Republic of the Philippines
TEODORO C. BORLONGAN,
- versus - G.R. No. 159605
THE OFFICE OF THE OMBUDSMAN; HON.
SIMEON V. MARCELO and HON. ANIANO
A. DESIERTO in their capacity as Ombudsman;
RAFAEL B. BUENAVENTURA, ALBERTO
V. REYES, MA. DOLORES B. YUVIENCO,
CANDON B. GUERRERO, JUAN D. DE
ZUÑIGA, JR., and TOMAS S. AURE, JR.,
PETITION FOR CERTIORARI
PETITIONER TEODORO C. BORLONGAN, by counsel, respectfully states that:
The proceedings before the Office of the Ombudsman stemmed from a complaint filed by petitioner for
violation of Articles 171(4) and 171(5) of the Revised Penal Code, Section 3(e) of Republic Act (RA) No. 3019 as
amended, Section 4 of RA 6713 and Section 16 of RA 7653 (the New Central Bank Act). The ultimate issue for
resolution, therefore, is whether or not there is probable cause to hold private respondents Rafael B.
Buenaventura, Alberto V. Reyes, Ma. Dolores B. Yuvienco, Tomas S. Aure, Jr., Juan D. de Zuñiga, Jr. and
Candon B. Guerrero liable for prosecution for the crimes charged by petitioner. Indeed, the Office of the
Ombudsman was correct in defining the issue as such.
Inexplicably, the Office of the Ombudsman deigned not to squarely rule on said issue. Instead, it ruled in
summary fashion that petitioner was questioning the propriety of said private respondents’ acts in placing Urban
Bank, Inc. (UBI) and Urbancorp Development Bank (UDB) under receivership, and revoking the trust license and
endorsing the revocation of the investment house license of Urbancorp Investments, Inc. (UII). This
misimpression was definitely an abuse of discretion on the part of the Office of the Ombudsman, which was
misled by private respondents into straying from the ultimate issue on hand and dismissing petitioner’s complaint
by way of a two-page ratiocination. In fact, the Office of the Ombudsman never dwelt on determining the
existence of probable cause. Petitioner therefore respectfully implores the Honorable Court to rectify this grave
abuse of discretion if only to settle the issue once and for all and thereby avoid manifest injustice.
The Honorable Court may note that in the case of Hon. Drilon, et al. vs. Court of Appeals (258 SCRA
280), it was ruled that probable cause need not be based on clear and convincing evidence of guilt, neither on
evidence establishing guilt beyond reasonable doubt, and definitely not on evidence establishing absolute
certainty of guilt. It implies probability of guilt and requires more than “bare suspicion” but less than evidence
which would justify conviction. It is submitted that this test was more than sufficiently met in this case.
Petitioner is well aware of the rule that the Court does not unduly interfere in the Ombudsman's exercise
of his investigatory and prosecutory powers, as provided in the Constitution (The Presidential Ad-Hoc Fact-
Finding Committee on Behest Loans, Presidential Commission on Good Government (PCGG) vs. Desierto, et al.,
366 SCRA 428; The Presidential Ad-Hoc Fact-Finding Committee on Behest Loans vs. Desierto, 362 SCRA 721).
However, the Honorable Supreme Court itself qualified such policy of non-intervention: it may intervene in the
Ombudsman’s investigatory powers for good and compelling reasons. In PCGG vs. Desierto, Disini, et al. (GR
No. 132120, 10 February 2003), the Honorable Court intervened in the findings of the Ombudsman ruling that the
latter gravely abused his discretion in disregarding the evidence on record. Further, in The Presidential Ad-Hoc
Fact-Finding Committee on Behest Loans vs. Desierto, 362 SCRA 730, the Supreme Court rectified the error of
the Ombudsman in dismissing the complaint based on alleged prescription of the offense. The rulings in said
cases insofar as the Supreme Court intervened in the investigatory powers of the Ombudsman, may well apply to
the instant case.
So as not to stray from the area of controversy and thereby present a more coherent view of the bias,
grave abuse of discretion and incongruous rulings of the Office of the Ombudsman, petitioner will endeavor as
closely as possible to observe the following order of presentation.
NATURE OF PETITION
This is a petition for certiorari under Section 4, Rule 65 of the Rules of Civil Procedure, to question the
Resolution of the Office of the Ombudsman dated 24 June 2002 dismissing the Complaint filed by petitioner
against private respondents and the Order dated 23 August 2002 denying petitioner’s Motion for Reconsideration.
The petitioner also seeks the declaration of the existence of probable cause against all of the said
respondents for violation of Articles 171(4) and 171(5) of the Revised Penal Code, Section 3(e) of Republic Act
(RA) No. 3019 as amended, and Section 16 of RA 7653 (the New Central Bank Act).
Certified true copies of the assailed Resolution and Order are attached as Annexes “A” and “B”,
Petitioner availed of the remedy of certiorari as a special relief in observance of the dictum laid down by
the Honorable Supreme Court in the case of Kuizon vs. Desierto (254 SCRA 158), specifically that an aggrieved
party may file a petition for certiorari with the Honorable Supreme Court to question the findings of the Office of
the Ombudsman in criminal cases, under Section 4, Rule 65 of the Rules of Court.
TIMELINESS OF PETITION AND PAYMENT OF REQUISITE FEES
Mr. Borlongan received on 9 July 2002 the Resolution of the Office of the Ombudsman in OMB-0-00-
1651 dated 24 June 2002 (Annex “A” hereof). Although Mr. Borlongan’s counsel did not receive his copy of the
Resolution, Mr. Borlongan by counsel filed a Motion for Reconsideration on 16 July 2002. questioning the
Resolution, Subsequently, he and counsel received on 24 July 2003 the Order of the Office of the Ombudsman
dated 23 August 2002 (Annex “B” hereof). Thus, he had sixty (60) days or until 22 September 2003 within
which to file this Petition in accordance with Section 4, Rule 65 of the Rules of Court. Simultaneous to the filing
of this Petition, he paid the appropriate docket and other lawful fees and deposit for costs as required by this
Petitioner is of legal age, Filipino, married and with address at No.1 Sparrow Street, Greenmeadows 1,
Quezon City. He was President of Urban Bank, Inc. (UBI), and Vice-Chairman of the Board of Directors of
Urbancorp Development Bank (UDB) and of Urbancorp Investments, Inc. (UII) up to 26 April 2000 when they
were ordered closed by the Monetary Board. UBI was a publicly-listed commercial bank; UDB was a thrift bank
and a subsidiary of UBI; and UII was an investment house with a trust department, and an affiliate of UBI.
Petitioner is the complainant in OMB-0-00-1651, a case filed before the Office of the Ombudsman against
respondents for violation of Articles 171(4) and (5) of the Revised Penal Code, Section 3(e) of Republic Act No.
3019, and Section 16 of Republic Act No. 7653.
Respondent Office of the Ombudsman is an office created under Section 5, Article XI of the 1987
Constitution, and organized under Republic Act No. 6770 otherwise known as “The Ombudsman Act of 1989”.
Under Section 15, R.A. 6770, the Office of the Ombudsman is empowered to investigate and prosecute on its own
or on complaint by any person, any act or omission of any public official, employee, office or agency when such
act or omission appears to be illegal, unjust, improper or inefficient. It issued the assailed Resolution and Order
subject of this Petition.
Respondents Simeon V. Marcelo and Aniano A. Desierto were the Ombudsman at the time they approved
the Order dated 23 August 2002 and the Resolution dated 24 June 2002, respectively. They are sued in their
capacity as such.
Respondent Rafael B. Buenaventura is the Governor of Bangko Sentral ng Pilipinas (BSP), a government
agency created under Republic Act No. 7653 (otherwise known as the New Central Bank Act), having
supervision and regulatory powers over the operations of banks in the Philippines. He may be served with notices
and other court processes through his counsel of record, Atty. Reynaldo Geronimo of 30th Floor, Citibank Tower,
Paseo de Roxas, Makati City.
Respondent Alberto V. Reyes is Deputy Governor of the Supervision and Examination Sector (SES) of
the BSP. Respondent Tomas S. Aure was the Officer-in-Charge of the Department of Commercial Banks II,
which is under the SES. They may be served with notices and other court processes through their counsel of
record, Yngson & Associates of Unit 7-B Strata 2000, Emerald Avenue, Ortigas Center, Pasig City.
Respondent Ma. Dolores B. Yuvienco is the Managing Director of SES. She may be served with notices
and other court processes at her office at Bangko Sentral ng Pilipinas, Roxas Boulevard, Manila.
Respondent Candon B. Guerrero is the Director of the Department of Thrift Banks and Non-Bank
Financial Intermediaries, which is under the SES. Respondent Juan D. de Zuñiga, Jr. is the General Counsel of
BSP and Secretary of the Monetary Board. These respondents may be served with notices and court processes
through their counsel of record, Ongkiko Kalaw Manhit & Acorda Law Offices of 4 th Floor Cacho-Gonzalez
Building, 101 Aguirre Street, Legaspi Village, Makati City.
STATEMENT OF FACTS AND MATTERS INVOLVED
1. From April to June 1999, the Supervision and Examination Sector (SES) of the Bangko Sentral
ng Pilipinas (BSP) conducted an annual examination of UBI, with 31 March 1999 as its cut-off date. SES
submitted its Final Report of Examination to the Monetary Board (hereafter “MB”) which noted said report in its
meeting of 19 November 1999. In the Overall Conclusion of said Final Report, SES found that UBI “showed
satisfactory financial condition”, “managed to maintain its solvency and liquidity”, and “substantially complied
with banking laws, BSP rules and regulations”. Private respondents concluded that UBI was in a satisfactory
financial condition as it managed to maintain its solvency, liquidity and profitability despite financial turmoil in
the Southeast Asian region.
2. On 29 December 1999, the MB issued Resolution No. 1900 ordering anew the examination of
UBI (and UII), despite the favorable findings in the recently-concluded examination report. Thus on 18 January
2000, BSP examiners began their on-site examination and presented their letter-authority to “examine, pursuant
to law, your books, documents and other records, cash and available assets and general condition”. Photocopy
of said letter-authority dated 18 January 2000 is attached as Annex “C”. Cut-off date of the examination was 30
November 1999, and the examination was completed in February 2000. Said examination was contrary to
Section 28 of Republic Act No. 7653 1 which provides that bank examinations be conducted at intervals of at least
twelve (12) months.
3. In February 2000, UBI nearly concluded its merger with Panasia Bank, a commercial bank much
smaller than UBI. UBI would be the surviving bank in a merger that would avail of a particular incentive (out of
several merger incentives) provided in BSP Circular No. 172 dated 31 August 1998. That incentive was the
revaluation of a bank’s undervalued properties, which appraisal surplus would be treated by BSP as additional
capital. The appraisal surplus, estimated at about P1-billion for UBI, would serve as the additional capital
without further cash contributions from UBI’s shareholders. Since August 1999, respondents Buenaventura and
Reyes were constantly apprised on the merger discussions between UBI and Panasia, and on UBI’s intention to
avail of this said incentive.
4. However in February 2000, when respondents were told that UBI and Panasia Bank had agreed
on the final merger terms, Buenaventura and Reyes separately informed petitioner and/or UBI chairman Arsenio
M. Bartolome III that they would be revising BSP’s merger rules, in particular this incentive, which would
prevent such merger between UBI and Panasia. BSP would allow the merger only if the merged bank met the new
minimum capital requirement before applying the appraisal surplus. This new condition made the particular
incentive inutile, as a bank had to prove that it did not need the appraisal surplus before it could use it. Thus, the
merger between UBI and Panasia did not materialize. (However in August 2000, the MB approved the merger of
Panasia Bank with Bank of Commerce, a commercial bank whose capital was actually smaller than UBI and
CAPITAL-DEFICIENT unlike UBI.)
5. Under BSP Circular No. 156 dated 19 March 1998, UBI was never capital-deficient, and it had
until 30 June 2000 to meet the increased minimum capital requirement of from P2.0-billion to P2.4-billion.
(UBI’s capital was P2.2-billion, as determined in the BSP SES Report.) It should be noted that prior to said
Circular, UBI had been increasing its capital at an exceptional average rate of over forty-one percent (41%) per
annum, compounded annually, over the ten (10) year period 1988-1997. A summary of the history and growth of
UBI is attached as Annex “D”.
1Section 28 of RA 7653 reads in part: “Examination and Fees. – The supervising and examining department head, personally, or by
deputy, shall examine the books of every banking institution once in every twelve (12) months, and at such other times as the
Monetary Board by an affirmative vote of five (5) members, may deem expedient and to make a report on the same to the
Monetary Board: Provided, That there shall be an interval of at least twelve (12) months between annual examinations.”
6. In the MB meeting of 4 February 2000, the SES made a false and erroneous report that UBI
failed to comply within the deadline the required divestment of its excess equity holdings in UII. MB Resolution
No. 1639 dated 26 November 1998, which approved UBI’s conversion from an expanded commercial bank to a
regular commercial bank, prescribed said divestment within one year. As a result of SES’ false report on the
status of UBI’s divestment, the MB issued Resolution No. 171 dated 4 February 2000 imposing restrictions in the
meantime that UBI has allegedly not completed its divestment.
7. In March 2000, BSP repeatedly disclosed negative information on the condition and business of
UBI, particularly on its downgrade status, to the news media in violation of Section 27(c) of Republic Act No.
7653 2 Of at least six (6) newspaper accounts, two quoted respondent Reyes, and another two cited BSP sources.
Worse, the information disclosed was inaccurate and false. BSP’s disclosures to news media came at the time of
a jittery financial market. Due to the negative press statements, UBI and UII (which shared the same clientele)
suffered constant withdrawals from March to April 2000.
8. In the afternoon of 25 April 2000, petitioner and UBI Chairman Bartolome met with respondent
Buenaventura in the latter’s office to pre-clear the declaration of a bank holiday to put a temporary halt on the run
caused by panic withdrawals. Buenaventura directed petitioner to submit “right then and there” 3 a written letter
formalizing UBI’s declaration of a bank holiday. A “letter to that effect was prepared and typed in the office of
Respondent Governor Buenaventura.” 4 Inside the office of Buenaventura, respondent Reyes prepared the draft
of the letter, and instructed Buenaventura’s secretary to call petitioner’s secretary to fax petitioner’s stationery.
The faxed-in stationery was photocopied on plain paper, and Buenaventura’s secretary typed Reyes’ draft thereon.
Before signing the letter, petitioner was assured by Buenaventura that UBI would re-open within thirty (30) days
provided that a “white knight” institution would be found to take-over UBI and give assurance to its creditors.
Said letter (which was attached to the SES Report on UBI) read:
“Dear Governor Buenaventura:
“Please be informed that in view of media reports of our down grading to a thrift bank which created
liquidity problems, Urban Bank is declaring a bank holiday effective at the close of business hours today,
April 25, 2000.
“The declaration of bank holiday will be subject to approval of our Board of Directors which shall be
meeting this afternoon.”
Photocopy of the letter is attached as Annex B of the Complaint; the Complaint with its annexes is
attached as Annex “E” hereof.
9. On 25 April 2000 immediately after petitioner’s meeting with Buenaventura, Reyes instructed
respondents Yuvienco, Reyes and Guerrero to prepare the SES Reports on UBI, UDB and UII in time for the MB
meeting that would be specially called for the purpose.5 Later at 6:00 PM, Reyes instructed respondent Zuniga to
“prepare a Legal Opinion on whether or not the declaration of a Bank Holiday is a sufficient ground to close a
bank”; it was Reyes (who is not an MB member) who told Zuniga (who is the MB secretary) that there would be
a meeting of the MB the following morning. 6
10. On 26 April 2000, at 10:45 o’clock in the morning, Buenaventura as chairman convened the MB
Special Meeting at the Manila Golf Club in Forbes Park, Makati City. During said Special Meeting, which
adjourned at 11:30 o’clock in the morning, the MB issued the following resolutions: 7
MB Resolution No. 634, ordering the closure of UBI and placing it under the receivership of the
Philippine Deposit Insurance Corp. (hereafter “PDIC”), under Section 30(a) of R.A. 7653;
MB Resolution No. 635, ordering the closure of Urbancorp Development Bank (hereafter “UDB”) and
placing it under PDIC’s receivership, under Section 30(a) of R.A. 7653;
2 Section 27 of RA 7653 reads in part: “Prohibitions. – In addition to the prohibitions found in Republic Act Nos. 3019 and 6713,
personnel of the Bangko Sentral are hereby prohibited from: xxx (c) revealing in any manner, except under orders of the court,
the Congress or any government office or agency authorized by law, or under such conditions as may be prescribed by the
Monetary Board, information relating to the condition or business of any such institution.”
3 Buenaventura’s counter-affidavit, par. 2.3.3i
4 Reyes’ counter-affidavit, par. 4.2.2
5 Counter-affidavits of Reyes, par. 4.3.1; Yuvienco, par. 8; Aure, par. 4.1.1; Guerrero, par 2.
6 Reyes’ counter-affidavit, par. 4.3.3; Zuniga’s counter-affidavit, par. 2
7 Zuniga’s counter-affidavit, par. 6-11.
MB Resolution No. 636, revoking the trust license of UII, and endorsing to the Securities and Exchange
Commission (SEC) the revocation of its investment house license and the joint designation of a receiver
by BSP and SEC.
11. The three (3) MB resolutions were based on the three (3) SES Reports on UBI, UDB and UII,
which the MB allegedly received and deliberated upon during the 26 April 2000 Special Meeting. The
recommendations of closure contained in the SES Reports were approved in toto in said resolutions. Under
Section 30 of R.A. 7653, the MB may close a bank only on the basis of a valid SES report 8.
12. There was no complete and detailed record of the actual deliberations of the MB during the 26
April 2000 Special Meeting. No tape recording or stenographic notes were made of said MB meeting, contrary to
the requirement of Section 11 of Rep. Act No. 7653 9.
13. Beginning 9:00 o’clock in the morning of 26 April 2000, one hundred eighty-eight (188)
personnel from the PDIC with their own security guards arrived at UBI’s head office and branches. At between
10:30 to 11:00 o’clock in the morning, PDIC’s Executive Vice President Ricardo Tan and Deputy Receiver-in-
Charge Angel Obrero served the MB closure order upon UBI's Corporate Secretary Corazon Bejasa, at
UrbanBank Plaza, Pasong Tamo, Makati City. The MB closure order was signed and served on UBI even before
the MB met to approve such closure, in violation of Section 30 of R.A. 7653. At 11:00 o’clock in the morning, the
PDIC commenced sealing all vaults, desk drawers, records rooms and filing cabinets in all floors occupied by
UBI and its affiliates in Urban Bank Plaza, and confiscated keyboards and access to UBI's computers. At 1:30
o’clock in the afternoon, PDIC gathered all of UBI's head office personnel and advised them that their
employment with the bank was terminated and that PDIC would be their new employer should their services still
14. On or about 28 April 2000 and without any charge or complaint, hold-departure orders were
hastily issued against petitioner, UBI Chairman Arsenio Bartolome III, UBI Corporate Secretary Corazon Bejasa,
and UBI Treasurer Renato Claravall. On 1 May 2000, President Joseph Estrada ordered the creation of a multi-
agency task force, composed of officials from BSP, Department of Justice (DOJ), Securities and Exchange
Commission, and Department of Finance to investigate and file charges against UBI officers. With regular
frequency and covered by media fanfare, BSP with PDIC filed, almost every month from 26 June 2000 to 15
November 2000, a total of five criminal complaints before the DOJ, against petitioner and twelve other UBI
officers and employees. Four of these complaints were for alleged estafa, two of which were in relation to
economic sabotage under P.D. 1681. 10
15. Only after written demand by petitioner’s counsel to BSP on 11 September and 2 October 2000,
respondents belatedly furnished petitioner on 20 September 2000 the SES Report on UBI, and on 11 October
2000, the SES Reports on UDB and UII. All three Reports were dated 26 April 2000, and contained findings
which were not discussed nor disclosed to the institutions, in violation of the Central Bank Manual of
Examination Procedures 11. (The SES Reports on UBI, UDB and UII are attached as Annexes E, J and L,
respectively, of the Complaint which is Annex “E” hereof.)
16. On 8 November 2000, petitioner filed a complaint for violation of the Revised Penal Code, R.A.
3019, R.A. 7653, and R.A. 6713 before the Office of the Ombudsman against all of the respondents, docketed as
OMB-0-00-1651 (herein criminal case) and OMB-ADM-0-00-0867 (the related administrative case). 12
8 Section 30 of RA 7653 reads in part: “Proceedings in Receivership and Liquidation. – Whenever, upon the report of the head of the supervising
or examining department, the Monetary Board finds that a bank or quasi-bank xxx in which cases, the Monetary Board may
summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution.
9 Section 11 of RA 7653 reads in part: “The Bangko Sentral shall maintain and preserve a complete record of the proceedings and
deliberations of the Monetary Board, including the tapes and transcripts of the stenographic notes, either in their original form or
10DOJ filed a total of eight criminal cases arising from BSP’s & PDIC’s complaints, before various branches of the Makati
Regional Trial Court. In all these cases, BSP engaged as PRIVATE PROSECUTORS the private law firms of Manuel L. Lazaro
& Associates, and of Roco Kapunan Migallos Perez &Luna.
11 Section L of General Instructions of the Central Bank Manual of Examination Procedures reads in part: “Concluding the
examination.– xxx A pre-closing conference led by the examiner-in-charge should be held with the officers/representatives of the
institution on findings/exceptions. The minutes of the conference may be made part of the report to the Monetary Board. A
copy of the summary of findings/violations should be furnished the institution examined so that corrective action may be taken by
them as soon as possible.”
12 In OMB-ADM-0-00-0867, the Ombudsman dismissed the administrative complaint against Buenaventura and Zuniga, but
found Reyes, Yuvienco, Guerrero and Aure liable for Simple Misconduct. Complainant-petitioner and respondents filed their
respective appeals before the Court of Appeals, in CA-G.R. SP No. 72270 Borlongan v. Buenaventura et al., and CA-G.R. SP No.
Petitioner alleged that the findings in the three SES Reports were falsified and untrue, and that the Reports had
been altered and ante-dated.
17. On 6 and 13 December 2000, the Congressional Committee on Good Government conducted its
hearings inquiring into UBI’s closure, attended by summoned BSP officers and examiners, including private
respondents herein. The first hearing on 6 December 2000 was conducted publicly, and transcript of proceedings
is available for public scrutiny. The subsequent hearing on 13 December 2000 was unexpectedly made a closed-
door executive session.
18. On 13 December and again on 14 December 2000, petitioner under threat and coercion
withdrew his complaint before the Ombudsman. On 4 and 23 January 2001, the Ombudsman dismissed the
administrative and criminal cases, respectively, on the basis of petitioner’s two (2) letters filed on 13 and 14
December 2000 withdrawing the SAME complaint. (BSP made the content of the 14 December 2000 letter, as it
was dissatisfied with the 13 December 2000 letter.) On 25 January 2001, petitioner and other UBI employees
jointly filed before the Ombudsman a letter under oath, complaining of the coercion and requesting the
Ombudsman to continue its investigation. Subsequently, the Ombudsman re-opened the cases, but did not
conduct any investigation into the reported coercion.
