Senate to probe Pnoy EO on banks’ merger

By Jerry Maglunog and Luis Leoncio

The executive order (EO) issued by Presi­dent Aquino to merge the Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP or Landbank) would be the subject of a Senate investi­gation amid allegations of an attempt to cover up DBP ir­regularities, said Sen. Sergio Osmena III, chairman of the Senate committee on banks and financial intermediaries.

Osmeña said the EO may also prove without legal force since only Congress could enact a law that would pave the way for the merger.

He added the two state-owned banks can­not be merged, since both have entirely different man­dates that would likely re­sult in government service disruption once merged.

“I have not studied its implications. The House passed a three-page bill, but I told (Finance Secretary) Ce­sar (Purisima) that these are two different policy banks with different legislative mandates and cultures and my committee would have to study why and how,” the sen­ator said.

The merger under the EO would have to be scru­tinized first by the Bangko Sentral ng Pilipinas (BSP) before it becomes final, said Communications Secretary Herminio Coloma Jr.

He said officials of the DBP and some entities un­der it would have to answer reports released by the Com­mission on Audit (COA) after the President approved the merger through EO 198.

Earlier, former Budget Secretary Benjamin Diok­no raised suspicions that the rush to merge the two banks on Feb. 4 was an effort to cov­er up behest loans amounting to billions of pesos as well as other irregularities in the DBP. The merger would have Landbank as the surviving entity that would effectively dissolve the DBP.

Suspicions of a cover-up were further strengthened after career DBP employess filed plunder complaints last week against the President’s appointees among the DBP officials before the Office of the Ombudsman in connec­tion with a P292.985-million deal for the purchase of a core banking system.

Named respondents were DBP President Gil Buenaven­tura, Chief Legal Counsel Fritzie Tangkia-Fabricante, Branch Banking Sector Head Anthony Robles, Operations Sector Head Dennis Decena, and Information Technology Department Head Nilo Cruz.

“All respondents, by vir­tue of their position as Senior Officers of the DBP, had full knowledge of the issuance of the DBP Board Resolution merging the Land Bank of the Philippines (LBP) and DBP and that, in view of the merg­er, there is no need for the procurement of a Core Bank­ing Solutions for DBP since LBP has its own Core Bank­ing Solutions,” the complaint filed by the Association of DBP Career Officials (Adco) said.

The complaint was filed by career officials of the DBP —Francis Romulo Badilla Jr., Mario Pagaragan Jr., Debbie Anza, Christian Joseph Presa, and Felipe Roque Jr.

The complaint said the DBP board wherein Bue­naventura was vice chairman, issued a resolution on March 25, 2015, for the LBP-DBP merger.

Buenaventura then entered into a deal worth P292,985,000 on June 4, 2015, with the joint venture of Kaisa Consulting Compa­ny and Polaris Consulting and Service Limited upon the rec­ommendation of Fabricante, Robles, Decena, and Cruz.

“The Commission on Audit conducted an Audit of the herein Integrated Core Banking Solution and COA found out that the procure­ment was overpriced and tainted with irregularities and violations of Government Procurement Law. The DBP made the technical specifica­tion to favor Polaris Consult­ing and Services Limited and disqualified all other bidders. It was also found out that the contract was overpriced,” the complaint said.

“By reason thereof, pub­lic funds in the amount of P292,985,000 were illegally disbursed, misappropriated, misused, fraudulently con­veyed, criminally disposed and wasted by Respondents and for which Respondents Bue­naventura, Fabricante, Dece­na, Cruz and Robles should be held liable for the crime of Plunder and Penalized with Reclusion Perpetua to Death,” it alleged.

Adco also filed in May last year a graft complaint before the Ombudsman over the allegedly questionable sale of the bank’s government se­curity holdings worth P14.3 billion.

The government alleged­ly suffered P717.07 million in actual losses because of the sale, it said.

Named respondents were Board Chairman Jose Nuñez Jr.; Board Vice Chairman Gil Buenaventura; Board Direc­tors Jose Luis Vera, Cecil­io Lorenzo, Alberto Aldaba Lim, Lydia Echauz, Reynaldo Geronimo, Vaughn Montes, Daniel Laogan; EVP Fe Su­san Prado; SVP Fritzie Tangk­ia-Fabricante; SVP Treasurer and Group Head Mariquita Agena; SAVP Head Rustum Corpuz of the Department of Asset and Liability Manage­ment; and SAVP Head Fran­cis Delos Reyes of the Local Bond Trading Unit.

In the following July, complainants Badilla and Pagaragan filed a plunder complaint before the Om­budsman against their senior officials in connection with P312.07-million additional incentives as performance bo­nus allegedly granted without the President’s approval.

Among the respondents were DBP President Gil Bue­naventura, Chairman of the DBP Board of Directors Jose Nuñez Jr. and Board Members Reynaldo Geronimo, Daniel Laogan, Lydia Echauz, Alber­to Lim, Raul Serrano, Vaughn Montes and Cecilio Lorenzo.

Likewise named respon­dents were members of the management committee: Fritzie Tangkia-Fabricante, Donna Shotwell, Ma. Teresa Jesudason, Ma. Teresa Atienza, Benel Lagua, Anthony Robles, Perla Melanie Caraan, Rafael Danilo Ranil Reynante, Cris Cabalatungan, Susan Prado, Alexander Patricio, Dennis Decena, Marietta Fondevilla and Isidro Sobrecarey.

Also included were GCG (Governance Commission for Government-Owned and Controlled Corporations) of­ficials Cesar Villanueva, Ma. Angela Ignacio, Rainier Bu­talid, and Paolo Salvosa.

“The apparent haste for the merger leads to spec­ulations of a cover-up. Is the outgoing administra­tion trying to sweep under the rug some questionable deals made by DBP officials? Who benefited from these deals? What will happen to the questions raised by the Commission on Audit on DBP’s losses and disal­lowances involving billions of pesos?” Diokno said.

Osmeña said it was Puri­sima who “went to Pnoy to secure an EO to affect the merger. But the EO cannot amend a law,” he added.

Osmena said those who are pushing the merger of the two banks must review the charter of the two banks to know if an EO can pave way the way for the merger.

“Unless the charter of each bank provides for it, an EO cannot amend it,” he added. Based on their char­ters, LBP is tasked to provide loans to farmers and co-op­eratives while DBP special­izes on commercial loans. Osmena said Congressional approval is needed for the merger.

If the merger pulls throuh, LBP’s assets will rise to over P1.6 trillion, thus making it the second-or third-biggest unibank in assets. At present, LBP has over P1.1 trillion assets while DBP has almost half a tril­lion peso assets.