Filipino bankers slam Singaporean partners

A group of Filipino investors in a foreign-controlled local bank slammed yesterday their Singaporean partners for allegedly depriving them of their rightful role in the decision-making process of their company in blatant violation of industry norms and banking laws.

At the same time, the Filipino bankers identified with a son of former Finance Secretary Edgardo Espiritu, charged that the Singaporean shareholders milked their bank "bone-dry" by sheer manipulation of its finances.

The local boys, who hold 40 percent of the United Overseas Bank Philippines (UOBP) said they were virtually excluded from participation in management decisions as a three-member executive committee (ex com) has practically taken over the functions of the board.

The ex com consisted of Wee Cho Yam, his son Wee Be Chong and Sammuel Poon Hon Thang, all based in Singapore who were managing UOBP by remote control.

The Filipino investors lamented that the majority stockholders cancelled a board meeting scheduled last Friday for alleged lack of quorum.

Lawyer Avelino Sebastian Jr., a member of the UOBP board, recalled that two years ago, the Bangko Sentral ng Pilipinas (BSP) and the state-run Philippine Deposit Insurance Corp. (PDIC) called the UOBP’s attention on the board’s failure to meet regularly as required by its by-laws.

Reacting to the observations by the BSP and the PDIC, officials of UOBP clarified that matters requiring board action are attended to by the ex com.

"This means that the day-to-day activities of the bank are conducted and controlled by three foreigners, to the exclusion of the Filipino investors," Sebastian noted, adding that the setup was a clear circumvention of Philippine banking laws which limit foreign representation in the board of the bank.

He also pointed out that the ex-com could not possibly make wise policy decisions as it seldom met. "If ever, the panel meet for only five to 25 minutes, casting doubts that it functioned normally."

The Espiritu-owned Westmont Bank was renamed UOBP after the Singaporean bank acquired 60 percent of Westmont in October 1999.

But relationship between the Singaporeans and their Filipino partners turned sour after the Monetary Board of the BSP, through Resolution 305, directed Westmont to reverse its decision to write off from the bank’s books all assets subject of a shareholders 1.4 transfer agreement and shareholders 1.4 collection agreement forged on Nov. 25, 1999.

The reversal of the write off of the assets in the bank’s books effectively deprived the Filipino investors of valuable consideration for giving up their majority shareholdings in the bank and their agreement to the reorganization and reduction of the capital of the bank.

The UOBL ignored demands by the Filipino bankers for a restoration of their shareholdings in the bank and refused to settle "valuable consideration" due them.

To further discourage the Filipinos from pressing settlement of their claims, the Singaporean made a counter-move of demanding payment from them (Filipino investors) to the tune of P1.6 billion representing their alleged capital infusion arising from the new investor agreement.

"This demand was made despite UOBL’s knowledge of the fact that the respondents (Filipino investors) had subscribed to 28 percent of the shares in the bank," Sebastian said.

It may be recalled that UOBP suffered heavy withdrawals in the first quarter of 2000 "as a result of a previous financial crisis."

To tide up its finances and in order to meet maturing obligations, the bank embarked on heavy borrowing, including a $49-mllion (P449.3 million) loan from UOBL at 7.17 percent interest.

After UOBP was able to stabilize its financial situation, it had a cash balance of P919.74 million.

Sebastian claimed that instead of repaying the dollar-denominated loan, UOBP management opted to deposit the funds with its creditor, UOBL, at a lower interest rate of 6.67 percent, resulting in a "negative spread of 0.5 percent on the deposit transaction.

"This is a simple and crude case of milking UOBP dry," the lawyer stressed.

"What is more appalling is the fact that the money could have been used to pay back, at least in part, the advances given by BSP and PDIC to the UOBP," he rued.