19. In its Order dated 26 March 2001, the Office of the Ombudsman approved the conduct of a
preliminary investigation of the herein criminal case, and in an Order dated 27 April 2001, ordered respondents to
file their counter-affidavits within ten (10) days from receipt thereof, otherwise “Failure to file the counter-
affidavits within the aforesaid period shall be deemed a waiver of respondents’ right to submit controverting
evidence.” In an Order dated 29 May 2001, the Ombudsman denied respondents’ motion for reconsideration and
upheld the Order dated 26 March 2001.
20. On 16 October 2001, petitioner filed a Manifestation and Motion before the Office of the
Ombudsman, manifesting among others, that one of the respondents had not yet filed his counter-affidavit, and
that four of the other respondents had filed their counter-affidavits on various dates after 2 October 2001 or four
months after the issuance of the 29 May 2001 Order. In said Manifestation and Motion, petitioner moved “that
the case be deemed submitted for resolution without the counter-affidavits”, and “in the remote event that this
Office admits the counter-affidavits of the respondents although belatedly filed, that Complainant be granted a
period of ten days from notice within which to file his Reply Affidavit thereto”. Petitioner did not file a reply-
affidavit, pending decision or order by the Office of the Ombudsman on said motion (which was never acted
21. In the assailed Resolution dated 24 June 2002 (Annex “A”), the Office of the Ombudsman
dismissed petitioner’s complaint against all of the respondents, and cited statements from respondents’ counter-
affidavits. However, petitioner did not have the opportunity to file a reply-affidavit to refute/controvert the
allegations of respondents in said counter-affidavits.
22. Petitioner filed a motion for reconsideration on 16 July 2002 questioning said Resolution.
Subsequently, the Office of the Ombudsman issued the assailed Order dated 23 August 2002 (Annex “B”)
denying petitioner’s motion for reconsideration.
The findings of the Office of the Ombudsman.
23. In the assailed Resolution dated 24 June 2002, the Office of the Ombudsman found:
“The issues of this case are as follows: (1) whether or not the respondents may be charged for
falsification allegedly for having conspired to falsify the SES Reports (pp.35-48, 96-99 & 105-108, Records)
and altering its true dates as well as the documents referred therein and (2) whether or not the respondents
caused undue injury to the complainant, UBI as an institution, its shareholders and other former officers
and employees, in the discharge of their official and administrative functions, thereby making them
liable for violation of section 3(e) of R.A. No. 3019, as amended.
“After a careful study of the facts and circumstances of the present case, the undersigned finds no
probable cause to indict respondents for the crimes charged.
72234 Reyes et al. v. Borlongan. In CA-GR SP No. 72270, the Court of Appeals in a Decision dated 13 August 2003, partially
reversed the ruling of the Ombudsman by finding Buenaventura, Reyes, Yuvienco, Guerrero and Aure guilty of GROSS
NEGLECT OF DUTY; Zuñiga was exonerated. The Court of Appeals has yet to decide on CA-GR SP No. 72234.
“On the basis of the issues presented, complainant is in substance questioning the propriety of herein
respondents-BSP officials’ actions, in placing the UBI and UDB under receivership and revoking the
trust license of UII. It appears, however, that the right to question such actions belongs only to the
stockholders representing the majority of the capital stock of the institution concerned and must
be exercised within ten (10) days from receipt by the board of directors of the institution concerned of the
questioned order. It is the court and not this Office which has the authority to decide such questions
under Sec. 30 of R.A. No. 7653.
“It is to be noted that only respondent Buenaventura, appears to be a member of the Monetary
Board, from among the respondents. Consequently, the exercise of the judgment to put a bank under
receivership is vested exclusively with the Monetary Board. This means that the findings of the
responsible officials of the Central Bank are only recommendatory, for until the subject Reports and
recommendations are actually approved by the MB, they remain just that, mere reports and
Recommendations with no action thereon. In other words, their findings are still subject to the approval
of the MB, which carry the responsibility of determining its propriety and to study whether or not
to accept the recommendation contained therein, considering that the documents will still be submitted
to it for review. Now, if the stockholders concerned are not satisfied with the action taken by the
Monetary Board, it is only the court which is empowered to rule on the legality of such actions under the
“It also bears emphasis that the present complaint substantially contained issues that were
practically the same with those in a previous case that was filed by Michael Defensor against the same
respondents, among others, that was docketed as OMB 0-98-0622.13 It is to be noted that the said
case was eventually dismissed after conducting the requisite preliminary investigati on. While the
complainant in the said case is different from the herein complainant, the fact is that they have an
identity of interest. A close scrutiny of the records revealed that this case is a virtual reiteration,
if not repetition of the allegations and charges in the said previous case.
“Worthy of emphasis also is the finding in the said case, hereunder quoted as follows:
‘Indeed, if we proceed to act on this criminal case this time, which basically puts in question the individual act
of the respondents leading to the issuance of the MB Resolutions and SES reports in question, we will
inevitably delving into the merits of these issuances. And if in case we come up with a finding that those
who prepared and drafted said documents are at fault, then we are in effect putting into doubt the merits
and wisdom of these submissions, which, this Office cannot legally and validly do so as said duty belongs
exclusively to the regular courts pursuant to Section 30 of the New Central Bank Act.’
“WHEREFORE, premises considered, it is hereby recommended that the instant complaint
against the above-named respondents be DISMISSED.” (Resolution pp. 7-9, Annex “A”, underscoring
24. In the assailed Order dated 23 August 2002 (which respondent Ombudsman Simeon V. Marcelo
approved only on 14 July 2003), the Office of the Ombudsman found:
“After a careful review, this Office finds no reason to reverse the assailed resolution. The issues
raised herein have already been appreciated and considered in the resolution under review.
“As borne by the records, the subject matter of this case is the alleged falsification of the
SES Reports and the alteration of its true dates committed by respondents. Consequently, the said
reports were made as basis for the issuance by the Monetary Board of resolutions ordering the
closure of the UBI and UDB and revoking the trust license of UBI affiliate, Urbancorp Investment Inc.
“It is worthy to note, in this regard, that by questioning the veracity of the SES Reports, complainant
is, in effect, putting into doubt the merits and wisdom of the resolutions issued by the Monetary
Board, which basically, were based on the said reports. To reiterate, it is the court and not this
office which has the authority to decide such questions under Section 30 of R.A. No. 7653. Precisely,
this is the reason why this Office did not decide on certain issues raised by complainant, for
they appeared to be beyond its jurisdiction.
13 Rep. Michael Defensor filed a complaint before the Ombudsman (docketed as OMB-0-01-0089 and not 0-98-0622) against
BSP officers and examiners, including respondents herein, for violation of the Revised Penal Code, R.A. 3019, R.A. 6713 and RA
7653. Said complaint was based in large part on admissions made by respondents during the 6 December 2000 public hearing
conducted by the Congressional Committee on Good Government, inquiring into UBI’s closure. Defensor filed his complaint on
24 January 2000, not long after petitioner was coerced to withdraw herein complaint on 13 and 14 December 2000. In a
resolution dated 14 September 2001, the Office of the Ombudsman dismissed Defensor’s complaint on the bases that (1)
Defensor had no “legal personality” to file the complaint; (2) the evidence were “basically hearsay ”; and (3) the complaint was
“prematurely filed”. Defensor did not file a motion for reconsideration.
“Further, complainant failed to state what specific injury he sustained as a result of respondents’
acts. If there is anyone who sustained injury by reason of the subject resolutions, it would have
been the stockholders representing the majority of the capital stock of the institution concerned.
“In view thereof, the Motion for Reconsideration filed by complainant is hereby DENIED.”
(Order pp. 3-4, Annex “B”, underscoring supplied))
Errors/Grave Abuse of Discretion of the
25. Although the Office of the Ombudsman correctly identified the issues, it failed to resolve them
squarely. One gets the impression that the Office of the Ombudsman passed the buck, so to speak, to the courts
for further disposition, when under the law, it has plenary and unqualified powers to determine the existence of
probable cause (Salvador H. Laurel vs. Hon. Desierto, GR No. 145368, 12 April 2002). The Office of the
Ombudsman also has the sole power to investigate and prosecute on its own or on complaint by any person, any
act or omission of any public officer or employee, office or agency, when such act or omission appears to be
illegal, unjust, improper or inefficient (Espinosa vs. Office of the Ombudsman, 343 SCRA 744). The Office of the
Ombudsman in refusing to resolve the issues squarely, committed grave abuse of discretion amounting to a lack
of or excess of its jurisdiction. The following statements of the Honorable Court in PCGG vs. Desierto, Disini, et
al. (supra) are instructive:
“During the preliminary investigation, the main function of the government prosecutor — the ombudsman
in this case — is merely to determine the existence of probable cause and, if it does exist, to file the
corresponding information. Probable cause has been defined as the existence of such facts and
circumstances as would excite in a reasonable mind — acting on the facts within the prosecutor's
knowledge — the belief that the person charged is probably guilty of the crime for which he or she is
26. Second, it was grave abuse of discretion for the Office of the Ombudsman to rule that petitioner
was in substance questioning the propriety of private respondents’ actions in placing UBI and UDB under
receivership and revoking the trust license of UII. Petitioner had not submitted the issue for the appreciation of
the Office of the Ombudsman; petitioner never even pretended the case was precisely for the purpose of
questioning the propriety of private respondents’ actions. The proceedings were strictly criminal in nature since
petitioner accused private respondents with violation of penal provisions namely, Articles 171(4) and 171(5) of
the Revised Penal Code, Section 3(e) of R.A. 3019, and Section 16 of R.A. 7653. It would be the height of
ignorance to facilely reduce them to an action under Section 30, R.A. 7653 when petitioner made no pretense
whatsoever that he represented a majority of the capital stock of UBI, UDB or UII. Since the action was criminal
in nature, any person may file a complaint against private respondents before the Ombudsman. No requirement of
a majority of stockholders representing the majority capital stock is required for the filing of a criminal complaint.
27. Third, the Office of the Ombudsman committed grave abuse of discretion in finding that
petitioner did not suffer any injury arising from the falsified reports of private respondents. This erroneous
conclusion of the Ombudsman stems from its baseless finding that the action was in essence, an action to question
the closure of UBI, UDB and UII. Even a cursory appreciation of the Complaint and the nature of the charges
show that the action was criminal.
28. The Ombudsman apparently neglected to take into account the fact that petitioner was an officer,
director, stockholder, depositor and client of UBI, UDB and UII. Their closure led to petitioner’s loss of
employment and the depreciation in value of his investments, among others. Petitioner’s name, honor and
integrity were verily ruined by private respondents’ false findings in the SES Reports. In fact, it is doubtful
whether petitioner would ever find gainful employment in any financial institution in consequence of these
falsified reports. To this extent, petitioner suffered injury. As such, Section 3(e), RA 3019 covers acts by public
officers “causing any undue injury to any party” “in the discharge of his official administrative or judicial
29. Fourth, the Office of the Ombudsman acted with grave abuse of discretion in holding that the
falsified SES Reports were merely recommendatory. The error in this finding is shown by the undeniable fact
that the MB acted on the basis of these falsified and erroneous reports, thereby causing damage not only upon
petitioner but thousands of other persons. Further, the evidence plainly shows that private respondents had priorly
orchestrated the whole affair; the false SES Reports were therefore not recommendatory, but the basis for the
malicious intent to shut down UBI, UDB and UII, as will be discussed below.
30. Fifth, the Office of the Ombudsman committed grave abuse of discretion in dismissing the
criminal complaint against private respondents when, on the other hand, it acted on the administrative case OMB-
ADM-0-00-0867 and found respondents guilty of neglect of duty for the very same acts. In fact, the very
reasons of the Ombudsman in dismissing the complaint could well have been the reasons for a dismissal of the
complaint in the administrative proceedings. The Ombudsman obviously did not dismiss the administrative
complaint; the Court of Appeals, as discussed below, even magnified the offenses committed by private
respondents and increased the penalty. The reasons offered by the Ombudsman in dismissing the criminal
complaint are hence, obviously sham, false and contrived. To the extent that it contradicted itself in failing to find
probable cause against private respondents and ruled that petitioner questioned the wisdom of the resolutions of
the Monetary Board, the Office of the Ombudsman grossly misappreciated or ignored the complaint on record.
31. Prescinding from the first above-discussed error of the Ombudsman, petitioner had more than
sufficiently observed the quantum of evidence required to establish probable cause, which is far less than
substantial evidence. That the Ombudsman miserably waylaid the evidence presented by petitioner is in itself
grave abuse of discretion that may be corrected by the Honorable Court. In PCGG vs.Desierto, Disini, et al.
(supra), the Supreme Court clarified the definition of probable cause:
“Probable cause is a reasonable ground for presuming that a matter is or may be well-founded on such
state of facts in the prosecutor's mind as would lead a person of ordinary caution and prudence to believe
— or entertain an honest or strong suspicion — that it is so. The term does not mean "actual and positive
cause"; neither does it import absolute certainty. It is based merely on opinion and reasonable belief. Thus,
a finding of probable cause does not require an inquiry into whether there is sufficient evidence to secure a
conviction. It is enough that the act or the omission complained of is believed to constitute the offense
charged. Precisely, there is a trial to allow the reception of evidence for the prosecution in support of the
“It ought to be emphasized that in determining probable cause, the average person weighs facts and
circumstances without resorting to the calibrations of technical rules of evidence, of which such person's
knowledge is nil. Rather, the lay person usually relies on the calculus of common sense, of which all
reasonable persons have an abundance.”
32. Petitioner respectfully submits that he had more than sufficiently met the standard laid down
above for determining probable cause. The wealth of petitioner’s evidence attests to this self-evident truth. In
fact, it would have been prudent for the Ombudsman to proceed with the filing of an information with the
Sandiganbayan and thereafter allow the latter to weigh the validity and merits of a party’s defense or accusation as
well as the admissibility of testimonies and evidence in the course of the trial (Layus vs. Sandiganbayan, 320
33. The following arguments and evidence underscore the grave abuse of discretion committed by the
Office of the Ombudsman and the overwhelming existence of probable cause against private respondents:
A. PRIVATE RESPONDENTS FAILED TO EXERCISE
DILIGENCE AMOUNTING TO GROSS
INEXCUSABLE NEGLIGENCE AND COMMITTED
ACTS MANIFESTING MALICE, BAD FAITH AND
PREMEDITATED PURPOSE TO SHUT-DOWN
UBI, UDB AND UII WITHOUT DUE PROCESS.
34. It bears stressing that under Section 30 of R.A. 7653, the MB may close a bank only upon the
basis of a report from BSP-SES. Because of BSP’s tremendous powers, including the power to summarily close
banks, Section 16 of same Act requires BSP officers and examiners to exercise a higher standard of diligence and
dedication in the performance of their duties. In fact, BSP alone among government agencies, is the only agency
whose employees are required by law to observe “extraordinary diligence” in the discharge of their duties and
Sec. 16. Responsibility. – Members of the Monetary Board, officials, examiners, and employees of the
Bangko Sentral who willfully violate this Act or who are guilty of negligence, abuses, or acts of malfeasance
or misfeasance or fail to exercise extraordinary diligence in the performance of his duties shall be held liable
for any loss or injury suffered by the Bangko Sentral or other banking institutions as a result of such
violation, negligence, abuse, malfeasance, misfeasance or failure to exercise extraordinary diligence.
14In OMB-ADM-0-00-0867, the Ombudsman found Reyes, Yuvienco, Guerrero and Aure guilty of Simple Neglect of Duty,
imposing upon them a suspension of one-month-and-one day without pay. The case was elevated to the Court of Appeals in CA-
GR SP No. 72270, which found Buenaventura, Reyes, Yuvienco, Guerrero and Aure guilty of GROSS NEGLECT OF DUTY
and imposed upon them a suspension of one year without pay pursuant to Sec. 25, RA 6770.
35. Furthermore, Sec. 3(e) of R.A. 3019 Anti-Graft and Corrupt Practices Act punishes, as a corrupt
practice, any acts by a public officer “causing any undue injury to any party…in the discharge of his official
administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable
36. The three SES Reports on UBI, UDB and UII, which respondents prepared, did not merely
contain incorrect or inaccurate statements, but were replete with outright lies and disinformation, purposely made
to justify their hurried closure. The Reports were “haphazardly and negligently done” even as it recommended a
closure which was “harsh”, “drastic” and “premature” 15 based on false and fabricated SES findings.
Respondents did not bother to exercise any diligence at all, tantamount to gross negligence that is inexcusable,
more so when dealing with three (3) institutions imbued with public interest. However, when respondents had
intended from the beginning to close UBI, when they altered and ante-dated official reports to justify closure,
when they attempted to cover-up their nefarious acts through further falsification, perjury and coercion,
respondents should also be held liable for their culpable malfeasance.
37. Respondents showed their malice, bad faith and premeditated purpose to shut-down UBI, UDB
and UII without regard for due process, as shown by the following circumstances:
The MB closure order was prematurely served on
UBI even before the MB deliberated upon and
approved the closure.
38. On 26 April 2000 at 10:45 AM, the MB convened at the Manila Golf Club, Forbes Park, Makati
City and adjourned at 11:30 AM. The MB meeting was a Special Meeting, especially called for the purpose of
deliberating upon the three (3) SES Reports on UBI, UDB and UII, and deciding upon the recommendations of
said Reports. During said Meeting, which was also attended by Mr. Norberto Nazareno, President of Philippine
Deposit Insurance Corporation (PDIC), the MB issued Resolutions Nos. 634, 635 and 636, ordering the closure of
UBI, UDB and UII, respectively 16.
39. However, PDIC served the MB closure order (Annex A of Complaint, Annex “E”) on UBI at
UrbanBank Plaza, Pasong Tamo, Makati City at 10:30-11:00 AM of 26 April 2000, at a time when the MB had
not yet met or was just starting to meet at the Manila Golf Club. The closure order already indicated the MB
Resolution Number 634, and was already signed by Nazareno who was attending the MB meeting at Manila Golf
Club. (At such time during a working day, it would have taken 30 to 40 minutes to deliver the “signed” order
from Manila Golf Club to UrbanBank Plaza, traversing through eight (8) traffic-signal intersections.)
40. The following pieces of evidence show that PDIC closed UBI despite the total lack of
deliberation by the MB on the SES Reports:
40.1. The affidavit of UBI Corporate Secretary Corazon Bejasa (Annex “F”), who stated under oath
that she received the MB closure order from PDIC officials at 10:30 AM:
“On April 26, 2000, at about 10:30 A.M., Mr. Ricardo Tan, Mrs. Aurora Baldoz and Mr. Angel
Obrero, officers of the Philippine Deposit Insurance Corporation (PDIC), arrived at my office at the 18 th
Floor, UrbanBank Plaza, Makati City. Prior to this time, it was reported to me that there were several
PDIC employees who were already at the Head Office Branch of the Bank at the ground floor of the
UrbanBank Plaza at about 9:00 a.m.
“x x x Mr. Tan handed over to me copies of a letter dated April 26, 2000 addressed to Mr. Teodoro
C. Borlongan and signed by Mr. Norberto C. Nazareno, President of the Philippine Deposit Insurance
Corporation (PDIC), copy of which is attached as Annex “A” hereof, prohibiting Urban Bank from doing
business in the Philippines and placed the bank under receivership by PDIC.
“I immediately called the office of Mr. Borlongan and I was advised by his staff that he was at the
Business Center of the UrbanBank Plaza located at the 24 th Floor of said building for a press conference
on the declaration of a bank holiday by Urban Bank.”
40.2. The affidavit of PDIC Deputy Receiver Angel Obrero (Annex “G”), who stated under oath the he
served the same closure order on Atty. Bejasa at 11:00AM:
“On 26 April 2000 at around 11:00 A.M., I together with Mr. Ricardo M. Tan and Ms. Aurora C.
Baldoz, as well as other officers and personnel of PDIC, served a copy of the Monetary Board Resolution
No. 634 on Ms. Corazon Bejasa of UBI.”
15 OMB-ADM-0-00-0867, Ombudsman’s findings in its Orders dated 2 and 30 July 2002.
16 Zuniga’s counter-affidavit, par. 6-11; Reyes’ counter-affidavit, par. 4.3.5
40.3. The 27 April 2000 newspaper account in the Philippine Star (page 5 of Complaint, Annex “E”)
which corroborates the time that PDIC closed down UBI. A press conference was convened on 26 April 2000 at
10:00AM by UBI Chairman Bartolome, with petitioner present, in the boardroom of the Business Center located
at the 24th Floor of UrbanBank Plaza. It was interrupted by PDIC after 10:30 AM but before 11:00 AM. The
abrupt manner by which PDIC took over UBI’s premises was recorded by the Philippine Star reporter who
attended said conference: “(the PDIC) came quite unexpectedly, forcing Bartolome to abruptly cut short his press
conference, as a PDIC representative held a simultaneous press conference outside the room where Bartolome
was explaining the Bank’s position. A cloak of fear appeared to grip the bank employees as the PDIC ordered the
sealing off of the executive floor on the 37th level”
41. The affidavits of UBI Corporate Secretary Bejasa (who received the MB closure order) and
PDIC Deputy Receiver Obrero (who served the same closure order) definitively set the time of the service and
receipt of the MB closure order between 10:30 and 11:00 AM of 26 April 2000, when the MB had yet to meet at
10:45 AM at the Manila Golf Club, per sworn statements of respondents who admitted that the meeting lasted
until 11:30 AM.
42. The document signed by Nazareno and purporting to be the MB closure order was therefore a
falsified document, as it bore no legal authority when it was served on UBI. The order was signed by Nazareno
even before he attended the MB Special Meeting which had not yet started, and was officially executed by PDIC
when no such MB authority existed at the time. The order even CITED the MB Resolution Number when no
meeting of the MB had yet taken place to approve said resolution, although the Resolution Number indicated
therein coincides with the number of the Resolution passed by the MB on 26 April 2000.
43. Clearly, this indicates the arbitrariness and bad faith of respondents in the same manner as the
preparation of the SES Reports. More frighteningly, however, this action, taken together with the unwarranted
examination of UBI's books and other unlawful actions of the respondents, suggest the presence of an unseen
hand whose wish to see the closure of UBI at all costs the respondents could not refuse.
Buenaventura and Zuniga violated the law by not
recording the MB meeting of 26 April 2000, in order
to conceal the deliberations and non-existence of the
44. Respondent Zuñiga stated in his counter-affidavit that the MB Special Meeting convened at
10:45 AM and adjourned at 11:30 AM of 26 April 2000 at the West Room of the Manila Golf Club. Records of
Manila Golf Club, however, show that a different room was reserved in advance under Buenaventura’s name, as
venue for the MB Special Meeting.
