Pichay denies malversation, graft raps

Manila, Philippines - Former lawmaker Prospero Pichay Jr. denied charges of malversation of public funds and graft and corruption before the Department of Justice (DOJ) yesterday.

In his counter-affidavit, Pichay, chairman of the Local Water Utilities Administration (LWUA), said he cannot be accused of malversation of public funds when he is not an accountable officer.

“How can I be accused of that when we didn’t use any money from the GAA (General Appropriations Act),” he said.

“We used internally generated funds from LWUA. Besides, the accusation on investment in a private corporation is not included in those items in the GAA where GOCCs cannot use the money.”

As LWUA board chairman, Pichay was accused of taking part in the allegedly anomalous buying out of the troubled Express Savings Bank Inc. Pichay said the DOJ does not have jurisdiction over the charges that have been pending with the Office of the Ombudsman for the past seven months.

“This is obviously forum shopping and political persecution,” he said.

Pichay also denied charges of violating the Central Bank Act in the purchase of the Laguna-based bank.

His co-respondents are LWUA board members Renato Velasco, Susana Dumlao Vargas, Bonifacio Mario Peña Sr. and Daniel Landingin. Finance Secretary Cesar Purisima filed the complaint against Pichay and his co-respondents last month.

Purisima asked the DOJ to recommend their immediate preventive suspension to prevent them from intimidating subordinates and tampering with documentary evidence pending preliminary investigation. 

He claimed that the LWUA board has been toying with the “devious scheme” of illicitly engaging in the banking business since 2008 when Pichay sought the legal opinion of the Office of the Government Corporate Counsel on the proposed creation of a Water Development Bank (WDB) as a wholly owned subsidiary of LWUA.

The OGCC opined that while the creation of the WDB as a subsidiary of LWUA is well within its corporate powers, it will still be subject to the review of the Department of Finance and approval of the President.

Without prior consultation with the DOF, Pichay proposed to then President Gloria Macapagal-Arroyo the purchase of the bank. Arroyo referred the matter to the central bank.

Bangko Sentral ng Pilipinas Deputy Gov. Nestor Espenilla informed Pichay of the moratorium on the establishment of new banks and advised Pichay to “scout for banks desirous of additional capital infusion or existing stockholders willing to divest of their stockholdings.”

Purisima said the LWUA board set its eyes on acquiring EXSBI despite drawbacks in investing in the thrift bank.

The complaint said that without obtaining the requisite approval from the DOF, Office of the President and the Monetary Board, LWUA pushed through with the acquisition of 485,337 shares of stock constituting approximately 60 percent of the outstanding capital stock of EXSBI worth P80 million.

LWUA likewise made additional capital infusion to EXSBI worth P400 million in the form of cash for future subscription on Aug. 25, 2009, intended to increase the authorized capital stock of the thrift bank and to address its capital deficiency.

The DOF said such acquisition by LWUA of a majority stake in EXSBI and infusion of additional capital in the bank caused undue injury and is manifestly disadvantageous to LWUA and the national government, in violation of the Anti-Graft and Corrupt Practices Act.

Purisima said the acts of respondents further constitute malversation of public funds punishable under the Revised Penal Code.

Purisima filed the complaint in his concurrent capacity as member of the Monetary Board. 

LWUA, a government-owned and controlled corporation, is a specialized lending institution for the promotion, development and financing of local water utilities, and depository of the reserves for capital improvement of local water utilities.

EXSBI has an authorized capital stock of P100 million divided into one million common shares.