2 bank execs convicted of fraud but get off

lightly
By Paolo G. Montecillo

FORMER executives of the failed Legacy banking group have been convicted of
fraud for their role in the group’s P14-billion Ponzi scheme that collapsed in 2008, the
Bangko Sentral ng Pilipinas (BSP) said Tuesday.

The convictions, however, represent but a small victory for the many people who lost
money in the scam, given the almost negligible punishment meted out by the courts.

Two Legacy executives, Zacarias Carticiano and Jose Girlo Caramat, who were both
found guilty of lying in the reports that they submitted to state regulators, were
ordered to pay measly fines of P100,000 each.

Carticiano and Caramat were president and controller, respectively, of the Rural Bank
of San Jose, a member of the Legacy banking group, which was shuttered in 2008.

The two were last September found guilty of falsifying documents by the
Metropolitan Trial Court, in violation of the New Central Bank Act, the BSP said in a
statement.

“The convictions of Carticiano and Caramat are the first convictions obtained thus far
in a wave of cases filed in 2009 by the BSP against multiple banks connected with the
Legacy Group of the late Celso de los Angeles,” the BSP said.

“Officers of these Legacy banks were charged with using falsified documents and
fictitious loans to siphon money from the banks,” the BSP added.

The Rural Bank of San Jose was part of a syndicate of more than a dozen small banks
that used “double-your-money” schemes to attract clients. The scam unraveled in
2008 when the banks failed to service customers’ withdrawals, indicating that the
companies had run out of money to keep up appearances.

Various estafa cases have been filed against Legacy executives, including the group’s
owner Celso de los Angeles, who died of cancer in 2012.

The Legacy banking group’s collapse cost the Philippine Deposit Insurance Corp. P14
billion in payouts of claims for deposits insured by the state.
 Based on the BSP’s investigations, the Rural Bank of San Jose was found to have lied
about the value of several of its assets, particularly five parcels of land worth P3.7
million. Carticiano and Caramat claimed in official documents that the value of the
land was P413 million.

The lie was done to cover up the bank’s true financial condition, the court ruled.

“The value was based on an appraisal of the properties done by Valueworld

Appraisers, Inc.,” the BSP said.

Read more: http://newsinfo.inquirer.net/738522/2-bank-execs-convicted-of-fraud-but-get-off-

lightly#ixzz4t304MLiw
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

Designing fraud? How

Legacy Group’s schemes
work
By CARMELA FONBUENA, abs-cbnNEWS.com/Newsbreak
Posted at Mar 08 2009 05:25 PM | Updated as of May 09 2009 06:04 AM

Share

 Save
 Facebook
 Twitter
 GPlus
 LinkedIn

The Bangko Sentral ng Pilipinas (BSP) knew that businessman-turned-

politician Celso de los Angeles is behind the capital-deficient Legacy-linked
rural banks, but couldn’t pin him down for years since de los Angeles’ name
does not appear on any corporate document.

The BSP has filed criminal charges against Legacy’s bank executives, but it
was only in February 26 when it finally named de los Angeles as one of the
respondents in its syndicated estafa case filed at the justice department. Last
Friday, the BSP filed a second syndicated estafa case that detailed P347
million in questionable transactions, which, the BSP alleged, sucked public
and government funds into a ‘scam.”

Both cases followed a trend: While de los Angeles and his accomplices are
not officials of the financial services arms—the rural banks and pre-need
companies—they allegedly masterminded a scheme where public money in
banks and investment instruments were siphoned into companies that de los
Angeles allegedly owned.

BSP’s smoking gun came from no less than de los Angeles’ lieutenants in the
scheme.

Key officers, including the presidents, of the Legacy rural banks helped the
BSP build the first syndicated estafa case against Celso de los Angeles.
abs-cbnNEWS.com/Newsbreak obtained copies of the affidavits signed by
William Lucero Escalante of Rural Bank of DARBCI Inc. in General Santos,
Mabini Urgelles Sanico of First Interstate Bank Inc. in Leyte, and Ernest
Carmel Jurado Sr. of Bank of East Asia in Cebu.

