Senators want heads to roll at SEC
The Philippine Star
By Aurea Calica and Jess Diaz Updated February 04, 2009 12:00 AM
Senators want heads to roll at the Securities and Exchange Commission (SEC) for failing to protect plan holders from anomalous business practices of pre-need companies, particularly Legacy Consolidated Plans Inc. owned by Sto. Domingo, Albay Mayor Celso de los Angeles.
“It is sad for me to say this but I think it’s about time the President (Arroyo) and the government start firing some people in order to wake them up to do their job,” Senate President Juan Ponce Enrile told reporters.
It was revealed that De los Angeles had offered to buy back policies from plan holders and dangled a “double-your-money” scheme, which the senators said was pyramiding or an illegal quasi-banking operation not registered with the SEC or the Bangko Sentral ng Pilipinas (BSP).
At Malacañang, Press Secretary Cerge Remonde said “economic managers are going through their plans and proposals that would be pushed by the Cabinet to strengthen the industry.” He also defended SEC head Fe Barin in the wake of calls for her to resign.
“In fairness to SEC chair Barin, she has articulated that they have limitations (in regulating the industry) by law,” he said.
Aside from pre-need plans, De los Angeles owned rural banks, which offered high interest rates on savings deposits.
“They already saw that there was a problem. Why did they not solve the problem?” Enrile demanded.
“They will say they have to balance between regulation and capital formation. We encourage capital formation provided that the people operate within the law, not to injure their beneficiaries. That’s a given: the moment the people will be injured, government must act to solve the problem,” the Senate president said.
“You see that guy Aquino yesterday, he is ignorant about his job,” Enrile said, referring to Jose Aquino, director of the SEC’s Non-Traditional Securities and Instruments Department.
When asked about his background during Monday’s hearing on the pre-need woes, Aquino said he used to be a literature professor before he was appointed to the SEC, much to Enrile’s surprise.
Sen. Manuel Roxas II, chairman of the Senate trade and commerce committee, said Barin must be replaced with a more aggressive official who could deal with unscrupulous and shrewd businessmen.
“We need a determined, single-minded and pro-active (SEC chairperson), not a grandmother,” Roxas said.
Roxas said SEC committed a “white collar crime” because its negligence resulted in the loss of investments of plan holders.
Roxas said SEC officials should be meted tough punishment for failing to do their job.
“They (SEC officials) should resign now. Or being appointees of President Arroyo, they should be sacked,” he said.
Roxas said that the assets of Legacy Consolidated, Inc. should immediately be kept intact and attached to the plan holders’ trust fund.
He noted that De los Angeles was able to sell a P55-million property in Ayala, Alabang before the company filed for corporate dissolution on Dec. 2, 2008.
“The sheriff should already take custody of all these properties so we can ensure that these are not squandered and are used for the needs of plan holders,” he said.
Probe on BSP sought
Enrile also said the government must investigate the allegation of De los Angeles that BSP Deputy Governor Nestor Espenilla, Jr. was a bank owner himself and had different standards in dealing with bankers.
“I do not need to say it. But as a matter of common sense, in the case of Bangko Sentral’s Mr. Espenilla, as I saw on television last night, he was arguing if they were really violating the law. But the question is, do you really own a rural bank?” Enrile said.
“He should answer the question. He should deny ownership of the rural bank if indeed he is not (the owner). That is in conflict with his interests as a bureaucrat supervising the banking system and at the same time owning a bank,” Enrile said.
“The charge against him is that he owns a rural bank and that he is making life difficult for the other guy. For all I know, that gentleman who owns Legacy is not a reliable person, but he must answer the question,” Enrile said.
Roxas said he would not accept De los Angeles’ excuse that his business collapse was due to BSP harassment, extortion, negative media publicity and the global financial crisis.
“He’s just making excuses. That is not acceptable,” he said.
De los Angeles said on Monday that a brother of retired BSP Deputy Governor Alberto Reyes, named Efren, borrowed money from his banks and everytime he would ask him to pay, a special audit team from the BSP would arrive to investigate him.
