P2.6 billion fictitious LOANS Mayor Radaza readies defense; PDIC hits rural bank’s fake loans

In this Jan. 5, 2009 photo, a Monday, depositors of the Rural Bank of Subangdaku in Mandaue City face locked doors and a sign announcing a “bank holiday.”

It was the start of a new year, the first Monday of 2009, when the Rural Bank of Subangdaku suddenly closed its doors and declared a “bank holiday.”

Depositors, alarmed by the locked doors, found themselves unable to withdraw their accounts in Mandaue City and six other branches in Lapu-Lapu city, Talisay City, General Santos in South Cotabato, Las Pinas in Metro Manila, Digos in Davao and Dumaguete city.

Nobody could explain at the time why the Cebu-based rural bank was declared “insolvent” and taken over by the Philippine Deposit Insurance Corp.
Four years later, the reason became clearer when the PDIC filed a criminal case on Jan. 13 against the bank’s former president, Lapu-Lapu City Mayor Paz Radaza, and the former loans manager “for the creation of fictitious loans and for conducting business in an unsafe and unsound manner.”

In its complaint, PDIC alleged that Radaza, president and member of the bank’s credit committee, and Julius Eullaran the bankwide loans manager “conspired and caused the creation of 6,051 fictitious loans amounting to almost P2.6 billion from 2004 to 2008.”

The suspected accounts accounted for about 97 percent of all loans supposedly released by the rural bank head office during the four-year period.

Radaza told Cebu Daily News yesterday she was reserving her comments until she consults her lawyers on the case.

She said she would let her lawyer Mario Bautista in Manila speak on her behalf and said she is retaining the services of a Cebu-based lawyer “para duna la’y motubag bahin ana nga kaso kay it’s too technical man gud.” Radaza said. (Just to have somebody answer regarding the case because it is too technical).

The PDIC released a statement announcing the filing of the case with the Department of Justice.
The complaint said “The respondents orchestrated the creation of official receipts and made it appear that payments were being made to the bank, when in fact, no payment was being received. These supposed payments were used to provide the purported source of the fictitious loan proceeds.”

Radaza, w ho is on her second term as Lapu-Lapu mayor, told CDN she has not received a copy of the complaint and just learned about the filing of the case in the local papers.
“Anyway that’s just preliminary. We are confident we can get over this case,” Radaza said.

She said she would continue her daily routine as city mayor.

“No this won’t affect my responsibility as city mayor.” she said.
The mayor said she was busy coordinating with the city disaster office and local officials to preapre for tropical storm Basyang.

In 2004, Radaza’s husband Arturo was mayor of Lapu-Lapu city and she was a barangay captain.

Getting bankrupt

Paz’s arch political critic, businessma Efrain Pelaez Jr. said the PDIC case should be taken seriously.“If they can make fake loans then they can make clones and fake payrolls,” said Pelaez, who ran and lost to Radaza in the 2007 and 2010 elections.

He has been criticizing City Hall for alleged ghost employees and project irregularities.

“She needs to swallow this bitter pill now (with the PDIC criminal case)…if she can make a bank go bankrupt, why not the City of Lapu-Lapu?”
Pelaez said his group will be closely watching developments of the DOJ case and encouraged depositors to file their cases.

“This is what we have been waiting for. This is the can of worms we have been waiting to be opened,” Pelaez said.
In a Jan. 29 press release the PDIC said that based on the sworn affidavit of the banks former loan officer, Radaza and Eullaran ordered their subordinates to create fictitious loans based on the list provided by the former loans manager.

In the course of collecting payment from borrowers, PDIC discovered nonexistent addresses and borrowers.

An investigation conducted by the expert forensic accounting team revealed that 5,470 of the 6,051 fictitious loans did not contain the required credit information. 581 loans also did not have any supporting documents.

The Monetary Board placed RBSI under PDIC receivership on January 8, 2009.
The corporation said they will continue to pursue legal action against bank officials and personnel who are involved in “unsafe and unsound banking practices.”

“These activities pose grave threats to the stability of the country’s baking system. The pursuit for justice against erring bank owners, officers and employees is an important undertaking of PDIC to protect the Deposit Insurance Fund,” PDIC said.