MANILA (UPDATED) — Surigao del Sur Rep. and former Local Water Utilities Administration chairman Prospero Pichay Jr. was found guilty of 3 counts of graft by the Sandiganbayan 4th Division for the misuse of P780 million funds of the utilities agency in 2009.

In the decision of the anti-graft court promulgated on June 7, 2022, Pichay and former acting deputy administrator of investments and financial services Wilfredo Feleo, Jr. who was likewise convicted by the anti-graft court, were sentenced to 6 to 10 years imprisonment for each of the 3 counts of graft, as well as perpetual disqualification from public office.

In the information filed by the Ombudsman before the Sandiganbayan, Pichay and other LWUA officials gave undue advantage to Express Savings Bank Inc., an insolvent bank owned by The Wellex Group and Forum Pacific.

A total of P700 million LWUA funds were deposited to ESBI in 2 tranches under Pichay’s chairmaship.

Some 445,377 shares of stocks in ESBI amounting to P80 million were also purchased by LWUA, resulting in its control of at least 60 percent of the voting stock.

All transactions were without the necessary approval from the Bangko Sentral ng Pilipinas and the Department of Finance.

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In its ruling, the court noted that LWUA was already getting “gentle reminders” from the BSP and the DOF to secure proper approval from the Monetary Board.

“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,” the court said in the decision penned by Associate Justice Lorifel Pahimna, with the concurrence of Division Chairperson Alex Quiroz and Associate Justice Edgardo Caldona.

During trial, Pichay noted that there was no manifest partiality since ESBI was the only bank involved.

Feleo, for his part, argued that he was not a member of the Board of Trustees and he was merely appointed to negotiate the sale of stocks in behalf of LWUA.

Both also stressed that tacit approval has been given by the MB as proven by the exchanges of correspondence between LWUA and the bank regulators.

“The fact that BSP and DOF have not been very blunt about the stubborn disobedience of LWUA to the mandate of the banking laws should not be perceived as a form of tacit approval, but simply an adherence to the old adage of parliamentary courtesy affording LWUA and its board due respect,” the court said.

Pichay and Feleo were however acquitted in the separate charge of violation of the Manual of Regulations for Banks under Republic Act 7653 or the New Central Bank Act, which applies only to bank officers and employees.

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In a statement, Pichay said that he is now discussing with his lawyers "our next course of action," saying that he is determined to "exhaust all possible legal remedies" under the law.

The congressman said that the Sandiganbayan ruling came to him "as a surprise," even questioning some of the grounds that led to the verdict.

"The constitutional right to be presumed innocent until proven guilty can be overthrown only by proof beyond reasonable doubt. Well-entrenched in jurisprudence is the rule that the burden of proof lies with the prosecution. This is a case of conspiracy for allegedly violating Section 3(e) of Republic Act 3019. Originally, there were 22 accused in this case which is why the recent decision of the Sandiganbayan came as a surprise," Pichay said.

"It is noteworthy that even the dispositive portion of the decision admits that no civil liability is adjudged against me in view of the fact that LWUA public funds invested in ESBI is under receivership and liquidation of the PDIC. So it is baffling: how can there be undue injury to the government?" he added.

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