First of three parts
SEN. Sherwin Gatchalian likes to project the image of a technocratic reformer, but the record shows that he and his family were anything but morally fastidious when, in 2009, they sold their troubled bank to the Local Waterworks and Utility Administration (LWUA), a government agency. The bank, however, was already clearly in dire financial straits, so that LWUA’s purchase eventually cost it in 2009 a total of P780 million — P1.4 billion in today’s money.
The ambitious senator and his controversial father
LWUA first paid Sherwin’s family (through their companies) P80 million (P130 million today) in 2009 to buy 60 percent of its Laguna-based Express Savings Bank Inc. (ESBI) that was losing heavily. SEC and Ombudsman records show that from 2005 to 2009 the Gatchalians’ bank bled roughly P28 million in losses and ran capital deficits. By March 2009, its realized value was already a negative P12.9 million. After purchasing the shares, LWUA then deposited and infused another P700 million (P1.1 billion) into the same institution — P300 million as a deposit and P400 million as an “advance payment” for an increase in ESBI’s capital stock.
In all, P780 million meant for water districts ended up sunk into a bank that was already in dire financial health and was eventually closed and placed under receivership and liquidation by the Philippine Deposit Insurance Corp.
The Sandiganbayan has since found that these acts caused undue injury to the government and convicted the former LWUA chair and its deputy administrator of three counts of graft, emphasizing that they pushed through the acquisition, deposits and capital infusion despite the absence of required approvals from the Monetary Board, the Department of Finance, the Office of the President and other regulators. “Ultimately, the absence of the requisite MB approval resulted in losses on the part of the government in the total amount of P780 million,” the court bluntly states. Ten years after its decision, the case is still pending as the LWUA officials have filed an appeal.
The other party in this graft tango — the selling side — the Gatchalian family walked away without criminal liability. The Sandiganbayan dismissed all graft, malversation and violations of banking law charges against Senator Gatchalian and his relatives and later affirmed that dismissal, holding that there was no probable cause to try them as accused.
Impunity
Legally, the Gatchalians are acquitted. But the crucial question for a public already weary of elite impunity is different: Were they morally right to sell their own failing bank to a government agency tasked with providing water to the countryside? And if they knowingly transferred a distressed private asset to a public institution, at great eventual cost to taxpayers and water users, what does that say about Senator Gatchalian’s moral standing to aspire to head the Senate?
ESBI was not some robust financial institution that LWUA opportunistically acquired as a strategic asset. It was, by the time of the 2009 deal, already a troubled thrift bank whose precarious condition had been flagged by regulators and investigators.
The Ombudsman’s findings, later echoed in reports and court discussions, described ESBI as having a “precarious financial standing” at the time of the sale. The very rationale for indicting the Gatchalian side was that, given the bank’s poor condition, the sale to LWUA gave the private respondents a windfall by unloading a distressed asset onto a government buyer.
The bank was owned and operated by the Gatchalian family through Wellex Group Inc. and Forum Pacific Inc. These were not remote, passive shareholdings. The Ombudsman identified Sherwin Gatchalian, his father William Gatchalian, and other family members as executives of Wellex, while related officers of Forum Pacific and ESBI itself were also charged.
So, the key moral fact is plain. The family that controlled the bank knew, or had every reason to know, that ESBI was in trouble. Yet they sold the majority control to a government agency whose public mandate had nothing to do with rescuing distressed private banks.
Why were the Gatchalians acquitted? The answer lies in the narrow standards of criminal law. The Sandiganbayan held that there was no probable cause to put them on trial because the prosecution failed to show that they were accountable public officers for LWUA funds or that there was sufficient evidence of conspiracy with LWUA officials.
Responsibility
That ruling may settle criminal liability, but it does not settle ethical responsibility. Should private owners have sold a financially precarious bank to a government water agency in the first place?
That distinction matters. A person may be acquitted because evidence falls short of the legal threshold for graft or malversation, yet still bear unmistakable moral blame for conduct that offends basic public ethics. In this case, the acquittal of the sellers does not erase the fact that a failing bank ended up in the hands of a public agency and then devoured P780 million in funds meant for water districts.
The family hid behind technicalities. They sold the bank for P80 million even if it already had a capital deficit of P28 million, because they were good salesmen, and that they didn’t “negotiate” at all with the LWUA head for him to buy the bank? Tell that to the Marines.
The patriarch William — whom the Cory Aquino regime moved heaven and earth to deport in the 1990s (and failed) as a Chinese national — was himself indicted alongside other family members and corporate officers, in connection with their bank’s sale to LWUA. That fact alone shows this was not some isolated transaction involving distant affiliates but a family-controlled corporate operation.
William’s inclusion in the case underscores that the controversy involved the very family that controlled the bank and the holding structures behind it.
Evasive
Some will insist that business people are entitled to sell assets and that the burden was on LWUA to do proper due diligence. That is legally convenient but morally evasive. The identity of the buyer matters. When the buyer is a government agency entrusted with public money for water services, the seller’s responsibility is no longer merely commercial; it becomes ethical and civic. The Gatchalians knew but didn’t care that the relief they would get by disposing of a losing bank would be at the cost of taxpayers’ money.
On July 7, 2011, the Bangko Sentral’s Monetary Board ordered the bank closed and placed it under PDIC receivership, which physically took it over the next day.
PDIC later reported to the Monetary Board that ESBI “cannot be rehabilitated nor can it resume business with safety to its depositors, creditors and the general public.” Goodbye to the P1.4 billion of taxpayers’ money plunked into a Gatchalian bank. Government had to spend an additional P500 million to the bank’s 2,500 depositors.
Ambitions
Sherwin’s ambitions for higher Senate leadership should be judged not only by legal acquittals but also by moral seriousness.
A senator whose family sold a troubled bank to a government agency, which then lost P1.4 billion and saw the bank collapse into liquidation, cannot simply invoke acquittal and claim the issue is closed. Sherwin cannot credibly claim the moral authority to lead the nation’s highest deliberative body.
The Senate president is the third most powerful official in the land: Sherwin would have the tremendous political clout to use for his conglomerate’s needs. And in this country, it is political connections that always overcome resistance to a conglomerate’s projects coming either from the public or its competitors.
He will be the presiding officer in Vice President Sara Duterte’s impeachment trial, and he will then become vice president if she is convicted. And therefore, he will do everything he can to have Sara convicted. Is that what Marcos’ minions in the Senate want? I do admire Marcos for this brilliant, diabolical Machiavellian plot.
The Sandiganbayan’s resolutions may have cleared Gatchalian of criminal liability, yet they did not erase the underlying reality that his family’s troubled bank was shamelessly sold to a government entity and that the public paid dearly for the consequences.
For that reason alone, he has no moral standing to preside over a Senate that still wants to present itself as the guardian of the public interest.
But is this just trivial history? Most definitely not. Such kinds of deals are apparently in Gatchalian’s corporate DNA. The conglomerate family owes the government another P1.6 billion because of a controversial loan deal during President Estrada’s administration. The family had also undertaken a P34 billion reclamation project in Manila Bay, which, however, is in limbo because Marcos suspended all projects pending an environmental-impact review. Marcos may just wake up one morning and lift his suspension, to the Gatchalians’ gratitude. I will discuss these in detail in the next parts of this series.
Now you would understand that Gatchalian is Marcos’ perfect choice for the Senate presidency. But, of course, he could transcend his family’s needs and serve the people. Tell that to the Marines.
Facebook: Rigoberto Tiglao
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