MANILA - The state deposit insurer has denied payment for 4,164 claims, amounting to P204.07 million, received from depositors of 12 bankrupt Legacy rural banks.

The Philippine Deposit Insurance Corp (PDIC) said in a statement on Tuesday tha, of the denied claims, 709 claims that represented some P78.68 million were found to be of questionable or fictitious accounts.

The remainder of 3,429 claims worth P125.4 million were claims for non-existent accounts in the Legacy banks.

The denied claims account for about 4% of the 109,791 deposit accounts already validated by PDIC's examiners and external auditors as of end-August.

So far, it has already paid off P1.43 billion-worth of valid claims to depositors, while P843.3 million is scheduled for release soon.

About 19,070 claims amounting to P2.55 billion were put on hold pending further verification. Another set of 21,819 claims, representing some P2.83 billion, were found to be document deficient. PDIC said they have already sent an advice to depositors to submit the necessary documents to substantiate their claims.

The rural banks of the Legacy Group went on bank holiday, and one-by-one eventually closed, last December 2008. The rural banks are key elements of the Legacy Group of financial service firms that receive funds from the public. The group also has several pre-need firms and investment outlets.

The Legacy Group crumbled after the Supreme Court allowed the Bangko Sentral ng Pilipinas (BSP) to look into the financial books of the rural banks.

Several civil and criminal cases have been filed against Celso de los Angeles, a businessman turned mayor of a town in Albay who founded the Legacy Group. Various executives and other alleged accomplices have been included in the charges.

Currently, cases built up by the PDIC and BSP have been lodged at the Justice Department, which would then find if the cases have merit before these are filed in the courts.

Recently, a warrant of arrest was served to De los Angeles who is ill. He is now serving on a "hospital arrest" in a posh private hospital in Quezon City.

The warrant of arrest was from a case filed by individual investors who filed at a regional trial court in Cagayan de Oro.

PDIC's president Jose C. Nograles said their examiners and external forensic audit auditors from Punongbayan & Araullo had to be extra diligent in paying deposit insurance claims amidst reports that these Legacy-affiliated banks have engaged in fraudulent transactions.

The PDIC examiners and forensic auditors have combed through about 2,000 boxes of documents to examine and process claims, missing bank records and several suspected fraud cases.

Initial reports indicate that fraud may have been heavily committed on the asset side of the banks' transactions involving siphoning of funds.