Sen. Manuel Villar cited the need for a review of regulatory policies to prevent the problem from getting worse.
“The big losers in the collapse of pre-need companies are our countrymen, parents who diligently invest their hard-earned money to secure their future and that of their children. Then they are left holding worthless policies and most of them have to pay for lawyers to run after the policy providers,” Villar said.
“This makes the recommendation to bail out these pre-need firm using taxpayers’ money ridiculous,” he said. “It is a double-whammy for the tax-paying policy holders involved in the debacle,” he pointed out.
Sen. Francis Escudero said he would support any move to amend the Securities Regulation Code to take out from the regulatory reach of the SEC the country’s ailing pre-need industry.
Escudero said the Insurance Commission could be a better regulator as it was more equipped for the task.
From SEC to IC
At the House of Representatives, members of the committee on banks and financial intermediaries agreed “in principle” to transfer the regulation of pre-need companies from the SEC to the Insurance Commission.
The transfer is provided for in the proposed pre-need code drafted by Aurora Rep. Juan Edgardo Angara.
The committee arrived at the decision in the course of its hearing on the problems of the pre-need industry and on the failure of the Legacy group of 12 rural banks and three pre-need companies.
Juan Miguel Vazquez, president of the Philippine Federation of Pre-need Companies, told the committee that federation members “are anticipating a solvency problem because of lower yields on investments, such as those on equities (stocks).”
“We have been discussing this with our regulator (SEC). One option is for the companies to raise capital (to meet their obligations), but not all would be able to raise capital,” he said.
Vazquez’s and Barin’s statements prompted Nueva Vizcaya Rep. Carlos Padilla to urge the SEC to declare a moratorium on the sale of pre-need plans.
Albay Rep. Edcel Lagman said the pre-need industry is clearly in a precarious situation.
“I think people who want to buy pre-need plans should be wary and careful,” he said.
At the House hearing, De los Angeles again blamed the “adverse publicity that we have been subjected to since August last year” for the collapse of his rural banks and pre-need companies.
He said many of his depositors withdrew their money in the wake of such negative publicity.
He blamed the media for his problems in response to questions from Makati Rep. Teodoro Locsin Jr., who, together with Lagman and Davao City Rep. Isidro Ungab, tried to grill De los Angeles extensively on the failure of his banks and pre-need companies.
Rep. Jaime Lopez of Manila admonished his colleagues who wanted to go into the details of Legacy’s alleged pyramiding operations that there would be time for it in future hearings.
Responding to questioning from Lagman, whose district includes De los Angeles’ town, the Legacy founder-owner said he owns 30 companies.
Lagman confronted him with an SEC certification he obtained last Monday showing that there are only 10 companies registered in the mayor’s name.
“None of these companies filed its financial statement with the SEC in violation of SEC rules,” he said.
De los Angeles said he was not aware that his firms did not file financial statements.
“I have to check with my legal and accounting group,” he said.
BSP execs deny wrongdoing
Espenilla, meanwhile, told reporters that BSP had “zero tolerance” for graft and corruption.
“On the one hand the BSP is being called to task for not doing its job and yet on the other hand we are being charged for harassment,” Espenilla said. “But in fact what we have been doing is following the normal course of supervisory practices,” he said.
Espenilla said the examination of the Legacy Group of banks revealed problematic areas as early as 2005 when examination established that at least some of the Legacy banks were severely undercapitalized.
“We also noticed a lot of unsafe and unsound banking practices,” he said. “It is part of our job to instruct them to recapitalize and to stop their unsafe and unsound practices, which we did.”
“Is this what they are calling harassment? That’s protecting public interest,” Espenilla added.
Former central bank deputy governor Alberto Reyes also decried allegations of irregularity raised against him by De los Angeles.
“These are all untrue and there were no such conditions,” Reyes told reporters. “I told my brother to stop his dealings with Mr. De los Angeles despite his explanation that it was purely a professional service work involving studies on merger.” – With Paolo Romero, Des Ferriols
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