Two officials from Negros Occidental and Bacolod City are among those to be indicted by the Office of the Ombudsman with former executives of the Local Water Utilities Administration, corporate executives of WELLEX Group Inc., Forum Pacific Inc. and Express Savings Bank Inc. in connection with the anomalous acquisition of ESBI in 2009.

The officials were identified as Mayor Enrique Montilla of Isabela, Negros Occidental and Aurelio “Art” Puentevella, both former LWUA board members during the Arroyo administration.

Puentevella is presently private secretary of Bacolod Mayor Monico Puentevella, who is his brother, as well as the official in charge of the Bay Center.

Ombudsman Conchita Carpio Morales, Friday, found probable cause to indict the officials, saying the “government effectively lost at least P80,003,070.51 in this questionable acquisition alone”.

Montilla said he is ready to prove his innocence in court, while Puentevella said he did not take part in the bank acquisition.

He was surprised at his inclusion in the charges, he was only connected with LWUA for a year, Puentevella said.

Facing indictment with Montilla and Puentevella are former LWUA administrator Prospero Pichay Jr., directors Eduardo Bangayan, Wilfredo Feleo, Daniel Landingin, Arnaldo Espinas; WGI executives Dee Hua Gatchalian, William Gatchalian, Elvira Ting, Sherwin Gatchalian, Kenneth Gatchalian and Yolanda Dela Cruz; FPI executives Peter Salud, Geronimo Velasco Jr., Weslie Gatchalian;

Rogelio Garcia, Lamberto Mercado Jr., Evelyn dela Rosa, Arthur Ponsaran, and Joaquin Obieta; and ESBI executives George Chua, Gregorio Ipong, Generoso Tulagan, Wilfred Billena and Edita Bueno.

The charges are for three counts of violation of Section 3(e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act), three counts of Malversation, and violation of Republic Act No. 8791 (General Banking Law of 2000) and the Manual of Regulation for Banks, a press release from the Office of the Ombudsman said.

The criminal charges involve the acquisition by the LWUA of ESBI, a local thrift bank based in Laguna owned by the Gatchalians, FPI and WGI.

NO REGULATORY APPROVALS

On 24 March 2009, the LWUA Board composed of Pichay, Bangayan, Montilla, Puentevella and Landingin passed Resolution No. 56 (Series of 2009) approving the acquisition of ESBI without the requisite regulatory approvals from the Monetary Board (MB) of the Bangko Sentral ng Pilipinas , Department of Finance (DOF) and the Office of the President (OP), Morales said in her decision.

The acquisition was also made in contravention of the legal opinion rendered by the Office of the Government Corporate Counsel that opined it is subject to review by the DOF and approval by the OP, including compliance with applicable banking laws, rules and regulations. Morales added.

DESPITE NEGATIVE FINDINGS

To compound the problem, Pichay, et al. approved the acquisition despite substantial negative audit findings uncovered during the due diligence stage.Audit findings made by a private firm revealed that the bank was insolvent after suffering substantial net losses and capital deficits for five straight years from 2005 to 2009, Morales said.

Subsequent to the acquisition, Pichay, et al. approved the transfer of almost P 780 million of LWUA funds to ESBI in order to increase the bank's authorized capital stock. The transaction between LWUA and ESBI was once again made without the regulatory approval from the MB.A total of P 80 million was paid to Gatchalian, et al. as bank owners, the Ombudsman said.

The Ombudsman dismissed charges against LWUA board member Bonifacio Mario Peña Sr., also a Negrense, for lack of probable cause.*CPG

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