Troubling PDIC goings-on

There are troubling goings-on at the Philippine Deposit Insurance Corp. (PDIC) that we learned about in connection with the closure of a thrift bank, Unitrust Development Bank, and they speak of an important cog in the Philippines financial sector going awry. And that is quite troubling.

Over coffee, Unitrust shareholder Francis R. Yuseco gave us tidbits about the way PDIC “raided” the bank of its assets even as the supposed reason for its closure was belied by employees within the PDIC itself who, unable to stomach the strange goings-on, furnished copies to Yuseco about the real state of affairs of Unitrust.

Unitrust was closed down supposedly for being insolvent on January 4, 2002. That reason for the closure, where liabilities are said to be more than the bank assets was, however, disproved by the very employees of PDIC on the real score on about the bank.

Yuseco told me that “civic-minded and conscientious other officials and staff of the PDIC were confidentially furnishing the official audited copies “ of Unitrust and it turned out that the bank had a net capital of P153 million as of January 31, 2002, a far cry from its supposed insolvent status.

This is a crucial issue, the P153-million net capital of the bank , since the PDIC had relied on the supposed insolvency status of the bank to file a petition with the Makati Regional Trial Court on April 25, 2005, to have the bank liquidated. With liquidation, all the bank assets can be sold.

Aside from the liquidation of the bank’s assets, the PDIC is empowered to sell an asset even at 49 percent of its value. And this, we learned is what Yuseco rues since he found out that another asset owned by the bank, a pricey condo unit in the Ayala area has just been sold within days of our conversation.

What Yuseco bewails is that during the hearings at the lower court where he contested the PDIC petition for the liquidation of the bank, the court had to order the PDIC to furnish it with the financial status of Unitrust and true enough, the confidential copies that PDIC employees furnished Yuseco were found out to be true.

He told me that the lower court after establishing that Unitrust was still solvent, ordered the PDIC to “cease and desist” from liquidating the bank. But the PDIC still maintained that bank should be liquidated. On appeal, the PDIC changed its legal theory that the bank was being liquidated not because it was insolvent but because it was illiquid. This change of legal theory, according to Yuseco, is anathema both to the Rules of Court and prevailing jurisprudence.

But this change of legal theory was allowed by the Court of Appeals 11th Division and this is what Yuseco finds difficult to comprehend, since there are no laws, jurisprudence or rules that allow the liquidation of illiquid banks provided they are still solvent. If so, the PDIC would have liquidated the Philippine Bank of Communications (PBCom) years ago.

Yuseco maintains that “had it not been for the buy-in of the Lucio Group of Companies, the P7.6-billion unsecured loan that was exposed by the late and enlightened former PDIC President Michael Osmena would have still remained unpaid.”

The Unitrust shareholder has now appealed the CA’s decision with the Supreme Court. Meanwhile, according to Yuseco, he has found out, that the PDIC has collected more than P39 million from the Unitrust. Of this amount, 87.7 percent has been allotted to the PDIC officials “additional salaries, allowances and bonuses” which, we understand, are all prohibited under the double-compensation rule of the 1987 Constitution.

Now, that takes the cake. For Yuseco faces the prospects of possibly getting a bank, should the Supreme Court rule in his favor that has been bled dry of its cash by PDIC officials. Strange, indeed, are the ways of the PDIC but “who will watch the watchmen?”