Nazareno said he did not commit any act of "simple misconduct" at all since the transaction between Land Bank of the Philippines and the National Food Authority was a "fait accompli" and, according to law, being between two government agencies, was presumed to be regular.
The case stems from the transfer of P562.5 million worth of promissory notes issued by the NFA from Urban Bank Inc. to Landbank two years ago.
Prior to its closure on April 26, 2000, Urban Bank had been trying to raise cash to cover the servicing of Urban Bank manager’s checks issued to various investors of Urbancorp Investments Inc.
Because of this servicing, the bank ran out of money to meet withdrawals and declared a bank holiday. The Monetary Board then closed it down and ordered PDIC to act as receiver.
Sometime before Urban Bank declared the holiday, Urban Bank "assigned and physically delivered" the NFA’s promissory notes to Landbank pursuant to a notarized deed of assignment. Ironically, it was Urban Bank president Teodoro Borlongan who sued Nazareno at the Ombudsman and BSP Gov. Rafael Buenaventura who was earlier cleared since he had no participation in the transaction at all.
On May 4, 2000, Landbank president Florido Casuela asked the NFA to confirm the "authenticity" of these notes, as Landbank had decided to exercise its legal rights to these instruments.
Four days later, the NFA wrote PDIC asking for its consent to pay Landbank and expressing its "earnest desire to settle (its) obligations as soon as possible."
On May 12, 2000, PDIC wrote the NFA saying it had "no objection to the request of your office to pay the amount."
PDIC’s Nazareno said the transfer of the NFA’s promissory notes to Landbank was "perfected" by the management under Borlongan, not by PDIC as receiver.
He said his "no objection" position was a good-faith decision that, under PDIC’s charter, automatically gives legal immunity to PDIC officials acting as receiver.
Even if he had objected, he said the transaction would have pushed through because Landbank had physical possession of the promissory notes which were "payable to order" and the contract was legal.
Nazareno stressed that PDIC’s decision not to object to the transfer of the NFA promissory notes to Landbank "is based on its legal guidelines and experience as the sole and mandatory receiver of closed banks."
"In addition," he said, "PDIC is guided by the standing principle of law that government transactions are presumed regular and perfected within the duties of the government officials concerned."