(Update) Legacy Group collapse hits OFWs, too

Posted at 02/27/2009 5:34 PM | Updated as of 02/28/2009 2:43 AM

The future of many overseas Filipino workers is now at stake after about 140 recruitment agencies in the country were said to be affected by the collapse of the Legacy Group of financial firms.

"Thousands of OFWs cannot leave for their work abroad because their recruitment agencies are facing possible suspension," said Atty. Ramon Diño, executive director of Legacy Group Citizens' Crime Watch Center.

According to the group, the OFWs' recruitment agencies have invested millions of pesos of their government-required standby funds in Rural Bank of Paranaque, which is part of the now bankrupt Legacy Group.

The agencies are now scrambling to replenish those funds that got stuck with the closed Legacy-linked rural bank. Otherwise, they could lose their license, leaving their OFW clients stuck as well.

The Philippine Overseas Employment Administration (POEA), the government agency for migrant rights, requires recruitment agencies to set aside P1 million each as a standby fund to cover expenses incurred when the OFWs they deploy encounter problems in their host countries. This fund is also used to pay for damages when there are conflicts between the overseas workers and the agencies.

The recruitment agencies have to deposit the P1 million in escrow with POEA-accredited banks.

Legacy's Rural Bank of Paranaque is not a POEA-accredited bank, but it was able to entice the recruitment agencies to skirt the POEA accreditation process.

Asiatrust

While the recruitment agencies are not required to grow their P1 million parked in the banks, it made business sense to them to let the funds earn instead of being  idle or confined in low-yield investments.

Rural Bank of Paranaque's promise of high interest earnings through its double-your-money schemes appealed to the recruiters, who then decided to place their escrow funds in the rural bank's conduit bank, Asiatrust, a private development bank.

Asiatrust is a POEA-accredited bank.

About 140 recruitment agencies entrusted about P200 million to the Asiatrust and Rural Bank of Paranaque alliance.

In a statement, Asiatrust said it preferred to keep the recruitment agencies' escrow funds with the bank, instead of just being a middleman for Rural Bank of Paranaque.

But it stressed that the agencies themselves, attracted by the rural bank's high-interest products, instructed Asiatrust to transfer their escrow funds to Rural Bank of Paranaque. Asiatrust said it followed the instruction since the recruitment agencies also agreed to assume all the risks.

Asiatrust added that it also took the initiative to ink a deal with Rural Bank of Paranaque for the latter to cover the portion of each agency's P1 million in escrow not covered by the Philippine Deposit Insurance Corporation (PDIC). The state-funded insurer covers deposits only up to P250,000. Asiatrust said Bank of Paranaque secured the remaining P750,000 uninsured portion by delivering low-risk government securities.

"In other words, Asiatrust as escrow agent made sure that the investment of the manpower recruitment agencies in Rural Bank of Paranaque is 100 percent secured." the statement said.

Thus, Asiatrust said that when Rural Bank of Paranaque declared a bank holiday in December, it was able to sell the government securities it previously required from the rural bank. The proceeds reportedly helped Asiatrust return up to 77 percent of the escrow funds to the recruitment agencies.

The Legacy Group Citizens' Crime Watch Center mentioned that about P200 million are at stake in the scheme between Asiatrust and Rural Bank of Paranaque.

However, it was not clear if this amount refers to the 140 agencies' aggregate escrow funds of P1 million each, or the remaining uninsured portion that the agencies now have to claim with the state-funded PDIC.

No POEA nod

The POEA said it was not aware that the escrow funds have made their way to the non-accredited Rural Bank of Parañaque because neither the recruitment agencies nor Asiatrust informed the agency.

"We no longer allow Asia Trust escrow agreements. Recruitment agencies that authorize the transfer of money from Asia Trust to Rural Bank of Parañaque should be held responsible for this also because they did not seek POEA’s approval for such a transfer," said Hans Cacdac, POEA Deputy Administrator.

"Had they informed us, we wouldnt have allowed [the transfer of funds from Asiatrust to Rural bank of Paranaque]," Cacdac added.

The POEA has declined to release the full list of recruitment agencies that are now encountering problems with their escrow funds since it is still coordinating with the affected recruitment agencies .

Nonetheless, while the POEA is willing to give the recruitment agencies more time to replenish their depleted escrow fund, the Legacy Group Citizens' Crime Watch Center said many recruitment agencies fear their licenses may be revoked since they now have to raise more funds to meet POEA's P1 million requirement.

Raising the funds could be tough, however, since the recruitment agencies are up against a shrinking global economy that is affecting their core business: deploying OFWs to countries that now have weaker economies.

Passing the buck

Meanwhile, Legacy Group founder Celso delos Angeles maintained that there was nothing illegal with how Rural Bank of Parañaque siphooned the recruiters' funds through Asiatrust.

“They (agencies) have a relationship with Asiatrust. Ang kausap po nila Asiatrust, and Asiatrust deemed it proper to invest in Bank of Parañaque,” Delos Angeles said. - with a report from Zen Hernandez, ABS-CBN