Corona’s Dollars!

Dateline: Maui, Hawaii, 3:00 P.M. May 3, 2012

I filed this report 3 hours after touchdown at Kahului Airport, Maui —

Where do the dollars of CJ Renato Corona could have come from?

The issue of whether he has dollar accounts, had already been settled after the PSBank President testified before the IC that the chief magistrate have at least six dollar accounts with that bank the total amount of which he could not reveal because of the secrecy law protecting disclosure of these deposits.  The only unsettled issue is how much was stashed in these accounts.

But  speculations were ripe that those accounts must be hefty.  The Office of the Ombudsman estimated a total of $10 million (P420 million) while  Philstar,  an online news made an estimate of $2.8 million (P118 million).  The refusal of CJ Corona to voluntarily disclose his dollar accounts lends credence to existence of such huge deposits, and their disclosure, can unravel the Chief Justice.

Now as to the question as to where did the embattled jurist get this huge dollar deposits, I can only make a run down of three (3) possible sources: Judicial Welfare Funds;  Mismanaged Banks;  High Profile Litigants.

  1. The Multi-Million Judicial Welfare Funds –

Mr. Marcos created the Judicial and Welfare Funds the source of which are the filing fees a litigant has to pay every time he avails of the court services. Philippines is a litigation-prone society – almost everyone interacts with the court on issues as mundane as your neighbor running over your undernourished cat to vicious fracas resulting to homicide.  It was Marcos’s ‘payoff’ to the judiciary perhaps as a recognition of his being set-free for the murder of a political opponent, Julio Nalundasan in 1935, or  simply as an investment in an institution that served him well during the dark years of his reign.

This fund is under the control of the Chief Justice and the fee schedule had more than trebled for the last decade. What used to be a P60.00 filing fee now runs about P200.00. Some people who have legitimate claim amounting to millions tend to downgrade their claims, unable to pay upfront, the prohibitive filing fee imposed by the Supreme Court.

Presidential candidate Gilberto Teodoro, claimed that this fund is outside the regular COA audit.  The chief justice need not dip his fingers into this fund to make money.  Just for him to direct which government banks this money is to be deposited already offers a rich opportunity for inordinate income.  Here is why:

“Despite the Central Bank’s efforts to curb lending by the bank, however, (Emerito) Ramos continued to pursue a different course.  By the end of 1964, he explains, he began “campaigning” for deposits  to increase the bank’s resources – first offering hefty kickbacks to government officials to encourage them to deposit funds in his bank, and later (after the 1966 prohibition on the deposit of government funds in private banks) by offering similar incentives to private depositors.  “Many depositors, he said, “got more in kickbacks than the value of their deposits.” From this standpoint, the annual kickbacks of 22 per cent to 26 percent plus 6 per cent interest he paid to depositors were cheaper than the 36 per cent penalty rate that the Central Bank charged for reserve deficiencies.” (Booty Capitalism, Paul D. Hutchroft, p. 95).

2.  Judicial Intervention In Banks’ Receivership

Photo courtesy of Yahoo

Bangko Sentral (BS) shut down the operations of Export and Industry Bank Inc, (EIB) Friday, April 27, due to its inability to meet obligations as they become due”. Exportbank took over the troubled Urban Bank in 2001.

The closure of EIB is not expected to adversely affect the Philippine banking system considering its relatively small size. Its total assets are equivalent to only about 0.3% of the total assets of the banking system,” Bangko Sentral reported in a Yahoo press release.

This latest financial setback highlights the pernicious practice that has plagued the banking industry through the decades: “mismanagement” and “selective loan dispersals to borrowers who are related to the banks” and thus these borrower-owners enjoy the largesse of the banks without security to the prejudice of their depositors who have to be bailed out by public money through the PDIC everytime these banks run aground.

The timely intervention of the BS in this latest banking hiccup sends a promising signal that the regulators are serious in the business of protecting the banking industry.  But banks are owned mostly by elite families who consider the state an extension of family enterprise and its institutions accessible to their predatory whims. If they could not control the banking regulators, they hastened to go to court, bribe their way around to protect their glorified “piggy banks.”

The last time BS intervened in the closure of Banco Filipino in 1985,  BS and its officers in the Monetary Board found themselves facing multi-million suits from the bankers.

