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Apostolic Exposure of Perfecto Conflicto

(Article published in the May 25,2011 issue of Manila Standard Today) 

Tuesday last week, 17 May, during the hearing of the House of Representatives’ Committee on Banks and Financial Intermediaries, the public was treated to a splendid exhibition of effective interrogation.  The star of the show was the Committee Chairman, Sergio F. Apostol.  In just a short sequence of verbal thrusts and slashes, he exposed Atty. Perfecto Yasay as seriously conflicted. 

Committee Chairman, Hon. Sergio F. Apostol, from the 2nd District of Leyte, a true blue Atenean whose native speech remained untarnished by the typical Arreneo accent, began by raising what seemed to be a point out of the blue.  Addressing his query to Ms. Cristina Orbeta, PDIC’s vice president and current officer-in-charge, the Jesuit product, who was graduated at the Ateneo Law School in those years when it was in thick of the legal world on Padre Faura Street, Manila, quietly asked: “What happened to the trust fund of the employees?”

On the surface, the concern was rhetorical.  After all, funds held in trust by a bank, for its trust clients, are not properties of the bank.  Hence, when a bank fails, as Banco Filipino did the second time around though not any livelier than the first, the funds held in trust are not prejudiced thereby, at least theoretically.  Trust assets are not the bank’s assets; they are instead assets of the beneficiaries (who may or may not be the trustors).  Hence, the retirement trust funds of the employees of Banco Filipino ought not to have been adversely affected by the failure of Banco Filipino itself.


Correctly, therefore, PDIC’s Ms. Orbeta replied, “…the trust funds of the employees, the documents turned over to the PDIC did not include the trust funds of the employees because the trust funds of the employees of Banco Filipino is a separate corporate entity.  It is distinct from the bank, Your Honor, we did not take over.”  Correctly said, in precise banking and trust law.

But Chairman Apostol, with the zeal of a true disciple on a mission sent, was not after the surface only.  He wanted, as his law professors had long ago taught him to do, to go deeper.  So, he followed up: “Not deposited with the bank?” 

That sequence of interrogation bore the mark of a trial lawyer seasoned by countless hours of cross-examination. Start with an easy general question, to put the witness (with an “i”, not an “e”) at ease; then make a quick thrust with the sharp point of a rapier.  And the answer of PDIC’s Ms. Orbeta was very direct.  “Based on the document and based on representations,” she said, “the amounts were deposited with the bank as a deposit—it is an ordinary deposit.” 

And as regards the likelihood of the recovery of the Banco Filipino employees’ retirement trust funds that were deposited with Banco Filipino, she minced no words: “The amount of the entitlement of any deposit irrespective of whether it is in excess of P500,000 or irrespective of whoever is the owner is just P500,000 by law, Your Honor.”   

As correctly said by PDIC Ms. Orbeta, except for the P500,000 insured coverage, whatever amount of the Banco Filipino employees’ retirement fund had been deposited with Banco Filipino was now money down the drain. 

The victims of such investment decision of the Board of Trustees to put the employees’ retirement funds mainly in Banco Filipino, are, naturally, Banco Filipino’s own employees.  Hence, it was imperative for Committee Chairman Apostol to draw the truth from one among them.  Turning to Banco Filipino’s top employee, President Teodoro Arcenas, he asked, “Mr. Arcenas, is that true that the trust fund was deposited as an ordinary fund?”  And Banco Filipino’s president had to admit: “The funds, I understand, are deposited in the bank as ordinary deposits.”  Touché.

But then, the statement of PDIC’s Orbeta and the confirmation by Banco Filipino’s president Arcenas had put the bank’s management in a bad light. So the fair and even-handed presiding officer that he was, Hon. Apostol called on the alleged co-chairman of the bank, to give him a chance at some damage control.  Hon. Apostol asked, “Well, let me ask Atty. Yasay about the trust funds of the employees, it is deposited as trust funds with the bank or as an ordinary deposits?”

Atty. Yasay who appeared to be the chair of BF’s Retirement Board responded: “The trust fund, the actual cash, is deposited with the banks as an ordinary deposit in the name of the retirement fund. But these are held in trust by a Board — the Retirement Board — and the Retirement Board placed these deposits in various banks, and among other banks, the main bank is Banco Filipino.”

Miracles do happen, even in Congress.  Even Atty. Yasay had to tell the truth: Banco Filipino was the “main depository bank of the cash funds” of the Banco Filipino employees’ retirement trust fund. And the retirement fund’s cash was with the bank as an ordinary deposit.

At that point, the objective of Hon. Apostol’s questions became apparent.  He had sensed something wrong and he uncovered it. 

Atty. Perfecto Yasay was the chair of the Banco Filipino employees Retirement Board.  Atty. Yasay, as chair of the Retirement Board had permitted, if not approved, the employees’ retirement funds to be deposited with the bank of which he, Atty. Yasay, was also allegedly co-chair.  But then the deposits are no more.   The bank had used them, to fund the legal fees payable to Atty. Yasay and his bunch of lawyers.   According to my classmate Ignacio Bunye, in the year 2010 alone, Atty. Yasay and his bunch of lawyers got over P100 million from Banco Filipino in legal fees. 

       Now we know, thanks to Hon. Apostol’s interrogation skills where most of the Banco Filipino retirement funds had gone.  In fact, really they are gone.