Sandiganbayan convicts Pichay of graft over misuse of P780-million water agency fund

The Sandiganbayan has found Surigao del Sur Representative Prospero Pichay, Jr. guilty of three counts of graft in connection with mismanagement of P780 million funding of Local Water Utilities Administration (LWUA).

In a 66-page decision dated June 7, the anti-graft court’s Fourth Division convicted former LWUA administrator Pichay and his then deputy administrator Wilfredo Feleo Jr. over LWUA's 2009 acquisition of a 60% voting stock of the Laguna-based local thrift bank Express Savings Bank Inc. (ESBI) owned by the WELLEX Group Inc. (WGI) and Forum Pacific Inc. (FPI).

Pichay and Feleo, as a result, have been meted six to 10 year jail time for each count of graft or a total of 18 to 30 years on top of being perpetually barred from holding public office.

The Sandiganbayan noted Pichay and Feleo caused undue injury to the government when they made the ESBI acquisition without securing requirements and prior approval of the Office the President, the Department of Finance (DOF), the Bangko Sentral ng Pilipinas-Monetary Board (BSP-MB), and the Office of the Government Corporate Counsel (OGCC) as provided under Republic Act 8791 or the General Banking Law of 2000 and Administrative Order No. 59.

“The prosecution was able to present sufficient evidence to prove that the irregular transactions carried out by the accused LWUA officials …were committed with gross inexcusable negligence. Ultimately, the absence of the requisite MB approval resulted in losses on the part of the government in the total amount of P780 million,” it said.

The anti-graft court also said BSP advised Pichay that the ESBI acquisition will result in change in majority ownership of the bank which requires prior MB approval, DOF endorsement, or clearance and approval from the Office of the President, among others.

The LWUA, under Pichay's leadership, acquired 60% of ESBI's outstanding shares amounting to P80 million and approved the initial payment of P40 million upon signing of the Deed of Absolute Sale.

"It cannot be denied that the accused Pichay and Feleo knew of this requirement as they had been in consultation with the Office of the President, the DOF, and BSP. They were specifically advised to secure prior approval of the MB. This advice was given before LWUA purchased ESBI shares," Sandiganbayan added.

The anti-graft court emphasized that the prior review and approval of the BSP and/or DOF is not an empty ceremony tantamount to a simple expedience of a mere compliance, with DOF serving as the government's supervisory arm on financial investments of state offices such as LWUA and the BSP having the best position to address the concern on ESBI's financial health.

"The dubious action of LWUA Board of Trustees headed by accused Pichay in the subsequent transaction with ESBI involving the deposit of P300 million pursuant to Resolution No. 303, Series of 2009, designating ESBI as LWUA's depository bank without the approval by the MB also suffered the same legal infirmity as that of the 60% shares of stock," the anti-graft court said.

"Similarly, the capital infusion of P400 million made by LWUA on August 26, 2009 intended to address ESBI's capital deficiency is irregular and constitutes unsafe and unsound banking practice according to the BSP," it added.

Sought for comment, Pichay said he is discussing with his legal counsel their next action on the matter.

"I am determined to exhaust all possible legal remedies accorded to me by law," he said in a statement.

He stressed that the constitutional right to be presumed innocent until proven guilty can be overthrown only by proof beyond reasonable doubt.

"Well-entrenched in jurisprudence is the rule that the burden of proof lies with the prosecution. This is a case of conspiracy for allegedly violating Section 3(e) of Republic Act 3019. Originally, there were 22 accused in this case which is why the recent decision of the Sandiganbayan came as a surprise," Pichay said.

The lawmaker noted that even the dispositive portion of the decision showed that no civil liability was adjudged against him in view of the fact that LWUA public funds invested in ESBI is under receivership and liquidation of the PDIC.

"So it is baffling: how can there be undue injury to the government?" Pichay said.—with reports from Anna Felicia Bajo/AOL, GMA News