“This gave meaning to an earlier lament of former Central Bank Governor, Jaime C. Laya that in times where the Bangko Sentral has acted against those who milked their banks, former bank owners have been known to seek personal connections even up to the Supreme Court, to confound the Central Bank discipline.  He said that even martial law didn’t seem to stop the lawsuits against Central Bank personnel. He actually laughed that the CB has never won a case. But the former head of the bank supervision sector, who has herself been sued, doesn’t find it a laughing matter:  “Why only in this country, she exclaimed, “do the regulators go to jail and the bankers go scot-free” ( ibid, p. 8-9).

Banco Filipino (BF) was reopened in 1991 through a Supreme Court order finding the act of BS putting BF under receivership as “arbitrary” only to close it later in 2011 because of the same problem of uncollectible loans made to sister-corporations and owners that were mostly unsecured and other highly illicit practices.  But a court intervention on failing banks means only one thing – payment of huge hush money to these jurists so these banks can transact business despite their unsound bank operations and predatory practices.  The decision to reopen BF in 1991 was a classic study of ironies. Five jurists sustained the position of BF that BS arbitrarily placed the bank under receivership, 5 jurists did not take part in the deliberations while three others dissented.  It was a case where the minority had its way in rescuing BF from the regulators despite its unsound banking practices.

Earlier banks had suffered the same fate as BF.

Here is Hutchroft again:

“In the course of the 1960s, the rapidly evolving banking sector was rocked by two major episodes of bank failure, Republic Bank in 1964 and Overseas Bank of Manila in 1968.  One level, these cases reveal common patterns of failure:  although both banks benefited from the capture of large quantities of government deposits, they were nonetheless gravely weakened by excessive plunder from the related enterprises of the families that owned them. xx”

 Republic Bank, first established as a savings bank in 1953, came under the firm control of Pablo R. Roman in September 1960 after a protracted fight for control with another bank founder, Damaso Perez; each accused the other of booking excessive and “irregular” loans for themselves.   Roman a Bataan businessman with distillery and lumber interests, was soon thereafter granted the first commercial bank license handed out by the incoming Governor Castillo, on his second day in office.  The subsequent fortunes of the bank can seemingly be correlated quite closely to Roman’s relationship to the political machinery. x x x”

 Not surprisingly, then, Republic Bank did not figure among the favored banks in competition for these deposits in 1961 (the first full year in 1962 nearly half of the bank’s deposit came from public funds.  At the end of the year, one-quarter of all government deposits in private commercial banks were held by Roman’s bank.  The bank registered rapid gains in the total assets, and jumped from eleventh-largest private commercial bank at year-end 1961 to third largest at year-end 1963.

 As the bank was registering meteoric growth, however, NP congresspersons began to attack Roman for the “biggest banking frauds in history.” They hinted that the bank was paying kickbacks in return for the huge placements of government deposits, charged that the Central Bank had in 1957 discovered some P2 million ($1 million) in loans granted to fictitious persons” and “dummies” of Roman, and revealed that Roman employed the brother of the superintendent of banks as manager of an important branch of the bank.  These allegations helped precipitate a run on a provincial branch of the bank, an event which was contained by prompt assurances of support by Castillo.  In May, however, a committee headed by LP Congressman Floro Crisologo cleared Roman of any responsibility for irregular loans in 1958 and 1959.

 In addition to his ties to the Palace, Roman enjoyed excellent connections with the Central Bank; first, as noted earlier, he employed the bank superintendent’s brother. Second, the chairman of Republic Bank, Bienvenido Y. Dizon, was a member of the Monetary Board (and immediate past president of Philippine National Bank).  Third, in May 1963 he employed former Governor Cuaderno as consultant to the bank at a reported monthly salary or P12,500 (worth roughly $3,200 in devalued pesos).  Roman’s old rival, Damaso Perez, complained that Castillo was  “tending to cover up” for Roman, and that Cuaderno had failed, as a Central Bank Governor, to enforce a 1959 Monetary Board resolution calling for the replacement of Republic Banks, officers. Castillo confirmed past irregularities at Republic Savings Bank, but blamed the administration for condoning them. 

On January 16, 1964, however, the Central Bank finally began a serious investigation of abuses within the bank (in the wake of which the bank suffered another mild run).  Four days later, Castillo wrote to Roman to list the bank’s specific violations of the law, and Roman meanwhile requested emergency assistance.  Apparently in exchange for Central Bank emergency loans of P13 million, Roman resigned as president of the bank and assigned voting rights on his stocks (80 per cent of total shareholdings) to a board of trustees that included Cuaderno.  In addition, the Monetary Board rescinded the bank’s authority to accept additional government deposits. 

