DBP: BSP directive prompted probe into Ongpin loans

by Judith Balea, abs-cbnNEWS.com

Posted at Aug 10 2011 06:49 PM | Updated as of Aug 11 2011 03:59 AM

Denies witch hunt claims

MANILA, Philippines (UPDATE) - State-owned Development Bank of the Philippines (DBP) on Wednesday said it started investigating "behest" loans extended to a company of former trade minister Roberto V. Ongpin after the central bank threatened to sanction it for violations of banking laws.

In a press briefing, DBP spokesperson Atty. Zenaida Ongkiko-Acorda denied Ongpin's claim that the new DBP board launched a "witch hunt" to pin him and bank officials during the term of former President Gloria Arroyo down.

"The investigation which was conducted by the DBP board was not a witch hunt."

"The DBP, in fact, received a letter from BSP (Bangko Sentral ng Pilipinas) calling its attention to the violation of banking laws and rules in these anomalous transactions and warning DBP of sanctions which are imposed for said violations," she said.

Ongkiko-Acorda said the BSP findings in the said letter, dated April 11, 2011, were the same as earlier findings of DBP's internal auditors and the Commission on Audit.

Reporters asked her for a copy of the BSP letter, but she said she didn't have it with her.

She said the BSP pointed out several anomalies in the P150-million and P510-million loan transactions between DBP and Ongpin's Delta Ventures Resources Inc. (DVRI).

She said DVRI was granted the loans "with extraordinary speed" and despite it being "undercapitalized." She said DBP waived no less than 10 borrowing requirements to grant the company the loans, violating banking laws and rules and exposing the bank to high risks and possibility of default.

"Equally shocking was when DVRI was allowed by some of the officers of DBP to withdraw its collateral while the loan was unpaid," Ongkiko-Acorda said, referring to the P510-million loan.

Ongpin and 25 past and current DBP officers, including its former president Reynaldo David, have been charged with graft before the Office of the Ombudsman in relation to the loans.

BSP deputy governor Nestor Espenilla did not confirm whether the central bank indeed gave DBP a letter, and what the said letter contained.

He said in a text message to ABS-CBN News: "I still have to confirm what DBP said. And even then I cannot comment on it as the law prohibits us from discussing any individual bank without MB (Monetary Board) clearance."

However, Espenilla had told abs-cbnNEWS.com's Lala Rimando in her two-part story last May that the success of DBP's transactions with Ongpin gave them no reason to conduct an investigation. "If there are no losses or injury, it is not for the regulators to come in," he said.

Philex shares

Ongpin took out the loans to help finance his acquisition of shares in Philex Mining Corp. He bought shares held by DBP in Philex for P12.75 each, and later sold these at P21 to the group of businessman Manuel Pangilinan. The sale allowed Pangilinan to take control of the mining company.

Ongkiko-Acorda said the sale of DBP's Philex shares to Ongpin -- which was financed by the loans Ongpin obtained from DBP itself -- deprived the bank of "opportunity" gains of P412 million.

Ongpin earlier said that his transactions with DBP were some of the "most profitable" ever entered into by the bank.

He said DBP earned P4 million interest income from the loans, and P1.3 billion trading gains from the sale of Philex shares. He also said that David made a "sound decision" to dispose of part of DBP's Philex holdings as he "cannot foretell future price movements."

But Ongkiko-Acorda said both Ongpin and David, as well as Pangilinan, "were all directors of Philex at that time, they were privy to the impending takeover of Philex" which was to eventually lift its share price.

Pinpin's suicide

Ongpin claimed the "witch hunt" at the government bank drove Benjamin Pinpin, a junior legal counsel of DBP, to commit suicide.

Ongpin alleged that Pinpin was pressured by the current DBP board to incriminate him and former bank officials with regard to the loans.

Pinpin, who was one of the officers asked by the board to explain his role in the approval of the loans, was found dead in a bathroom of a budget hotel in Las Piñas City on August 2. Police said he hanged himself using a nylon cord.

Ongkiko-Acorda denied Pinpin was pressured. She maintained the DBP board was only acting upon a directive of the BSP.

"The board of directors only dischared its duty to investigate these anomalies by issuing show cause letters to those officers who were identified to be involved in the transactions. The letters merely informed these officers of the discovered anomalies and requested them to explain their alleged involvement. That was a necessary step in responding to the express directive by the BSP to report the actions that they have taken against the erring officers."