DOJ files three new cases versus 5 Urban Bank offi

The Department of Justice has filed three new criminal cases against five Urban Bank Inc. officials, including its former president and chief executive Teodoro Borlongan, for violating the country’s laws on lending.

Borlongan and four other former officers of Urban Bank were charged with violating the central bank’s single borrower’s limit" and "real estate exposure limit," when they "unlawfully" and "feloniously" purchased "trash" receivables from Urbancorp Investments Inc. on April 19, 2000.

Urban Bank declared a bank holiday last year after it ran out of money after buying almost P5-billion worth of trash loan papers from Urbancorp Investments, where Borlongan was also connected.

Earlier, government lawyers alleged that with Urbancorp getting cash from the bank, it was able to refund its investors, including relatives of ranking Urban Bank officials.

Court records show that Borlongan, Urban Bank senior vice president Nida Santos, vice president Cecilia Magugat, senior manager Milagros Santiago and manager Chulla Formanes bought P136.1 million worth of debts that AIC Realty and Holdings Corp. owed Urbancorp Investments.

This transaction transferred debts that AIC Realty owned from Urbancorp Investments to Urban Bank. With AIC Realty already indebted to Urban Bank by about P485.8 million, the loan transfer brought the realty firm’s total debts to Urban Bank to P621.9 million, or three percent more than the single borrower’s limit set by the Bangko Sentral ng Pilipinas.

The single borrower’s limit sets the maximum amount that a bank may lend to a single borrower, and is set at 25 percent of a lender’s unimpaired capital.

In Urban Bank’s case, when it acquired AIC Realty’s debt papers, it was allowed to lend, at most, around P547 million to a single borrower as it had an unimpaired capital of P2.19 billion. AIC Realty’s debts to Urban Bank exceeded this limit by P74 million.

Similarly, Borlongan and his officers acquired from Urbancorp Investments some P964 million worth of debts that Metro Pacific Corp. owed Urbancorp Investments. As in the case of the AIC Realty, Inc., this transaction exceeded the single borrower’s limit by 19 percent, or by P417 million.

Finally, the DOJ accused Borlongan of violating the 20-percent limit on a bank’s exposure to real estate loans. This limit allows a bank to lend, at most, 20 percent of its total loan portfolio to property companies.

According to the justice department, Borlongan and the other Urbanbank officials also acquired from Urbancorp Investments more than P2.1-billion worth of debts incurred by eight property firms.

These companies were AIC Realty, Asiaworld Properties Philippines Corp., Marilaque Land Inc., Philrealty and Holdings Corp., Prime East Properties Inc., Ray Burton Development Corp., Universal Rightfield Property Holdings, and Puerto Azul Land Inc.

These debt papers jacked up Urban Bank’s exposure to the property sector from P886 million to P2.9 billion, or from 8.8 percent to 29.67 percent of its total loan portfolio, which then stood at P10 billion.