Nacionalista congresspersons, however, were not appeased, and called for Castillo’s ouster for the “CB-RB mess.”  Out of P160 million loans granted without sufficient collateral, they charged P78 million were granted to members of the bank’s board of directors.  Although lending operations were supposed to have been frozen, a P500,000 loan to Mrs. Roman had just been renewed.  Government deposits of P100 million in the bank, he said, exceeded the bank’s capitalization ten times.  In February – seemingly in response to these charges – the Macapagal administration reported that the reserves of Republic Bank were deficient and that the bank was accepting overvalued collateral in exchange for huge loans to its directors and officers and their relatives.  The Finance Secretary said Central Bank ceilings on government deposits were being violated, and Central Bank was guilty of violating its own rules on government deposits. 

The Crisologo committee, which had earlier defended Roman and his bank, now urged criminal prosecution of top Central Bank and Republic Bank officials, and called on the Central Bank to extend emergency loans to rehabilitate the bank and secure the government deposits placed there.  Crisologo noted Cuaderno’s large earnings and charged that most of the bank’s irregularities had occurred under his watch.  Alfonso Calalang, former deputy governor of the Central Bank, complained that the Central Bank was too lax in its supervision of the private banks.  NP Senator Jose W. Diokno called for court action against Republic Bank officials, and suggested that the bank was “being used as a funnel for government deposits to be converted into loans to person’s influential with the administration.”  Castillo defended the Central Bank, but responded to criticism in March 1964 by dissolving the earlier board of trustees (of which Cuaderno was a member) and asking PNB to take over control of the Bank.

 As wheels of Philippine politics continued to turn, however, Pablo Roman rehabilitated his fortunes and climbed from the outs back up to a firmly inside position.  In 1965 – as a candidate for Congress who had just lost his bank – he authored a collection of speeches that introduced him as a “leader who is beyond reproach, a man whose best asset is goodwill and whose humility in a materialistic and unreasonable world seems totally strange.”  The story of Republic’s closing is a recast in terms of a valiant struggle for Philippine-controlled development: “Unique among the citizens of this country are those who can see no threats from foreign banking community, but are instead concentrating on the affairs of their countrymen with the intent of harassing them.  This colonial attitude must be smashed.  I (Roman), regard Republic Bank, as the unfailing ally of the Filipino businessman. “

 By 1967, with Roman in Congress (and chairman of the House Committee on Banks, Currency and Corporations!), a judge ordered that PNB could no longer continue to manage Republic Bank.  As the Manila Times reported, “Roman was congratulated by his colleagues in the House as he distributed copies of the court order.”  The Central Bank tried to convince the courts that PNB should continue to manage the bank, but to no avail; Roman resumed the presidency of the bank in March 1968.  In 1967, the Supreme Court threw out Damaso Perez’s petition to have Roman prosecuted, and in 1970 an appeals court faulted the Central Bank both for its failure to investigate Republic Bank in a “discreet manner” in 1964, and for its subsequent adoption of “repressive measures which could only end in the liquidation” of the bank.  In the view of the court, the Central Bank had a clear responsibility to rehabilitate Republic Bank (no matter, it seems, what its past sins may have been).  At the same time that it’s halting efforts at bank supervisions were being bashed by the judiciary, the Central Bank could find little solace from the executive branch.  In various ceremonies through the late 1960s and early 1970s, President Marcos called Republic Bank “one of the leading commercial banks in the country today,” and praised Roman as ‘a highly respected member of the community.’

 The story of Emerito Ramos’s Overseas Bank of Manila (OBM) offers a striking contrast to that of Roman’s Republic Bank.  Ramos – who presided over a family conglomerate with interests in such diverse ventures as urban real estate, mining, lumber, fishing, agribusiness, filmmaking, and trading with Japan – established his bank as a closed family corporation in January 1964 using money borrowed from a bank partially owned by a friend.  His plans for further expansion had been constrained by a shortage of credit, he explained.  “I thought that with a bank, my liquidity needs would be eased.”  Unfortunately for Ramos, however, he found that even with bank he was unable to meet the demand for loans generated both by his own companies and by others who were “itching to start their own businesses.” By the second year of the bank’s operations, the total of all loans was more than twice that of all deposits.  In 1965, the Central Bank suspended OBM’s lending operations four times for chronic reserve deficiency, and began to charge high rates of interest on its chronic debts to the Central Bank’s clearing house. 

