LWUA - Unholy mixing of water and banking

LWUA - Unholy mixing of water and banking

THURSDAY, 21 JULY 2011 20:01     ZOILO ‘BINGO’ DEJARESCO III / FREE ENTERPRISE  

PROSPERO “Butch” Pichay, chairman of the Local Water Utilities Administration (LWUA), and two underlings were sacked recently and forbidden to ever hold public office by the Office of the Ombudsman.

This stemmed from a highly irregular use of LWUA funds to buy a losing thrift bank in Laguna called Express Savings Bank. The bank was also ordered closed last week by the Philippine Deposit Insurance Corp. (PDIC) as it could no longer honor deposit withdrawals of its over 2,000 clients.

Our banking sense tells us the bank sale conjures images of corruption.

For why indeed should LWUA—which already provides financing to water districts—still have to buy a bank to do the same function? Why buy a losing bank whose branches (four) are all in Laguna when LWUA’s constitutency is nationwide?

The amount of LWUA funds used is huge: P80 million to buy 60 percent of the bank’s common shares. Worse, the LWUA sank in P300 million for bank deposits and another P400 million as investment in the same bank. All in all, a stupendous P780 million in taxpayers money paid for a small bank in 2009.

In less than two years, the bank was run to the ground. Allegedly, Express Savings Bank lent to “friendly borrowers” who later refused to pay their loans to the point that the bank could no longer service deposit withdrawals of clients, as a consequence.

Pichay, a prosperous honcho who reportedly owns newspaper Remate and station dzME in Quezon City, was defending his acts over media, like the world owed him a living.

Red in the face, he said acting Ombudsman Orlando Casimiro has been doing nothing lately but filing graft cases against the Arroyo allies. Casimiro, we think, is just doing what former Ombudsman Merci Gutierrez has NOT been doing through all these years.

The former congressman has been defending his fort dismally and erroneously.

One, he said the P780 million was not government money (in the national budget sense) since it was LWUA’s internally generated funds.

Two, the bank made a P40-million net income in 2010 so the P80 million was a good investment.

Three, he had the approval of former President Arroyo (GMA) in buying the bank through LWUA funds.

Four, Express Bank was able to help water districts get loans for water projects from the bank.

First, from an accounting standpoint, the “profits” or Pichay’s so-called internally generated funds become part of the equity of LWUA if undeclared as dividend to the national government, the LWUA being a government entity. The LWUA board cannot unilaterally decide on the use of those funds like they were its own.

Second, the total investment of LWUA in the bank is P780 million, not P80 million as Pichay likes the public to believe. Moreover, the last PDIC audit showed that Express Bank owes depositors some P600 million. Technically, that means the P700 million  cash (P300 million plus P400 million) could not be totally recovered since only P600 million will be serviced by the PDIC (those accounts above P500,000).

The P80-million equity investment, of course, went to the lucky original Express Savings owners, who sold 60 percent of their shares to LWUA. That money will never be retrieved by LWUA ever. Neat?

Third, Pichay never had the categorical approval of GMA. Her signature, according to former GMA Cabinet Secretary Ignacio Bunye, “was subject to the consent of the Monetary Board.” According to Bunye, the Monetary Board disapproved Pichay’s request not once but twice.

Fourth, the water districts and borrowers never faithfully paid their loans which caused the bank’s collapse, in the first place. Not “sweetheart” deals between the controlling bank shareholders and the favored water districts and borrowers?

There is no doubt that Pichay was one of the most favored lieutenants of the past administration, so close was he to the Palace that in Congress, he was chairman of the Committee of the National Defense and then the powerful Commission of  Appointments. In charge of the AFP budget, he was accused by whistle-blower Col. George Rabusa of receiving P500,000 three times, the same number of times he allegedly visited the AFP headquarters.

Worse, during the Senate hearings to dig into the “corruption issue” at the DPWH and the banned Philippine contractors (fingered by the World Bank), together with First Gentleman Mike Arroyo, former Public Works Sec. Florante Soriquez and “broker” Boy Belleza, Pichay was one of the two congressmen supposedly alluded to as part of the “collusion cartel” pointed by the World Bank for road projects. The other was reportedly Negros Oriental Congressman Jacinto Paras.

So, the history of Pichay in matters of transparent governance is murky-clear as mud.

In his alchemy of making money out of his various businesses, this was one concoction-mixing water with banking that didn’t seem to work well. He will be lucky if the charge ends up with his just being administratively sanctioned.

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