Legacy Group: Back in the local headlines

For a couple of months now we’ve always been wondering why the 12 rural banks belonging to the Legacy Group (many of them are here in Cebu) collapsed and what really happened to their parent company. Apparently we got part of the answer in last Tuesday’s Philippine STAR story entitled “BSP Uncovers P7.8 B in Fake Legacy Loans.” Fake loans?

That story emanated from a briefing in Congress by Bangko Sentral ng Pilipinas (BSP) director Chuchi Fonacier who said this money was “siphoned off” from the bank’s deposits by fraudulent means. She added: “Ten out of the 12 banks extended P3.7 billion in motorcycle loans to more than 44,000 borrowers who upon verification by the BSP examiners turned out to be mostly fictitious. This money was paid to a sister firm, Legacy Motors.”

Fonacier said, “To mislead BSP auditors, (Celso) de los Angeles’ banks ‘window dressed’ their books of accounts by selling their fake and questionable loans to real estate companies also owned by De los Angeles at grossly overvalued prices. One property valued only at P2 million was made to appear that it was worth P2 billion!” Call it the skeletons of the Legacy Group.

Of course, these allegations have to be proven in court by the BSP regulators or examiners. But these give credence to our suspicions as to why De los Angeles went to court to secure a temporary restraining order (TRO) from a “willing” RTC judge in order to stop the BSP from examining his books. Luckily, the Supreme Court stopped the Court of Appeals from implementing that restraining order and with that, the 12 Legacy-owned rural banks started collapsing one after the other by mid-December last year.

Call Celso de los Angeles a wily or crafty character, as he was able to veer away from getting those loans himself, lest he get embroiled in what is called the Directors, Officers, Stockholders Related Interests (DOSRI) loan that got the Orient Bank in trouble when it also collapsed due to heavy loans made by its directors. But this is absolutely not a good banking practice… we call this plain and simple fraud!

Last week, the Legacy Group once more made the headlines of the local news media that covered a story from across the island of Cebu to Leyte where we learned that the Legacy Group apparently claimed ownership of the small island of Kalanggaman (meaning Bird Island) off Palompon. So the municipal government of Palompon headed by Mayor Eulogio Tupa took a motorized banca to Kalanggaman Island to reclaim it from the Legacy owner, as under the law this island is classified as inalienable and therefore an indisposable land or public domain that cannot be owned privately.

Purportedly, the island was placed under the ownership of the Rural Bank of Carmen (Cebu) and then of Edifice Realty so it could escape the scrutiny of the Philippine Deposit Insurance Inc. To mark his repossession of Kalanggaman Island, Mayor Tupa erected a colored sign signifying their protest and ownership of the island. I do not know what will be the eventual outcome of this case, but certainly De los Angeles has his hands full.

Meantime, let’s focus our attention on another ill-fated Cebu-based rural bank… the Rural Bank of Subangdaku (RBS) that also folded up during the first hour of business last January. This bank was managed by Mrs. Paz Radaza, wife of Lapu-Lapu City Mayor Arturo Radaza who was either “forced to quit” or given an early retirement by its owners, the Gaisano family. To date, we still have to hear from the BSP as to why RBS folded up despite the financial backing of Cebu’s heavyweight clan, the Gaisano family.

The latest report we read on why RBS collapsed mentioned some allegedly fictitious or should I say, fake loans. But Mrs. Paz Radaza has kept mum on this. For the sake of transparency because she’s planning to run for mayor of Lapu-Lapu City to replace her husband in the 2010 elections, we’ve already urged Mrs. Radaza to come clean on this issue because most RBS depositors are her constituents in Lapu-Lapu City. In short, if those depositors sense that she is covering up some hanky-panky, she might as well kiss her political ambitions goodbye. So once more we ask Mrs. Radaza to tell us more about the fictitious loans that caused the RBS to fall.

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I was in Makati to visit my daughter who is studying at the International School for Culinary, Hotel and Management (ISCHAM) and I stayed at the still fabulous Mandarin Oriental. I learned from a magazine that the Mandarin Oriental has been voted as the Best Business Hotel in the country for five straight years! I haven’t been back at the Mandarin for years, but I can certainly attest that this is still a great business hotel to stay in Manila.

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For e-mail responses to this article, write to [email protected]. Bobit Avila’s columns can also be accessed through www.philstar.com. He also hosts a weekly talkshow, “Straight from the Sky,” every Monday, 8 p.m., only in Metro Cebu on Channel 15 of SkyCable.