Insider trading in DBP deal?

MANILA, Philippines - Businessman Roberto Ongpin may have engaged in insider trading with the help of former Development Bank of the Philippines (DBP) president Reynaldo David in selling shares of stocks he briefly held in Philex Mining Corp., Senate President Juan Ponce Enrile said yesterday.

Enrile voiced his suspicion during a hearing on behest loans where he castigated David for reportedly allowing Ongpin to dictate on the bank the terms of a P660-million loan the latter used to buy some 50 million Philex shares in 2009.

Ongpin, through his Golden Media, later sold the shares to Twin Rivers of Manuel Pangilinan. He acquired the DBP loan through his Delta Ventures Resources Inc (DVRI).

The Senate Blue Ribbon committee and the committee on banks, financial institutions and currencies, headed by Senators Teofisto Guingona III and Sergio Osmeña III, respectively, are investigating the controversy. Yesterday’s hearing dragged on for six hours.

“My impression of your testimony is that when you sold the DBP shares to Golden Media and paid for by a borrowing by Delta Ventures, you feign ignorance about the activity of Mr. Ongpin with respect to accumulating shares of Philex for the purpose of building up a block of shares to somebody. Am I correct in this?” Enrile asked David.

“I learned about the accumulation in an article that came out. I think it was early this year. I didn’t realize that it was accumulating,” David said.

It emerged during the hearing that Pangilinan was able to corner 20.6 percent of Philex shares on Nov. 28, 2008 from DBP. His acquisition of additional shares from Ongpin’s Golden Media allowed him to gain control of Philex. But Enrile stressed “there is no need” to invite Pangilinan.

He told reporters after the hearing that there was still no indication of former first gentleman Jose Miguel Arroyo’s complicity in the alleged anomaly.

Master and conductor

Enrile called Ongpin “master and the conductor” in the behest loan issue.

“In fact Mr. Ongpin was buying from DBP, from others to accumulate a block of shares to be sold to some particular person. The reason why I know that he negotiated this transaction personally with the buyer. In fact, he was haggling, he wanted P27 per share,” Enrile said. He admitted that his law firm had been involved in the setting up of Philex.

Enrile said he learned from his contacts that the transaction between Pangilinan and Ongpin to corner the Philex shares from DBP was already a done deal even before the actual sale of shares to Ongpin’s DVRI.

“And the transactions concluded in Shangri-La Hotel in Makati where he shook hands with Manny Pangilinan for the price of P21 before he was able to accumulate and he never shared this information to DBP, and to the other stock holders,” Enrile said.

Enrile cited a testimony from David himself that even then Social Security System president Romy Neri wanted to sell SSS shares in Philex for the same price.

“Mr. Romy Neri knew that Mr. Ongpin succeeded in selling a block of shares at P21. He also wanted the SSS to enjoy that advantage but it’s too late, Mr. Ongpin cornered the market using inside information,” Enrile said.

“In fact according to the witness, that you were brought along with your remaining 50 percent to be sold to Mr. Pangilinan at P21 pesos,” Enrile said. David replied it was Ongpin who “brought us to the deal.”

“You did not know that Mr. Pangilinan all along who was buying the shares. It was only Mr. Ongpin who knew about it,” Enrile added.

“It was because of probably the gratefulness of Mr. Ongpin because he was able to wangle, getting 50 percent of your holdings in DBP. That was my impression so very obvious that Mr. Ongpin took advantage of an information that he alone knew,” Enrile said.

Ongpin’s name was not in documents of DVRI submitted to the joint hearing. Instead, it was Josephine Manalo, a long time secretary of Ongpin, who was listed as company head. Ongpin and Manalo were not present in the hearing.

Enrile then moved to issue a subpoena to Manalo who had sent the Senate certification from her doctors at Saint Luke’s Medical Center that she was unfit to appear before the joint hearing due to heart problems.

David said that the DBP even earned out of the transaction with DVRI contrary to allegations that the deal was lopsided and disadvantageous to the government.

“DBP was able to do by selling 50 million shares to a ready buyer in Mr. Ongpin (instead of dumping it into the market) at the prevailing market price of P12.75 per share. As we all know, if the market is flooded with such a volume of shares, the market price would significantly drop,” David said.

David said DBP earned a total of P1.397 billion from the subsequent transaction with Two Rivers of the First Pacific group as well as the first credit accommodation to DVRI.

“Clearly, DBP’s funds were not placed in peril. In fact, the funds were used to generate income that equipped DBP with additional resources to serve both its universal banking business and its developmental banking mandate,” he added.

David also disputed the claim of Solicitor General Jose Anselmo Cadiz that the loans were granted at “extraordinary speed” and that the process deviated from the DBP charter of giving out developmental loans.

Questioned by Sen. Ferdinand Marcos Jr., David explained that DBP was also allowed to give out commercial loans and invest in stock options.

“The purpose is not contradictory to the pledge of the loan to the DBP. The purpose of the loan is to acquire Philex shares,” said Marcos, confronting Cadiz over his report classifying the loans as “behest.”

“Is it not stated in the pledge that the purpose of the loan is to acquire Philex shares from DBP?” Marcos added.

“Did you ask yourself as a banker why this transaction was being tailored this way considering that this is not your property this is the property of the bank?” Enrile asked David. A stammering David replied that he was instructed to do so by DVRI.

“The DVRI is almost like a single proprietorship of Josephine Manalo who owned 24,996 shares out of the 25,000 shares,” Cadiz also told the committee.