Taxpayers win 1st round in fight vs QC graft

Filipino taxpayers have won the first round against corruption in the Quezon City government. The Office of the Ombudsman has suspended for six months two Quezon City councilors, Francisco Calalay Jr. and actor Roderick Paulate, for putting almost 60 “ghost employees” on City Hall’s payroll. Criminal charges of graft and malversation of public funds and administrative charges of grave misconduct, serious dishonesty, and falsification of official documents have been filed against them. Their liaison officers, Flordeliza Alvarez and Vicente Bajamunde, were also suspended and included in the complaints.

The existence of ghost employees in the Quezon City government payroll was exposed at the Kapihan sa Manila at the Diamond Hotel by former Sen. Aquilino Pimentel, who brought with him the whistle-blower, Jimmy Lee Davis, a former City Hall employee.

After investigation, the Field Investigation Office (FIO) of the Office of the Ombudsman found that Paulate had 30 ghost employees in his payroll from July to November 2010, and Calalay, 29 ghost employees from January to November 2010. These fictitious employees were paid between P2,500 and P5,000 a month. According to the FIO, Paulate disbursed P1.12 million for their salaries, and Calalay, P2.175 million.

The investigators found that these ghost employees had no birth records in the National Statistics Office, were not listed voters in Quezon City, had not secured clearances from the National Bureau of Investigation, and had bogus home addresses.

As of press time, there is no comment from Paulate and Calalay.

They are only the first councilors to be charged as “test cases.” There will be more, according to ex-Senator Pimentel and Davis.

Quezon City Mayor Herbert Bautista should not stop there, as corruption is supposed to be endemic at City Hall. After the councilors, the Quezon City government should audit the barangays who get huge amounts from taxpayers through the Internal Revenue Allotments and through allowances they give themselves.

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The offer of Henry Sy’s Banco de Oro (BDO) to buy out the Export and Industry Bank (EIB) is still alive. In fact, the agreement was ready to be approved by the Bangko Sentral ng Pilipinas (BSP) and Philippine Deposit Insurance Corp. (PDIC) by the first quarter of this year but was derailed by a suit filed by some EIB shareholders.

As of early this week, BDO has revised its offer to meet BSP and PDIC requirements.

You will remember that as early as July 2009, BDO and EIB entered into a binding agreement that would fully protect the latter’s 40,000 depositors with some P14 billion in deposits as well as its 580 employees. Essentially, BDO was to acquire a list of selected assets and assume all of EIB’s deposit liabilities.

The transaction was initially presented to BSP and PDIC in August 2009. From then on, the two banks had discussions with BSP and PDIC regarding the terms of the financial assistance package, as well as the resolution of related legal issues. In the interest of completing the transaction, EIB and BDO agreed to all the requirements imposed by BSP and PDIC, including the condition that EIB shareholders would not be paid anything.

As early as November 2009, the BSP’s Monetary Board recognized that closing EIB would carry the risk of a confidence crisis among depositors of peer banks and other perceived capital-challenged banks, as well as influential depositors of EIB in key industries.

Following this and the discussions among the parties, the transaction was approved by the PDIC board in March 2010. BSP likewise approved it on July 26, 2010. The two banks agreed to comply with the other conditions of PDIC’s approval. At that time, the transaction was ready to be completed.

But for reasons known only to government regulators, an updated due diligence review was again required, which delayed the completion of the deal. The transaction was then approved for the second time by the PDIC Board in April 2011.

Subsequent to this approval, the parties worked on the documentation of the transaction. By the first quarter of 2012, all conditions of the implementation of the transaction had been met except for the case filed by the group of William Gatchalian against EIB stemming from a 2003 transaction executed by EIB’s subsidiary, which case hampered EIB operations. As efforts to resolve the case proved to be in vain, EIB, with the full knowledge and approval of its board of directors and the management, voluntarily surrendered control of the bank’s operations to BSP on April 27, 2012. PDIC was then appointed receiver of the bank.

EIB is now on the 90th day of rehabilitation, during which the regulators will try to find a “white knight” that can provide relief to its depositors and creditors.

That “white knight” is BDO, which has revised its offer to buy EIB.

The regulators should approve the transaction as soon as possible for the sake of EIB’s 40,000 depositors and avoid a loss of P6 billion to PDIC that would be paid to insured deposits and other losses.

If BDO backs out because of the delay, how can PDIC explain to the public the loss of P6 billion when there is already a buyer willing to assume payment of all the deposits? Surely, it will be blamed for foot-dragging. And why did it take PDIC three years to process BDO’s original proposal? EIB’s closure could have been avoided had PDIC acted quickly.