45. On 26 April 2000, respondent. Buenaventura conducted the MB Special Meeting without the
required tape-recorder or stenographer, in violation of Section 11, RA 7653. As Chairman of the MB, he would
and should have required such. However, when one’s purpose in conducting the meeting is a sham and contrary
to law, any tape-recorded coverage of the proceedings is deliberately suppressed, as was done in this case.
46. Section 11 of RA 7653 provides:
“The Bangko Sentral shall maintain and preserve a complete record of the proceedings and
deliberations of the Monetary Board, including the tapes and transcripts of the stenographic
notes, either in their original form or in microfilm.”
47. In conducting the MB Special Meeting, respondent Buenaventura knowingly and for the first
time violated this legal provision, in an obvious attempt to conceal the true facts as to what, and how, the MB
actually deliberated on the closure (assuming the MB even discussed, much less deliberated on anything).
48. In the 6 December 2000 hearing conducted by the Congressional Committee on Good
Government inquiring into UBI’s closure, respondent Zuñiga erroneously stated that there was no requirement
for a tape recording of the meeting and that the MB and BSP would rely solely on the minutes:
REP. DEFENSOR. Mr. Chairman, in the course of the meeting that you had, you have the minutes and
the tapes of that meeting?
MR. DE ZUNIGA. We prepared the Minutes except that there is no tape mechanism during that meeting.
So, we just rely on the Minutes. There was no taping mechanism at Manila Golf Club.
REP. DEFENSOR. Well, Mr. Chairman, isn’t it part of the regulations of the Monetary Board that all
Board meetings are taped?
MR. DE ZUNIGA. What is required is that if there are tapes or transcripts, these be preserved. But there
is no mandatory requirement that all proceedings be taped. But the Minutes should be kept.
REP. DEFENSOR. And these are Minutes of the actual transcript, verbatim statements?
MR. DE ZUNIGA. There was no transcript because there was no stenographer present. So, I just took
notes as Secretary of the Monetary Board, Your Honor.
(Congressional transcript, Committee on Good Government 6 Dec. 2000, pages tjasipin/ VII-1 & 2.)
49. In his counter-affidavit in OMB-0-01-0089 Defensor vs. Buenaventura et al., Zuñiga had even
more to say with regard to the 26 April 2000 MB meeting:
“The proceedings and deliberations of the MB need not be recorded through tapes and stenographic notes.
It is sufficient if minutes are taken of said proceedings and deliberations.
xxx xxx xxx
“To be sure, the Minutes reviewed, approved and signed by the MB members in attendance at the
meetings to which said Minutes pertain would carry more weight than mere tape recordings or
stenographic notes taken by third persons. Stenographic notes, in particular, often carry inaccurate
statements and errors, depending on the proficiency and ability of the stenographer. On the other hand,
Minutes of meetings that are reviewed, approved and signed by the persons concerned, would be said
persons’ statements and admissible in evidence.” (OMB-0-01-0089, Zuñiga’s counter-affidavit,
50. Again, respondent Zuñiga attempted to sell his own warped version of Section 11 of RA 7653.
Obviously, no one can maintain complete and detailed records of proceedings of formal MB meetings by merely
jotting down notes thereon. This is contrary to law. He even insults our very own government institutions that
rely upon tape and stenographic recording of proceedings and hearings as a mandatory exercise, such as our
judiciary courts, committees and houses of Congress, and the regulatory agencies under the executive branch.
This unusual, unlawful excuse by the MB Secretary and BSP General Counsel becomes startling when the
deliberations involve the closure of a commercial bank (more so, simultaneous with a thrift bank and an
investment house, all imbued with public interest).
51. This circumstance calls to mind the Banco Filipino case, where the Central Bank refused to
produce the tape recordings of the MB meetings that eventually led to the decision to close Banco Filipino. In
sustaining the production of documents and tape recordings of the MB’s deliberations on Banco Filipino, the
Supreme Court said:
“xxx Respondent's reason for their resistance to the order of production are tenuous and specious. If
the respondents public officials acted rightfully and prudently in the performance of their duties, there
should be nothing at all that would provoke fear of disclosure.
“On the contrary, public interests will be served by the disclosure of the documents. Not only the
banks and its employees but also its numerous depositors and creditors are entitled to be informed as to
whether or not there was a valid and legal justification for the petitioner's bank closure. It will be well to
consider that —
‘Public interest means more than a mere curiosity; it means something ion which the public, the
community at large, has some pecuniary interest by which their legal rights or liabilities are affected"
(State vs. Crocket, 206, p. 816 cited in Words and Phrases, Vol. 35, p. 229).
“IN VIEW OF ALL THE FOREGOING, the order to produce documents dated February 17, 1986
issued by the court below in S.C.-G.R. NO. 70054, is hereby affirmed, except as to the copies of the tapes
relative to the Monetary Board deliberations on the closure of Banco Filipino on January 25, 1985 and its
meeting on July 27, 1984, and March 22, 1985 and only if such tapes are actually no longer available taking
into account respondent Monetary Board's manifestations that the tape recording of the deliberations of that
Board are, for purposes of economy, used over and over again inasmuch as these tapes are not required to
be kept or stored.”
(Banco Filipino vs. Monetary Board, 142 SCRA 523, pp. 532-533)
52. The total failure of respondents Buenaventura and Zuñiga to tape-record the MB meeting
palpably demonstrates the lack of diligence in the handling of the closure of UBI, UDB and UII. Actually, it
points to bad faith and malice on their part for with the absence of any tape recording of the proceedings, they
would be given free rein to modify whatever discussions were made thereat.
PDIC served the wrong closure order on UDB.
53. PDIC served the wrong closure order on UDB, as it was addressed to UBI. Even worse, said
order was addressed to UBI’s Cebu branch at an address that had been vacated for more than a year.17 UDB
was a small thrift bank with its single-office located at Osmeña Boulevard, Cebu City. As required under BSP
regulations, the large signage outside its office clearly identified it as UDB’s premises (and not UBI). The order
also cited MB Resolution No. 634 closing UBI, instead of Resolution No. 635 closing UDB (Annex D of
Complaint, Annex “E”).
54. Such fatal flaw clearly manifested respondents’ haphazardness and negligence, when they
conveyed the erroneous information to PDIC. Like the closure order on UBI, the document purporting to be the
closure order on UDB bore an invalid authority of closure when it was presented to UDB.
55. The foregoing show that no stage-managed crime can be perfectly executed. Gaps in the evil
tapestry will show. Here, it reflects negligence, cowardice, and ineptness. It reflects the heinous character of the
offense which Buenaventura is guilty of, and which his co-respondents implemented at his bidding.
Buenaventura preemptively announced UBI’s closure
and receivership, a day before the MB met to
deliberate on the SES Reports and decide on the
56. Irrefutable evidence show that respondent Buenaventura pre-empted the MB and decided on
UBI’s fate, even before the MB met to decide on the issue.
57. On 25 April 2000 twelve (12) hours before the MB Special Meeting of 26 April 2000,
respondent Buenaventura was interviewed live over telephone, which was aired on the 10:00PM television news
of Channel 21 (ANC-21, Business Nightly). In said interview, he stated that PDIC would immediately take-over
UBI as receiver the following day, which meant that he was closing-down UBI. Thus, Buenaventura stated on
the air before millions of viewers:
“BUENAVENTURA: xxx From what we gather, the Urban Bank situation is such that it is solvent but
quite illiquid and therefore, the infusion of capital plus new owners should allow it to be reopened.
NEWSCASTER: Have you uncovered any anomalies, let’s say like DOSRI [loans to directors, officers,
stockholders and related interests] violations, or are you expecting to uncover such anomalies?
BUENAVENTURA: That’s too early for us to say because, obviously, they’ve only declared the holiday
today. Tomorrow, we will be coming in to take over. PDIC will be the receiver, at which point, then, of
course, we will start doing an inventory of the assets and liabilities of Urban Bank.
And as I said, and Urban Bank Management agreed, that we try to appoint an investment banker or
bankers to do a due diligence so that we can offer the bank to a foreign or local bank that might be willing
to buy it, so that we can reopen it as soon as possible, and business would carry on as usual, after it is
(Transcript of the videotaped interview is attached as Annex “H”)
58. For the first time in the history of Philippine banking, the MB ordered the closure of a bank even
as it had not even convened to decide a bank’s fate, but whose judgment thereon had already been announced by
the BSP Governor a day before the meeting was to take place. Moreover, Buenaventura managed to arrive at
such decision without the benefit or need of the requisite SES Reports, which were inexistent at that time.
17 The MB closure order served by PDIC on UDB was addressed to “The Manager (or to the Highest Officer Present), Urban Bank-
Osmena, Cebu Branch, GF Fortune Life Bldg., Osmena Blvd., Cebu City”. UBI did not have any branch at Osmena Blvd; its only branch
in Cebu City had been relocated to Ayala Cebu Business Park for more than a year.
B. RESPONDENTS FLAGRANTLY VIOLATED
THEIR OWN CENTRAL BANK MANUAL OF
EXAMINATION PROCEDURES, THEREBY
DENYING UBI, UDB AND UII THE REQUISITE
59. The BSP Supervision and Examination Sector (SES), in conducting its examination and preparing
its reports to the MB, is bound by set examination standards and procedures, specifically, the Central Bank
Manual of Examination Procedures. The following highlight the requirements as provided under the Manual:
CENTRAL BANK MANUAL OF EXAMINATION PROCEDURES:
BANK EXAMINER’S CODE OF CONDUCT.
17. Prepare yourself with details of findings before conferring with officials of the institution at the
termination of the examination. Conduct the conference with an open mind and in the most dignified
manner. Avoid arguments and take note of their explanations or reasons to exceptions noted.
18. Complete and submit your report within a reasonable period.
C. PLANNING AND ORGANIZING EXAMINATIONS.
The Examiner-in-Charge undertakes the overall supervision of the examination. He directs the
examination so as to attain its objectives most efficiently. His primary duties and responsibilities are as
xxx xxx xxx
6. Summarizes examination findings noted.
7. Leads the conference with officers/directors of the institution on exceptions/deficiencies noted.
8. Prepares the examination report.
L. CONDUCTING EXAMINATIONS
4. Concluding the examination.
All working papers together with a list of exceptions/deficiencies noted should be turned-over by assisting
examiners to the examiner-in-charge for review and compilation. Follow-up of previous examination
findings should be undertaken by the examiner-in-charge.
Assisting examiners should refrain from conferring about their findings with any of the institution’s
officers or employees. They should leave this to the examiner-in-charge to avoid confusion and
embarrassments. A pre-closing conference led by the examiner-in-charge should be held with the
officers/representatives of the institution on findings/exceptions. The minutes of the conference may be
made part of the report to the Monetary Board. A copy of the summary of findings/violations should be
furnished the institution examined so that corrective action may be taken by them as soon as possible.
(Photocopy of the above Manual of Examination Procedures is attached as Annex “I”).
60. Respondents, in preparing the suspect SES Reports, wantonly violated their own Central Bank
Manual of Examination Procedures, viz:
60.1. Respondent Aure admitted in his counter-affidavit (par. 22.214.171.124 to 8) that he himself prepared the
SES Report on UBI. Under the Manual of Examination Procedures, the findings should have been prepared by
the examiner-in-charge of UBI, which is then subject to the review of the department head. Aure short-circuited
the required process by preparing the findings in the SES Report himself, contrary to the Manual of Examination
60.2. No conference with UBI, UDB and UII was held by BSP to discuss its findings, contrary to their
own Manual of Examination Procedures. The Manual, as a measure of due process, requires the conduct of such
60.3. Respondents did not provide UBI, UDB or UII with a summary of the SES findings/violations,
contrary to their own Manual of Examination Procedures. The SES Reports themselves were given five (5) months
after the closure and only upon the formal demand of petitioner’s counsel. The Manual of Examination
Procedures requires that the institution be furnished a summary or report of the SES’s findings.
60.4. Respondents did not give UBI, UDB and UII any time or opportunity to correct their
exceptions/violations, contrary to their own Manual of Examination Procedures. The Manual requires the
furnishing of the summary of its findings/violations to the institutions being examined precisely “so that
corrective action may be taken as soon as possible”. By recommending the immediate and radical closure of UBI,
UDB and UII, respondents wantonly deprived shareholders and management of said institutions of viable
remedies to address any deficiency.
61. Respondents clearly disregarded the Central Bank Manual of Examination Procedures to facilitate
the baseless and confiscatory closure of UBI, UDB and UII. In CA-G.R. SP No. 72270 entitled Borlongan vs.
Buenaventura et al., respondents Zuñiga, Yuvienco and Guerrero made the following statement to evade the clear
requirements of the Central Bank Manual of Examination Procedures:
“The Central Bank Manual of Examination Procedures…was issued on June 27, 1975 and has since been
superseded. The relevant regulations in force since 1997 are found in the BSP Manual of Regulations for
(CA-G.R. SP-No. 72270, Zuñiga, Yuvienco and Guerrero’s Comment dated 11 October 2002, page 42)
62. The truth is, the BSP Manual of Regulations for Banks DID NOT SUPERSEDE the Central Bank
Manual of Examination Procedures. These manuals are two totally different manuals. The Manual of
Regulations is a compilation of BSP’s rules and regulations on banks (not on BSP examiners) for enjoining
banks’ compliance. On the other hand, the Manual of Examination Procedures is an instructive reference for BSP
examiners (not for banks) covering their examination work, review and appraisal. In attempting to deceive the
Court of Appeals, Zuñiga, Yuvienco and Guerrero perjured themselves.
63. Four (4) rural banks were named by respondents Reyes and Aure as having been closed in 1999-
2000 allegedly “because of illiquidity but not on the basis of insolvency”. However, the SES Report dated 2
September 1999 on Rural Bank of San Teodoro, the SES Report dated 9 August 2000 on Rural Bank of Gumaca
(Quezon), the SES Report dated 16 August 2000 on Rural Bank of Bocaue (Bulacan), and the SES Report dated 6
September 2000 on Rural Bank of Santander (Cebu) show that BSP still observed and strictly complied with the
Manual of Examination Procedures before recommending their closure -- unlike in the case of UBI, UDB and
UII. (Annexes “J”, “J-1”, “J-2 and “J-3”).
64. The following statements of the Supreme Court in the classic Banco Filipino case (204 SCRA
771) are instructive as regards respondents’ failure to comply with the Central Bank Manual of Examination
“The actuation of the Monetary Board in closing petitioner bank on January 25, 1985 barely four days
after a conference with the latter on the examiners' partial findings on its financial position is also violative
of what was provided in the CB Manual of Examination Procedures. Said manual provides that only after
the examination is concluded, should a pre-closing conference led by the examiner-in-charge be held with
the officers/representatives of the institution on the findings/exception, and a copy of the summary of the
findings/violations should be furnished the institution examined so that corrective action may be taken by
them as soon as possible. It is hard to understand how a period of four days after the conference could be
a reasonable opportunity for a bank to undertake a responsive and corrective action on the partial list of
findings of the examiner-in-charge.”
65. In said Banco Filipino case, the Supreme Court found that four (4) days was unreasonable time
for a bank to respond and take responsive and corrective action on the SES findings/violations. In contrast, UBI,
UDB and UII were instantly closed, with absolutely zero due-process.
66. Incidentally, the Supreme Court also found that the SES report on Banco Filipino, which took six
(6) months to prepare, was incomplete. In contrast, BSP admitted that it took just three (3) hours to prepare
the SES Reports on UBI, UDB and UII 18 and even bragged that such critical and sensitive reports “could be
easily prepared at such short notice” 19 and “at the flick of a finger”. 20 Banco Filipino was ordered closed two
(2) days after the SES report was submitted to the MB. In contrast, UBI, UDB and UII were ordered closed on
the same morning that the SES Reports were submitted.
18 During the 6 December 2000 hearing by the Congressional Committee on Good Government inquiring into UBI’s closure,
BSP examiner Aurora Inumerable testified that it took her about three hours to prepare the SES Report on UII, from 6:00PM to
8:30 PM of 25 April 2000. (Congressional transcript, pages ESBongon/VIII-4 & ia/IX-1)
19 OMB-0-01-0089 Defensor v. Buenaventura, Reyes’ counter-affidavit, par 2.3.2
20 OMB-0-01-0089 Defensor v. Buenaventura, Aure’s counter-affidavit, par. 2.1.1
67. As shown, bad faith and malice marred the entire effort to close UBI, UDB and UII. Apparently,
respondents neglected to observe the little details and left the finer points of their staged closure scenario
untended. They ignored lapses, short time frames, unbelievable details which if done in the regular course of
business would have taken months to complete. As they were in a hurry to close UBI along with UDB and UII,
those picayune lapses have turned out to be monumental landmarks of their intent.
C. IN VIOLATION OF LAW, RESPONDENTS
MALICIOUSLY DISCLOSED TO THE PUBLIC
NEGATIVE AND FALSE INFORMATION ON UBI,
TO FAN THE PANIC WITHDRAWALS THAT
EVENTUALLY LED TO THE DECLARATION OF
A BANK HOLIDAY ON 25 APRIL 2000.
68. In their counter-affidavits, respondents pretend that UBI was in a distressed financial condition
long before its declaration of a bank holiday. They failed to take into account the undeniable fact that they were
responsible for the panic withdrawals that eventually led to UBI’s declaration of a bank holiday. Respondents
unlawfully leaked negative information to news media on UBI’s downgrade status and condition; worse, the
information was false and misleading. Respondents were the source of these numerous negative news reports in
March 2000 at a time of a jittery financial market that they were obviously aware of. It was the deluge of these
news reports that eroded public confidence in UBI and UII which shared the same clientele. The constant
withdrawals of their depositors/investors in March to April 2000 eventually led UBI to declare a bank holiday to
put a temporary halt to the panic withdrawals. In revealing such information to the public, respondents violated
Sec. 27(c) of R.A. 7653, Sec. 3(k) of R.A. 3019, and Sec. 7(c) of R.A. 6713.
69. On 9 March 2000, petitioner and UBI Chairman Bartolome met with respondent Buenaventura to
pre-clear with the latter the proposed conversion of UBI to a public holding company, not unlike the Special
Purpose Asset Vehicle that would focus on real estate and housing, and the increased capitalization of UDB that
would focus on whole-sale mortgage banking. (See Annex “K”, “Proposal to the Monetary Board for the
Reorganization of Urban Bank”, copy of which was presented to Buenaventura on 9 March 2000.) In
petitioner’s presence, Mr. Bartolome cautioned respondent Buenaventura on the critical handling of such
sensitive information relative to UBI’s plans, as it may be misconstrued by a very jittery financial market existing
at the time. Buenaventura concurred.
70. Shortly after that meeting however, false information on matters relating to the condition and
business of UBI, particularly its downgrade status, was disclosed to the news media. Despite Mr. Bartolome’s
warning and Buenaventura’s assurance, respondents leaked these adverse, distressing news reports to the media.
Respondents blatantly ignored Section 27(c), RA 7653 on confidentiality of a bank’s condition, which provides:
Sec. 27. Prohibitions. – In addition to the prohibitions found in Republic Act Nos. 3019 and 6713 21,
personnel of the Bangko Sentral are hereby prohibited from:
xxx xxx xxx
(c) revealing in any manner, except under orders of the court, the Congress or any government office or
agency authorized by law, or under such conditions as may be prescribed by the Monetary Board,
information relating to the condition or business of any such institution. This prohibition shall not be held to
apply to the giving of information to the Monetary Board or the Governor of the Bangko Sentral, or to any
person authorized by either of them, in writing, to receive such information.
71. From 16 to 17 March 2000, at least two (2) news reports highlighted UBI’s downgrade status.
Worse, they were false. In both articles, respondent Reyes was quoted:
ABS-CBN News, 16 March 2000
BSP MAY SLAP SANCTIONS ON URBAN BANK
The Bangko Sentral ng Pilipinas (BSP) has ordered Urban Bank to sell its stake in companies engaged
in non-banking activities by the end of March, or face possible sanctions and fines.
Alberto Reyes, BSP deputy governor for bank supervision, said the monetary board has agreed to slap
sanctions on Urban Bank if it still fails to divest its holdings in non-banking subsidiaries.
The penalties may include suspension of branching privilege, non-declaration of dividends, and
suspension of authority to accept government deposits.
Non-compliance will also subject the bank to a daily fine ranging from P500 to P30,000.
xxx xxx xxx
21Sec. 3(k) of R.A. 3019 and Sec. 7(c) of R.A. 6713 prohibit the disclosure of confidential information by public officers. Said
violations are punishable by the penal provisions of Sec. 12, R.A. 3019 and Sec. 11, R.A. 6713. Violations of R.A. 7653 are
punishable by the penal provisions of Sec. 36 of same Act.
The BSP lowered Urban Bank's ranking to a non-expanded commercial bank early last year, after the
latter could not meet the capital requirements set by the BSP.
**** **** **** ****
Malaya, 17 March 2000
BSP GIVES URBAN BANK MARCH 31 DEADLINE
Urban Bank has until the end of this month to bring down its equity exposure in its real estate and
investment house subsidiaries in accordance with its downgraded status as a regular commercial bank,
Bangko Sentral ng Pilipinas (BSP) deputy governor Alberto V. Reyes said.
Reyes said the Monetary Board, the policy-making body of the central bank, gave UrbanBank three
months starting January this year to comply with the requirement.
xxx xxx xxx
Reyes said Urbanbank will have to comply within the allotted time by the Board or face the recently-
approved penalties for downgraders.
The BSP prefers bank consolidation through mergers and acquisition over status conversion. A
circular to banks would be issued slapping fines and other forms of sanctions to non-compliant banks.
(Photocopies of the above news reports are attached as Annexes “L” & “L-1”)
72. On 20 March 2000, petitioner and UBI chairman Bartolome met respondent Reyes at the latter’s
office, to formally protest BSP’s unabashed error in reporting UBI’s condition. They expressed grave concern
over the unfavorable impression such news had on the public, given the then-panicky condition of the financial
73. During said meeting, petitioner personally handed to Reyes his letter addressed to BSP, attention
of respondents Reyes and Yuvienco. In said letter dated 20 March 2000, petitioner wrote:
This has reference to your letter dated February 24, 2000, advising us of Monetary Board Resolution
No. 171 dated February 4, 2000, granting Urban Bank an extension of six (6) months or up to May 26,
2000 within which to complete the divestment of the bank’s excess equity holdings in Urbancorp
Please be advised that the bank completed the divestment of its excess equity investments in
Urbancorp Investments, Inc. (UII) within the original deadline of November 26, 1999 as prescribed by the
Monetary Board in its Resolution No. 1639 dated November 26, 1998. While we did request, in a letter
dated August 10, 1999 for an extension up to November 26, 2000, we were advised that such an extension
will not be granted.
xxx xxx xxx
Lastly, the completion of the divestment process was among the first items sought to be verified by
your team of examiners when they conducted a special audit of the bank and UII beginning January 18,
We are therefore concerned that the Monetary Board may have been advised that the bank failed to
comply with Monetary Board directive to divest in UII, which may have unjustly created an unfavorable
impression upon the members of the Monetary Board. In fact, such unfavorable impression has spread to
the public through a news item in the Malaya issue of March 17, 2000…
We hope that appropriate steps will be taken to correct this matter.
