Regulators question ‘anomalous’ sale of debt papers

The woes of the top officials of Urban Bank and its investment arm Urbancorp Investment Inc. continue to mount as government regulators contested an "anomalous and highly abnormal" sale of debt papers by UII to its parent company that eventually led to the bank’s collapse.

In a motion filed at the Department of Justice, the legal counsels of the Bangko Sentral ng Pilipinas and the Philippine Deposit Insurance Corp. said the Urban officials, led by chairman Arsenio Bartolome III and president Teodoro Borlongan, were responsible for the cross sale of P4.6 billion worth of debt papers of companies with doubtful capacities to pay these back.

The officials are now facing estafa charges since the purchase used up the reasoning funds of UBI to pay off the debt papers on April 19, 24 and 25, leaving the bank with only 2125 million in cash and less than P1 billion in quick assets.

On April 26, UBI declared a bank holiday, forcing it to seek refuge at the PDIC and the Securities and Exchange Commission since it could not cover its deposit liabilities of more than P8 billion in the spate of massive withdrawals thereafter.

The BSP and PDIC counsels said the cross sale involved the purchase by UBI of receivables from UII without the proper authority and supporting documents, aside from the fact that the transactions involved receivables purchased that were either past due, restructured or renewed two or three times, and classified as substandard or specifically mentioned per the BSP’s criteria.

They pointed out that the financial statements, appraisal reports, credit investigation reports, and real estate tax receipts of the receivables were not updated and "some borrowers have losses which exposed the collection of the loans at great risk."

Among the bozzowing companies include Tan Yu’s AIC Corp. and Asiaworld Properties, Columbian Motors and its owner Jose Ch. Alvarez, Puerto Azul Land, and listed property firms Philippine Realty Holdings and Universal Rightfield.

"With the adverse classification of the loans, the shaky financial conditions of the borrowers, respondents likewise violated the General Banking Act in purchasing the receivables of UII to the damage and prejudice of UBI" the government lawyers noted.