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Fragile Friendship Based on Business

(Article published in the Nov 30,2011 issue of Manila Standard Today) 

Reynaldo G. David must have been a very sad man last 14 November 2011.  On national television, David unabashedly sang peans about his friend, Roberto V. Ongpin, in the course of his testimony at the joint hearings of the Senate Blue Ribbon Committee and Committee on Banks and Other Financial Institutions.

David stood by Ongpin, as a good friend does, through thick and thin, through the thick of criticism against the transactions that the Development Bank of the Philippines (DBP) entered into with the Delta Ventures Resources, Inc. (DVRI) in 2009 as the year  drew to a close, and through the thin of attempts of the previous DBP management to set up some form of palatable defense for its questioned actions.

Surely, former DBP President David deserved, or so he must have thought, a modicum of reciprocation from his friend Ongpin.   But, unfortunately for David, Ongin was a friend of a different kind.  Ongpin quickly deserted David at the first opportunity that he got.

  That opportunity came when the questions from the senators shifted for a moment from DVP’s dealings with Philex shares to DBP’s dubious transactions with a hardly known company named Global Air Services, Limited (GAS).  Ongpin very promptly,  categorically and repeatedly distanced himself from the mess and dropped his friend David like a hot potato, leaving poor  David to fend for himself and defend, all by his lonesome self, another one of the previous management of DBP’s the sordid affairs.


Ironically, in both the DVRI and the GAS episodes, Ongpin, appeared, based on what so far have been unearthed during the Senate committee hearings, to have reaped, directly or indirectly,  benefits, in the millions.  In DVRI, Ongpin earned a hefty spread in just a few days selling what he had bought in less than a month, clearly executing what stockmarket residents call the “short swing.”  In GAS, the Ashmore Group, which Ongpin had earlier claimed he represented in the Philippines, were able to unload its “economic interest”  leaving the bag and its dubious contents at the doors of DBP and the Land Bank.

His friend David, on the other hand, appeared to have harvested, at least from what can be gleaned from the records that have been produced to date as well as from his body language during the hearing, nothing more than misery.  Misery, and all for being loyal to Ongpin.

The case filed by the current DBP chairman, Jose A. Nunez, Jr. and President/Vice-Chairman Francisco F. Del Rosario, Jr. with the Office of the Ombudsman, early August this year recite a litany of accusations against DVRI, its officials, and officials of DBP headed by David.  Essentially, the complaint alleged that the transactions (involving loans totaling P660 million and sale of about 50 million shares of stock of Philex Mining) did not pass the usual standards and processes required of loans with ordinary borrowers of DBP.

The transactions were said to have been conducted with undue haste, in contrast to the usual time it took the DBP to approve or deny a loan from Juan de la Cruz.  They involved the strange scenario of DVRI, which was in the first place seemingly undercapitalized, fronting as the borrower and, its sister company, Goldenmedia Corporation, ending up as the owner of the shares, the purchase of which was the purpose of the loan was granted to the borrower. And the loan was apparently under collateralized  most of  the time (“most of the time” only because for a brief period of a few days, the loan had no security at all).

Despite all these defects, DBP, went ahead with the questioned transactions because it was common knowledge, to all those who had a hand in processing and approving the transactions, that behind them all was David’s friend, Roberto V. Ongpin. Ongpin was, in David’s words and Ongpin’s own admission, the “beneficial owner” of DVRI.

David declared “the premise for the grant were two things, one is the pledge of the shares and second was the fact that to our minds, if there is a beneficial owner and we believe in the credit integrity of that beneficial owner, that there is moral obligation to support it.”  Later, David was to add, “rightly or wrongly, it enhances the credit” and Ongpin, in the mind of David and presumably also of his board, “was not expected to turn his back on the credit extension.” 

In return for this expression of steadfast loyalty by his friend David, Ongpin quickly junked David. When the discussion briefly moved to the transaction of DBP involving Global Air Services Limited (GAS), Ongpin, in David’s face, flatly said, “I had absolutely nothing to do with the GAS loan”. 

By so doing, Ongpin left David all by himself to rationalize why Php 90 million were lent to a company that had a recorded paid-up capital of only US$2.00, to that same company that had reported a net loss of US$403,509.00 for the year 2005 (more recent financial statements GAS did not submit) and that had assets of only US$5,364.00 compared to a liability of US$408,871.00.

The temperature of the hearing room must have been, for David, very cold indeed.  And not all the pork and perks that David enjoyed in being in the board of directors of three of five corporations of Ongpin could have enough to warm it. 

In fairness to Ongpin, his desertion of David was not without precedent.  David should have seen his abandonment by Ongpin coming had he (David) read carefully the counter-affidavit filed by Ongpin with the Ombudsman.  Ongpin, dodging the accusation that he had received unwarranted benefits from DBP,  staunchly maintained: “The fact is that I never asked for any special treatment, exemption, preference or advantage from anyone in connection with the Loans and the Transactions.”

Not content with just avoiding the blow, he sought to deflect it David’s way.  He fumed: “DBP alleges that in processing the Loans, the bank extended certain exemptions from the loan requirements provided in certain internal rules of the bank.  I did not ask for those exemptions and I had no hand whatsoever in the grant of those exemptions…they are best addressed to the people in the bank who processed, recommended and approved the exemptions….”

In other words, as far as Ongpin is concerned, let David and company justify why he was accorded special treatment not extended to you and me. Indeed, the ties that bind friends in business have become rather fragile of late.  Certainly they are no longer as strong as they used to be, at least not since Shylock and Portia stole the scene from Antonio and Basanio.