(Photocopy of this letter is attached as Annex “M”)
74 Facts below, implicit in the foregoing letter, show a devious trail of respondents’ machinations
leading to the closure of UBI:
74.1. UBI had requested BSP in 10 August 1999 for an extension of the original deadline to comply
with its divestment in UII, but was told that such extension would not be granted. (It was Reyes who told
74.2. UBI managed to complete the divestment within the original deadline of 26 November 1999. On
18 January 2000, BSP examiners conducted an unlawful examination of UBI (and UII), and verified the
divestment as among their first items. They were, of course, distraught to know that it had already been done.
74.3. Despite BSP’s verification of said divestment, respondents rendered a false and erroneous report
to the MB on 4 February 2000 which led the MB to uselessly grant an extension of time for UBI’s divestment and
impose restrictions. To be sure, respondents were in receipt of UBI’s several letters from November 1999 to
January 2000, informing BSP of the divestment.
74.4. The MB inexplicably granted said extension two-and-a-half months too late, after allowing the
lapse of time for UBI to violate the original deadline of 26 November 2000, despite UBI’s timely request on 10
74.5. Finally, petitioner called BSP’s attention to the negative press information regarding the
divestment of which respondent Reyes was the source.
75. The above facts belie respondent Buenaventura’s claim of “adequate familiarity” of UBI’s
allegedly precarious financial condition as he engineered a situation which would eventually lead to UBI’s
collapse. And when he was unable to do it by squeezing UBI to comply with its requirements, he manipulated
reports on its financial condition and fabricated stories to picture an ailing institution headed towards perdition:
“The truth of the matter is that Urban Bank, prior to its closure, has been subject of the Bangko
Sentral’s attention in several instances, giving the management and staff adequate familiarity with
facts needed to quickly generate the reports. Thus:
xxx xxx xxx
“h. On 04 February 2000, the Monetary Board, learning of Urban Bank’s inability to divest itself of
its equity holdings in Urbancorp Investments, Inc. resulting from its downgrading as a
commercial bank, gave it another six months or up to 26 May 2000 to comply;”
(Buenaventura’s counter-affidavit, par. 2.3.2)
76. Respondents Buenaventura and Reyes knew and were adequately warned of the ill effect of
undue media disclosures. This notwithstanding, they disseminated information which made UBI depositors and
UII investors jittery. Instead of assisting, they spread false news with malice. They caused UBI’s and UII’s run.
77. The only reasonable inference from the foregoing is that respondents had pre-ordained the
eventual closure of UBI (with UDB and UII). Buenaventura first mustered the powers of his office first to
conduct an unlawful examination in January 2000 to gather evidence to support closure. When Buenaventura
was unable to find fault with UBI, he with his co-respondents created false evidence and submitted them to the
MB on 4 February 2000. It was then that they unlawfully revealed to the public MB’s actions on UBI’s alleged
violation, well aware of the jittery market at the time.
78. Respondents’ disclosures to media had extraordinary impact as panic swept the financial market
from February to April 2000. Respondents knew very well that there were over P10-billion of unpaid debt
instruments floating in the market at that time, including Wincorp, ASB Realty Group, C&P Homes, and East
Asia Capital. Indeed, the enormity of these unpaid instruments issued through banks and investment houses
caused jitters among depositors and investors, a number of whom were severely affected. Other factors during
the same period February to April 2000 further exacerbated an already fidgety financial environment – the
massive flight of investment capital which BSP closely monitored; the stock market crash due to the BW fiasco
and controversial investigation; the coup rumors and “Erap-resign” movement. It is impossible to conceive that
BSP, the central monetary authority of the country, would not be aware of these developments.
79. Further evidence of the existence of a panicky market were the events immediately following
UBI, UDB and UII’s unceremonious closure on 26 April 2000. Their closure instantly triggered further runs
on numerous institutions in the banking industry and investment-house industry as well. The Honorable
Court may take judicial notice of the financial situation at that time. In the few weeks immediately after the
closure, it is estimated that BSP and PDIC extended P25-billion in financial assistance to several banks including
the Philippine Bank of Communications, International Exchange Bank, and Export and Industry Bank. This does
not include the P25-billion lent to the Philippine National Bank in October 2000 and the P30-billion lent to
Equitable PCI Bank, later.
80. Respondents ignored petitioner’s protests on 20 March 2000 and continued releasing negative
information to the news media. Despite petitioner’s and Mr. Bartolome’s warning the second time, at least four
(4) more news reports were published on 30 March 2000, which only aggravated the jittery situation. Two of
these news reports even cited as their source a “senior official of the Bangko Sentral” and “sources from the
Bangko Sentral”. Such coordinated media blitz was plainly orchestrated by the respondents, as these very similar
news reports were all published with almost the same text on the same day 30 March 2000:
Phil. Daily Inquirer, 30 March 2000
URBAN BANK - PANASIA MERGER TALKS BOG DOWN
The planned merger between Urban Bank and Panasia Banking Corp. of the Tan Yu group fizzled out
after the parties failed to agree on the terms and conditions of the union.
Urban Bank wanted to acquire the three-branch bank but sources from the Bangko Sentral ng
Pilipinas said negotiations bogged down due to problems of valuation and division of shares.
xxx xxx xxx
BSP sources also said Urban and Panasia were two of the three commercial banks that have requested
the central bank for a downgrade in their status due to their inability to comply with the BSP's mandatory
capital increase requirement.
xxx xxx xxx
Urban Bank, for its part, earlier got a downgrade from a universal bank to a regular commercial bank.
BSP sources said the bank "intends to refocus and concentrate on real estate lending" as part of its niche
This means Urban could be seeking a downgrade to thrift bank status.
xxx xxx xxx
BSP, in Circular 229, has given capital deficient banks six months to phase out services and activities
they are barred from doing when they are downgraded.
xxx xxx xxx
Non-monetary penalties include the suspension of branching privileges and declaration of cash
dividends. Erring banks could no longer tap the central bank's overnight lending or borrowing facility and
they could not lend to affiliates.
Their authority to accept or handle government deposits, engage in derivative activities, and to invest
in allied undertakings would also be suspended.
**** **** **** ****
ABS-CBN News, 30 March 2000
URBAN BANK - PANASIA BANKING MERGER FIZZLES OUT
Negotiations for a possible merger by Urban Bank with Panasia Banking Inc. have fizzled out after
the former opted to simply focus on property development, a senior official of the Bangko Sentral ng
Pilipinas (BSP) said.
The BSP official said the decision by Urban Bank to concentrate on real estate projects was reached
shortly after it was downgraded from a universal bank to a regular commercial bank.
xxx xxx xxx
The capital build-up should be completed by the banks by yearend. For banks whose status were
downgraded, the BSP directed them to trim some of their functions or face stiff monetary penalties.
Meanwhile, BSP governor Rafael Buenaventura said the central bank would keep the moratorium on
bank branching in order to give value to small banks which want to sell out.
"We will keep it for a while because I am trying to give value to those who want out," he said.
**** **** **** ****
BusinessWorld, 30 March 2000
3 CAPITAL-DEFICIENT BANKS SEEK BSP LICENSE DOWNGRADE
At least three commercial banks have volunteered to downgrade their licenses after failing to meet the
yearend capital build-up program of the Bangko Sentral.
The three banks are Panasia Banking Corp. (Panbank) of tycoon Tan Yu, the Philippine Bank of
Communications (PBCom) of the Nubla family, and Urban Bank.
A well-placed source said the three banks have already signified their intentions to the Bangko Sentral
after failing to raise the fresh capital last Jan. 31.
The source added Panasia's voluntary downgrade was a result of the failure of negotiations it had
initiated with Urban Bank late last year.
“That deal fell through so they now have no choice but to downgrade,” he said.
xxx xxx xxx
Urban Bank, which had already downgraded to the commercial banking category last year after
failing to maintain its universal bank status, will "refocus" its operations to service the housing loans
market as its primary niche.
“Urban Bank has informed the Bangko Sentral that it will focus its efforts on this market (housing)
since it is their lucrative core business anyway," he said. As of end-1999, Urban Bank was capitalized at
**** **** **** ****
Malaya, 30 March 2000
3 BANKS REQUEST FOR DOWNGRADE
At least three commercial banks are requesting for a downgrade in status or "refocusing" from the
Bangko Sentral ng Pilipinas (BSP) notwithstanding the penalties to be slapped on them, a well-place
banking source said.
Pan Asia Bank, Urban Bank, and Philippine Bank of Communications (PBCom) all have expressed
their intentions for status conversion.
The source said Urban Bank, which has converted into a regular commercial bank, wanted to become
a niche player and focus its service on house financing.
Pan Asia Bank, owned by taipan Tan Yu, is for sale, the source said though the merger negotiations
with Urban Bank finally bogged down due to problems on pricing.
(Photocopies of the above news reports are attached as Annexes “N”, “N-1”, “N-2” and “N-3”)
81. Respondent Reyes particularly has shown a deplorable proclivity to leak confidential
information. In a recent case, the Court of Appeals found Reyes and his co-respondents guilty of
unprofessionalism for violating the rule on confidential information and brokering the sale of the Rural Bank of
San Miguel (CA-GR SP No. 60814, Rural Bank of San Miguel vs. Alberto V. Reyes, et al). In its resolution dated
29 July 2002, the court found Reyes liable, holding that:
“Given the extraordinary diligence required of respondent Reyes under the BSP law in the performance of
his duties (Sec. 16, RA 7653), we are of the view that the Ad Hoc Committee’s exoneration of Reyes from
petitioner’s complaints of unauthorized disclosure of confidential information is not warranted by the
evidence on record. As it is, Reyes’ response, when coupled with the news item referring to BSP officials
as the source of the confidential matters, the veracity of which was not shown to have been controverted,
fell short of the extraordinary diligence required of him under the law. Indeed, the news item should have
prodded this respondent to conduct a more thorough and objective investigation of the matter, more so in
the light of the absolute prohibition under the BSP law against disclosure in any manner of information
relating to the condition or business of a bank (Sec. 27, par. 6, RA 7653).”
82. The case was eventually elevated to this Honorable Court (GR No. 154499, Alberto V. Reyes, et
al. vs. Rural Bank of San Miguel, et al.). In a Decision dated 14 March 2003, this Court concurred with the
appellate court’s finding that Reyes did carelessly handle confidential and vital information regarding the
financial status of Rural Bank of San Miguel.
83. Even the BSP Provident Fund contributed to the panic withdrawals at UBI, when it pre-
terminated its placements (which had only a few remaining days till maturity) one day before UBI was forced to
declare a bank holiday:
Philippine Star, 2 May 2000
BSP EMPLOYEES NEAR VICTIMS OF URBAN MESS
The Bangko Sentral ng Pilipinas (BSP) nearly became victims of the sudden closure of Urban Bank.
sources said the BSP provided fund had a P60-million deposited with the now closed bank. Provident
fund officials were able to withdraw their money just before the Holy Week.
Philippine Daily Inquirer, 9 February 2001
BUENAVENTURA: I WILL NOT RESIGN
“I have a duty to do and we need to preserve the independence of the BSP,” Buenaventura said in the
face of accusations hurled against him by Makati Rep. Joker Arroyo and Misamis Oriental Rep. Oscar
xxx xxx xxx
Arroyo and Moreno, who served as House prosecutors during Estrada’s impeachment trial, said
Buenaventura had favored Estrada and the BSP employees over the ordinary depositors of Urban Bank.
xxx xxx xxx
Arroyo and Moreno, however, pointed out yesterday that the BSP Provident Fund likewise pre-
terminated a P15-million deposit with Urban Bank before it declared a bank holiday on April 26.
Moreno said the deposit was pre-terminated on April 24, four days before maturity date.
“The idea of pre-terminating a fixed deposit is an indication that the BSP knew that Urban Bank will
cease operations,” Arroyo said.
“There can be no doubt that they had to terminate the high-yielding account prior to its stated, agreed
maturity in order to jump the gun on Urban Bank ahead of the other depositors,” Moreno added.
Central Bank sources confirmed the P15-million withdrawal made by the BSP Provident Fund.
They also said the three of the BSP deputy governors who sit in at Monetary Board meetings also
served on the BSP Board of Trustees.
“They gave preference to themselves over private depositors. They had inside knowledge the Urban
Bank was closing. And they betrayed the trust of the people,” Arroyo said.
(Photocopies of the above news articles are attached as Annexes “O” and “O-1”)
84. It is remarkable how respondents were the source of news-driven rumors regarding UBI’s capital-
deficient and downgraded status, threatened with sanctions and penalties that would be imposed on capital-
deficient or downgraded banks. Yet a few days after UBI’s closure, respondents completely reversed their
position and announced alternative schemes for banks to meet the minimum capital hike; they even suspended
that requirement altogether. They did this to calm-down the public panic arising from its perception of capital-
deficient (and therefore weak) banks—a situation that UBI actually suffered because of BSP’s irresponsible
85. Respondents’ quick reversal of their harsh position which brought UBI to its ordered closure is
eloquent proof of their bad faith in the handling of UBI’s supposed capital deficiency that contributed to panic
withdrawals by its clients. As shown, it was BSP’s increased minimum capital requirement that was the basis of
the news-driven rumors against UBI, of which BSP was the source. Sauce for the goose should have been sauce
for the gander. This obviously was not applicable to UBI, as it was targeted for closure despite its baselessness
ABS-CBN News, 4 May 2000
BSP ALLOWS BANKS TO TAP CAPITAL-RAISING SCHEME
The Bangko Sentral ng Pilipinas (BSP) said Wednesday it would soon allow banks to tap a scheme
that would allow them to raise capital.
The BSP said Wednesday it would soon allow banks to raise capital using the “tier 2 capital” to assist
banks to comply with the BSP's mandatory capital build-up.
“Tier 2 capital”, also known as mezzanine capital, combines deposits and equities. It will provide
banks additional money without diluting shareholders' equity.
The funds are infused as equity but are really deposits for which investors are paid a fixed yield.
BSP governor Rafael Buenaventura said once the amendments to the General Banking Act are
approved by Congress this month, the BSP could start allowing banks to put up “tier 2 capital”.
Buenaventura said this would prevent other banks from unnecessarily shutting down operations.
“Like what happened to Urban Bank when existing shareholders do not want to infuse fresh equity
anymore and the bank had no recourse but to close,” Buenaventura said. He added that if “tier 2 capital”
were previously allowed, then Urban Bank would not have suffered liquidity problems.
BusinessWorld, 13 June 2000
BSP SCRAPS CAPITAL CALL FOR THE YEAR
The Bangko Sentral has scrapped the final stage of its three-year capital buildup program imposed on
banks since 1998.
“We will no longer have a capital increase requirement for the year 2000,” Bangko Sentral Gov.
Rafael B. Buenaventura said.
xxx xxx xxx
In addition to lifting banks' third capital call, the Bangko Sentral is also extending the deadline to
comply with the 1999 capitalization requirements to end-2000.
The original deadline was last January, with the penalties for noncompliance scheduled to take effect
“We will also extend the compliance period for 1999 to end-2000,” Mr. Buenaventura said. “Penalties
will be applied beginning yearend instead of next month.”
Under a plan formulated after the 1997 crisis, banks are required to increase their capital accounts
progressively over a three-year period to insulate them from market-induced financial stress.
“This move provides temporary relief to the banks as it effectively extends the period for compliance
with the required end-1999 capitalization levels,” the central bank chief said.
xxx xxx xxx
Mr. Buenaventura said there is no sense penalizing banks with higher capital requirements if they are
only engaged in traditional lending businesses with lower risk profiles.
(Photocopies of the above news reports are attached as Annexes “P” and “P-1”)
D. RESPONDENTS DENIED TIMELY AND
SUFFICIENT FINANCIAL ASSISTANCE TO UBI.
THEY MISERABLY AND MALICIOUSLY
FAILED TO COMPLY WITH THEIR LEGAL
OBLIGATION TO ASSIST UBI.
86. BSP and respondents had the duty to assist, if not help preserve, UBI especially at a time of
temporary illiquidity induced by financial panic. Instead of extending assistance to UBI, respondents
recommended closure. They conveniently forgot their duty to assist in resuscitating a bank, rather than hastening
its demise. BSP, as the bank of last resort, had that legal obligation.
87. Former MB Member Cayetano Paderanga made clear the nature of a financial panic and BSP’s
role to assist banks during such critical times:
BusinessWorld, 1 May 2000
A BANK HIT BY A 'RUN' SHOULD 'TELL THE TRUTH'
Last week, the banking sector lived through a nightmare.
It saw the temporary closure of Urban Bank, adding panic to an already jittery clientele. While
depositors scrambled to empty their accounts in a few banks, these banks found themselves in a quandary:
Should they passively allow clients to withdraw their money or should they try to stop them from doing so?
xxx xxx xxx
No one could pinpoint exactly where the talks started, but many couldn't care less. When hard-earned
money is at stake, bankers admitted it would be hard to persuade people to heed the call for sobriety and
“think of the good of the country.”
“It's basically a herd instinct. Bank runs are occasioned by fear,” former Monetary Board member Dr.
Cayetano Paderanga told BusinessWorld.
xxx xxx xxx
Bank runs could cause perfectly sound banks to fold as panic to spread from one bank to another,
weakening the entire banking system, forcing the government to step in to prevent a systemic crisis by
dipping into taxpayers’ money, causing business confidence to wane - the list could go on and on.
“You are talking here of panic spending, inflation, not to mention all the sleepless nights,” said Mr.
xxx xxx xxx
If there is one lesson bankers and the government can learn from the bank runs, Mr. Paderanga said, is
that trust and a bank’s good name is in fact its only real currency.
“All banks, and that include all good banks, are highly leveraged. That is why all banks are vulnerable
to bank runs,” he said.
Banks get deposits from the public by giving a guarantee that the funds will be managed properly and a
promise that these will earn while in their vaults. Banks then turn around and invest these funds to make
these grow. Thus, simultaneous withdrawals will naturally weaken any bank, even the good ones, said Mr.
But the former Monetary Board member explained that government has all the cash that depositors
need to service their claims.
“There will always be enough liquidity (from the government) to service claims. It's all a game of
confidence,” said Mr. Paderanga.
(Photocopy of the news report is attached as Annex “Q”)
88. It should be noted that Sections 83 and 84 of R.A. 7653 precisely empowers the BSP to assist
banks, particularly in situations of illiquidity or emergency:
Sec. 83. Loans for Liquidity Purposes. – the Bangko Sentral may extend loans and advances to
banking institutions for a period of not more than seven (7) days without any collateral for the purpose of
providing liquidity to the banking system in times of need.
Sec. 84. Emergency Loans and Advances. – In periods of national and/or local emergency or of
imminent financial panic which directly threaten monetary and banking stability, the Monetary Board,
may, by a vote of at least five (5) of its members, authorize the Bangko Sentral to grant extraordinary
loans or advances to banking institutions secured by assets as defined hereunder xxx
The Monetary Board may at its discretion, likewise authorize the Bangko Sentral to grant emergency
loans or advances to banking institutions, even during normal periods, for the purpose of assisting a bank
in a precarious financial condition or under serious financial pressures brought by unforeseen events, or
events which, though foreseeable, could not be prevented by the bank concerned: Provided, however, that
the Monetary Board has ascertained that the bank is not insolvent and has the assets defined hereunder to
secure the advances xxx
89. It was in that meeting on 20 March 2000 that petitioner and UBI Chairman Bartolome discussed
with respondent Reyes their concern regarding recent negative news reports on UBI, and the need for a liquidity
war chest to meet possible withdrawals as a result of the news-driven rumors. On several occasions thereafter
and on one occasion evidenced by UBI’s letter dated 27 March 2000, petitioner and Bartolome sought BSP’s
assistance for liquidity by offering as collateral the National Food Authority (NFA) -issued Notes and the Home
Insurance Guaranty Corporation (HIGC) -guaranteed Notes. Both Notes carry the guarantee of the National
90. Despite repeated requests of petitioner and Bartolome for liquidity assistance, BSP and
respondents refused to acknowledge the urgency of the matter. BSP never even bothered to reply to UBI’s letter.
UBI never received a single centavo of assistance from BSP (and/or PDIC) in respect thereof. That fact alone
provides ample information on whether BSP and respondents readily provided liquidity assistance to UBI or had
no intention of salvaging the bank from a collapse. However, the following facts show that BSP and respondents
had no intention of rescuing UBI:
91. First, BSP released an official statement dated 13 October 2000 entitled “Urban Bank Case on
Track” which was printed in several newspapers on or after 14 October 2000. BSP stated:
“The first request for assistance from Messrs. Bartolome and Borlongan was for the possibility of UBI
rediscounting their NFA (National Food Authority) promissory notes with the Bangko Sentral totalling
P2.4 billion. What BSP did was to refer the matter to the Land Bank instead and the result was that NFA
was given a loan that enabled it to pay the promissory notes.”
(Photocopy of BSP’s official statement is attached as Annex “R”)
92. One wonders if the liquidity requests from the Philippine National Bank and other distressed
banks after UBI’s closure were likewise referred by it to the Land Bank of the Philippines. It is also a mystery
why BSP was reluctant to accept a paper that was guaranteed by the National Government itself, especially in
crisis situations where timing and swift decisions were paramount. It is difficult under such circumstance to
ignore some nefarious design of respondents.
93. Second, the MB approved Resolution No. 633 dated 24 April 2000 (one day before UBI’s bank
holiday), finally granting liquidity assistance to UBI:
“To approve-in-principle the grant to the Philippine Deposit Insurance Corporation (PDIC) of a loan of up
to P800 million as authorized under Section 13 of R.A. 3591, as amended, which loan shall be secured by
papers acceptable to the Bangko Sentral ng Pilipinas (BSP) and a real estate mortgage on a Bonifacio
Land property with appraised value of at least P1.0 billion, and subject to the following terms and
conditions xxx” 22
94. The Honorable Court may note that the amount of P800 million is inconsistent with prior
declarations of respondents. It is dubious why the MB would approve only “in principle” a loan that was most
urgently needed by a distressed yet qualified borrower, and why the loan was not granted directly but through
PDIC when BSP would pick which of UBI’s collaterals were “acceptable”. Indeed, what “stringent
requirements” differed between BSP and PDIC in granting a liquidity loan to UBI? Or was this a ploy for BSP to
enter in the nick of time (as a hero to boot!) to lend a lame hand to an institution gasping for breath to avert a
95. As shown above, respondents were the source of media reports on UBI’s condition, portraying it
as an errant bank and threatening sanctions and penalties for downgrading. Respondents’ media leak fanned the
flames of market uncertainty and distrust that led to the unceasing withdrawals from UBI and UII. For five
weeks, respondents were slow in acting on UBI’s requests for liquidity support. That UBI, with UII, survived
during those weeks of constant cash outflow was remarkable, when other similar-sized institutions could not have
lasted for a week or two.