 Despite the Central Bank’s efforts to curb lending by the bank, however, Ramos continued to pursue a different course.  By the end of 1964, he explains, he began “campaigning” for deposits  to increase the bank’s resources – first offering hefty kickbacks to government officials to encourage them to deposit funds in his bank, and later (after the 1966 prohibition on the deposit of government funds in private banks) by offering similar incentives to private depositors.  “Many depositors, he said, “got more in kickbacks than the value of their deposits.” From this standpoint, the annual kickbacks of 22 per cent to 26 percent plus 6 per cent interest he paid to depositors were cheaper than the 36 per cent penalty rate that the Central Bank charged for reserve deficiencies.” (ibid p. 93-95).

3.  Another Source of Booty Money – High Profile Litigants

The BIR had been running after Lucio Tan for decades for tax evasion but this Chinese Taipan has never lost a major case in the Supreme Court.  One tax-evasion case he won against the government generates tremendous media outrage that the court has to come up with a pronouncement that it did not  receive any bribe money from Mr. Tan for ruling in his favor.  The PALEA case also highlights how a moneyed litigant always has the law on his side.

A crony of Marcos, Danding Cojuangco, keeps his millions filched from the poor coco-farmers nationwide because his lawyer, Estelito Mendoza, (also the lawyer of Lucio Tan) can tap a rich reservoir of goodwill from the Supreme Court.   No one would believe that this goodwill, built during the Marcos years was only for a song – for it is believed that none of these jurists are endowed with artistic flair such that they can appreciate a falsetto, a base or a baritone  — and  Atty. Mendoza was never known as a captivating tenor either.

Every lawyer in the Philippines understands how lucrative a jurist position is and this explains why a single vacancy in the court lures a beeline of anxious applicants from Manila to as far as Batanes and Sulu.

That a judicial post is a thankless job and the incumbent chief justice is the epitome of integrity and patriotism, is an aberrant perception!

12 thoughts on “Corona’s Dollars!

  1. Fascinating. As a former banking executive, I am astounded at the games people play here, with other people’s money. Loosey goosey is a vast understatement. Bank regulators must be friends of the popular families. Is there such a thing here as a “regulatory examination”? In the US, there are overlapping authorities with the FDIC (which has investigative and audit powers), state and national examiners (depending on if a bank is chartered as a state or national institution), and the Fed for larger banks. You blink sideways, you get dinged by a regulator and depositors flee. Your financials tip the wrong way, and the bank is grabbed by regulators and sold out from under you. It is a crisp, clean process because they’ve had to do so many during tough economic cycles.

    Clearly, Philippine bank secrecy laws are damaging to Philippine safety and security when law enforcement is banned from following the dirty money trail. So one is inclined to ask “what are laws hereabouts protecting?”

    The answer, of course, is “the crooks”.

    Enjoy Maui. I’ve been to Oahu and Hawaii, which are great, but I understand Maui is stupendous.

    You got a thing for islands?

    • We are still savoring the island joeam — but our place in RP, (Atulayan Island, CamSur, aside from Caramoan have more beauty and allure than than the beaches of Maui)…… Try going to Caramoan, you will know what I am talking about…

      • ahh, so noted. My wife has badgering me to do some traveling, so I’ll put that on the idea list.

  2. This was also a complaint from foreign investors. They told me that there is no justice here in PI. Ika nga “money talks”!

  3. So Corona did not waste time in accepting kick-back here & there right after GMA put him on the “Midnight Appointment” & get super rich. I can’t believe banks can do this to small people it is so disgusting….now we have problem! Corona won’t reveal his saln (dollar account) it said and I read it too from “Shadow of Doubt” that justices do not have to file saln because they are treated like God or supreme being. But Corona is brutish! marked by animal traits and by lack of man’s dignity or refinement…hopefully dishonest justices or under investigation is no exception, they must file their saln and reveal to people for the sake of transparency. Too bad for Corona spend too much time finding all loopholes to slither out and through of the corruptions he did. But no matter what he is a destroy man and beyond repair. I wonder if he can sleep at night anymore, only for money and the earthly desire of being look up by the common people as above and belong to the pack of wolves (elites) so material! so temporal.

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