– PDIC asks help of forensic experts in its investigation of 13 banks
HUNDREDS of victims in the Davao region of the Legacy double-your-money schemes are having a hard time filing their multi-million-peso claims due to difficulty in putting up the required court deposits.
This was learned from lawyer Israelito “Bobit” Torreon, counsel of more than 200 Legacy victims in the Davao area.
Torreon said that in filing a civil case, the court requires around P20,000 per P1 million claim. The claims of Legacy victims being handled by Torreon total about P250 million.
With the huge amount of deposits needed, Torreon said they will be exploring other ways that would allow the court to approve deposits based per claimant and not based on the total amount.
As for the filing of the criminal case, Torreon said they are awaiting the result of the petition filed by Senator Mar Roxas before the Department of Justice which seeks to reduce, or even waive, the required filing fee.
At present, he said they are still finalizing the complaints based on documents, many of which were secured in Manila where the Legacy’s main operation was based.
Meanwhile, Philippine Deposit Insurance Corporation (PDIC) President Jose C. Nograles announced that the Corporation has brought its investigation of 13 Legacy-affiliated banks to a higher level by engaging the services of Punongbayan & Araullo, an audit firm with expertise in forensic fraud investigation, and affiliated with Grant Thornton, International PA.
This kind of investigation is geared towards uncovering transactions intentionally hidden in a maze of paper trail and deleted computer files. It aims to identify and document possible fraud schemes, irregularities and anomalies that may have been perpetrated against the banks and which may be used as basis for the filing of criminal, civil and/or administrative cases.
It is also expected to establish a case management system to preserve evidence gathered during the investigation. Asset recovery and tracing will also be conducted to enable the PDIC to lay claim to the properties of Legacy owner Celso delos Angeles and other persons found to have committed fraud. Forensic fraud investigation is used by other countries such as the United States. The Federal Bureau of Investigation’s Racketeering Records Analysis Unit uses forensic fraud investigation in cases covered by the Racketeering Influence and Corrupt Organization (RICO Law).
Writ of attachment
Nograles said the Corporation’s own ongoing investigations that entails combing through 2,000 boxes of voluminous documents, has resulted in the filing of several cases, including syndicated estafa, directly against Delos Angeles as well as a collection case with request for writ of attachment of Delos Angeles’ properties. In the course of said investigations, they have uncovered schemes of a different level of sophistication, requiring more expertise and in-depth investigations to unravel.
“We are dealing, not just with individual banks but with a group of companies composed of several banks and pre-need companies controlled by certain persons through dummy ownerships, enmeshed in a criss-crossing labyrinth of transactions. The endless combinations and permutations of these transactions have created a veritable empire of smoke and mirrors meant to cover up fraud and confuse regulators and the public alike,” Nograles said.
Hold order
The Department of Justice (DOJ) has issued a hold departure order (HDO) against Delos Angeles, his son Martin Nicolo and 19 other Legacy officers and employees in relation to the syndicated estafa charge filed by the PDIC.
The HDO was based on the syndicated estafa charge filed by the PDIC alleging that Delos Angeles, et al conspired to siphon off funds of Rural Bank of Carmen in Cebu solicited from the public by way of deposits through fictitious or simulated loans. RB Carmen is a Legacy-affiliated bank under receivership of the PDIC.
In its complaint, PDIC stated that Delos Angeles created 39 fictitious loans amounting to P16.85 million in RB Carmen, and diverted the proceeds to his son, Martin Nicolo, and to other Legacy related corporations.
Another syndicated estafa case was filed by the PDIC against Delos Angeles, his wife and son; and seven other Legacy Group officers for allegedly conspiring to misappropriate Nation Bank’s funds using a farmland in Negros Occidental known as the Hacienda Busay through fictitious or simulated loans. Nation Bank is one of the 12 Legacy-affiliated banks placed under PDIC receivership in December 2008. Syndicated estafa is a non-bailable offense and is punishable with lifetime imprisonment.
Meanwhiule, KPMG Manabat Sanagustin, the independent audit firm engaged by the Philippine Deposit Insurance Corporation (PDIC) to help speed up the pre-settlement examination of deposit accounts in the 12 Legacy-affiliated banks placed under PDIC receivership in December 2008, confirmed that bulk of the P6.05 billion doubtful accounts in said banks had incomplete documentation due to missing bank records and discrepancies in recording done by accountable officers.
“Documentation of bank transactions is the responsibility of the bank officers. It is incumbent upon bank officers to comply with the regulations on deposit-taking,” Nograles said.
Incomplete records
In its report to PDIC, KPMG Manabat Sanagustin said that some bank records required in the validation of deposit accounts such as teller’s blotters, proofsheets, bank copies of certificates of time deposit, among others, were found to be missing as of takeover dates. These documents are needed to show evidence of funds inflow to the banks.
“Under the PDIC Charter, PDIC is mandated not only to determine the legitimate depositors on record but also to validate that the deposit account had actual funds inflow,” Nograles added.
PDIC had earlier reported that of the P6.05 billion classified as doubtful, the examination of P5.42 billion worth of deposit accounts is being hampered by incomplete documentation. Nograles said that the verification process for these accounts have significantly slowed down because of incomplete bank records.
He clarified that bank records turned over by accountable bank officers to PDIC when these banks were placed under receivership in December 2008 were insufficient to enable PDIC to determine the validity of the bulk of the deposits. The bank records turned over to PDIC were inventoried as part of standard receivership procedures.
New rules
In the face of the Legacy controversy, Nograles said that the state deposit insurer will institutionalize new rules to help prevent deposit splitting which poses undue risk to the Deposit Insurance Fund (DIF). The DIF is the funding source for payouts of valid deposit insurance claims.
Splitting of deposit occurs when a deposit account of more than the maximum deposit insurance coverage under the name of a natural or juridical person is broken down and transferred into two or more accounts in the names of persons or entities with no beneficial ownership on the transferred deposits. This means that the transferee does not really own the deposit account, even if it is in his name and is only acting as a “dummy”.
This practice is resorted to by individuals who put their money in risky instruments masquerading as deposits. Instead of bearing the higher risk associated with higher interest, they shift the risk to PDIC, by resorting to splitting so that each split account will be within the maximum deposit insurance coverage. This is what is known as moral hazard.
Nograles said among the measures being studied by the PDIC is the inclusion of a sworn statement in the claim form for deposit insurance. This will make the false “transferees” or dummies criminally liable for any misrepresentation concerning the claim for deposit insurance, particularly with regard to ownership of the deposit. Introducing the risk of criminal liability is intended to discourage persons willing to act as dummies. “PDIC will also adopt payment of valid deposit insurance claims through registered mail as a standard payment system not only for faster service to depositors, but to ascertain that only valid deposit insurance claims are paid. Mailing the checks to claimants on record will also make it difficult for a depositor of split accounts to control receipt of the payments by their dummies,” Nograles said.
Under the new PDIC Charter (as revised by RA 9576) which increases deposit insurance coverage from P250,000 to P500,000 effective June 1, 2009, the Corporation was granted institutional strengthening powers to deal with the risks associated with higher deposit insurance coverage. This includes more stringent rules on splitting of accounts.
The new law prohibits splitting of deposits within 120 days from bank closure or declaration of bank holiday. Under the old law, deposit splitting is not allowed within 30 days from bank closure. “The longer window set by law along with the new rules will help ensure that benefits of deposit insurance are not abused,” Nograles said.