96. Then, when BSP was willing to provide liquidity assistance, the amount was meager. Petitioner
informed respondent Buenaventura that P1.3 billion was not enough. What would a bank and investment house,
that had already serviced P3 billion in withdrawals, do with only P1.3 billion? However, MB Member Antonino
Alindogan made it a take-it-or-leave-it proposition and remarked: “If it is not enough, Urban may have to declare
a holiday.” 23
22 Minutes of MB Meeting of 24 April 2000 was attached as Annex 1 of Reyes’ counter-affidavit.
23Taken from petitioner’s counter-affidavit of 6 October 2000 before Department of Justice in I.S. No. 2000-1512, which complaint was filed by BSP
and PDIC against 10 UBI officers for alleged estafa in relation to economic sabotage:
“On Holy Wednesday April 19th at 9:00am, Mr. Bartolome and I met with Gov. Buenaventura and Mssrs. Alindogan and
Reyes in the Governor’s conference room. The relationship between UBI and UII was clear to them, as they offered financial
assistance of P3.5 billion which, they suggested, would have to be coursed through a conduit so that the investment house may
be assisted. (BSP can only give direct assistance to banks and quasi-banks.) It was in that meeting that Gov. Buenaventura
suggested Banco de Oro as a possible conduit and our ‘white knight’.
“On Easter Sunday April 23rd at 5:00pm, Mr. Bartolome and I met with Gov. Buenaventura, Mr. Alindogan, and PDIC
President Norberto Nazareno at the Manila Golf Club. xxx In that meeting, Mr. Alindogan said that our liquidity assistance
would only be P1.3 billion (and I don’t know how BSP arrived at that amount), broken down as follows – P500 million from
PDIC to finance the trust withdrawals of UII, and P800 million from BSP to finance UBI’s deposit withdrawals. I said that the
amount was not enough, but Mr. Alindogan said that if it was not enough, ‘Urban may have to declare a holiday’. I told Gov.
97. It was at this particular moment that petitioner was made mindful of the reality that a bank
holiday was the only option made available to UBI, in order to put a temporary halt on the panic withdrawals.
Support had been purposely delayed, then offered too late in the game, then not enough to be of meaningful
assistance. All efforts to seek support had become a futile exercise.
98. The only reason why UBI was unable to avail of any financial assistance from the BSP was that
Buenaventura KNEW that it was not enough. Buenaventura and the PDIC President even ADMIT this:
99. First, in a documented speech before the Rotary Club of Manila on 4 May 2000, PDIC President
Norberto Nazareno admitted having been told on 25 April 2000 that the P1.3 billion assistance offered by BSP
“Bank management instead decided to declare a bank holiday. I was told that the primary reason was that
they knew P1.3-billion was not sufficient. Governor Buenaventura gave me a call right after the bank
made that decision.”
(Photocopy of Mr. Nazareno’s speech is attached as Annex “S”)
100. Second, after the MB ordered the closure of UBI, UDB and UII, respondent Buenaventura was
interviewed again over telephone, which was aired live on the 10:00PM television news (ANC-21 “Business
Nightly”) on 26 April 2000. In said interview, Buenaventura frankly admitted that BSP’s offer of assistance
was insufficient such that UBI’s “better alternative” was to declare a bank holiday:
“Newscaster: Urban Bank has chosen not to tap a emergency fund facility, that was an option for them in
“Buenaventura: Well, it was an option for them, but we came to the conclusion that at the rate things
were going, it would probably prove to be insufficient, so that the better alternative course of action was to
declare a holiday to allow the Central Bank and the PDIC to first pay-off the people with less than
P100,000 and subsequently put the house, put the records in order, in order to give time for interested
(Transcript of videotaped interview, Annex “H”)
101. A bank holiday is the least desirable of all options. Yet, respondents were dangling this option in
front of petitioner without going through the other lesser evils of rediscounting, repurchase, liquidity assistance or
emergency advance. Despite the more than sufficient collaterals being offered, it was astonishing that the
respondents were too insistent for UBI to declare a bank holiday, yet were also too reluctant to provide liquidity
assistance. Petitioner turned to respondent Buenaventura and told him that should UBI declare a holiday, it would
cause an industry run. Buenaventura callously replied to petitioner: “There will be no industry run. I will just
declare a holiday for these banks. So be it.”
102. Buenaventura’s animosity for UBI was too obvious from his inaction at a time when help from
the BSP was badly needed. Two days after UBI’s closure, Buenaventura made his revealing admission to Dow
Jones Newswires while in Hongkong, that “bank closures were inevitable as the industry consolidates.
Unfortunately, as the bigger banks consolidate, from time to time you will see some of the banks that have their
own peculiar problems. The market will determine which banks survive.” 24 Buenaventura made evident his
partiality and prejudice. UBI did not survive because Buenaventura was reluctant in assisting the smaller, weaker
banks. It did not survive because he had intended to see an end to UBI without assessing the consequences of his
acts. While other central bank governors earnestly prevent bank closures, respondent Buenaventura made sure
that bank closures would be his landmark achievement to an already weak economy. In fact, UBI is one of the
largest, if not the largest, banks ever ordered closed in Philippine banking history.
103. Yet later a few days after UBI’s closure, respondents suddenly reversed their position on the
liquidity assistance that they had willfully deprived UBI, and relaxed their requirements to promptly assist other
banks that suffered the same illiquidity problems as UBI. (It is estimated that BSP with PDIC lent about P25
billion to numerous banks in the few weeks immediately following UBI’s closure.) Respondents’ sudden reversal
Buenaventura, ‘Governor, should Urban declare a holiday, it will cause an industry run.’ Gov. Buenaventura replied, ‘There
will be no industry run. I will just declare a holiday for these banks. So be it.’”
24Buenaventura’s statement to Dow Jones Newswires was carried by several news media, including Philippine Daily Inquirer on
29 April 2000 “Five More Banks Hit By Heavy Withdrawals”. Said statement subsequently drew negative comments from some
of their posture on the matter manifests their realization of the aftermath of their unwarranted actions upon UBI,
and serves as ineluctable proof of their bad faith.
ABS-CBN News, 2 May 2000
BSP EASES LOAN REQUIREMENTS FOR TROUBLED BANKS
The Bangko Sentral ng Pilipinas (BSP) said Tuesday it has expanded the coverage of the emergency
loan for banks, consequently easing the lending requirements on them.
BSP governor Rafael Buenaventura said the move aims to assist banks like Urban Bank which
experienced heavy withdrawals in recent weeks that led to its closure last April 26.
Too, the BSP said it would soon rename the emergency loan to “liquidity line”, since bank owners
are hesitant to tap the facility, worried about sending the wrong signals to depositors and investors.
Buenaventura said Tuesday the liquidity line would not require a higher capital requirement for a
bank in need, as the BSP had previously required.
The BSP also said that banks can avail of its overnight lending facility at any given time.
Aside from the overnight lending facility, the BSP added it has four other lending windows which
banks can tap if they suffer liquidity problems.
Among these are the repurchase, rediscount, special deposit accounts, and emergency loans and
The repurchase window allows banks to turn over assets to the BSP, on the condition that these would
be repurchased at a later date.
The BSP said it could extend loan facilities to banks with government securities as collateral. Non-
bank financial institutions with a quasi-banking system are also entitled to avail of the repurchase window
using a conduit bank.
On the other hand, the rediscount window allows the BSP to grant loans to a bank against eligible
papers on a short-term basis.
The special deposit accounts facility is available to a bank which can withdraw or pre-terminate its
Finally, the emergency loans and advances window is open to banks which are in urgent need of
liquidity, after all the other loan windows have been tapped.
(Photocopy of the news report is attached as Annex “T”)
E. RESPONDENTS’ THREE (3) SES REPORTS ON
UBI, UII AND UDB WERE FALSIFIED, UNTRUE,
MISLEADING AND, AS THE OFFICE OF THE
OMBUDSMAN FOUND, NEGLIGENTLY AND
104. The five (5)-page SES Report on UBI (Annex E of Complaint, Annex “E”) was prepared by BSP-
SES Department of Commercial Banks II headed by respondent Aure. Dated 26 April 2000, it was signed by
respondents Reyes, Yuvienco and Aure. In said report, three (3) findings on UBI’s financial condition were
stated, forming the basis for the recommendation of closure – namely, (a) capital deficiency; (b) illiquidity; and
(c) high ratios of past-due and adversely-classified loans.
105. The four (4)-page SES Report on UDB (Annex J of Complaint, Annex “E”) was prepared by
BSP-SES Department of Thrift Banks and Non-Bank Financial Intermediaries, headed by respondent Guerrero.
Dated 26 April 2000, it was signed by respondents Reyes and Guerrero. Said report recommended UDB’s closure
based on its finding of illiquidity.
106. The four (4)-page SES Report on UII (Annex L of Complaint, Annex “E”) was also prepared by
BSP-SES Department of Thrift Banks and Non-Bank Financial Intermediaries. Dated 26 April 2000, it was
signed by respondents Reyes and Guerrero. Said report recommended the virtual closure of UII, through the
revocation of UII’s trust license and the endorsement to the Securities and Exchange Commission to revoke UII’s
investment house license and to designate a receiver.
107. The three SES Reports were allegedly the bases of the MB to order the closure of UBI, UDB and
UII, when the MB met at 10:45AM of 26 April 2000 at Manila Golf Club. Under Section 30 of R.A. 7653 New
Central Bank Act, the MB may close a bank only upon such a report.
108. The SES Reports took respondents just three (3) hours to prepare (beginning the evening of 25
April 2000) and were rushed in time for the MB Special Meeting the following morning that would be especially
called for the purpose of deliberating upon said Reports and deciding on the recommendations contained therein.
Said Reports contained false and misleading findings on the financial conditions of the three institutions to justify
their recommendations of immediate closure.
109. Despite the clear provisions of the Central Bank Manual of Examination Procedures, UBI, UDB
and UII were given ZERO due-process to respond to and take corrective action on the (clearly false) findings in
the SES Reports. Worse, the reports were altered and ante-dated. Naturally, the only plausible conclusion is that
respondents deprived petitioner of due process in order to cover up their criminal designs.
F. SES REPORT ON UBI MADE A FALSE FINDING
OF ILLIQUIDITY. UBI SUFFERED FROM
TEMPORARY ILLIQUIDITY INDUCED BY PANIC
WITHDRAWALS WHICH RESPONDENTS
CAUSED AND WERE AWARE OF.
110. Illiquidity was one of three financial findings in the SES Report on UBI (Annex E of Complaint,
Annex “E”) to support its recommendation of closure. Respondents alleged that UBI was in a state of chronic
illiquidity necessating its closure. Respondents Buenaventura, Reyes and Aure, in their counter-affidavits, alleged
that the BSP and the Monetary Board had long known of UBI’s “precarious financial condition” which they
averred existed since 1998.
111. However, in spite of the finding of alleged illiquidity (which was temporary at worst and caused
by panic withdrawals occasioned by BSP’s irresponsible press statements), UBI never borrowed a single centavo
from BSP or PDIC. Yet in the five weeks of the run, UBI and UII made good about P3 billion in withdrawals. No
financial institutions of similar size would have accomplished such a feat. Even at the time of its closure, UBI still
had left P2.0 billion left in liquid and non-risk assets, while UII still had P355 million. 25 Clearly, UBI and UII
suffered from temporary illiquidity that was caused by panic withdrawals. Respondents actually ignored and
suppressed evidence regarding UBI’s fundamental or long-term liquidity versus the temporary illiquidity it was
suffering due to BSP’s media leaks.
112. The following recent facts and events, however, belie respondents’ claim of UBI’s chronic
illiquidity, and only betray their partiality against UBI in the SES Report:
112.1. In 1998 as a testament to UBI’s financial soundness, BSP cited UBI for its overall performance in
solvency, liquidity, and management. Regarded as a determining factor in evaluating the overall health of banks,
the SLIM rating (Solvency, Liquidity, and Management) was BSP’s tool to measure a bank's condition as
against the entire expanded commercial banking system. UBI scored 82.89 points, outperforming the industry
average of 76.09 points. BSP found UBI’s financial position to be better than the majority of expanded
commercial banks in the country.
112.2. In 1999, the BSP-SES conducted its annual examination of UBI, which Final Report of
Examination was noted by the MB in its meeting of 19 November 1999, and which BSP provided UBI on 22
November 1999. In the Overall Conclusion of said Final Report, SES found that UBI showed satisfactory
financial condition, managed to maintain its solvency and liquidity, and substantially complied with banking
laws, BSP rules and regulations. Respondents concluded that UBI was in a satisfactory financial condition as it
managed to maintain its solvency, liquidity and profitability despite financial turmoil in the Southeast Asian
“Urban Bank, Inc. showed a satisfactory financial condition as of March 31, 1999. xxx
“For the last three (3) years, its operations continued to be profitable despite recent financial turmoil
in the Southeast Asian region. It managed to maintain its solvency and liquidity during the period under
review. Its management is considered competent and receptive to banking laws, BSP and other
government regulations. xxx
“Bank’s composite CAMELS rating of ‘3’ indicated that UBI may be vulnerable to business
fluctuations and other outside economic factors but failure is unlikely. Bank had substantially complied
with banking laws, BSP rules and regulations except for some violations/exceptions and weaknesses
detailed in Annex ‘A’. xxx”
(Photocopy of the Final Report of Examination is attached as Annex “U”)
25 UII’s liquid assets of P355 million excludes UII’s deposits with UBI, which amounted to another P550 million.
112.3. In 1999, UBI granted a P3-billion one-year loan facility to the National Food Authority (NFA) to
finance its food procurement and inventory. In that year, the NFA received P2.4 billion in loans from UBI, about
P2 billion of which was lent in December 1999, making UBI among the largest if not the largest lenders to NFA
in that year. Respondent Buenaventura, as a member of the NFA Council, knew about this fact.
112.4. Moreover, in 1999, UBI provided P921 million in mortgage loans under the government’s Home
Insurance and Guaranty Corporation (HIGC) guaranty, benefiting some 30 developers and countless homebuyers.
UBI became one of the largest if not the largest lenders under the HIGC program for the year 1999 (Annex “V”).
Together with the loans to NFA, HIGC and other private businesses, UBI lent about P4 billion in 1999
alone. Definitely, UBI was not illiquid.
112.5. In January 2000, UBI was among the largest lenders in the interbank call loan market (composed
of all commercial banks, all quasi-banks, and several thrift banks) in terms of net daily average for the whole
month. UBI also managed to lend funds in the interbank market on certain days in March and April 2000.
113. In the SES Report and in their counter-affidavits, respondents made it appear that UBI suffered
huge illiquidity reckoned from UBI’s “large” interbank borrowings since February 2000. The largeness of these
interbank borrowings, however, should be made relative to the size of the institution and the market. UBI’s net
average borrowings of P295 million and P249 million in February and March 2000, respectively, constituted a
small fraction (about 2% only) of the interbank loan market that averaged about P14-15 billion during those
months. They were also just a small fraction (about 3% only) of UBI’s total liabilities of about P9-10 billion.
114. The SES Reports, which recommended a harsh and radical closure merely because of temporary
illiquidity, was devoid of any rational basis. As clearly stated in UBI’s letter to respondent Buenaventura dated
25 April 2000 (Annex B of Complaint, Annex “E”), the reason behind the temporary bank holiday was not
chronic illiquidity, rather it was the run caused by negative media reports which was temporary at worst.
115. In the 6 December 2000 hearing by the House Committee on Good Government investigating
into UBI’s closure, respondent Reyes was asked, “Kapagka nagkaroon ng crisis of confidence, there is no bank in
the whole world that can stand a large scale bank run, di po ba?” Reyes answered, “That’s right.”
(Congressional transcript, Committee on Good Government, 6 December 2000, page tjasipin/XIV-4)
116. In his counter-affidavit (par. 4.2.4), respondent Reyes stated: “The legal basis for the closure of
UBI is its illiquidity which became apparent when Borlongan and Bartolome asked for emergency assistance.”
However, subsequent to UBI’s closure, the BSP granted enormous liquidity assistance to several banks such as
the Philippine Bank of Communications, International Exchange Bank, Export and Industry Bank, Philippine
National Bank, and Equitable-PCI Bank, which likewise suffered from illiquidity. These banks were never
recommended by the BSP-SES to be closed, despite their illiquidity which also became apparent when they asked
for emergency assistance. Clearly, illiquidity was not a legal basis for the closure of any bank.
Respondents perjured themselves to conceal the fact
that UBI and UDB were the only banks closed for
illiquidity in the 52 years under the old and New
Central Bank Acts.
117. Respondents Reyes and Aure perjured themselves to cover-up the fact that UBI and UDB were
the only banks closed for illiquidity in the fifty-two (52) years of existence of the former Central Bank of the
Philippines (under R.A. 265 Central Bank Act) and the BSP (under R.A. 7653 New Central Bank Act). In fact,
they misled the Office of the Ombudsman into thinking that there were precedents for the closure of a bank for
illiquidity, citing four (4) rural banks. In two separate pleadings before the Office of the Ombudsman in the
related administrative case OMB-ADM-0-00-0867 Borlongan vs Buenaventura et al., Reyes and Aure jointly and
falsely stated that the MB had placed several banks under receivership because of illiquidity but not on the basis
of insolvency: Thus:
“5. Notably, the closure of UBI for illiquidity is not without precedent. Earlier other banks were also
closed by the Monetary Board for incurring liquidity problems.
“5.1. The closure of UBI for illiquidity arising from a bank holiday was not the first closure
undertaken by the Monetary Board. On several occasions, the Monetary Board had placed a bank under
receivership because of illiquidity but not on the basis of insolvency. In the years 1999 and 2000, the
following banks were placed by the BSP under receivership on the ground of illiquidity, to wit: Rural
Bank of Santander (Cebu), Inc.; Rural Bank of Gumaca (Quezon), Inc.; Rural Bank of Bocaue (Bulacan),
Inc.; and Rural Bank of San Teodoro, Inc.
“Copies of the Memoranda recommending the closure of the above-enumerated banks under
receivership due to illiquidity are herewith attached as ANNEXES 1, 1-A, 1-B, and 1-C, and made integral
parts hereof.” 26
(OMB-ADM-0-00-0867, Reyes & Aure’s Supplement to Opposition dated 22 October 2001, par. 5)
**** **** **** ****
“4.2. This Honorable Office in insisting that the Respondents should have made a finding on the
insolvency of UBI, failed to consider that the closure of UBI for illiquidity is not without precedent.
Earlier other banks were also closed by the Monetary Board for incurring liquidity problems. The closure
of UBI for illiquidity arising from a bank holiday was not the first closure undertaken by the Monetary
Board. On several occasions, the Monetary Board had placed a bank under Receivership because of
illiquidity but not on the basis of insolvency. In the years 1999 and 2000, the following banks were placed
by the BSP under Receivership on the ground of illiquidity, to wit: Rural Bank of Santander (Cebu), Inc.;
Rural Bank of Gumaca (Quezon), Inc.; Rural Bank of Bocaue (Bulacan), Inc.; and Rural Bank of San
Teodoro, Inc. It must be stressed again that the legal basis for the closure of UBI was its illiquidity
problem and not because it was insolvent.” (OMB-ADM-0-00-0867, Reyes & Aure’s Motion for
Reconsideration dated 18 July 2002, par 4.2)
118. However, the four banks cited by respondents Reyes and Aure only highlight the whimsical and
capricious closure of UBI and UDB. The evidence 27 of the SES reports on these four banks only proved
respondents’ perjury, as they tell that all four banks were ACTUALLY insolvent and not merely illiquid. SES
found each of these four banks to be insolvent even before they recommended closure in its reports. (Insolvency,
when a bank’s liabilities exceed its realizable assets, is an unequivocal basis for closure under Sec. 30(b) of R.A.
7653.) In contrast, UBI and UDB were not even found to be insolvent in the SES Reports.
Rural Bank of San Teodoro, Inc.
SES Report dated September 2, 1999. (Annex “J”)
“The book value of the bank’s assets is less than its liabilities by P17.185 million (as of February 28,
xxx xxx xxx
“Despite a P32.938 million drawdown from its approved emergency loan of P50.000 million (approved by
the M.B. in its Res. No. 091 [P20 million] dated January 21, 1998, and No. 980 [P30 million] dated July 8,
1998), the bank has not been able to contain the continuing demands for withdrawal.
xxx xxx xxx
“In our [BSP] letters of February 9 and 15, 1999, the bank was given up to February 28, 1999 to have the
rehabilitation in place, otherwise Section 30 of R.A. 7653 shall be applied. Again, in our letter of March
30, 1999, management was informed that it has been given sufficient time within which to rehabilitate the
“In our letter of May 12, 1999 informing the bank of the results of the special examination as of February
28, 1999, we reiterated to management that it has been given enough time within which to rehabilitate the
bank but none has ever materialized. The bank was warned that the persisting and untenable condition
leaves BSP with no recourse but to implement Section 30 of R.A. 7653.”
**** **** **** ****
Rural Bank of Gumaca (Quezon), Inc.
SES Report dated August 9, 2000. (Annex “J-1”)
“The bank has insufficient realizable assets, as determined by the Bangko Sentral ng Pilipinas, to meet its
liabilities. Net realizable assets as of April 30, 2000 is computed as follows (in million) … (P9.644).
xxx xxx xxx
“The realizable value of the bank’s assets is P11.218 million less than its liabilities to be settled.
Realizable value after considering appraisal increment of P1.574 million on ROPOA would still be less
than the liabilities by P9.644 million.
xxx xxx xxx
“In our [BSP] letter dated May 23, 2000, the bank was given a final deadline of June 15, 2000 to correct
the serious findings noted in the April 30, 2000 special examination, particularly the infusion of fresh
26 Respondents Reyes and Aure did not attach said SES reports or “memoranda recommending the closure of the above-enumerated banks”,
in order to conceal their perjury regarding these four rural banks. Instead, what they attached as Annexes 1, 1-A, 1-B and 1-C of
their pleading were the minutes of the MB meetings relating to UBI.
27The SES reports on these four rural banks were obtained from OMB-0-01-0089 Defensor vs. Buenaventura et al., where they were
inadvertently submitted by respondent Reyes.
capital to correct the deficiency. Bank management failed to infuse the required capital within the June
15, 2000 deadline.
“In a letter dated July 6, 2000, the [rural bank’s] Board of Directors was reminded of management’s
inaction on the directives as contained in the May 23, 2000 letter; and that said inaction would be taken to
mean as disinterest on its part to rehabilitate the bank; and that BSP would have to take action as
mandated by law.”
