SC affirms Ombudsman dismissal of graft rap versus DBP execs over P635M ‘behest loan’

The Supreme Court (SC) has affirmed the Ombudsman’s dismissal of a graft complaint against six officials of the Development Bank of the Philippines (DBP) in connection with the grant of P634.8-million in alleged behest loans to a textile company during the regime of dictator Ferdinand Marcos.

In a recent 19-page decision, the SC 3rd Division denied the petition of the Presidential Commission on Good Government (PCGG) seeking the reversal of the Ombudsman’s July 31, 2006 resolution.

Cleared by the Ombudsman were former DBP officials Cesar Zalamea, Rafael Sison, Alicia Reyes, J.V. de Ocampo, Joseph Edralin, and Rodolfo Manalo, as well as ALFA Integrated Textile Mills, Inc., officers Ramon Lee, Johnny Teng, Antonio DM. Lacdao, and Cesar Marcelo.
The PCGG found the loans granted to ALFA from 1979 to 1981 to be anomalous, because it had inadequate collaterals and was already suffering continuous losses at the time. It argued that the loans were only used to pay off existing debts and not to invest, allegedly depriving the state bank of any chance to recover the funds.

It likewise questioned the DBP’s recommendation of a rehabilitation plan that was supposedly disadvantageous to the government. DBP recommended the sale of ALFA’s P462.32-million fixed assets to Cape Industries, Inc.—owned by Marcos crony Eduardo “Danding” Cojuangco, Jr.—for a meager P100 million.
But, the SC agreed with the Ombudsman’s finding that these acts were done in the exercise of the DBP officials’ “sound business judgment” and in accordance with “existing banking regulations.”

It said the PCGG failed to show the “risk” taken by the DBP officials was “arbitrary or malicious.”

“Likewise, it was unable to prove the element of undue injury, that is, the losses that would have been unavoidable in the ordinary course of business,” read the decision penned by Associate Justice Marvic Leonen.
The SC also affirmed the Ombudsman’s finding that the PCGG failed to prove the collaterals were insufficient.

This was because a P25-million loan was backed by P45.47 million in chattel mortgages and a $2.67-million loan was secured by P418.29 million in real estate and chattel mortgages. A P137-million loan was granted on the condition that ALFA execute a mortgage over its buildings and machinery in Laguna and allow the DBP to gain full control of the company and secure the proceeds of its export sales.

Even if ALFA prioritized the payment of duties and taxes as well as obligations to foreign suppliers instead of the repayment of the loans, the SC said this still “benefited the government.” After all, the duties and taxes were required by law and the foreign debts were covered by a sovereign guarantee.

The SC added that the undervalued sale of ALFA’s fixed assets to Cojuangco’s company was “not by itself, disadvantageous to the government,” because it still included a repayment schedule for its debts to DBP.
“As petitioner was unable to substantially prove its allegations, this Court rules that public respondent Office of the Ombudsman did not gravely abuse its discretion in finding that there was no probable cause to charge private respondents with violation of Section 3(e) and (g) of the Anti-Graft and Corrupt Practices Act. This Court will not overturn its findings when they are supported by substantial evidence,” the SC said.

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