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A Pasay
City Regional Trial Court recently ordered the United
Coconut Planters Bank (UCPB) to pay P1.07 billion in
damages to a building contractor whom it had cheated of
millions in a loan transaction.
The
court found, after a lengthy and thorough judicial
process, that UCPB had cheated a big corporate
borrower—building contractor E. Guanzon Inc. (EGI)—of
over P440 million in connection with loans the firm had
taken out to finance its business expansion.
In his
decision, Judge Jesus Mupas noted that the bank
foreclosed on EGI’s mortgaged properties worth some P905
million, but claimed these were worth only P723.5
million. The bank made EGI believe it still owed UCPB
money, and forthwith proceeded to demand additional
payments (under a scheme called dacion en pago, or
payment in kind) in the form of other EGI-owned assets
worth P400 million. In other words, the mortgaged
properties which were foreclosed were more than enough
payment, but UCPB extracted hundreds of millions more.
All told, the excess payments EGI was made to pay
amounted to P400 million.
Based on
the finding of the court that UCPB had “grossly violated
its fiduciary duty” to EGI, Judge Mupas awarded P1.07
billion in damages to EGI and declared the original
debts of EGI (of P720 million) fully paid.
Anywhere
in the world, a bank that strays from its fiduciary duty
to uphold and protect the interests of its clients
somehow loses its basis for remaining in the business.
The banking business, after all, is all about public
trust. Banks have flourished or collapsed on the basis
of how well—or poorly—they have demonstrated their
trustworthiness. Any bank that loses this trust loses
everything. This is precisely why some banks have the
key word “trust” in their company logos. Trust is the
end-all and be-all of banks.
Incidentally, those named by EGI in its damage suit were
Lorenzo V. Tan, former president; Geronimo Kilayco,
chairman; Virgilio Jacinto, board secretary; Enrique
Gana, first vice president; and Jaime Jacinto, assistant
VP.
The
funny thing about UCPB is that nobody’s really sure
whether it is a private or semiprivate bank, even at
this stage of its history. All we know is that it was
once one of the biggest, most robust banks in the
country—way back when Marcos still held sway and the
government’s support for the coconut industry was at its
peak. It was intended to become eventually a private
bank of the coconut industry, although at its inception
it received generous doses of government funds under the
management of certain cronies. It flourished after
Marcos imposed the now-infamous coconut levy, being the
official depository of such funds, which amounted to
several billions.
After
martial law, however, like the
Roman empire with its glory days over, it began to decline. The bank,
under sequestration and the control of various
administrations from the time of Cory Aquino, became a
political plum. It’s useless to name the ones who have
been running the bank to the ground since then. Suffice
it to say the bank’s downward trajectory was steep and
continuous until, lately, the Philippine Deposit
Insurance Corp. had to infuse some P20 billion to prop
it up.
Having
been under several sets of caretakers that had no stake
or even a single peso’s equity in the bank, the
corruption of the bank’s corporate culture became a
certainty.
And, as
if the EGI case were not shocking enough, we hear yet of
another breach of ethics allegedly committed by one of
the bank’s subsidiaries. The case has all the hallmarks
of a developing damage suit that could cripple the UCPB
subsidiary. The scandal involves one of the bank’s big
clients and directly concerns Coco Life (United Coconut
Planters Life Assurance Corp.).
It seems
that in the insurance industry, it is illegal for any
insurance company to pirate the key executives of other
insurance companies under certain circumstances. The
Insurance Commission (IC) has issued the guidelines
concerning the hiring of such executives. I think the
guidelines have to do with the fierce competition for
clients among the companies.
I have a
copy of a terse and formal letter from the law firm
Santiago, Arevalo, Asuncion De la Cruz & Associates on
behalf of its client Fortune Life Insurance Co. giving
an ultimatum to Alfredo C. Tumacder, president of Coco
Life, to satisfy Fortune Life in connection with the
pirating of one of Fortune Life’s top executives
assigned in the Visayas and Mindanao regions.
Fortune
Life claims the recent hiring of Coco Life’s new vice
president (in the Visayas and Mindanao) was in violation
of IC Circular 6-2002 and PLIA JD Circular 2002-23
(whatever that is) “on unfair and predatory recruitments
of employees with rank equivalent of department head and
agency heads. . . .”
Fortune
Life, it seems, has reason to squawk as noisily as it
can because it is one of UCPB’s clients. As a bank
client, Coco Life had access to all the inner trade
secrets that would otherwise not be available to other
competitors of Fortune Life.
The law
firm’s ultimatum does not specify how Tumacder can
“rectify” the breach, but it obviously anticipates that
this was next to impossible, the whole thing being a
fait accompli now. Thus, in its letter, Fortune Life
underscores in bold print the phrase, “without prejudice
to other remedial actions available to the aggrieved
company under existing laws and regulations.”
Fortune
Life gave Tumacder 10 days to “rectify” what he did,
which the latter described as a “betrayal of trust.”
Fortune Life furnished copies of this demand letter to
the Insurance Commission and the Philippine Life
Assurance Association.
The EGI
case showed that UCPB officers were, at the very least,
liable under Section 16 of the Bangko Sentral’s handbook
on corporate governance concerning the “fit and proper
rule.” Under that section, “the Monetary Board may
disqualify, suspend or remove any bank director or
officer who commits or omits an act which renders him
unfit for the position.”
This
“fit and proper” rule, however, may not necessarily
apply to the officers of a bank’s subsidiary. But what
has the Insurance Commission have to say about Tumacder,
assuming Fortune Life has every reason to be aggrieved?
You can
expect to see a lot of legal fireworks on this issue in
the next few weeks. I have it on the best authority.
Omerta_bdc@yahoo.com |