**** **** **** ****
Rural Bank of Bocaue (Bulacan), Inc.
SES Report dated August 16, 2000. (Annex “J-2”)
“Findings in the general examination as of January 31, 2000 disclosed that the bank has insufficient
realizable assets to meet its liabilities …
xxx xxx xxx
“The bank has insufficient realizable assets, as determined by the Bangko Sentral to meet its liabilities.
The bank’s net realizable assets is computed as … (P39.269).
xxx xxx xxx
“The bank was granted a liquidity loan of P100 million on June 5, 2000 (MB Resolution No. 927). A
total of P17.023 million has been released …
xxxx xxxx xxxx
“In a meeting held at the BSP last April 7, 2000 and attended by one bank officer and the legal counsel,
the bank was enjoined to infuse fresh funds of at least P53.146 million within 30 days from April 7, 2000.
“The bank was advised to consider inviting new investors to rehabilitate the bank within 30 days if present
stockholders are not in a position to infuse fresh funds.”
**** **** **** ****
Rural Bank of Santander (Cebu), Inc.
SES Report dated September 6, 2000. (Annex “J-3”)
“The bank has insufficient realizable assets, as determined by the Bangko Sentral ng Pilipinas, to meet its
liabilities. Net realizable assets as of March 31, 2000 is P14.951 million less than liabilities of P67.180
xxx xxx xxx
“In a meeting held on August 24, 2000, it was emphasized that infusion of fresh capital should be adequate
to cover capital deficiency and solve the liquidity problems…
“On August 28, 2000, the [BSP] Department received Resolution No. 27 dated August 25, 2000 adopted
by the [rural bank’s] board of directors and controlling stockholders voluntarily surrendering the
operation/affairs of the bank.”
119. It bears stressing that in the fifty two (52) years of the old and New Central Bank Acts (R.A. 265
and 7653), UBI and UDB apparently are the only banks ever closed by the MB for reason of only illiquidity.
Respondents will risk perjury and criminal prosecution in the attempt to keep this fact and their malfeasance from
coming to light.
120. Additionally, attention of this Court is called to BSP-SES’ observance of the required diligence
and due process in the case of these four rural banks. BSP took several months before finally recommending
closure, whereas in the case of UBI, UDB and UII, it took less than 24 hours to do the same. BSP complied with
the requirements of Central Bank Manual of Examination Procedures, evidenced by the conferences held by BSP,
its letters informing the banks of its findings and prospective actions, and the ample opportunity that it gave to
these banks to correct their deficiencies. However, in the case of UBI, UDB and UII, no effort at due process nor
any opportunity was given for the institutions to respond to and take corrective action on SES’ (false) findings.
121. In the landmark case of yet another bank 28, Banco Filipino declared a bank holiday on 23 July
1984 because of continuing illiquidity and after having availed of a P119.7 million emergency loan from the
Central Bank on 29 June 1984. Yet, the MB did not order the closure of Banco Filipino because of its illiquid
situation. Instead, the MB allowed the bank to re-open under conservatorship on 1 August 1984, and further
assisted it with an additional P3 billion credit line from the Central Bank. In contrast, UBI and UDB were not
placed under conservatorship; instead, they recommended and ordered closed for illiquidity. They never
borrowed from the BSP nor PDIC.
28 Banco Filipino Savings and Mortgage Bank vs. Monetary Board et al., 204 SCRA 771.
122. Moreover, Banco Filipino was closed six (6) months after it had declared a self-imposed holiday
and subsequently re-opened. It was ordered closed by the MB on 25 January 1985, not on the basis of BF’s bank
holiday, but on the basis of the SES report finding the bank insolvent (i.e., its liabilities exceeded its realizable
assets). In contrast, UBI was ordered immediately closed, less than 24 hours after it declared a bank holiday that
was in fact pre-cleared with BSP Gov. Buenaventura. UBI nor UDB were not even found to be insolvent.
123. The Banco Filipino case disproves respondents’ claim that “there is no basis to state that a bank
holiday is a mere ‘temporary’ suspension of banking activities”.29 Yet it is undeniable that UBI and UDB are the
first banks in the 52 years of the Central Bank and BSP to be ever closed for such reason contrary to law.
Inspite of Land Bank’s P562.5 million withdrawal
after UBI’s closure intended to reduce UBI’s liquidity
picture, UBI still had P2.0 billion left in liquidity.
124. In OMB-ADM-01-0327 Borlongan vs. Buenaventura & Nazareno, the Office of the Ombudsman
found that PDIC President Norberto Nazareno facilitated the P562.5 million withdrawal by Land Bank of the
Philippines from UBI, less than one month after UBI was ordered closed and placed under PDIC receivership.
Despite said withdrawal, which was plainly intended to reduce the state of UBI’s true liquidity at the time
of closure, UBI still had P2.0 billion left in liquid and non-risk assets. (Respondent Buenaventura is a member
of the PDIC board of directors.)
125. In said case, the Office of the Ombudsman made the following findings of fact: 30
“Records show that the alleged sale of P562.50 million NFA Notes to Land Bank of the Philippines
and charging the same against the latter’s inter-bank loans to UBI was done at the time when the latter was
already closed on April 26, 2000…. Practically, the alleged anomalous transaction reduced LBP’s loan
exposure to UBI from P1,050,000,000.00 to about P488,510,416.00 after interest.
“A judicious examination of the pieces of evidence on record shows that the alleged sale of P562.50
million NFA notes to LBP was done illegally and prejudicially to the service. xxx
“xxx we still find hereby respondent Nazareno guilty of Conduct Prejudicial to the Best Interest of the
Service. The mere fact that he allowed or acquiesced to the sale as head of PDIC proves that he indeed is
guilty of the charge as aforesaid. As receiver of UBI, the disposition of NFA notes in favor of Land Bank
obviously violated Section 30, R.A. 7653 which states thus:
‘The assets of an institution under receivership liquidation shall be deemed in custodia legis in the
hands of the receiver and shall, from the moment the institution was placed under such receivership or
liquidation, be exempt from any order of garnishment, levy, attachment, or execution.’”
(OMB-ADM-01-0327, Order dated 1 July 2002)
**** **** **** ****
“The pertinent portion of Section 30, R.A. No. 7653 provides: ‘The receiver shall immediately gather
and take charge of all the assets and liabilities of the institution, administer the same for the benefit of its
creditors, xxx but shall not, with the exception of administrative expenditures, pay or commit any act that
will involve the transfer or disposition of any asset of the institution.’
xxx xxx xxx
“xxx The Deed of Assignment relied upon by respondent Nazareno is of no help either. On the
surface of the LBP pre-printed form of the said deed, the clause “by way of security” was superimposed.
This would show beyond doubt that the NFA PN’s assigned by UB to LBP was intended to secure the loan
of UB from LBP, and not to sell the same. xxxx. There was certainly uncalled for haste in deciding
whether or not to approve the transfer of assets contrary to PDIC’s mandate as receiver.
“xxx He directly committed a serious breach of the important obligation of the PDIC, acting as a
receiver, to secure and consolidate the assets of the insolvent bank.”
(OMB-ADM-01-0327, Order dated 22 July 2002)
**** **** **** ****
29The quoted statement was made by Reyes, Yuvienco, Guerrero and Aure in their Petition (at page 31), in CA-G.R. SP-No.
72234 Reyes et al vs. Borlongan.
30Despite the clear and repeated findings of fact by the Office of the Ombudsman as contained in the three different Orders, which
were concurred by the Office of Legal Affairs and then-Ombudsman Aniano Desierto, Ombudsman Simeon Marcelo inexplicably
dismissed the administrative complaint against respondent Nazareno on 14 July 2003—the same date that he also denied
petitioner’s motion for consideration in OMB-0-00-1651 subject of the herein Petition for Certiorari.
“Respondent Nazareno's insinuation that he merely relied on the recommendations of his
subordinates is of no moment. He directly committed a serious breach of the principal obligation
of the PDIC, acting as a receiver, to secure and consolidate the assets of the insolvent bank.
Nobody else at PDIC did it for him. Respondent Nazareno was directly on top of the decision to
allow NFA to directly settle its obligation of the promissory notes to LBP. He was well aware of the
circumstances surrounding the NFA request as shown by his handwritten instruction to Aurora C.
Baldoz, Vice President, Claims, Receivership and Liquidations Group of PDIC. In short,
respondent Nazareno was not performing a mere ministerial duty while ac ting as a receiver of Urban
Bank. His responsibility for the administrative infraction in the instant case is primary and direct.”
(OMB-ADM-01-0327, Order dated 21 August 2002)
G. SES REPORT ON UBI MADE A FALSE FINDING
OF CAPITAL DEFICIENCY. THE CLEAR
PROVISIONS OF BSP CIRCULAR NO. 156 PROVE
THE PERJURY OF RESPONDENTS WHEN THEY
WENT FURTHER TO INSIST UNDER OATH
THAT UBI WAS CAPITAL-DEFICIENT.
126. Capital deficiency was second of three financial findings in the SES Report on UBI (Annex E of
Complaint, Annex “E”) to support its recommendation of closure. According to the SES Report, UBI’s capital
was P2.184 to P2.202 billion from January to March 2000, which was allegedly short of the P2.400 billion
minimum capital required by the BSP.
127. However under BSP Circular No. 156 dated 19 March 1998 (photocopy of which is attached as
Annex “W”), the minimum capital requirement on UBI as a publicly-listed commercial bank was only P2.000
billion at the time, and the P2.400 billion capital was required to be met only on 30 June 2000:
“Minimum capital for commercial banks. All commercial banks, including those already in operation as
well as those to be established hereafter, shall have capital accounts of at least P2.8 billion each.
xxx xxx xxx
“Commercial banks which are existing, or which are newly authorized but not yet operating, or persons
from whom completed applications to establish commercial banks have been received as of (date of MB
Resolution) but pending action by the Bangko Sentral ng Pilipinas (BSP) are hereby allowed the following
time frame within which to meet the minimum capital requirement:
P2.000 billion on or before December 24, 1998
P2.400 billion on or before December 31, 1999
P2.800 billion on or before December 31, 2000.
“xxx Provided, further, That for commercial banks which are listed in the Philippine Stock Exchange, or
are in the process of listing as certified by the Securities and Exchange Commission, shall have an
additional six (6) month period to meet the minimum capital requirement.”
128. Under BSP Circular No. 156, UBI was capital-sufficient. Said circular provided a build-up
timetable for banks to meet the further increases in minimum capital requirements, and provided publicly-listed
banks (such as UBI) six more months in said timetable. Thus, the SES Report was an outright lie when it stated
that UBI was capital-deficient from January to March 2000, as it fully complied with the capital requirement
applicable at the time and until its closure.
129. Respondents, in their respective counter-affidavits, swore to the truthfulness and accuracy of the
SES Reports, further stating that the Reports “were actually based on verified findings of the BSP”.31 However,
respondents falsified their finding that UBI was capital-deficient in order to describe UBI’s “precarious” financial
130. BSP Circular No. 156 is clear and leaves no room for interpretation. UBI was capital-sufficient
and not capital-deficient. Respondents had no legal basis to disregard or ignore as they did the clear provisions
of BSP Circular No. 156 since it had not been superseded by any other circular or issuance of the BSP until the
time of UBI’s closure.
131. Respondents intentionally ignored BSP Circular No. 156 and falsely stated in the SES Report that
UBI was deemed capital-deficient to justify the closure of the bank. Furthermore, respondents, despite having
time to review their legal basis, continued to insist said falsehood under oath in their counter-affidavits. The
31 OMB-ADM-0-0867, Reyes and Aure’s Supplement to Opposition, par. 3
Ombudsman, however, opted to look the other way, closing its eyes to the obvious fraud and perjury that
respondents purposely committed.
132. The truth is: UBI was never capital-deficient. Assuming arguendo that respondents stated the
truth that UBI was capital-deficient (which petitioner vehemently denies), how then could UBI have voluntarily
provided, as additional loan loss-reserves, P348-million more than what the BSP had prescribed in its 1999 Final
Report of Examination on UBI? Since UBI was sufficiently capitalized under BSP Circular No. 156, it therefore
could afford to generously set-aside P348 million more reserves as additional cushion. Thus, there can be no truth
in the allegation that UBI was capital-deficient in the amount of P198 to 216 million for January-March 2000.
133. Respondents therefore cannot escape their obvious perjury.
H. SES REPORT ON UBI MADE A FALSE FINDING OF
HIGH PAST-DUE AND ADVERSELY-CLASSIFIED
LOANS. RESPONDENTS CONCEALED A
SINGULARLY MATERIAL OFFSETTING FACT IN
THE REPORT AND EVEN DENIED IT UNDER
OATH BEFORE THE OMBUDSMAN.
134. Respondents reported UBI’s high ratios of past-due and adversely-classified loans as a third of
the three findings to justify their recommendation of closure, in their SES Report on UBI (Annex E of Complaint,
Annex “E”). This finding is highly misleading.
135. Firstly, the Report found UBI’s past-due ratios of 24.21%, 18.63% and 19.18% higher than the
industry average of 12.34%, 13.43% and 13.79% in December 1999, January and February 2000, respectively.
However, comparing UBI with industry average or the “middle bank” did not mean that UBI’s condition was
serious, as there would of course be numerous other banks with higher or similar past-due ratios (such as the
Philippine National Bank, United Coconut Planters Bank, Land Bank of the Philippines, Bangkok Bank, Dao
Heng Bank, Prudential Bank, Asian Bank, Bank of Commerce, and Pilipinas Bank).
136. Secondly and more importantly, when a finding is made on high past-due or adversely-classified
loans, banks correct this finding (1) by actual loan collection, or (2) by loan restructuring, or (3) by providing for
loan-loss reserves. Loan-loss reserves are funds deducted from a bank’s capital accounts and are set aside to meet
potential losses from probable bad loans.
137. On 22 November 1999, BSP required UBI to set aside a total of P572 million in total loss-
reserves for loans and other risk assets, based on BSP’s 1999 annual examination. This means that BSP deemed
P572 million sufficient to cover probable losses from UBI’s past-due and adversely-classified loans. Instead of
merely complying with BSP’s directive, UBI voluntarily provided P920 million in reserves, which was P348-
million or sixty-one percent more than what BSP required. This singularly important and offsetting fact was
concealed in the SES Report, and denied by respondent Aure under oath before the Ombudsman.
138. Respondent Aure intentionally made misleading statements in his counter-affidavit (Par. 126.96.36.199)
to confuse the investigation of this vital fact, viz:
“Borlongan’s claim in his Complaint-Affidavit that the non-performing loans had adequate reserves
greater than that required by BSP is erroneous. xxx Likewise, Borlongan’s claim that UBI provided P920
million as of December 31 1999 or P348 million more or 61% greater tha(n) BSP prescribed reserve is
139. That UBI provided more than sufficient loan loss-reserves was a fact known to respondents
before and at the time that they prepared the SES Report on UBI on 26 April 2000.
140. That UBI provided P920-million in loss-reserves is clearly stated in UBI’s audited financial
statements as of 31 December 1999 prepared by Sycip Gorres Velayo & Company (SGV), and contained in
SGV’s Independent Public Accountants’ Report dated 25 February 2000. (Photocopy of said SGV report is
attached as Annex “X”.)
141. That UBI provided P920-million in loss-reserves is also clearly stated in UBI’s Report to BSP on
“Compliance With General Loan Loss Provision” as of 31 March 2000, which BSP actually received. In fact, it
was the SES Department of Commercial Banks II (which respondent Aure headed) that stamp-received said
report on 14 April 2000 - two (2) weeks prior to the preparation of the suspect SES Report on UBI. (Photocopy of
said stamp-received Report is attached as Annex ”Y”.)
142. The substantial loan-loss reserves is a material and offsetting fact in evaluating UBI’s past-due
and adversely-classified loans, as the reserves are provided precisely to answer for probable losses arising from
such loans. Respondents not only maliciously concealed this information in the SES Report, they willingly lied to
justify the summary closure of the bank.
143. In addition to the SGV Audited Financial Statement as of 31 December 1999 and UBI’s Report
stamp-received by BSP on 14 April 2000, the sworn statement of BSP manager Antonio Brotonel (attached as
Annex “Z” hereof) proves that respondents were actually and fully aware of UBI’s excess loss-reserves at the
time that they prepared the SES Report to the MB, but yet conveniently and purposely omitted that fact in their
144. If respondent Aure insists in his counter-affidavit (at par. 188.8.131.52) that UBI provided P348 million
excess reserves only on 14 April 2000 (and not 31 December 1999) which would have reduced UBI’s capital by
same amount, how then can he and his co-respondents possibly make a finding that UBI’s capital was deficient in
January-March 2000 by P198 to 216 million? It is either an insane reasoning by respondents, or another obvious
attempt at perjury.
145. Respondents, with bad faith or evident partiality, purposely and maliciously omitted the fact that
UBI set aside more than adequate loan loss-reserves, when they claimed that UBI was in a “precarious” financial
condition prior to its closure.
146. Furthermore, the SES’ 1999 Final Report of Examination, which the MB noted in its meeting on
19 November 1999, had concluded that UBI “showed satisfactory financial condition”, that it “managed to
maintain its solvency and liquidity”, and that it “substantially complied with banking laws, BSP rules and
regulations”. Said Final Report contradicts and disproves the findings of the 26 April 2000 SES Report
prepared by respondents and submitted to the MB just five (5) months after its meeting.
I. SES REPORT ON UDB MADE A FALSE FINDING
OF ILLIQUIDITY. UDB HAD LIQUID ASSETS
ENOUGH TO ANSWER FOR ITS DEPOSITS
THIRTY-SIX TIMES OVER.
147. UDB was a small private development bank with single office in Cebu City. It was a fully owned
subsidiary of UBI and was recently granted its thrift bank license in late-1997. It was ordered closed despite its
extremely liquid and solvent position.
148. The SES Report on UDB (Annex J of Complaint, Annex “E”) found that UDB was illiquid,
justifying its recommendation to close-down UDB. The Report alleged that UDB’s liquidity position would
suffer because its government-securities assets (investments in bonds and other debt instruments) of P50.987
million were “under the custody of Urban Bank”, and that therefore UDB’s “only available resource to service
its deposits” was only P1.3 million cash in vault and with BSP.
149. On the contrary, UDB was enormously liquid. With P57 million in capital and only P2.7 million
(P2.4 million, actually) in deposit liabilities, UDB had cash of P1.3 million enough to instantly service one half
(1/2) of its deposits. Moreover, it had P50.987 million in government securities, which are considered liquid
assets, sufficient to answer for the remaining deposits—not once—but thirty-six (36) times over. Even if the
securities were under UBI’s custody, they were clearly under mere safekeeping, were unencumbered, and were
owned by UDB (not UBI). That these government securities were safe and sound is evident by the fact that they
were accounted for in UBI’s records and vaults when PDIC took over UBI and UDB.
150. Like the SES Report on UBI, the SES Report on UDB demonstrates the amazing proclivity of
respondents to engage in falsehoods and mislead the government and the general public.
Respondents and PDIC suppressed the evidence of
UDB’s liquidity that would prove the SES Reports
false, by attempting to secretly liquidate UDB in
violation of Section 30, RA 7653.
151. Respondents and PDIC attempted to bury the evidence of UDB’s liquidity that would prove the
SES Reports false.
152. On 25 May 2000 (barely one month after UDB’s closure), PDIC received P20 million cash
amount for UDB’s behalf, representing the latter's share in the proceeds of the prepayment by National Food
Authority (NFA) of its Promissory Notes in the aggregate principal amount of P600 million. Of this amount,
P562.5 million was paid directly to Land Bank of the Philippines under PDIC's authority, while P37.5 million was
paid to PDIC. In turn, the amount of P37.5 million consisted of P14.355 million owing to UBI and P20 million to
UDB, which were both under PDIC at that time. In a letter of even date addressed to PDIC president Nazareno,
“Dear Mr. Nazareno:
“Attached is PNB Manager’s check in the amount of Pesos: forty million six hundred ninety nine thousand
six hundred fifty two & 80/100 (P40,699,652.80). Said amount represents payment of interest on NFA’s
P600M loan and full payment of the unassigned portion of PN No. 834201 for P37.5M with Urban Bank
under the receivership of Philippine Deposit Insurance Corporation…”
(Photocopy of the letter is attached as Annex “AA”)
153. It may be of interest to this Honorable Court to note that the PDIC’s P20-million cash receipt
belonging to UDB arose from the payment of the same P600-million NFA Notes subject of the Ombudsman
investigation in OMB-ADM-01-0327 mentioned above. In said case, the Ombudsman found that “the alleged sale
of P562.5 million NFA notes to Land Bank of the Philippines and charging the same against the latter’s inter-
bank loans to UBI was done at the time when the latter was already closed xxx As receiver of UBI, the disposition
of NFA notes in favor of Land Bank obviously violated Section 30, R.A. 7653”.32
154. With this cash receipt, UDB could have easily paid off all its deposit liabilities and still be left
with more than enough operating capital were it to resume operation, not counting the balance of the P50.987
million government securities under the custody of PDIC as receiver of UBI. PDIC concealed this cash receipt by
failing to record it in UDB’s books even up to a year later.
155. Section 30 of RA 7653 requires that PDIC shall “determine as soon as possible, but not later
than ninety (90) days from takeover, whether the institution may be rehabilitated or otherwise placed in such a
condition so that it may be permitted to resume business with safety to its depositors and creditors and the
156. PDIC was obviously aware of UDB's cash position, and yet failed to recommend its immediate
re-opening. On the other hand, the MB should have ordered UDB’s immediate re-opening that would have
restored public confidence in the banking system. It should be noted that respondent Buenaventura was
concurrently a member of the NFA Council and PDIC Board of Directors, as well as the BSP governor and
157. Then again, the re-opening of UDB would only prove their malicious intent in falsifying facts and
data so stated in their SES Reports. It would have proven that UDB was not illiquid, and that there were no legal
and factual bases to order the closure. Thus, instead of re-opening the thrift bank that would restore
32 OMB-ADM-01-0327 Borlongan vs Buenaventura & Nazareno, Order dated 1 July 2002
33The text of the relevant provision in Sec. 30, R.A. 7653 reads: “The receiver shall immediately gather and take charge of all the
assets and liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers of a
receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act
that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver may deposit or place the
funds of the institution in non-speculative investments. The receiver shall determine as soon as possible, but not later than ninety
(90) days from take over, whether the institution may be rehabilitated or otherwise placed in such a condition so that it may be
permitted to resume business with safety to its depositors and creditors and the general public: Provided, That any determination
for the resumption of business of the institution shall be subject to prior approval of the Monetary Board.
“If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance with the
next preceding paragraph, the Monetary Board shall notify in writing the board of directors of its findings and direct the receiver
to proceed with the liquidation of the institution.”
confidence to the banking system, PDIC and respondents violated their mandate and opted for a quiet
liquidation to bury the evidence that would once and for all, prove false the SES Reports. They deliberately
and wantonly violated the requirements of Section 30 of R.A. 7653.
