Bank faces suit over botched investment

Asiatrust Bank faces a possible lawsuit from a group of small investors who claim the bank may have deliberately misled them on the investment of their funds in a company that eventually went bankrupt.

The group said they are now mulling charges against the Quezon City-based bank for alleged misrepresentation involving transactions estimated at over P20 million after the bank rolled over their placements just 11 days prior to the debtor-company’s closure.

The investors led by Ma.Anna De Ocampo, alleged that Asiatrust Bank officers enticed them into placing their funds in the bank’s trust department, offering rates higher than other financial institutions. The bank then lent the money to Ramcar-subsidiary Oriental Motolite Corp., which eventually defaulted on its loans.

The investors bewailed "the failure of Asiatrust Bank officers to properly advise us about the investment which caused the loss of our hard-earned funds when the company went bankrupt." We could have been advised that the company is about to go under, they underscored.

They also said that the bank directly violated the Bangko Sentral’s rule of exercising prudence and diversification of risk when handling trust accounts by putting all their investments into a single account.

It appears, they said, that the bank already knew that Oriental Motolite was about to be placed under receivership when Asiatrust officers decided to roll-over their placement.

The investors explained that "it is impossible that Asiatrust Bank did not know that Ramcar is on the verge of closure". The proximity of the date of the roll-over of our funds and Ramcar’s closure is highly suspect, they pointed. It was also around that time that they were told that Ramcar has been placed under receivership and that they could no longer get their money back.

They added that it was Asiatrust which chose the investment outlet and not them.

They said the failure to advise them is "not merely misrepresentation but also a serious breach of the fiduciary relationship between a bank and its client."

Ramcar declared a debt moratorium in late 2001 following its failure to service some P7.9 billion in debt. Some 19 creditor banks, including the Garcia family-owned Asiatrust Bank, were affected by the move.

Asiatrust Bank was founded in 1960 as the Quezon City Development Bank, and later changed its name in 1982.

The P10-billion thrift bank has a deposit base of over P7 billion and capital funds of approximately P1.5 billion.

While the Garcia family continues to own a majority share of the bank, the Social Security System and the Singapore-based ASEAN Strategic Capital Ltd. also have significant holdings.

The bank became publicly listed in the Philippine Stock Exchange in 1996.