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Doggone Lawyers Fighting Over the Wrong Bone

(Article published in the March 11, 2002 issue of TODAY, Business Section)

Sometime in 1993, Citibank, N.A. filed criminal cases against two of its own senior officers, the treasurer of the bank’s Global Consumer Group and an assistant vice president, upon discovering that the duo were conducting covertly (at least, not until then known to top management) some sort of money market operations within the Citibank itself.

The modus operandi was simple: Citibank’s clients would be told that certain companies were willing to borrow money from them at interest rates which were higher than what Citibank was willing to give for the same tenor. Thus lured by the promise of higher returns on their money, the clients would be asked to transfer money from their Citibank accounts to the accounts, also in Citibank, of two corporations in which the two enterprising Citibankers had financial interest. The two companies would issue their own checks, against their Citibank accounts, to the borrowers selected by the clients.

Upon maturity of the placements, the process was reversed. The borrowers would issue their checks in favor of the two companies, which in turn issued two sets of their own checks, one set in favor of the bank clients and another in favor of the two Citibankers. To be a lucrative endeavor, the payment by the borrower to the two companies, of course, had to be bigger than what the two companies paid to the bank clients. The difference, called the margin, was the money made by the two Citibankers.


Citibank did not appreciate this kind of competition and so, on September 21, 1993, filed, through one of its vice-presidents, the criminal complaints against the two senior officers, for violating the conflict of interest provisions in the Corporation Code, and, later on, also for estafa. In order to prove Citibank’s case, the complaining vice president revealed and annexed to his complaint-affidavit documents pertaining to the dollar deposits of three of its clients.

This disclosure was admittedly authorized by vice president who was the business manager of the Global Consumer Banking Group of Citibank, but not by the bank’s Global Consumer Banking country business manager and country corporate officer, both of whom were two ex pats. In Citibank, as you know, matters of this grave importance, do not need to go all the way to the top.

The owners of the deposit accounts, however, did not authorize the disclosure of their deposit relationship with Citibank. But the Citibank, in contrast to its reluctance to reveal deposit information during the impeachment trial of President Joseph Ejercito Estrada, readily made the disclosure of their accounts in order to substantiate its charges against its own senior officers. That case had a life of its own, but that is not today’s story.

The Citibank clients, whose accounts were disclosed, were incensed by the unauthorized disclosure and filed criminal complaints against Citibank and its officers for violation of Republic Act 1405, as amended, before then the provincial fiscal’s office of Pasig. The case, just on the issue of whether a criminal complaint should be filed against Citibank and its officials, meandered for nearly ten years through all the pathways of the criminal justice system, and is in effect very instructive material for a law student’s case book on criminal procedure.

The investigating fiscal recommended the dismissal of the complaint; the recommendation was overruled by the provincial fiscal. The provincial fiscal’s resolution was appealed to the secretary of justice who overruled the provincial fiscal. From the Department of Justice, the case was brought to the Supreme Court, which referred the matter to the Court of Appeals, whose decision is what was reviewed by the Supreme Court in this case of Intengan v. Department of Justice, G.R. No. 128996, promulgated February 15, 2002.

In each stage of the ladder, the issue the lawyers fought over was whether Citibank, N.A. and its officers violated R.A. 1405, as amended, on the secrecy of bank deposits. The depositors said "yes"; Citibank said "no".

The Supreme Court said, you guys are debating over the wrong law. Justice Sabino De Leon, Jr., ponente, wryly commented: "Actually, this case should have been studied more carefully by all concerned. The finest legal minds in the country – from the parties’ respective counsel - the provincial prosecutor, the Department of Justice, the solicitor general, and the Court of Appeals—all appear to have overlooked a single fact which dictates the outcome of the controversy".

And what fact was that? That the accounts of the complaining depositors were not regular books accounts, but instead dollar accounts opened and maintained under the authority of R.A. 6426, known as the Foreign Currency Deposit Act of the Philippines". The applicable law was therefore not R.A. 1405, as amended.

There was only instance, under R.A. 6426, when disclosure was allowed of an FCDU deposit account; and that is, a disclosure with the written permission of the depositor. (This was before to the Anti-Money Laundering Law, which creates another statutory exception). Since the disclosure made by Citibank of the dollar deposit accounts was admittedly made without the written permission of the depositors, prosecution should have been made under that law. It is a law that punishes a malum prohibitum, that specie of criminal act that is considered an offense independently of the criminal intent of the perpetrator. Thus, the fact that Citibank had no criminal intent and was constrained to disclose the dollar deposits only because it was necessary to prove its case was not a valid defense.

So, could the depositors now go back to square one and begin the prosecution under the foreign currency deposit act? Unfortunately for the depositors and fortunately for Citibank, time, like a termite colony, had already eaten into the foundations of the case. A violation of R.A. 6426, under the principles laid out in R.A. 3326, the law on prescription of crimes, prescribes after eight years. Since the disclosure was discovered by the Citibank depositors in 1993 (and for one depositor in 1994, January) and it is now past January 2002, the depositors had lost their right to prosecute.

Noted the good Justice: "Even during the pendency of this appeal, nothing prevented the petitioners (the complaining depositors) from filing a complaint charging the correct offense against private respondents. This was not done, as everyone involved was content to submit the case on the basis of an alleged violation of R.A. 1405 (Bank Secrecy Law), however, incorrectly invoked."

This is sometimes the result when "the finest legal minds in the country" get very engrossed in a legal issue. When winning a legal point becomes the overriding passion, instead of doing justice to every man.