For allegedly forging loans; PDIC sues Radaza, former bank official

CEBU, Philippines - Philippine Deposit Insurance Corp. sued the former president and the former loans manager of shuttered Rural Bank of Subangdaku Inc. before the Department of Justice for creating nearly P2.6 billion worth of fictitious loans.

The PDIC  on Wednesday said the criminal raps against officials of the Cebu-based rural bank were filed on Jan. 13.

PDIC complained that respondents Lapu-Lapu City Mayor Paz Radaza, the former bank president and member of the Subangdaku credit committee, and loans manager Julius Eullaran conspired to create 6,051 fictitious loans amounting to almost P2.6 billion from 2004 to 2008, that accounted for about 97 percent of loans supposedly released by the Subangdaku head office.

Apart from the non-existent loans entered in the books of the bank, PDIC noted in an e-mailed statement the former bank officials also did business in an unsafe and unsound manner. The rural bank was placed by the Monetary Board under receivership on Jan. 8, 2009, Bangko Sentral ng Pilipinas records showed.

The respondents ordered the staff to fill out official receipts purporting to payments being made to the bank while in reality Subangdaku received no payments, the complaint noted. "These supposed payments were used to provide the purported source of the fictitious loan proceeds," the PDIC said.

Based on the sworn affidavit of the bank's former loan officer, PDIC said respondents ordered their subordinates to falsify receipts creating non-existent loans - "no questions asked" - PDIC claimed, citing a former loan officer of Subangdaku. The list supposedly contained information - details - of the loan transactions.  

"This claim was supported by the findings of the expert forensic accounting team from Alba Romeo & Co. that PDIC engaged to assist in the investigation," the insurer of bank deposits said.

Results of the forensic investigation showed 5,470 of the 6,051 fictitious loans had no credit information as a basic requirement, while 581 did not have any supporting document attached, PDIC claimed.  

"Consequently, demand letters to the named borrowers of these loans were returned because of unknown addresses or because the borrowers did not exist," PDIC said.

"These activities pose grave threats to the stability of the country's banking system. As co-regulator of banks, deposit insurer and receiver/liquidator of closed banks, the PDIC is authorized to conduct investigations and file appropriate cases against erring bank officials and individuals who are found to have violated banking laws," according to PDIC.

When contacted by The Freeman for for comment, Mayor Paz Radaza through her media media consultant Jonji Gonzales refused to issue statements citing that they are not yet receive the copy of the complaint. — GMA News with Jose P. Sollano