Government to review pre-need bailout
By Paolo Romero and Jess Diaz Updated January 27, 2009 12:00 AM
The government announced yesterday it would look into the cause of the pre-need industry’s debacle even as some officials debate the wisdom of a bailout package for these distressed firms.
Deputy presidential spokesperson Lorelei Fajardo said the Department of Finance has received a formal proposal for a “stimulus package” for the crumbling industry.
“I think our economic managers would be willing to look into this (bailout) and discuss this in the Cabinet,” Fajardo told a news briefing at the Palace.
But Socioeconomic Planning Secretary Ralph Recto was cool to the idea of bailing out the pre-need industry.
He said what is more important is for the government to review the regulatory environment in the industry.
“I don’t see why we have to bail out the pre-need industry,” Recto told The STAR in a telephone interview. “In the first place, where will we get the money?”
He said the pre-need firms should instead be made to account for failing to meet their commitments to their clients.
“Why should we waste taxpayers’ money to bail out big pre-need firms? Why should a farmer in Mindanao pay for these?”
He pointed out the Insurance Commission has been doing a good job in regulating the insurance industry and it might be a good idea for the agency to let it take over the regulation of the pre-need industry from the Securities and Exchange Commission.
He said the two industries are almost identical.
Congress also readies probe
At the House of Representatives, minority members led by Bayan Muna Rep. Teodoro Casiño filed a resolution calling for an inquiry.
“There is a need to look at the pre-need industry so we can propose measures to protect hundreds of thousands of plan holders,” Casiño said.
He said the government apparently did not learn a lesson from the collapse of the College Assurance Plan Inc. some four years ago.
He said the closure of several pre-need firms has left plan holders with the proverbial empty bag.
Just three weeks ago, three pre-need companies belonging to the Legacy group closed shop after the Bangko Sentral ng Pilipinas padlocked its 12 rural banks for alleged unsound banking practices.
Legacy plan holders now do not know what to do with their plans. Many of them are filing complaints with the SEC.
Lawmakers have urged the authorities to apply the full force of the law on Legacy owners led by politician businessman Celso de los Angeles.
Casiño said the inquiry would also look into the failure of the BSP and SEC to protect the public.
In Legacy’s case, he said the BSP and SEC knew of its financial problems as early as three years ago.
These regulatory agencies should have acted promptly to protect tens of thousands of depositors and plan holders, he said.
But according to BSP Deputy Gov. Nestor Espenilla, they moved early enough to confront Legacy’s rural banks but the Court of Appeals stopped them.
He said it was only a few months ago that they successfully closed the banks after the Supreme Court reversed the appellate court.
The Philippine Deposit Insurance Corp. (PDIC) has taken over De los Angeles’ rural banks.
PDIC president Jose Nograles told a recent House hearing that the banks have about 130,000 clients in about 50 locations.
He said his agency would soon settle the depositors “legitimate” claims.
He added that claims have amounted to more than P14 billion.
The House committee on banks is also set to investigate the failure of De los Angeles’ banks.
Speaker Prospero Nograles, brother of PDIC’s Nograles, has expressed support for the planned inquiry.
DOJ urged to step in
Sen. Manuel Roxas II, for his part, wants the Department of Justice to step in and check reports that the industry is suffering from a P40-billion trust fund deficiency.
Roxas said the DOJ should also investigate the liability of pre-need companies and their officials, as well as the SEC.
He also suggested that the DOF take over SEC in addressing the pre-need industry problem.
Roxas assailed the Arroyo government for failing to act swiftly and decisively to save tens of billions of pesos of Filipinos’ pre-need plan investments.
“We will see if there is a problem or not. What is important here is that the SEC seems to have been remiss in its duties. I pity those who invested their monies for the education of their children, only to be told later that their monies are gone,” Roxas said.
“The agency that is supposed to handle these issues is the SEC. But the SEC is always left in the dark. These malpractices have long been happening but until now, the SEC has not filed any cases against any of these companies,” he added.
Roxas filed Senate Resolution No. 849 seeking the reopening of the investigation into the pre-need mess that started with the collapse of CAP.
Aside from Legacy Consolidated Plans, Scholarship Plan Philippines and All Asia Plans Corp. ceased operations.
Roxas noted that when the industry first showed signs of distress, the government did not even take any step to strengthen regulation of the pre-need business, at the expense of 800,000 plan holders who lost their hard-earned money.
“I have already warned the government about preparing safety nets for the pre-need industry. We have seen what happened to CAP,” he said.
“It is important that we protect the hard-earned monies of our citizens. It is important that we ensure a good future for our children and make sure they are not affected by this financial slump,” Roxas said.
Industry figures show that as of end-June 2008, the industry’s trust fund deficit had ballooned to P46.83 billion, from a surplus of P6.8 billion as of end-December 2007.
In August 2008, the pre-need industry reportedly informed the SEC of its predicament and warned that if urgent solutions were not implemented, the industry would collapse.
Roxas said those found to have endangered the investments of hundreds of thousands of Filipinos should be charged with grand-scale estafa and prevented from leaving the country.
“If (DOJ Secretary Raul) Gonzalez would do something to save the reputation of DOJ, he should run after those who let this malaise happen, whether they are officials of pre-need companies or of the government itself,” Roxas said.
“Secretary Gonzalez should now act and order an investigation into the reported looming collapse of the pre-need industry. He should not wait for (President Arroyo) to order him to do so,” he said.
He also said Gonzalez should focus on the so-called big fish.
“There should be no sacred cows. He should not focus on the small fries but on influential people, whether from the companies or from government, who were responsible for the current status of the industry,” Roxas said. With Aurea Calica
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