158. The surreptitiousness with which respondents devised the closure of UDB and the manner in
which the records are concealed show that they had something to hide, namely the errors in their SES Reports.
Yet for all that apparent effort to conceal the truth, the truth simply cannot be held back.
J. SES REPORT ON UII MADE FALSE FINDINGS
AND INTERCALATION OF INFORMATION NOT
AVAILABLE AT THE TIME OF THE REPORT.
159. Respondents, not content with the false reports on UBI and UDB that they prepared, proceeded to
commit a third falsehood by making false findings in the SES Report on UII. In fact, respondents substituted
information not available at the time of the preparation of the SES Report and went so far as to maliciously
suppress and withhold the pertinent annexes to their SES Reports.
160. In the case of UII, none of the findings in the SES Report (Annex L of Complaint, Annex “E”)
validate the Report’s recommendation to revoke UII’s trust license nor its investment-house license. The
Report’s recommendations are questionable as, firstly, UII’s trust department was a separate and distinct entity
from its investment house, and secondly, none of the several investment houses beset by similar problems at the
time were recommended by SES to have their trust or funds-management or investment-house licenses revoked.
Moreover, several of the findings in the Report were erroneous or subsequently intercalated/substituted, as
discussed in petitioner’s Complaint (at pages 19-21).
161. In the SES Report on UII, respondents recommended to the MB the “endorsement to SEC
(Securities and Exchange Commission) the revocation of its investment house license and the designation by SEC
of a receiver”. Yet, how could respondents prematurely make such recommendation of SEC’s designation of
UII’s receiver, when UII applied with the SEC for Suspension of Payments with Rehabilitation only on 8 May
162. The SES Report found that UII’s “debt-to-equity ratio of 133.4% signifies greater risk being
assumed by the creditors”. This statement is grossly and maliciously false. A debt-to-equity ratio of 133.4% is
mathematically equivalent to an asset-to-debt ratio of 175.0%. This means that the risk assumed by creditors is
actually covered, contrary to the SES Report, because the debt is more than adequately protected by assets worth
1.75 times the debt. Clearly, there was a clear and purposeful design by respondents to prepare a deceitful
Report. Moreover, UII’s debt-to-equity ratio of 133.4% represents a significantly low ratio by industry and any
business standards, a yardstick that respondents intentionally ignored.
163. In addition, errors and fabrications abound in the report. Respondents falsely stated in the Report
163.1. The SES Report on UII cited the existence of DOSRI accounts, when this “highlight” never appeared in
its preliminary report (as it was in compliance with DOSRI rules) following the January-February 2000
examination, nor was this finding discussed with UII officers, making it a malicious intercalation to
enhance an otherwise bland and shabby report. The Report mentions the figure of P2.033 Billion in
DOSRI loans, but in Annex C thereof it talks of only P2.028 Million, and in its unmarked Annex it
refers to a P2.028 Billion. Respondents obviously committed a hurried intercalation of the foregoing
“facts” that they threw caution to the wind, and did not bother to check or reconcile them with each
other. For public officials out to close a bank, respondents did remarkably sloppy work.
163.2. Annex C of the SES Report on UII alleged that “UII does not always indicate the statement ‘UII
assumes no liability for the payment, directly and indirectly, of this instrument’ on the Confirmation of
Sale used in its without recourse transactions”. However, this finding was not part of the BSP’s
preliminary report nor was it discussed in the exit interview in February 2000. It was part of BSP’s
findings made after 26 April 2000 and discussed with UII only on or about June 2000, thereby
highlighting its being a clear recent intercalation, constituting a fraudulent, falsified “creation” of the
Report after 26 April 2000.
163.3. A list of subsidiaries’ assets, liabilities and capital as of 31 December 1999, covering a list of ten
companies was annexed to the SES Report on UII. However, the numbers indicated therein were not yet
reflected in the records that UII had; rather, they were obtained from the audited financial statements
prepared by SGV. Curiously, these SGV statements were not available at the time of examination
conducted by BSP in January-February 2000, as SGV submitted most of them in early April 2000. In
addition, no financial statements nor any report on these companies were required to be submitted to the
BSP, nor did UII submit them to BSP prior to 26 April 2000. Obviously, said “list”, was only
“discovered” by BSP when it took over UBI’s premises after 26 April 2000, which clearly makes the list
spurious and inexistent at the time the SES Report was allegedly prepared and considered by the MB in
the morning of 26 April 2000.
164. As in the preparation of the SES Report for UBI and UDB, the SES Report for UII which
respondents prepared, is pockmarked by inaccuracies, tampering and falsehoods. Yet despite these circumstances,
the Ombudsman neglected to take into account the pernicious effects of such inaccuracies and falsehoods.
K. TO JUSTIFY THE FALSE FINDINGS IN THE SES
REPORT ON UBI, RESPONDENTS EVEN
ALTERED ITS SUPPORTING ANNEXES AS
EVIDENCED BY THE BROTONEL AFFIDAVIT.
165. In OMB-0-01-0089 Defensor vs. Buenaventura et al., Representative Michael Defensor filed a
complaint before the Office of the Ombudsman on 24 January 2001 against BSP officials and examiners, based
on the 6 December 2000 hearing conducted by the Congressional Committee on Good Government inquiring into
UBI’s closure. In said case, Mr. Antonio M. Brotonel, a manager under respondent Aure’s Department of
Commercial Banks II, submitted his counter-affidavit (Annex “Z”) stating:
“I had no difficulty of preparing the financial data and gathering other information about UBI on
April 25, 2000 considering that Division 2 had already the available financial data as of April 18, 2000
which was submitted by Mr. Aure Jr. to the Deputy Governor, Supervision and Examination Sector, so
that it only requires updating the financial position of the UBI from April 18 to April 25, 2000.
Besides, the Report of Examination of Urban Bank as of March 31, 1999 was already finished.
xxx xxx xxx
“As a matter of fact the source of financial data and reports were picked up or taken from various
reports submitted by UBI to BSP as shown in the matrix of the source documents supporting the
memorandum to the MB on April 26, 2000 and copy of which is hereto attached as Annex ‘2’”
166. The Annex “2” that Brotonel attached to his affidavit was entitled:
URBAN BANK, INCORPORATED
MEMORANDUM TO THE MONETARY BOARD
April 26, 2000
167. Said annex was a listing of “source documents supporting the memorandum to the MB on April
26, 2000”. The source documents were supposedly annexed to the memorandum (SES Report) on UBI to support
its recommendation. However, the annexes enumerated by Brotonel are inconsistent or different from the annexes
actually attached to the SES report on UBI. The comparative table below makes plain the inconsistencies.
Source document to SES Report,
Annex per Brotonel Document actually annexed to SES Report
Annex A Letter of Urban Bank-List of UBI branches Adjusted Capital Position- Jan, Feb, Mar 2000
Annex B Manual of regulations Sec X106 bank capital; Compliance with Reserve Requirements on Deposit
UBI’s consolidated statement of condition Jan, Feb, Liabilities, Feb 3 to Apr 19 2000
Mar 2000; UBI’s report on compliance with loan
loss provision Jan, Feb, Mar 2000; BSP’s report of
examination, 31 Mar 1999; MB resolution 256, 16
Feb 2000 allowing URDI earnings as part of capital
Annex C Large Loan Accounts as of Latest Regular
Examination, Mar 31 1999
Annex C & D BSP’s report on interbank loan transactions Jan,
Feb, Mar 2000; UBI’s consolidated daily report of
condition Jan-Apr 2000; BSP’s printout statement
of account showing overdraft, 26 Apr 2000
Annex D BSP’s statement of overdrawings Liquid Assets- Feb, Mar 2000
Annex E BSP’s status of loan portfolio Dec, Jan, Feb2000 Top 20 Stockholders, Dec 31 1999
Annex E-1 Senior Officers & Members of the Board of
Directors, Dec 31 1999
Annex F Details of classified accounts per BSP’s exam
report, 31 Mar 1999; UBI’s report on credit and
equities exposure P1-million-up, 31 Dec 1999;
UBI’s consolidated statement of condition, 31 Dec
Annex G UBI’s deposits insured by PDIC, 29 Feb 2000;
UBI’s CDRC, Jan-Mar 2000
Annex H Urban’s CSOC Feb, Mar 2000
Annex I Urban’s CSOC Feb 2000
Annex J New Central Bank Act Sec 30, proceedings in
receivership and liquidation
Unmarked Urban’s letter to BSP on bank holiday; BSP’s letter
to PDIC placing UDB under receivership; Zuñiga’s
168. The above inconsistencies show that the SES report on UBI was altered or substituted.
169. In addition, Brotonel’s affidavit establishes that certain documents were made available and
actually rendered to respondents when they prepared the SES Report. However, respondents intentionally
omitted (and later suppressed) information that contradicted their findings in the SES Report on UBI:
169.1. The BSP’s Manual of Regulations, Section X106, on bank capital would show that publicly-listed
banks such as UBI would have an additional six (6) months to meet the increased minimum capital of P2.4
billion. Respondents falsely stated in the SES Report that UBI was capital-deficient from January to March 2000.
169.2. UBI’s Report on Compliance with Loan Loss Provision as of March 2000 would show that UBI
provided P920 million in loss-reserves, much more than sufficient to meet the possible losses from past-due and
adversely-classified loans (Annex “Y”).
169.3. BSP’s Report on Interbank Loan Transactions for January 2000 would show that UBI had
substantial liquidity evident from its large and consistent interbank lending activities during the month. BSP’s
Report for March 2000 would also show that UBI still managed to lend on certain days during the month. These
facts were selectively screened-out in the SES Report’s short but negative discussion of UBI’s interbank
Respondents maliciously withheld from the courts
the incriminating annexes of the SES Reports on UBI
170. In two cases pending before the Court of Appeals, Reyes, Yuvienco, Guerrero and Aure
maliciously withheld from the court the incriminating annexes of the SES Reports on UBI and UII. In their
Petition in CA-G.R. SP No. 72234 and in their Comment in CA-G.R. SP No. 72270, said respondents submitted
the SES Reports on UBI and UII dated 26 April 2000 together with their accompanying annexes. However, said
Reports are not identical to the SES Reports submitted to the Office of the Ombudsman in OMB-ADM-0-00-0867
and OMB-0-00-1651. In particular, respondents omitted reference to certain accompanying annexes of the
Reports, which had been included in petitioner’s Complaint.
171. Respondents omitted the following annex attached to the SES Report on UBI (Annex E of
Complaint, Annex “E”). Said annex would serve only to emphasize their misleading calculation of UBI’s capital
URBAN BANK, INC.
Adjusted Capital Position Computed Pursuant to
Section X106 of the Manual of Regulations for Banks
As of Dates Indicated
[01/31/00, 02/29/00 and 03/31/00]
172. Respondents also omitted the following annexes of the SES Report on UII (Annex L of
Complaint, Annex “E”):
URBANCORP INVESTMENTS, INC. – TRUST LOANS
Extended to DOSRI of Both UBI and UII
As of 30 November 1999
URBANCORP INVESTMENTS, INC.
LIST OF ITS SUBSIDIARIES’ ASSETS, LIABILITIES & CAPITAL
AS OF 31 DECEMBER 1999
173. It is more than coincidence that these two annexes were conveniently omitted by respondents,
because they were particularly assailed by petitioner in his Complaint (at pages 20-21) as discussed above.
Respondents never countered, refuted or denied them at any time in the course of the Ombudsman investigation.
It should be noted that the annexes that respondents omitted happened to be only the incriminating documents
that they could never explain satisfactorily:
L. RESPONDENTS FABRICATED A NON-
EXISTENT FAX THAT THEY CLAIMED WAS
ANNEXED TO THE SES REPORT ON UDB.
174. The SES Report on UDB (Annex J of Complaint, Annex “E”) made particular reference to the
UDB’s letter dated 26 April 2000 which was allegedly attached as “Annex A” of the Report. Said Report (at
page 1) stated:
“Urbancorp Development Bank in its letter dated 26 April 2000 (Annex A), advised BSP that since Urban
Bank Inc., its parent bank, has declared a bank holiday starting today, it had likewise decided to declare a
175. Respondents claim that by 9:30 AM of 26 April 2000, the SES Reports on UBI, UDB and UII
were completed and submitted to respondent Reyes’ office in sealed envelopes.35 As Reyes had already left by
then, the Reports were delivered to Manila Golf Club where Reyes received them “at a little past 10 A.M.” 36
176. However, Guerrero’s department received UDB’s letter at its BSP-Roxas Boulevard office at
only 10:18 a.m., as evidenced by its own receiving time-stamp on the letter as borne by the attached Annex “BB”
hereof. Since respondents only received the letter at 10:18 a.m., they therefore could not have enough time to
prepare the Report and deliver it to Manila Golf Club in time for the MB meeting on 26 April 2000. Under
Section 30 of R.A. 7653, the MB may close a bank only upon such SES report.
34 The SES Reports on UBI and UII, with their annexes as submitted by respondents, were attached as ANNEX E and ANNEX
L, respectively, to petitioner’s Complaint-Affidavit dated 8 November 2000.
35 Guerrero’s counter-affidavit, par. 13
36 Reyes’ counter-affidavit, par. 4.3.5
177. To counter this evidence, respondent Guerrero stated that he had received the letter from UDB
earlier by fax “at exactly 8:46 a.m.” of 26 April 2000.37 According to Guerrero, it was the fax copy he annexed
to the SES Report which was transmitted to the MB.
178. Truth is, there was no fax and there was no valid report when the MB met on 26 April
2000. Respondents ante-dated the SES Report and, since the report cited UDB’s letter, they had to prove
that they received the letter much earlier than 10:18 a.m., hence the incredible and fictitious 8:46 a.m. fax.
179. Seven (7) pieces of evidence are herewith submitted proving the fabrication of the alleged fax,
including four (4) pieces of physical evidence.
180. In their affidavits (attached hereto as Annexes “CC” and “DD”, respectively), UBI Corporate
Secretary Corazon Bejasa and UDB Corporate Secretary Justina Callangan both attested to the ultimate fact that
as of 8:46 AM of 26 April 2000, the letter to the BSP had not even been prepared. Atty. Bejasa swore that she
prepared and signed her initial on the letter at 9:30 AM. Atty. Callangan (who was the last signatory) swore that
she signed the letter at almost 10:00 AM before dispatching it to BSP. That having been established, how then
could respondents claim that they received through fax such letter bearing the signatures of Attys. Bejasa and
Callangan – at 8:46 AM?
181. The physical evidence of the alleged fax (Annex “EE”) was pockmarked with spurious markings
and features that should have put into question the veracity of respondents’ assertions. The fax, submitted as
evidence by respondents to the Ombudsman in OMB-0-01-0089 38, showed numerous unique markings that could
not have been made under an authentic fax transmission in the first place. For example, there were two, not one,
headers on the alleged fax document. The header at the top indicated the time 9:00 AM, while the header at the
bottom indicated a different time – 8:46 AM, the time which respondents swore they supposedly received the fax
from their machine.
182. In his affidavit (Annex “FF”), UBI’s Systems Head and First Vice President Prudeno Natividad
attested, among others, that all of UBI’s fax machines imprint their headers only at the top of the transmitted
documents. Moreover, respondents submitted to the Ombudsman another fax from UBI to BSP (Annex “GG”),
this time a true and authentic fax, as sample for comparison. However, the latter showed physical features which
were consistent with Mr. Natividad’s claim in a true fax, but were inconsistent with the alleged 8:46 fax, further
proving its spuriousness. For example, the authentic fax (Annex “GG”) did not have a bottom header while the
spurious fax (Annex “EE”) contained one to indicate the time of alleged transmittal at 8:46 AM.
183. Still another piece of physical evidence is the SES Report on UDB with its attachments. The
document actually attached and indelibly marked as “Annex A” to the SES Report was not the 8:46 AM fax
which respondents claimed, but rather the original letter stamp-received at 10:18 AM. On said “Annex A”
document, respondents attempted in vain to obscure the receiving-time stamp to conceal the time that it was
actually received by respondents. Photocopy of said document is attached as Annex “HH”.
184. Given the conflicting testimonies between respondents and Attys. Bejasa and Callangan, physical
evidence should be the arbiter of who are telling the truth. As stated by this Court: “Greater credence is given
to physical evidence as evidence of the highest order, because it speaks more eloquently than a hundred
witnesses.” (People vs. Alolod, G. R. No. 117506-07, Jan. 7, 1997)
M. UBI’S AND UDB’S CONDITION WAS THAT OF
ALLEGED ILLIQUIDITY AND SHOULD HAVE
BEEN PLACED INSTEAD UNDER
CONSERVATORSHIP AS PROVIDED BY LAW.
185. At the 6 December 2000 hearing by the Congressional Committee on Good Government,
respondent Buenaventura stated:
37 Guerrero’s counter-affidavit, par. 9
38Atty. Benjamin Tabios Jr. filed a complaint before the Ombudsman (docketed as OMB- 0-01-0614) against all of respondents
in OMB-0-01-0089 Defensor v. Buenaventura et al., for perjury and falsification committed in the course of the Ombudsman’s
investigation, with respect to the alleged 8:46AM fax. Tabios was counsel for complainant Defensor. The Ombudsman
dismissed the complaint of Tabios, who elevated it to the Court of Appeals in CA-G.R. SP No. 73475. The CA dismissed his
petition on the basis that it should have been filed with the Supreme Court. The case is pending before the SC as G.R. No.
“First, it was a situation of illiquidity and inability to pay liabilities in the course of its business, a situation
which Urban Bank unilaterally brought upon itself. In other words its closure contrary to what is
commonly thought was not grounded on insolvency but on its illiquidity. And we repeat, it was not
grounded on insolvency but on illiquidity.”
(Congressional transcript, page tjasipin III-5)
186. During the same congressional hearing, Buenaventura went further to define illiquidity versus
“Insolvency means there is insufficient realizable assets. In other words, if you have, let’s say 10 billion
of liabilities, do you have enough assets to liquidate in order to pay-off all your liabilities. But that’s just
pure insolvency. But as to when you can liquidate it, it’s a matter of time because if they’re all illiquid
assets, and I’ll go back on that illiquidity, then you might be able to realize it but it might take you today,
next year, 3 months from now, 6 months from now...”
(Congressional transcript, pages ESBongon/ IV-6 & 7)
187. Having said that, it was highly irregular for respondents, in their SES Reports on UBI and UDB,
to have recommended closure under Section 30(a) of R.A. 7653. For, the banks were not insolvent but merely
temporarily illiquid. (In the case of UDB, it was not even illiquid, though the SES Report found otherwise.)
Instead, both institutions should have been placed under conservatorship which would have enabled them to get
back on their feet. Section 29 of the same law provides:
Section 29. Appointment of Conservator. – Whenever, on the basis of a report submitted by the
appropriate supervising or examining department, the Monetary Board finds that a bank or a quasi-bank
is in a state of continuing inability or unwillingness to maintain a condition of liquidity deemed
adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a
conservator with such powers as the Monetary Board shall deem necessary to take charge of the assets,
liabilities and management thereof, reorganize the management thereof, collect all monies and the debts
due said institution, and exercise all powers necessary to restore its viability. The conservator shall
report and be responsible to the Monetary Board and shall have the power to overrule or revoke the
actions of the previous management and board of directors of the bank or quasi-bank.
The conservator shall be competent and knowledgeable in bank operations and management. The
conservatorship shall not exceed one (1) year.
188. It should be noted that the Philippine National Bank, Equitable-PCI Bank, and the several other
banks that suffered similar illiquidity but received financial assistance from BSP and PDIC were not even placed
189. In the case of UBI and UDB, they did not borrow a single centavo from BSP nor PDIC, but were
instead immediately shut-down. Was this simply a case of an unequal application of the law, or a purposeful
malicious closure of a bank which was momentarily cash-starved?
N. UBI AND UDB WERE CLOSED UNDER SECTION
30(a) OF R.A. 7653, WHICH REQUIRES THE
CONCURRENCE OF FIVE CONDITIONS
BEFORE A BANK MAY BE CLOSED.
190. As indicated in the SES Reports, UBI and UDB were recommended and ordered closed under
Section 30(a) of R.A. 7653 New Central Bank Act.
191. Section 30(a) of R.A. 7653 provides:
SEC. 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION.– Whenever, upon the
report of the head of the supervising or examining department, the Monetary Board finds that a
bank or quasi-bank :
(a) is unable to pay its liabilities as they become due in the ordinary course of business.
Provided, that this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
In which cases, the Monetary Board may summarily and without need for prior hearing forbid
the institution from doing business in the Philippines and designate the Philippine Deposit
Insurance Corporation as receiver of the banking institution.
192. The following five (5) elements are therefore required to be simultaneously present, before a
bank may be closed under Section 30(a) of RA 7653:
192.1. Monetary Board approval is required before a bank may be closed.
192.2. A valid report (the BSP-SES Report) on the condition of the bank is submitted to and
deliberated upon by the MB prior to its decision of closure, which approval will be based upon said report.
192.3. The bank is unable to pay its liabilities as they become due in the ordinary course of business,
meaning, under the ordinary demands for withdrawals. This condition therefore does not apply in a bank’s “un-
ordinary” course of business -- i.e., irregular, abnormal, sudden, unusual or extraordinary demands on the
192.4. There is no financial panic in the banking community that induced the extraordinary demands
for withdrawals from the bank.
192.5. A finding must be made and determined on the existence of the two (2) above-mentioned
conditions, before the MB may “summarily and without need for prior hearing” close-down the bank.
Furthermore, such awesome power demands the exercise of extraordinary diligence in determining such finding,
as required under Section 16 of R.A. 7653.
193. Mere illiquidity of a bank therefore is not a condition to close a bank under Section 30(a) of RA
7653. On the other hand, Section 29, RA 7653 provides for conservatorship when a bank is in a condition of
illiquidity. After all, ALL financial institutions are considered illiquid or leveraged to a certain degree to operate
profitably, as affirmed by former MB Member Cayetano Paderanga (Annex “Q”). The very essence of Section
30(a) clearly recognizes this fact, as well as BSP’s role insofar as liquidity and emergency assistance is concerned
. Extraordinary withdrawals induced by financial panic, such as the one experienced by UBI, are certainly not
considered “in the ordinary course of business”.
As BSP’s General Counsel, respondent Zuñiga issued
a Legal Opinion which was reckless, unprecedented
and hastily prepared, to merely conform to
respondents’ intentions to close-down UBI.
194. In his official capacity as BSP’s General Counsel, respondent Zuñiga issued a Legal Opinion
dated 26 April 2000, upon the urgent request of respondent Reyes made during the previous evening. In his short,
two (2)-page Opinion, Zuñiga stated that a bank may be closed under Section 30(a) of R.A. 7653 when it declares
a bank holiday, because it “closes itself for business” and is therefore unable “to pay its liabilities as they become
due in the ordinary course of business”. Zuniga’s Opinion was attached to the SES Report on UBI (Annex E of
Complaint, Annex “E”).
