los Angeles.
One was a P9 million withdrawal from the IMA account in February 2007. It was deposited the following day to Legacy Motors Inc., a company directly controlled by De los Angeles. BSP said the businessman, who supposedly divested from Legacy Motors, Legacy’s 12 rural banks, 3 pre-need firms, and a number of other firms when he became mayor of an Albay town, maintained direct control of the firms under the Legacy Group.
Another transaction was the IMA withdrawal of some P35 million in June 2008 before the investment account was subsequently closed.
Escalante, the president of Darbci bank, was reportedly instructed to deposit the amount to a “friendly bank,” which turned out to be the General Santos branch of Planters Bank, another government owned and controlled bank for farmers.
From Land Bank, the P35 million was used as collateral to obtain a P33 million loan from Planters. The loan’s payee was Legacy Consolidated Plans Inc., a company under the control of De los Angeles’s associates.
“Clearly, respondents have willfully, unlawfully, and fraudulently misappropriated or converted the amount of at least P70 million, to the damage and prejudice of the stockholders/investors of RB Darbci as well as the public in general and the government,” the BSP affidavit said.
In this case, it is not just the rural bank that suffered from the alleged misappropriations by Delos Angeles. According to BSP lawyer Alfonso Penaco IV, Director of the BSP Office of Special Investigation, Dolefil has not paid its loans from Land Bank, too.
"There are two victims. The cooperative borrowed the money but they did not receive the proceeds. Plus nakasangla ang property nila. The bank, on the other hand, acknowledged that they received the proceeds when the truth is it was misappropriated by Legacy officers," Penaco said.