Behest or not, Ongpin loans invite questions

QUIBBLING: There is much quibbling over whether the loans secured by businessman Roberto “Bobby” V. Ongpin from the state-run Development Bank of the Philippines could be called behest loans.

Former DBP President Reynaldo David objected to the term “behest loans,” saying the loans were granted in accordance with the DBP’s policies and guidelines.

Commission on Audit chairman Gracia Pulido-Tan said they did not use the word “behest” in the COA report, although COA has referred the DBP-Ongpin loans to its Fraud and Investigation office, as well as to the Securities and Exchange Commission for possible insider trading.

Ongpin had said that the loans could not be called behest loans because they were fully paid even before the maturity date.

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CRITERIA: But “behest” or not, the Senate Blue Ribbon Committee’s investigation last Friday indicated that the two loans totaling P660 million given to the Ongpin-led Delta Ventures Resources Inc. may have gone against good banking practices and transparency.

During the hearing, Solicitor General Jose Cadiz cited Memorandum Order No. 61 dated Nov. 9, 1992, that defined a behest loan as having at least two of these eight criteria:

Loan is under-collateralized; the borrower firm is undercapitalized; endorsed by high government officials; stockholders, officers or agents of the borrower firm are identified as cronies; diversion of loan proceeds from the claimed purpose; use of corporate layering; non-feasibility of the project to be financed; and extraordinary speed of the loan release.

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DEVIATIONS: Cadiz noted that the criteria did not say that a loan has to be a defaulted loan, meaning it was irrelevant that the P660 million loaned to Ongpin had been fully paid.

CoA and DBP officials and Cadiz all noted alleged irregularities and unsound practices in the granting of the loans.

“We have noted some deviations from DBP internal policies,” Aurita Villosos of the DBP’s internal audit said. The loans were granted, she said, despite losses in operations in 2008 and a low fixed interest rate was granted despite a DBP circular prohibiting such arrangement.

Cadiz said DVRI’s second loan of P510 million was secured solely by Philex shares of stock, not including PhilWeb shares as David claimed, thereby making the collateral inadequate.

Pulido-Tan said the DBP became both the seller of the Philex shares and lender of the money that was used to buy the same shares in the transaction. He said DBP and DVRI in effect became part of the same selling block.

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WHY EXPEDITED?: CoA noted a four-day gap when the P510-million loan was not collateralized because the DBP had already released its 50 million Philex shares so DVRI could make the sale to First Pacific’s Two Rivers.

Ongpin had bought shares held by DBP in Philex for P12.75 each, and sold these for P21 to Two Rivers in 2009. The sale enabled the group of businessman Manuel V. Pangilinan to take control of the mining company.

Had DBP directly sold the shares to Two Rivers, the state-run bank would have made P400 million more than what it did when it first sold shares to DVRI, CoA’s Pulido-Tan noted.

She said CoA had asked for an SEC investigation, because its auditor noted that in less than 30 days there was a notable appreciation of Philex share prices.

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SEC ACTION: Senate President Juan Ponce Enrile told reporters he had received a letter from the SEC informing him that Ongpin was being investigated for possible insider trading. He forwarded the letter to the Blue Ribbon committee.

The letter read in part: “Based on the surveillance report of our market regulation department, Mr. Ongpin may have committed insider trading….

“Mr. Ongpin’s affiliation with Philex as director and vice chairman allegedly classify him as an insider as defined under… the Securities and Regulation Code notwithstanding his resignation on Dec. 7, 2009.

“If considered as such, he may have been in possession of material information not available to the general public when he purchased Philex shares on Dec. 2, 2009.”

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INTERLOCKING: Pulido-Tan also cited the “interlocking directorship between DBP and Philex” when the loans were granted.

She noted that David was DBP president and chairman of the committee that approved the loans, while he was also independent director and chairman of the audit committee of Philex, of which Ongpin was vice chairman and Pangilinan chairman.

Sen. Panfilo Lacson, whose resolution prompted the Senate investigation, asked David what due diligence the bank conducted on DVRI and how, despite a paid-up capital of only P625,000, DVRI was able to secure a P660-million loan.

Lacson had said DVRI’s license to operate was revoked in 2003 for failing to submit reportorial requirements. Records showed that DVRI last submitted an audited financial report in 1996. The SEC automatically revokes corporate licenses if the company has not been operating for five consecutive years.

Lacson noted that DVRI was inactive until 2008 before DBP renewed its first credit facility and granted the controversial P510-million loan the next year.

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WANG-WANG: Sen. Serge Osmeña, chairman of the committee on banks, called Ongpin’s loans “wang-wang,” because of the way they cut through the usual traffic that loans go through on their way to approval. It usually takes at least one to two months.

Questioning David, Osmeña elicited information that all three credit committees of the DBP under the previous board had approved the first loan of P150 million in one week, while the second loan of P510 million was approved in one day.

Officials of DBP present in the hearing admitted that no other loan was ever approved by the bank with the same speed.

Whether the Ongpin loans are behest or wang-wang or whatever else they mat be called, it is pointless to go into tomayto-or-tomahto quibbling.

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