P2.6-B ‘fake’ loans

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Friday, January 31, 2014


LAPU-LAPU City Mayor Paz Radaza and a former bank employee were slapped with a criminal complaint by the Philippine Deposit Insurance Corp. (PDIC) for allegedly conspiring to create fictitious loans amounting to P2.6 billion when they were working at the Rural Bank of Subangdaku Inc. (RBSI).

The Monetary Board placed the bank under PDIC receivership in January 2009. Radaza was the president of the bank then. Included in the complaint was former loans manager Julius Eullaran.

In a complaint filed before the Department of Justice last Jan. 13, the PDIC accused Radaza and Eullaran of conducting business “in an unsafe and unsound manner.”

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The PDIC alleged that Radaza, then president and member of the bank’s credit committee, conspired with former bank-wide loans manager Eullaran to create 6,051 fictitious loans from 2004 to 2008.

The loans reportedly comprised 97 percent of all loans released by the RSBI head office during that period.

Sun.Star Cebu tried to get the side of Radaza. Her consultant, Jonji Gonzales, said the mayor and her lawyer have yet to receive a copy of the complaint.

“She prefers not to issue any statement pending her receipt of the copy of the complaint,” he said in a phone interview.

The PDIC claimed that Radaza and Eullaran were behind the creation of official receipts and made it appear that payments were made to the bank even when no actual payment was received. The supposed payments were allegedly used to provide the source of fictitious loan proceeds.

A statement posted on the PDIC website cited the sworn affidavit of the bank’s former loan officer, who claimed that the respondents ordered subordinates to create the fictitious loans without asking questions.

These were reportedly based on a list provided by Eullaran containing information to be used in creating the bogus loans.

“This claim was supported by the findings of the expert forensic accounting team from Alba Romeo & Co. that PDIC engaged to assist in the investigation,” the statement read.

According to the forensic investigation, 5,470 of the 6,051 fictitious loans did not have the required credit information.

It further revealed that 581 of the loans did not have supporting documents.

Demand letters sent to the named borrowers were returned because of unknown addresses or because they reportedly did not exist.

The PDIC assured they will continue pursuing legal action against bank officials and personnel found to have engaged in unsafe and unsound banking practices.

It warned that such activities pose threats to the stability of the banking system of the Philippines.

The PDIC, as co-regulator of banks, deposit insurer and receiver or liquidator of closed banks, is authorized to investigate and file cases against erring bank employees found to have violated banking laws.

Protection

“The pursuit of justice against erring bank owners, officers and employees is an important undertaking of PDIC to protect the Deposit Insurance Fund, PDIC’s funding source for payment of insured deposits, as well as to maintain financial stability,” the statement read.

If convicted of a crime, Radaza may face disqualification from holding public office.

Lawyer Julius Caesar Entise said a public official can be charged with a disqualification case in court after he is convicted of a crime with “final judgment.”

“One of the qualifications of a public officer is that he must have not been convicted of a crime involving moral turpitude,” he said.

He said “moral turpitude” is negative act that affects the moral character of an official.

Under the Local Government Code, “an elective official may be disciplined, suspended, or removed from office” if he committed a crime “punishable by at least prision mayor (six years and one day to 12 years).”

In the case of Radaza, Entice said she can continue her service because the complaint filed by PDIC has yet to be resolved.

Radaza became a mayor in 2010, after serving as barangay captain of Mactan, Lapu-Lapu City.

Entise said Radaza cannot be indicted for plunder because the alleged crime does not involve government funds. RBSI is a private entity.

His fellow lawyer Earl Bonachita, Integrated Bar of the Philippines Cebu City chapter past president, shares the view.

Under the Anti-Plunder Act, the crime of plunder is committed by a public official who amasses, accumulates or acquires ill-gotten wealth in the aggregate amount or total value of at least P75 million.

“By that definition, the criminal act must have been committed during the incumbency of the public official concerned,” said Bonachita.

“Any such act committed prior to his having become a public official may constitute another crime, but not plunder.”

Published in the Sun.Star Cebu newspaper on January 31, 2014.

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