In a 12 July 2021 decision penned by Associate Justice Edwin Sorongon, the CA’s 11th Division junked the petition of RCBC Bacolod branch manager Andrew A. Jereza to reverse the Monetary Board’s 2018 resolution backing PDIC’s legal action against him based on PDIC’s prima facie evidence that he conducted unsafe and unsound banking practice when he accepted second-endorsed checks as deposits in the account of Manu Gidwani.
The PDIC accused Jereza and RCBC of enabling the transfer of P98.7 million worth of deposit insurance payments on 471 accounts in 14 closed banks into a single account owned by Manu Gidwani (RCBC Account No. 1-419-86822-8 in the Bacolod branch managed by Jereza).
The banks, which the PDIC dubbed as “legacy banks”, were ordered closed by the BSP from 2008 to 2010.
The legacy banks had an estimated insured deposit of P14.1 billion.
These 14 legacy banks (and the total placements made by the Gidwanis before these were closed by PDIC from 2008 to 2010) are:
* Rural Bank of Bais (P22.75 million in 91 accounts)
* Nation Bank Inc. (P12 million in 48 accounts)
* San Pablo Development Bank (P12 million in 48 accounts)
* Philippine Countryside Rural Bank (P12 million in 48 accounts);
* Rural Bank of Carmen (P11 million in 44 accounts)
* Pilipino Rural Bank (Dumaguete branch with P10 million in 40 accounts)
* Rural Bank of Paranaque (Pasig branch with P8 million in 32 accounts)
* Rural Bank of DARBCI (P8 million in 32 accounts)
*Bank of East Asia (P6 million in 24 accounts)
* Rural Bank of San Jose (P6 million in 24 accounts)
* Rural Bank of Polangui (P6 million in 24 accounts)
* Dynamic Bank (P2 million in 8 accounts)
* First Interstate Bank (P2 million in 8 accounts)
* Rural Bank of Paranaque (Marikina branch with P437,500 in 5 accounts).
PDIC’s investigation showed that the Gidwanis used 86 individuals – helpers and rank and file employees of the couple with limited financial capacity – to open these 471 accounts with P118.19 million in total deposits to enjoy the high deposit yields of the legacy banks while minimizing their risks by ensuring full coverage from the PDIC in case of bank closure.
All these dummy accounts were funded by the Gidwanis themselves with majority of the 86 individuals listing the home or office address of the Gidwanis in their respective information sheets.
The dummy depositors were paid their claims for deposit insurance through 683 crossed checks from PDIC’s Land Bank of the Philippines account and mailed to the Gidwani address.
While the checks issued were “payable to the payee” account only, the 86 dummy depositors did not deposit these in their respective bank accounts.
The checks were instead credited to a single RCBC account owned by the Gidwanis in connivance with Jereza and the staff of his RCBC branch.
Without this scheme, the Gidwani spouses were only eligible for P250,000 as maximum deposit coverage for their deposits and not P98.73 million.
PDIC has also filed criminal charges against the Gidwanis and their accomplices with the Department of Justice.
The CA ruling is a major victory for PDIC in its quest to crush abuse of its deposit insurance system.
It has been a long and challenging road for PDIC as the BSP, during the term of former governor Amando Tetangco Jr., initially dismissed its move to pursue an administrative case against RCBC, Jereza and its employees.
The PDIC appealed to the MB and the initial ruling was reversed in 2018, a year after Tetangco retired.