These affidavits were included in BSP’s first estafa case filed at the Justice
Department.
Mastermind
The banks presidents claimed that between the last quarter of 2006 until
November 2008, de los Angeles presided in at least four meetings of
presidents of Legacy banks to discuss the “Motorcycle Loan Program,”
“Investments Loans” program and—before the banks closed in December
2008—the necessary “clean up” to cover their tracks.
Based on the affidavits, abs-cbnNEWS.com/Newsbreak’s computation show
that the “Motorcycle Loan Program” and “Investment Loan” program siphoned
P1.6 billion up to P2 billion from the three banks to other companies allegedly
owned by de los Angeles.
Besides the three bank presidents, officials of at least eight more Legacy
banks attended the meetings, the documents showed.
The 13 Legacy banks had an estimated P24 billion in total deposits when they
were closed. Out of this, only P14 billion will be returned to depositors whose
bank accounts were P250,000 and below. This will be shouldered by the
taxpayers through the state-owned Philippine Deposit Insurance Corporation.
“From the very start, the “investment loans” program of Mr. Celso de los
Angeles was just a means of [de los Angeles-owned] Fusion Capital to siphon
bank funds from from BEA,” Jurado sai in his affidavit.
“I followed all the instructions of my superiors as I was afraid of losing my job,”
Escalante also said in his affidavit.
While the bank documents do not register de los Angeles as the controlling
owner of the banks, the presidents said they know that he is the “titular head.”
They also claim that most orders from Manila office were explained to them as
instructions from de los Angeles.
Motorcycle Loan Program
The first “series of meetings” were held in the last quarter of 2006 in de los
Angeles’s office in Makati City. Escalante and Sanico detailed how de los
Angeles explained the “Motorcycle Loan Program.”
“During these meetings, Mr. Celso de los Angeles explained to us that his
company, Legacy Motors Inc. (LMI), would purchase motorcycles from China
and these would be offered for loans through our banks to interested
borrowers,” Escalante said in his affidavit.
The procedure was simple. The banks will convince the prospective borrowers
to each avail of the P55,000 motorcycle loans. For every approved loan,
P51,000 would be deposited to the account of LMI. The rest was recognized
as income by the bank.
LMI would deliver the motorcycles to the approved borrowers, who would pay
a monthly amortization of P3,000 for period of three years.
Escalante said his bank in General Santos was able to deposit more than
P200 million to the account of LMI from the loan scheme. Based on abs-
cbnNEWS.com/Newsbreak computation, that involved at least 3,921
approved loans.
“Out of the total motorcycle borrowers, only a few motorcycles were delivered
and distributed to the borrowers,” Escalante wrote.
Sanico’s bank in Leyte, on the other hand, was able to convince at least 2,000
motorcycle borrowers and deposited at least P102 million to the account of
LMI.
“Out of the 2,000 borrowers, only 100 motorcycles were delivered and
distributed to the borrowers,” Sanico said.
These allegations by Escalante and Sanico were supported by affidavits of
bank employees who executed the scheme.
“The LMI account covered all the funds that would be taken out from the bank.
A withdrawal slip was issued every time de los Angeles asked for funds from
the bank to be deposited to the LCPI account at Banco De Oro Corp Bel-Air
Branch,” Escalante said.
“The said account was also used to clean up simulated loans, motorcycle
loans, and other Legacy related loans and to pay for marketing incentives,”
Escalante wrote.
Investors Loan Program
De los Angeles presided in another meeting in November 2007. It was held at
the 29th floor of the World Center Building in Makati City. It is said to be the
personal office of de los Angeles.
Aside from Escalante and Sanico, the meeting was also attended by Jurado of
Cebu’s Bank of East Asia. Jurado only joined BEA in 2006.
This time, de los Angeles allegedly discussed the “Investment Loan” program.
He tasked Legacy bank presidents and employees to look for “investors” and
give priority to existing depositors of Legacy owned banks as they would be