195. In his counter-affidavit (at par. 28.3), Zuñiga stated:
“In the present case, I prepared the requested Legal Opinion with utmost care and diligence, basing it
on my knowledge and research of the relevant law and jurisprudence, as well as on my longtime
experience of working in the banking industry.
“I was presented with the question of whether or not the declaration by a bank of a ‘bank holiday’ is
sufficient ground to order the closure of said bank and place it under receivership.”
196. In his Comment (at page 35) in CA-G.R. SP No. 72270, Zuniga further stated that: “There being
legal basis for respondent de Zuniga, Jr.’s opinion, he cannot be said to have prepared the same recklessly and
197. Zuniga’s hurriedly prepared Opinion contained no citations, precedents, pertinent laws or
jurisprudence to support his very brief view of Section 30(a). Yet in his counter-affidavit as in his Comment,
Zuñiga continued to fail to name any precedent—as to specific banks, jurisprudence, or historical events—upon
which he allegedly based his research or experience, to prove his claim.
39 At Sec. 83 Loans for Liquidity Purposes, and Sec. 84 Emergency Loans and Advances, of R.A. 7653
198. Contrary to Zuniga’s assertions, there is no such precedent. UBI and UDB were the first banks
ever closed by BSP by reason of illiquidity or bank holiday. Zuniga clearly issued a conforming opinion to tailor-
fit a pre-determined intention by respondents to hurriedly close UBI, UDB and UII.
199. That his Opinion was recklessly made to merely conform to the conclusion and intention of his
co-respondents is evident in the following:
199.1. Zuniga’s “knowledge and research of the relevant law” would have brought his attention to Sec.
29 of R.A. 7653 and not merely Sec. 30(a). Nowhere in his Legal Opinion did he mention, even as an alternative,
conservatorship under Section 29 that applies to banks in situations of illiquidity.
199.2. Zuniga”s “knowledge and research of the relevant jurisprudence” would have led him to the
Banco Filipino case, a landmark in banking jurisprudence -- where Banco Filipino was not ordered closed after
declaring a bank holiday but was re-opened under conservatorship one week after. The case verily contradicts
Zuniga’s mistaken opinion that a bank holiday is basis for closure as contemplated under Sec. 30 of RA 7653
(formerly Sec. 29 of RA 265).
199.3. Zuniga did not bother to discuss anywhere in his Legal Opinion, about the exempting provision of
Sec. 30(a). Said provision excludes situations of a bank’s inability to pay its liabilities in the un-ordinary course
of business, as caused by extraordinary demands induced by financial panic in the banking community.
199.4. Zuniga claimed in his counter-affidavit (par. 9) that the SES Reports and his Legal Opinion
“were presented to and deliberated upon by the MB”. Yet, as reflected in the MB Minutes of 26 April 2000,
there was no discussion at all about his Opinion nor with respect to the exempting provision of Sec. 30(a), while
he was present during said MB meeting.
200. Respondent Zuñiga rendered his faulty Opinion not merely as a lawyer. He did so as the General
Counsel of the Bangko Sentral, thereby betraying the trust of such office. Sec. 16 of R.A. 7653 required him to
“exercise extraordinary diligence in the performance of his duties”; Sec. 3(b) of R.A. 6713 required him to
“perform and discharge (his) duties with the highest degree of excellence, professionalism, intelligence and skill”.
Despite that, he recklessly and without precedent, issued his Opinion with manifest partiality, evident bad faith
and/or gross inexcusable negligence.
UBI and UDB were closed under Section 30(a) of
R.A. 7653. However the conditions required under
Sec. 30(a) were not determined or even discussed in
the SES Reports that recommended their closure.
201. The SES Reports invoked Section 30(a) of R.A. 7653 in recommending closure of UBI and UDB.
However, the conditions required under said section (i.e., the ordinary demands of withdrawals under which the
bank is unable to pay, and the non-existence of financial panic) were not even discussed in the Reports, much
less complied with.
202. In their Petition (at page 31) in CA-G.R. SP No. 72234, respondents attempted to escape
culpability by erroneously stating that “Section 30(a) of R.A. 7653 does not expressly require the Report to
contain a categorical finding to that effect” “with respect to the existence or absence of financial panic in the
banking community which induced the extraordinary demand upon UBI’s deposits”.
203. Section 30(a) of R.A. 7653 crucially requires the determination of such conditions. Whose job
is it then, if not the respondents as officials of BSP in charge of bank supervision and examination, to make such
determination or finding before invoking Section 30(a) in their own Reports?
UBI and UDB were closed under Section 30(a) of
R.A. 7653. The conditions required under Sec. 30(a)
were not deliberated upon or even discussed in the
MB Special Meeting.
204. In his counter-affidavit in OMB-0-01-0089, respondent Zuniga, who is the BSP General Counsel
and MB Secretary, had this to say with regard to the MB Special Meeting of 26 April 2000:
“The proceedings and deliberations of the MB need not be recorded through tapes and stenographic notes.
It is sufficient if minutes are taken of said proceedings and deliberations. xxx To be sure, the
Minutes…would carry more weight than mere tape recordings or stenographic notes…”
205. If respondent Zuñiga is to be believed that MB meetings are not required to be taped or
stenographic notes taken, then the Minutes therefore represent the “complete record of the proceedings and
deliberations of the Monetary Board”. This is so required by Section 11 of RA 7653.
206. Petitioner therefore submits as further evidence against respondents, the Minutes of the 26 April
2000 MB Meeting, which had been submitted as Annexes 1, 2 and 3 of Zuñiga’s counter-affidavit in herein case
OMB-0-00-1651. Said annexes are hereto attached as Annexes “II”, “II-1” and “II-2, respectively.
207. It is evident in those Minutes that there was absolutely no discussion nor deliberation on the
financial panic and/or extraordinary demands on UBI and UDB. No finding or determination was made on
whether the conditions required under Section 30(a) existed or not, that would justify their closure.
208. Respondents’ violation of the law in respect of UBI’s and UDB’s closure is plain from BSP’s
own documents on the matter.
Respondents were actually aware that the required
conditions under Sec. 30(a), R.A. 7653 to close a bank
were absent, at the time that they prepared the SES
209. Two more vital pieces of evidence prove irrefutably that respondents actually knew that the
conditions required to close a bank under Section 30(a) of R.A. 7653 were absent, before and at the time that they
prepared the SES Reports.
210. First, respondents knew of the existence of a financial panic, as evidenced by petitioner’s letter to
respondent Buenaventura, which was prepared by respondent Reyes in Buenaventura’s office in the afternoon of
25 April 2000. Said letter is proof that respondents were informed of and knew about the financial panic that
affected UBI. Said letter was in fact made an annex to the SES Report on UBI (Annex B of Complaint, Annex
211. As plainly stated in said letter, “media reports of our down grading to a thrift bank” “created
liquidity problems”, obviously indicating the existence of a public panic. It was precisely the negative news
media reports that caused the panic withdrawals that led to UBI’s temporary illiquidity. As discussed above,
respondents were also aware of the panicky financial market that existed at the time, caused by over P10-billion
unpaid instruments by various issuers, the BW and stockmarket crash, the massive capital flights, and several
212. A crucial condition of Section 30(a) was therefore absent.
213. Second, respondents were aware of the extraordinary demands for withdrawals from UBI, as
evidenced by their own admission. The following evidence is proof that respondents were told and knew of UBI’s
un-ordinary course of business in the afternoon of 25 April 2000:
“Finally, in the afternoon of 25 April 2000, at about 3:30 p.m., Bartolome and Borlongan were at the
Bangko Sentral and had a meeting with respondents Governor Buenaventura, Deputy Governor Reyes and
Monetary Board Member Alindogan during which Bartolome indicated that since they expected checks
drawn against Urban Bank amounting from Php 1 to 2 billion would be going to the clearing house that
night, the assistance available from the PDIC, which amounted to Php 300 million only, would be
insufficient.” (Buenaventura’s counter-affidavit, par. 2.3.3i)
**** **** **** ****
“4.2.1. On 25 April 2000, at about 3:30 P.M., Complainant Borlongan and Mr. Arsenio Bartolome
(Chairman of the Board of UBI), had a meeting with Respondent Governor Buenaventura, Mr. Alindogan
and I, at the Office of Governor Buenaventura. Also present in said meeting was Ms. Teresita Hatta.
“At the said meeting, Complainant Borlongan and Bartolome declined the offer of PDIC to provide
funding support. In declining the offer of PDIC, Mr. Bartolome reasoned out that the initial support of
P300 Million from PDIC would be useless considering that UBI’s expected inward clearing items (or
clearing loss) for that day would be anywhere from P1-2 Billion. Mr. Bartolome also stated that deposits
have already been drawn by P4.5 Billion for the past two (2) weeks. xxx
xxx xxx xxx
“4.2.3. On 25 April 2000, at about 6:30 P.M., the BSP issued notice of declaration of bank holiday by
UBI and advised the non-settlement of inward clearing items of 25 April 2000 due for settlement at 6:30
P.M. on said day.
“The Philippine Clearing House Corporation (‘PCHC’ for brevity) implemented said notice by not
accepting the inward items or checks amounting to a total value of P1.206 Billion.” (Reyes’ counter-
214. Undeniably, respondents were informed and aware of the extraordinary demands of withdrawals
that UBI was suffering on 25 April 2000, as indicated by the unusually large magnitude of checks (P1-2
billion) drawn on UBI that was expected to clear through the clearing-house that same evening. The demands on
UBI were extraordinary, despite the miniscule liquidity assistance (P300 million) that BSP and PDIC were
willing to provide at the last minute. Respondents were fully aware of UBI’s un-ordinary situation and the
extraordinary demands on 25 April 2000. No further discussion can be any clearer on the fact that UBI’s
situation did not square with the requirements under Section 30(a), R.A. 7653.
215. The second crucial condition of Section 30(a) was therefore absent.
As found the Court of Appeals in CA-G.R. SP No. 72270, the closure of UBI, UDB and UII was
“abrupt” and “came as a bolt out of the blue, to the public.” Even the Office of the Ombudsman, in OMB-
ADM-0-00-0867, found that the SES Reports’ recommendations of closure were “harsh”, “drastic” and
However, the three (3) SES reports, which were prepared by respondents, did not merely contain incorrect
or inaccurate statements. They were replete with outright lies and disinformation, purposely made to justify the
hurried closure of UBI, UDB and UII. The unequivocal facts and wealth of evidence demonstrate only too well
the manifest partiality, malice and bad faith of respondents.
Respondents falsified the three SES Reports on UBI, UDB and UII, which were allegedly the MB’s bases
to order their closure. Respondents altered the official reports and made untruthful statements, making it appear
that there were grounds to close UBI, UDB and UII, when in truth and in fact, the grounds alleged by them in
their Reports were false, erroneous, contrived, feigned, inappropriate, inadequate and misleading. In violation of
Article 171(4) and (5) of the Revised Penal Code, respondents wantonly and malevolently falsified the SES
Reports by way of the following:
a. Respondents substituted the SES Report on UBI and altered its supporting annexes, in order to justify the
false findings in said Report, as evidenced by the Brotonel affidavit. (paragraphs 165-173)
b. Respondents altered the true dates of the SES Reports and fabricated a non-existent fax, claiming that it
was annexed to the SES Report on UDB. The alleged fax was fabricated to make it appear that the
Reports existed at the time that the MB met to deliberate on said Reports on 26 April 2000 morning.
c. Respondents altered the SES Report on UII as evidenced by the intercalation of information not available
at the time of the report. Respondents also made misleading and erroneous findings. (paragraphs 159-
d. In the SES Report on UBI, three findings on UBI’s financial condition were stated, forming the bases to
recommend its closure, namely – (1) illiquidity; (2) capital deficiency; and (3) high past-due and
Respondents made a false finding of illiquidity, in their SES Report on UBI. UBI was suffering from
temporary illiquidity induced by panic withdrawals which respondents caused and which they were aware
of. (paragraphs 110-116)
Yet, despite Land Bank’s P562.5 million withdrawal which was executed after UBI’s closure and
intended to reduce its true liquidity picture, UBI still had left P2.0 billion in liquid and non-risk assets at
the time of closure, and UII still had P355-million (paragraphs 124-125). Respondents even perjured
themselves before the Ombudsman to conceal the fact that UBI and UDB were the only banks closed for
reason of illiquidity in the 52 years under the old and New Central Bank Acts (paragraphs 117-123).
e. Respondents made a false finding of capital deficiency, in their SES Report on UBI. The clear provisions
of BSP Circular No. 156 prove its falsehood as well as respondents’ perjury when they went further to
insist under oath that UBI was capital-deficient. (paragraphs 126-133)
f. Respondents made a false finding of high past-due and adversely-classified loans, in their SES Report on
UBI. UBI provided huge loan loss-reserves, and respondents concealed this singularly material and
offsetting fact in the Report and even denied it under oath before the Ombudsman. (paragraphs 134-146)
g. In their SES Report on UDB, respondents made a false finding of illiquidity which formed the financial
basis to recommend its closure. UDB actually had liquid assets enough to answer for its deposits thirty-
six times over (paragraphs 147-150). Respondents with PDIC suppressed the evidence of UDB’s cash
liquidity that would prove the SES Reports false, and attempted to secretly liquidate UDB in violation of
Section 30 of R.A. 7653 (paragraphs 151-158).
Respondents denied UBI, UDB, UII and petitioner of their rights to due process and equal protection, as
enshrined in our Constitution and pronounced by this Honorable Court in the case of Banco Filipino Savings and
Mortgage Bank vs. Monetary Board, Central Bank of the Philippines, et al. 40 The findings in the SES Reports
were neither discussed nor furnished by respondents, nor was any opportunity given for the institutions to respond
to and take corrective action on respondents’ (false) findings – all in clear and flagrant violation of their own
Central Bank Manual of Examination Procedures. (paragraphs 59-67)
Respondents’ intent when they prepared their SES Reports was betrayed by the following events that
manifested their premeditated purpose to shut-down UBI, UDB and UII without any due process:
a. In violation of Section 30 of R.A. 7653, respondent Buenaventura preemptively announced UBI’s closure
a day before the MB met to deliberate on UBI’s fate. Worse, Buenaventura arrived at such conclusion
without the benefit or need of the requisite SES Reports, which were inexistent at that time. (paragraphs
b. In violation of Section 11, R.A. 7653 and despite the Banco Filipino precedence, respondents
Buenaventura and Zuniga failed to keep complete detailed recording of the MB’s deliberations on 26
April 2000. No tape-recording or stenographic notes were taken of the MB meeting that would otherwise
reveal what and how MB actually deliberated upon the SES Reports if they existed at the time.
c. In violation of Section 30 of R.A. 7653, PDIC prematurely served on UBI the MB closure order, even
quoting the MB resolution number, when the MB had not yet met to deliberate on and approve such
closure. (paragraphs 38-43)
d. PDIC served the wrong closure order on UDB. Worse, said order was addressed to UBI’s Cebu branch at
an address that had been vacated for more than a year. (paragraphs 53-55)
Respondents’ malice and bad faith in the preparation of the SES Reports were further manifested in the
following events which triggered UBI’s and UII’s panic withdrawals leading to their temporary illiquidity:
a. In violation of Section 28 of R.A. 7653, respondents conducted an arbitrary and unlawful examination of
UBI (and UII) two months before its closure, in January and February 2000. (paragraphs 1-2)
b. Despite the examination, respondents rendered a false and erroneous SES report to the MB on 4 February
2000, causing the MB to impose unjust restrictions on UBI. (paragraphs 6, 72-75)
c. Respondents repeatedly disclosed to news media in March 2000, negative information on UBI to fan the
panic withdrawals that eventually led to the declaration of a bank holiday. Worse, the information was
false and misleading. In revealing confidential information on the condition or business of the bank,
respondents violated of Section 27(c) of R.A. 7653 as well as Sec. 3(k) of R.A. 3019, and Sec. 7(c) of
R.A. 6713. (paragraphs 68-85)
d. Respondents denied timely and sufficient financial assistance to UBI. They miserably and maliciously
failed to comply with their legal obligation to assist UBI. (paragraphs 86-103)
40 204 SCRA 767.
Respondents, out of their gross or purposeful negligence, recommended the closure of UBI and UDB
under Section 30(a) of R.A 7653. However, said Section requires the concurrence of five conditions before a
bank may be closed (paragraphs 190-193). None of those conditions were met:
a. The conditions required under Section 30(a), were not determined or even discussed in the SES Reports
that recommended their closure (paragraphs 201-203). Nor were they deliberated upon or even discussed
in the MB meeting, as evidenced by the Minutes of the MB meeting (paragraphs 204-208).
b. Respondents actually knew that the required conditions under Section 30(a) to close a bank were absent,
at the time that they prepared the SES Reports. Respondents were aware of the public panic and the
extraordinary demands of withdrawal on UBI on 25 April 2000. (paragraphs 209-215)
c. UBI’s and UDB’s condition was that of alleged illiquidity and should have been placed instead under
conservatorship as provided under Section 29 of R.A. 7653 (paragraphs 185-189). As BSP’s General
Counsel, respondent Zuñiga issued a unprecedented and reckless Legal Opinion to conform to co-
respondents’ ill intentions to close-down UBI (paragraphs 194-200).
d. UBI declared on 25 April 2000 a bank holiday that was pre-cleared with respondent Buenaventura, to put
a temporary halt on the panic withdrawals that reached extraordinary magnitude of P1 to 2 billion during
that day (paragraphs 8, 213-214). On the other hand, UDB declared a bank holiday on 26 April 2000 not
because of any illiquidity but in consideration of the bank holiday that its parent bank UBI had earlier
declared. (paragraph 174).
e. The Banco Filipino case is one of several cases in Philippine banking jurisprudence wherein a bank
holiday is a temporary suspension of banking transactions and not a basis for closure (paragraphs 121-
123; 199.2). In fact, UBI’s and UDB’s closure for reason only of illiquidity or bank holiday is
unprecedented (paragraphs 117-119).
In conspiring and confederating with each other to falsify the SES Reports in order to unlawfully close
UBI, UDB and UII, respondents committed other acts of abuse, misfeasance and malfeasance in office. Section
16 of R.A. 7653 indomitably holds them liable for the loss and injury suffered “as a result of such violation,
negligence, abuse, malfeasance, misfeasance or failure to exercise extraordinary diligence”.
It is clear from the foregoing discussion that petitioner has sufficiently laid the basis for the Ombudsman
to find the existence of probable cause against private respondents. That the Ombudsman ruled against the
petitioner despite abundant evidence definitely amounted to a grave abuse of discretion amounting to a lack or
excess of its jurisdiction. While as a general rule, the Supreme Court does not intervene in the investigatory and
prosecutory powers of the Ombudsman, there is adequate basis for intervention in this case: The Ombudsman not
only ignored the evidence on hand and its own findings in the related administrative case, but it also shirked from
its legal obligation to determine probable cause. If only to rectify the patent errors of the Ombudsman, petitioner
respectfully implores the Honorable Court to review the findings of the Ombudsman and the evidence.
WHEREFORE, it is respectfully prayed that:
1. The Petition for Certiorari be given DUE COURSE;
2. The questioned Resolution of the Office of the Ombudsman dated 24 June 2002 and Order dated
23 August 2002 be SET ASIDE and/or ANNULLED; and in lieu thereof, that the Office of the Ombudsman be
directed to file the appropriate charges against private respondents for:
Violation of Articles 171(4) and 171(5) of the Revised Penal Code, and Section 3(e) of Republic Act
No. 3019 Anti-Graft and Corrupt Practices Act;
Violation of Sections 11, 27(c), 28 and 30 of R.A. 7653 New Central Bank Act, in relation to Section
16 and punishable under the penal provisions of Section 36 thereof.
Violation of Section 3(k) of R.A. 3019, and Section 7(c) of R.A. 6713, in relation to Section 27(c) of
Such other remedies as are just and equitable under the circumstances are likewise prayed for.
Pasig City for Manila, 9 September 2003.
CHATO ELEAZAR & LAGMAY
Counsel for Petitioner
8/F Strata 2000, Emerald Avenue
Ortigas Center, 1600 Pasig City
WILFREDO M. CHATO
IBP No. 570899/12-27-02/Makati City
PTR No. 1378599/1-03-03/Pasig City
Roll of Attorneys No. 21487
VICTOR Y. ELEAZAR
IBP No. 570898/12-27-02/Calauag, Quezon
PTR No. 1033429/1-03-03/Calauag, Quezon
Roll of Attorneys No. 32838
I, TEODORO C. BORLONGAN, of legal age, with postal address at No. 1 Sparrow Street,
Greenmeadows 1, 1110 Quezon City, after being duly sworn in accordance with law, hereby depose and say that:
1. I am the petitioner in the above-captioned case.
2. As such, I have caused the preparation of the foregoing Petition for Certiorari, the contents of
which I have read and attest to be true and correct of my own knowledge and belief.
3. This Petition is filed within the reglementary period provided in Rule 65 of the Rules of Court.
4. I hereby certify that I have not commenced any other action of proceeding involving the same and
identical issue/s in the Supreme Court, Court of Appeals or different divisions thereof, or any other tribunal or
agency, and to the best of my knowledge no such action or proceeding is pending with the Supreme Court, Court
of Appeals or different divisions thereof, or any other tribunal or agency, other than CA-GR SP Nos. 72270 and
72234, both pending with different divisions of the Court of Appeals.
5. I undertake that if I should thereafter learn that a similar action or proceeding has been filed or is
pending before the Supreme Court, Court of Appeals or different division thereof, or any other tribunal or agency,
to promptly inform the courts of that fact within five (5) days therefrom.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of September, 2003 at Pasig City.
TEODORO C. BORLONGAN
SUBSCRIBED AND SWORN to before me this 9th day of September, 2003 at Pasig City, affiant
exhibiting to me his Community Tax Certificate No. 15504173 issued on 18 January 2003 at Quezon City.
THE OFFICE OF THE OMBUDSMAN
HON. SIMEON V. MARCELO
HON. ANIANO A. DESIERTO
Agham Road, Diliman, Quezon City
ROMULO MABANTA BUENAVENTURA SAYOC
& DE LOS ANGELES
Atty. Reynaldo Geronimo
Counsel for Respondent Gov. Buenaventura
30/F Citibank Tower
Paseo de Roxas, Makati City
YNGSON & ASSOCIATES
Counsel for Respondents Reyes and Aure, Jr.
7/F Strata 2000, Emerald Avenue
Ortigas Center, Pasig City
ONGKIKO KALAW MANHIT & ACORDA LAW OFFICES
Counsel for Respondents Zuñiga, Jr. and Guerrero
4/F Cacho-Gonzalez Building
101 Aguirre Street, Legaspi Village
MA. DOLORES B. YUVIENCO
Bangko Sentral ng Pilipinas
Roxas Boulevard, Manila