Urban Bank - The Charges - Supreme Court Final Ruling To Proceed With P 4.5 Billion Estafa Case Against 4 Officers

Supreme Court Final Ruling To Proceed With P 4.5 Billion Estafa Case Against 4 Officers

On April 18, 2008, the Supreme Court of the Philippines 2nd Division affirmed the appellate court’s judgment to proceed with the PHP 4.5 Billion (USD 109 Million) estafa case against the officers of Urban Bank, namely, Nida S. Santos, Milagros Santiago, Rowena Punzalan, Chulla Formanes, Loida O. Payonga and Amalia Ordas.

On other cases filed... The BSP Media Section reported on 06.08.2004:

(See http://www.bsp.gov.ph/publications/media.asp?id=328&yr=2004)

"The Court of Appeals has dismissed the administrative complaint filed against BSP Governor Rafael B. Buenaventura and five other BSP officials regarding Urban Bank’s receivership, thereby setting aside its earlier order to suspend the Governor and other BSP officers.

In an Amended Decision penned by Associate Justice Lucas P. Bersamin and promulgated on June 4, 2004 by the Court of Appeals, the CA Special Division of Five also unanimously rejected the motion for reconsideration of complainant Teodoro Borlongan, former Urban Bank President, seeking the dismissal of the BSP officials. Under CA rules, when there is disagreement in a division, the case goes to an expanded division of five. The Fifth Division included Associate Justices Bersamin, Eugenio S. Labitoria, and Elvi John S. Asuncion; Associate Justices Salvador J. Valdez, Jr., and Rebecca de Guia-Salvador completed the expanded Division.

The Associate Justices were unanimous in clearing BSP Governor Buenaventura of the charges alleged by Mr. Borlongan. Except for the dissenting vote of Associate Justice Labitoria, all the other Associate Justices similarly exonerated or cleared BSP officials Alberto V. Reyes (Deputy Governor), Dolores B. Yuvienco (Managing Director), Candon B. Guerrero (Director) and Tomas Aure (former Director).

BSP Governor Buenaventura hailed the Amended Decision of the Court of Appeals clearing the BSP officials of the charges related to Urban Bank’s receivership. He said the Court of Appeals decision “should strengthen the resolve of others in government to continue to do their work with vigilance and courage, and to keep faith in the justice system.”

The Governor declared: “We at the Bangko Sentral ng Pilipinas have always believed that the courts will rule in our favor. We are professionals and we stand by the integrity of our actions and intentions.”

BSP’s timely decision to place Urban Bank under receivership protected the depositors and the general public. It also facilitated the take over and assumption by Export and Industry Bank (EIB) of Urban Bank’s assets and liabilities, which allowed EIB’s repayment of assumed liabilities including deposits.

In the Amended Decision, the Court of Appeals ruled that the dismissal of the administrative charges against the BSP Governor and the BSP General Counsel by the Ombudsman is final and unappealable, following the Rules of Procedure of the Office of the Ombudsman.

The Amended Decision also held that:

1. Borlongan has no standing to sue considering that the owners of the majority stock of Urban Bank themselves decided against challenging the Monetary Board (MB) resolutions, a fact attested to by Arsenio M. Bartolome III, Urban Bank Chairman, in his affidavit of Dec.15, 2002. Mr. Bartolome also said the MB action was “in the first place not unexpected.” Urban Bank’s own top management had continually provided the BSP the picture of the worsening situation of the Bank in the four weeks leading to its unilateral declaration of the bank holiday on April 25, 2000;
2. The receivership of Urban Bank has firm legal basis under the BSP Charter;
3. The recommendations for said receivership by Reyes, Yuvienco, Guerrero and Aure were based on adequate and constant monitoring and examination of Urban Bank’s records over a period of time; and
4. Borlongan’s citation of the Banco Filipino Supreme Court ruling is misplaced since the latter was based on the old Central Bank Act (R.A. No. 265, as amended) whereas the basis for the receivership of Urban Bank is the new BSP Charter (R.A. No. 7653).

This case arose after the Monetary Board placed Urban Bank under receivership following the unilateral declaration of a bank holiday by Urban Bank on April 25, 2000. Upon the takeover of Urban Bank by the Philippine Deposit Insurance Corporation (PDIC) as receiver, serious irregularities in said bank were uncovered consisting of the massive transfer of deposit funds from said bank to its affiliate, the Urbancorp Investments Inc.(UII). In particular, deposit funds totaling P4.60 billion from Urban Bank were exchanged for doubtful receivables from UII just before the declaration of a bank holiday, thereby causing the bank’s illiquid position.

Government supervisors also uncovered unauthorized pre-termination of money market placements of certain investors and violations of bank regulations on single borrower’s limit and the limit on real estate exposure. With these findings, the Department of Justice filed four (4) cases for estafa and three (3) criminal cases for violations of bank regulations against Mr. Borlongan. These cases are being pursued in the Makati Regional Trial Court by DOJ prosecutors and by lawyers from both BSP and PDIC.

In the meantime, Mr. Borlongan filed criminal and administrative complaints in the Ombudsman against the BSP Governor and other officers of the BSP. The Ombudsman has since dismissed the criminal charges and this dismissal was affirmed by the Supreme Court with finality in its two (2) Resolutions dated Oct. 13, 2003 and Nov. 24, 2003. The Ombudsman also dismissed the administrative charges against the BSP Governor and the BSP General Counsel Juan de Zuñiga, Jr., but held that the other BSP officials are liable for simple neglect of duty for which their suspension for one month and one day was ordered.

From this Ombudsman decision, Reyes et al. appealed to the CA and their case was assigned to the 17th Division, chaired by Associate Justice Mario L. Guarina III. Mr. Borlongan also appealed the Ombudsman decision to seek the dismissal of the BSP officials; his case was assigned to the 5th Division of the CA chaired by Associate Justice Labitoria, which proceeded to resolve the case and denied the motion for the consolidation of the case with the earlier filed case with the 17th Division. In the contested resolution of the 5th Division issued on Aug.13, 2003, the suspension for one year of Gov. Buenaventura and BSP officials Reyes, Yuvienco, Guerrero and Aure was ordered for “alleged gross neglect of duty.”

In a contrasting decision, the 17th Division on Sept. 18, 2003 found no basis for the administrative charges against the BSP officials and dismissed the same. The decision, penned by Associate Justice Mario Guarina III and concurred in by Associate Justices Martin S. Villarama,Jr. and Jose C. Reyes, Jr. said: “ Urban Bank’s Borlongan has taken extraordinary effort to expose, malign and destroy the SES (BSP’s Supervision and Examination Sector) reports. His tirades fail to convince us……At a time when indecision and hesitation have become the order of the day in our society and government, the decisiveness shown by the petitioners in this case shows that our people have not yet lost the political will to enforce the law and protect the public interest beyond personal ties or convenience. Many more acts of silent heroism among our civil servants might be needed before we can finally rise Gunmar Myrdal’s lasting criticism of the soft state.”

Acting on the motion for reconsideration of Mr. Borlongan, the 17th Division affirmed the dismissal of the charges. The decision of the 17th Division has been appealed by Mr. Borlongan to the Supreme Court where it is pending.