“credible.”
“The concept of the “investment loans” program is for the bank to grant loans
to individuals with the proceeds of their loans to be invested in Fusion Capital
Corporation, a company owned by Mr. Celso de los Angeles,” explained
Jurado in his affidavit.
Escalante also testified that Fusion Capital Corporation was owned by de los
Angeles.
“In this program, the borrower individual is given one percent
“incentive/commission” by the bank in consideration for his/her loan availment
and investment at Fusion Capital. Mr. Celso de los Angeles also said that
these loans shall be unsecured loans. Mr. de los Angeles encouraged us to
market said product to our existing depositors, friends, and relatives,” Jurado
added.
The office of the Fusion Capital Corporation was in the 30th floor of the same
building. A follow up meeting was called by de los Angeles’s known
consultant, Alex Petralba, explained the mechanics further.
The banks of Escalante and Jurado were able to generate from the
“Investment Loan” P800 million and P500 million respectively. There seemed
to be a typographical error in Sanico’s affidavit. It said his bank was able to
generate “more or less P385,000,00.00.” It is not clear if it meant P385 million
or P38.5 million.
A cashier’s check was issued in the name of the borrower to make it appear
that they received the loan. But the banks’ presidents said the proceeds were
deposited to the account of Fusion Capital Corp. maintained in their banks.
“The cash discrepancy in the bank cannot be noticed because it would be
covered by the alleged withdrawal from the account of FCC in our bank,”
Escalante said.
These allegations were also supported by affidavits of bank employees and
“fake borrowers” who signed loan documents amounting to P2 million in
exchange for P10,000 to P15,000 commission.
Covering their tracks
Jurado also testified about meetings in August and November 2008, which de
los Angeles presided jointly with Petralba.
“During the meeting, Mr. de los Angeles and Mr. Petralba instructed all
presidents of Legacy banks, including myself, to secure real properties from
Legacy Consolidated Assets Holdings Inc. (LCAHI) and Fusion Capital, or for
Fusion Capital to purchase and acquire real properties from prospective
individual owners who are willing to sell their properties at a low price,” Jurado
said in his affidavit.
“According to Mr. Petralba, the purpose of this scheme was to clean up and
erase all traces of the investment loans and simulated loans from the books of
BEA and replace them in BEA’s books with real properties,” Jurado added.
Before the closure of BEA in December 2008, Jurado said Petralba also
instructed him to get rid of the originals and loan documents covering the
investment loans and simulated loans.
“BEA burned some of the documents,” Jurado said.
Legacy Plans, too
Sanico and Escalante also mentioned how Legacy Plans Inc. chief finance
officer Namnama Pasetes and chief executive officer Carolino Hinola would
instruct them to take out funds from the bank—ranging from P100,000 to P1.5
million—to deposit to the account of Legacy Consolidated Plans Inc.
“Ms. Pasetes and Ms. Hinola would explain to me that those were directives of
Mr. Celso de los Angeles, thus, I have no other choice but to follow their
instructions because Mr. de los Angeles is the titular head of our bank,”
Sanico said.
Escalante had the same excuse. “I have no choice but to follow their
instructions. Sometimes, in giving these instructions, Ms. Pasetes and Ms.
Hinola would tell me that these instructions have to be followed as the
Chairman of the Legacy, Mr. de los Angeles, needs the funds,” he said.
Petralba, Pasetes, and Hinola were also tagged by the BSP as respondents in
the syndicated estafa case.

Read more: http://newsinfo.inquirer.net/738522/2-bank-execs-convicted-of-fraud-but-get-off-

lightly#ixzz4t2zxhTNI
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook
Read more: http://newsinfo.inquirer.net/738522/2-bank-execs-convicted-of-fraud-but-get-off-
lightly#ixzz4t2zqzKtb
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

Read more: http://newsinfo.inquirer.net/738522/2-bank-execs-convicted-of-fraud-but-get-off-

lightly#ixzz4t2zgNDu8
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook