3 Court of Appeals justices, judge face complaint over Legacy mess

MANILA, Philippines - Three Court of Appeals (CA) justices and a Manila judge are under fire from congressmen for stopping the Bangko Sentral ng Pilipinas (BSP) last year from closing the Legacy Group’s 12 ailing rural banks.

Opposition Rep. Rufus Rodriguez yesterday said he would file with the Supreme Court an administrative complaint against CA Justices Apolinario Bruzelas Jr., Bienvenido Reyes and Mariflor Punzalan-Castillo, and Judge Nina Antonio Valenzuela of Regional Trial Court Branch 28 in Manila.

He said it was Valenzuela who issued a temporary restraining order (TRO) against the BSP in May 2008 upon petition of the Legacy Group.

The three justices, who are members of the appellate court’s 8th division, subsequently upheld the TRO, he said.

“They violated the New Central Bank Act, which enjoins the judiciary from issuing any TRO against the BSP in its examination and closure of banks suffering financial difficulties,” he added.

Last December, the Supreme Court reversed the lower court’s TRO, finally enabling the BSP to close Legacy’s rural banks.

Bruzelas and Reyes were previously implicated in the Meralco-Government Service Insurance System bribery controversy.

Quoting BSP Deputy Gov. Nestor Espenilla Jr., Rodriguez said because of Valenzuela’s TRO, Legacy’s rural banks were able to solicit P1.3 billion in additional deposits between May and December.

“More depositors were victimized by these banks. Thousands of them are my constituents in Cagayan de Oro City, where Legacy has a rural bank,” he said.

The House committee on banks has decided to invite Valenzuela and the three justices to its next hearing.

Espenilla told the committee on Monday that while the banks accepted P1.3 billion in deposits between May and December last year, they reported P1.7 billion in accounts covered by the deposit insurance law.

“This means that they split more accounts than the amount of deposits they accepted,” he said.

He said the banks asked depositors to split or limit their deposits to P250,000, the maximum amount covered by the deposit insurance law.

“We are dealing here with an organized syndicate that from Day One was created to exploit human nature and weak links in the legal, regulatory and enforcement framework of our banking and financial system,” he said.

He added that syndicate members “removed” the funds from the banks “through a web of fictitious loans and self-dealing investments.”

Espenilla pointed out that it is now the taxpayers, through the state-owned Philippine Deposit Insurance Corp. (PDIC), who are “left holding the proverbial empty bag.”

Congressmen asked why PDIC president Jose Nograles, a brother of Speaker Prospero Nograles, wants to expedite payments to Legacy depositors despite the alleged fraud involved in the acceptance and use of deposits.

The PDIC boss announced that his agency would begin paying depositors this week.

The PDIC has requested a P14-billion loan from the BSP to pay off Legacy depositors.

‘Sacred cow’

Meanwhile, Sen. Manuel Roxas II said Legacy Group owner Celso de los Angeles, who is also mayor of Sto. Domingo, Albay must be enjoying some protection to be able to have escaped scrutiny from authorities despite reported problems in his banks as early as 2003 and in his pre-need firm last year.

Despite the closure of his banks, De los Angeles, who was not a bank official, would not be charged along with his officials, according to Nograles.  

And although the BSP clarified that the operation of an “organized syndicate” in Legacy led to the collapse of the 12 rural banks, it said during the House hearing that it saw no evidence linking De los Angeles to any fraudulent activity.

De los Angeles’ assets – an estate in Cebu, four luxury cars worth P8 million and a yacht, M/V Legacy – were also intact but not frozen.

De los Angeles said he had sold his other house in Ayala Alabang in Muntinlupa and his assets were valued at P100 million.

Asked if he was willing to give up these assets to pay off those people he allegedly defrauded, De los Angeles avoided the question and said the trust fund could pay the plan holders but could not give the same assurance to depositors.

Roxas belied the claim of De los Angeles and said the trust fund could be the sole source of payments for plan holders and depositors. “These include all the assets of the corporation. And even including your personal assets because you were the one who made those promises,” Roxas told De los Angeles.

He said the assets of De los Angeles must be frozen and that a hold departure order must be issued against him so he would not be able to escape.

He also said he would provide legal assistance to the plan holders and depositors so they could run after De los Angeles, whom he said was engaged in a “grand fraudulent scheme” using his banks.

In a press briefing after the hearing, Roxas said he was hearing a lot of speculations that De los Angeles has a lot of “influential backers” and that this could be asked during the next hearing.

Roxas and Sen. Francis Escudero also said it took quite sometime before authorities acted to police the Legacy Group.

Escudero said the BSP and Securities and Exchange Commission (SEC) ignored the first signs of trouble in the pre-need industry, when problems were starting to surface.

He even chided the two agencies for ignoring the complaints that had ballooned into the scandalous mess the pre-need industry was facing today. —Aurea Calica