SC affirms ruling dismissing Pichay from LWUA, barring him from public office

Mike Navallo, ABS-CBN News

Posted at Jan 17 2022 02:01 PM | Updated as of Jan 17 2022 07:56 PM

MANILA — The Supreme Court has upheld a 2011 Ombudsman ruling dismissing Surigao del Sur 1st District representative Prospero Pichay, Jr. as head of the Local Water Utilities Administration (LWUA) for grave misconduct and perpetually disqualifying him from public office. 

The administrative case stemmed from LWUA’s acquisition of a thrift bank without approval of the Monetary Board and the President.

The same SC resolution, dated November 11, 2021 but uploaded only on January 14 this year, also rejected his bid to reverse the Sandiganbayan’s finding of probable cause to charge him with 3 counts of graft and 1 count of violating the Manual on Regulations for Banks over the same transaction.

Pichay served as LWUA chair from September 2008 until he was dismissed in 2011.

During his stint, he oversaw the acquisition by LWUA of 445,377 shares or 60% of the shares of thrift bank Express Savings Bank, Inc. (ESBI) for P80 million. LWUA also deposited P300 million and made an advance payment of P400 million to subscribe to the increase in ESBI's authorized capital stock.

But some LWUA employees questioned the transaction, accusing Pichay and his fellow LWUA officers of violating the General Appropriations Act for Fiscal Year 2009 which prohibited government funds from being invested in private banking institutions like the Gatchalian-owned ESBI. 

Pichay was also accused of not securing prior approval of the Bangko Sentral ng Pilipinas’ (BSP’s) Monetary Board before acquiring more than 20% ownership of a bank. 

The employees also argued ESBI was under BSP rehabilitation and P480 million of LWUA’s investment was not protected by government securities nor by certificate of stocks by ESBI.

The Ombudsman found Pichay and fellow LWUA officers guilty of grave misconduct and ordered their perpetual disqualification from service. The Court of Appeals sided with the Ombudsman.

In his appeal to the Supreme Court, Pichay claimed violation of due process when he was supposedly not informed of the bases of the administrative charge because the complaint did not allege the lack of the approval of the President and the Monetary Board.

But the SC said these points were raised in the proceedings with the Office of the Ombudsman and in the position paper of complainants and he had all the opportunity to address the allegations.

SC affirmed the finding of grave misconduct, noting that Pichay was repeatedly informed, through various letters, that acquiring ESBI needs prior approval of the President and the Monetary Board.

“The flagrant disregard of the rules committed by Pichay, despite being knowledgeable of the requirements for obtaining ESBI, as evinced by the letters that were sent to him, is evident. The absence of a definitive approval as required by the banking laws and regulations should have prompted Pichay to raise concerns with the LWUA Board before proceeding with the acquisition of ESBI. However, instead of raising such concerns, he allowed the LWUA Board, under his leadership, to continue with the negotiations and eventual acquisition of ESBI. This repeated disregard of the rules equates to a grave misconduct,” the SC’s First Division said through a resolution signed by the Division Clerk of Court.

The resolution said the LWUA’s ESBI transaction resulted in losses on the part of the government amounting to P780 million.

“Continuously transferring funds to an entity, for which approval of the appropriate regulatory body was not yet acquired, exposed these funds to visibly potential risks. As it later turned out, the risks led to losses, as ESBI was eventually closed, and there was no showing that LWUA was able to recover the full amount it spent in relation to the acquisition of ESBI,” it said.

The undue injury to the government was also the basis for the SC’s ruling that the Sandiganbayan had probable cause to charge Pichay of 3 counts of violation of section 3(e) of the Anti-Graft and Corrupt Practices Act (RA 3019) and 1 count of violating the Manual on Regulations for Banks (MORB).

Not only was the LWUA required to obtain prior approval by the Monetary Board before purchasing more than 20% shares of a bank, it was also obligated to register the transfer of ownership under the MORB, the SC said.

Pichay sought to challenge the perpetual disqualification penalty, claiming that perpetual disqualification under Administrative Order No. 07 only applied to government positions that involve employment, not to any public office.

But SC said there is nothing in the provisions of AO 07 which would prevent it from being applied to administrative cases in the civil service. 

Instead, the court said, the administrative order makes the penalties under Executive Order No. 292 applicable to disciplinary actions, which include perpetual disqualification from holding public office.

The high court also rejected Pichay’s claim of violation of right to speedy disposition of the case.

Pichay who served as representative for the 1st District of Surigao del Sur from 1998 to 2007, lost in the 2007 senatorial race before becoming LWUA chair in 2008. 

Following his dismissal from LWUA, he returned to the same seat at the House of Representatives and is now running for his third and final term in the May 2022 polls. 

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