On the surface, the scheme appears simple – deposits are generated from the public and then siphoned off to the interests of certain persons or companies. However, the transactions were of a different level of sophistication intentionally hidden in a maze of paper trail and deleted computer files that required more expertise and in-depth investigations and the proverbial patience of Job from investigators and forensic experts to uncover.

The scheme is the story behind the three syndicated estafa cases filed by the Philippine Deposit Insurance Corporation (PDIC) against Celso delos Angeles, his wife and son, and officers of his Legacy banks and companies. The complaints on these cases allege that they conspired to defraud Legacy banks by siphoning off millions of bank funds through fraudulent, anomalous and irregular transactions. Syndicated estafa is a non-bailable offense and is punishable with lifetime imprisonment.

PDIC General Counsel Romeo M. Mendoza, Jr. said that the 3 syndicated estafa cases were built up from results of investigation conducted by PDIC and Punongbayan & Araullo, an audit firm with expertise in forensic fraud investigation, affiliated with Grant Thornton, International PA. PDIC engaged the services of Punongbayan early this year to help identify and document possible fraud schemes, irregularities and anomalies that may have been perpetrated against the banks and which may be used as basis for the filing of criminal, civil and/or administrative cases. Forensic fraud investigation is being used by other countries such as the United States. The Federal Bureau of Investigation’s Racketeering Records Analysis Unit uses forensic fraud investigation in cases covered by the Racketeering Influence and Corrupt Organization (RICO Law).

1^st: Calanggaman Case

On March 11, 2009, the PDIC filed a syndicated estafa case against delos Angeles, his son Martin Nicolo delos Angeles and 19 others before the Department of Justice, for conspiring to siphon off funds of Rural Bank of Carmen (Cebu) which were solicited from the public by way of deposits. As shown by the documents recovered from the closed bank, the complaint indicates the direct involvement of delos Angeles and officers of Legacy-related corporations in these transactions, as follows: Delos Angeles created 39 fictitious loans amounting to P16.85 million in RB Carmen, and diverted the loan proceeds to his son, Martin Nicolo, and to other Legacy related corporations. Said fictitious loans were erased from the books of RB Carmen after delos Angeles himself purchased the same fictitious/simulated loans in consideration for a 9.8 hectare island, Calanggaman, located in Calanggaman, Tinabilan, Palompon, Leyte.

A month and four days after delos Angeles assigned the Calanggaman island to RB Carmen, the bank was made to appear to have sold the property to EDIFICE Realty and Development Corporation for P32 million payable in 15 years. Records from the Securities and Exchange Commission showed that EDIFICE Realty and Development Corporation is 99% owned by Resource Providers and Manpower Services, Inc. while the remaining 1% is owned by delos Angeles and his family. Resource Providers and Manpower Services, Inc. is, in turn, 98.94 % owned by delos Angeles and the remaining 1.06% by his son, Martin Nicolo and others.

The alleged amortization payments by EDIFICE for the Calanggaman property were funded by the deposit accounts of Legacy Motors, Inc. (LMI) and Fusion Capital Corporation (FCC), both Legacy related corporations, which were later found to be funded with proceeds of fictitious motorcycle and investment loans.

EDIFICE’s obligation with RB Carmen was made to appear to have been fully discharged with the assignment of five properties located in Batangas but these properties were traced to another Legacy bank, the closed Dynamic Bank, which has a mortgage lien on these properties. The registered owners of the mortgaged properties denied having sold the properties in favor of respondents Rolando V. Mata, Judith I. Dionson, Mary Ann Biarcal, Cristina M. Metante and Warren Collamat.

Later, the title of the Calanggaman property was said to have been transferred to EDIFICE for P1 million only.

2^nd: Hacienda Busay Case

On April 15, 2009, the PDIC filed before the DOJ Task Force on Legacy a second syndicated estafa case against delos Angeles, his wife Ma. Concepcion, his son Martin Nicolo and seven other Legacy Group officers for allegedly conspiring to misappropriate the funds of Nation Bank funds using a farmland in Negros Occidental.

The complaint indicates that delos Angeles and company made it appear that the heirs of the late owner of Hacienda Busay located in Bago City, Negros Occidental borrowed P56 million from Nation Bank using the hacienda as collateral. But the heirs of Lucy Araneta-Solinap: Jose, Marciano, Nicolas, Jesus and Geronimo, did not and never intended to obtain a loan with Nation Bank. Instead, they said the hacienda was sold to delos Angeles for P37 million, of which only P30 million was actually received by the Solinap heirs.

The complaint further states that delos Angeles used Nation Bank’s funds to pay the Solinap heirs the amount of P25 million in the form of certificates of time deposits (CTDs) and checks. The balance of P31 million of the proceeds of the loans attributed to the Solinap heirs were diverted to delos Angeles’s savings accounts maintained with Nation Bank.

Bank records also showed that delos Angles and other respondents to the case allegedly made it appear that Nation Bank acquired Hacienda Busay by virtue of an undated Deed of Absolute Assignment after merely a month from the time the purported P56 million loan was extended to the Solinap heirs.

The respondents then made it appear that Nation Bank sold Hacienda Busay to Hacienda Busay Inc., a corporation owned and controlled by delos Angeles, for P80 million payable in 15 years. The respondents afterwards made it appear that Hacienda Busay Inc. made amortization payments to Nation Bank when the truth is the payments were actually sourced from one of the savings accounts of delos Angeles, which according to PDIC, was funded with fictitious and/or simulated motorcycle loans.

The respondents further made it appear that the remaining balance of the purchase price of the hacienda in the amount of P64.76 million was fully settled by Hacienda Busay Inc. through an Amendment to Sales (Mortgage) Contract Receivable dated August 22, 2008 whereby 33 properties, registered in the name of another closed Legacy bank, Rural Bank of Bais, Inc., were assigned to Nation Bank.

Delos Angeles’s wife is one of the incorporators of Hacienda Busay, Inc. while his son, Martin Nicolo, is the majority owner of CGA Holdings Inc. which owns the majority shares of Hacienda Busay, Inc.

The other named respondents in the case are Raycell D. Baldovino, Sherylyn Ng, Christine Limpin, Victoria Noel, David Tan, Reynaldo Manit, and Alexis Petralba.

3^rd: Fusion Case

On July 8, 2009, PDIC filed with the DOJ Task Force on Legacy its third syndicated estafa case against delos Angeles and 16 others for siphoning P29.6 million from the Rural Bank of Bais through fraudulent transactions. These funds were generated from the public through aggressive deposit solicitation.

The complaint states that 2,749 fictitious motorcycle loans were created from February 2007 to September 2007, of which 2,741 were not supported by documents. The fictitious loans aggregated to about P151.92 million, net proceeds of which amounting to P140.2 million were deposited to the savings account of Legacy Motors, Inc. (LMI) in RB Bais. LMI is owned by de los Angeles. The amount of P29.6 million was withdrawn from the LMI account of which P27.176 million was deposited to the accounts of delos Angeles in other banks.

The motorcycle loans were later erased from the books of RB Bais by making it appear that these were paid using the withdrawals from the account of delos Angeles-owned Fusion Capital Corporation with RB Bais, later to be funded by fictitious or simulated investment loans.

Among those charged were Alexis Petralba, Roy Hilario, Ariel Isberto, Agnes Santiago, Arnel Sulquiano, Jeanette Ortiz, Myrna Axalan, Carmencita Cedo, Rolando Labrador, Wilfredo Novo, Edgar Cando, Na, Lidonna Gabayan, Cecil Ibgos, Wieshaun Ebacuado, Joylyn Tandoy and Leopoldo Regino.

More Cases Being Built Up

The PDIC General Counsel said that PDIC has filed a total of 12 cases to date, including the aforementioned three syndicated estafa cases. It continues to investigate the Legacy-affiliated banks and gather evidence for subsequent cases to be filed. He said that Punongbayan and Araullo is currently working on a number of leads involving tangled deals that had rendered the transactions opaque and untangling these deals could possibly result to findings of fraud and the filing of additional cases.

He said more cases are being investigated involving fictitious loans/deposits of Legacy corporations aimed at siphoning off funds from the Legacy banks, anomalous assignments of overvalued properties to Legacy banks to erase fictitious loans, conversion of pre-need plans to deposits without actual cash inflow, accommodation by the Legacy banks of unfunded personal checks, creation of fictitious deposits from proceeds of fictitious loans, and creation of fictitious loans to acquire properties for the personal use.

Mendoza expressed confidence that PDIC will be able to build more strong cases against responsible persons after the forensic fraud investigation is concluded.