17-18 DECEMBER 2001
‘Bribery Charges, Unpaid Debts Hound Luke Roxas

by YVONNE T. CHUA and SHEILA SAMONTE-PESAYCO


Our latest series tells the story of Luke Roxas, the businessman who supposedly paid off Ombudsman Aniano Desierto P500,000 in cash and P273,000 in video equipment, in exchange for deferring an investigation on BSA Bank, which Roxas owned.

Our investigation shows that Roxas, a high-flying banker and real-estate developer, has left a trail of debts to some of the country's biggest banks and also to over 700 individuals, whom he owed P3.9 billion. None of these individual creditors have been paid since Roxas's company, ASB Holdings, went under in March 2000.

The creditors include two congressmen, lawyer Leonardo Siguion-Reyna and his wife Armida, all of whom lent Roxas amounts in the tens, and even hundreds, of millions. But the list also includes the likes of a 71-year old former employee who put his P200,000-retirement into ASB Holdings.

We found that Roxas used deception in getting these loans and that he took advantage of the loopholes in the law to get large amounts of money from unsuspecting people. So far, he has eluded sanctions for nonpayment, thanks in part to the highly paid lawyers of the ACCRA law firm.


FORMER overseas contract worker Petronio Rocio and his wife Dina may not look like they would ever have anything to do with condominium developer Luke Roxas. The businessman is currently being investigated by the House of Representatives for having allegedly bribed Ombudsman Aniano Desierto in 1997 regarding a case involving a bank he owned.

But once upon a time, the Rocios had lent Roxas money, as had trader Julie Uy and Binondo businesswoman Elizabeth Chan. So too had multimillionaire lawyer Leonardo Siguion Reyna and his actress-producer wife Armida, former Visayan congressmen Jerome Paras and Rodolfo Tuason, a police general, and several hundred other individuals and institutions.

All of them had been lured by the big interests offered by Roxas in return for using their money. Instead, most of them today fear that they will never get paid at all.

Records show that Roxas, once also the majority stockholder of the Bank of Southeast Asia (BSA), has about 712 unsecured creditors, or those without collateral from their borrower. Many of these creditors had put their lifetime savings into Roxas's ASB Holdings, Inc., without knowing what they were getting into.

These loans were made in the mid-1990s, when real estate was doing quite well; Roxas was still able to make good on his lavish promises to creditors. When the Asian financial crisis hit in 1997, however, many companies began to feel the pinch, among them Roxas's firms. By last year, Roxas could no longer pay his creditors, and ASB Holdings finally filed a petition for suspension of payments of claims and rehabilitation with the Securities and Exchange Commission (SEC).

Unlike the travails of Urban Bank and Orient Bank, both of which were forced to close and deal with hundreds of thousands of depositors and creditors demanding their money back under media glare, the story of the Bible-quoting Luke Roxas and the people who had put faith-and their money-in him has not attracted much attention.

But the tale is replete with lessons about the lack of government regulation of private investments and the dangers behind promises of big returns by businessmen who their clients say used deception to convince them to part with their money. Many of Roxas's creditors, for example, say they lent to his company at the behest of BSA personnel, who claimed their loans were secured by the bank.

The P3.9 billion Roxas owes individual creditors includes amounts such as Paras's P138.8 million and the Siguion-Reyna's P28.7 million. But there are also the more modest sums lent by the likes of the Rocios, who are now frantically searching for ways to pay their medical and credit-card bills. One 71-year-old retiree has pleaded with the SEC to let him have his P200,000 back before he dies.

Some of the unsecured creditors seem to have accepted the rehabilitation plan for ASB Holdings that was approved last April by the SEC. Siguion-Reyna, for instance, sits in the project governing board chaired by rehabilitation receiver Fortunato Cruz. Paras is Siguion-Reyna's alternate.

But others have opted to file criminal complaints against Roxas before the Department of Justice (DOJ) and the SEC. Among these are the Rocios and other unsecured creditors who either say they need their money now to pay for all sorts of bills or are so enraged with Roxas that they just want to see him behind bars.

Says engineer Jaime Gosiaco, who had loaned the developer some P8 million: "Our fault before is that we didn't put people like Dewey Dee in jail. Now, history is repeating itself. I just want him (Roxas) to go to jail so that this thing will not happen to my apo (grandchildren)."

In the last 20 months, several unsecured creditors have been filing case after case against Roxas, accusing him of many things, ranging from estafa, to violation of Batas Pambansa 22 or the bouncing check law, to economic sabotage.

But the long wait, including the dismissal of a few complaints and inaction on most before the justice department, has made many of them jittery. Their anxiety has increased all the more now that Roxas's ex-counsel, Ernesto B. Francisco Jr., has filed an impeachment complaint against Ombudsman Desierto, alleging that the developer had bribed the official with P500,000 in cash and P273,372 worth of video equipment in 1997.

This, said Francisco, was to hush-and later defer-the investigation of the diversion of several Petron checks intended for the Bureau of Customs amounting to about P540 million and their irregular encashment at BSA.

Roxas, in an affidavit submitted to the House, has denied Francisco's allegations, saying, "I never gave money to Ombudsman Desierto, and I never authorized anyone to do so. Neither did I ever spend, or cause the spending of, any sum for anything for him or his benefit or any other government official."

But many of his creditors remain in a state of doubt and near panic. Says Jimmy Chua, 60: "What's so frightening is how much he (Roxas) would be willing to pay in bribes to get out of this mess. We don't have that money to compete with him, especially when he has big-time lawyers like Accra."

Accra is the acronym for the high-powered law firm once headed by Senator Edgardo Angara and which has blue-chip companies such as San Miguel Corporation among its many clients.

Just how ordinary people like Chua and the Rocios managed to cross paths with such bigwigs as Roxas and Accra is itself an interesting tale.

True to what Roxas has said repeatedly in response to the complaints filed against him, a number of creditors transacted directly with ASB Holdings, which by then had formed a pool of traders-or "investment assistants" as they were called by the firm-to borrow money from the public. Ex-Rep. Tuason himself says he lent a total of P42.9 million directly to ASB Holdings on the recommendation of a friend.

But smalltime creditors say that it was Roxas's Bank of Southeast Asia that had led them to ASB. Most of Roxas's individual unsecured creditors, in fact, were BSA depositors.

In the case of the Rocios, one of their daughters had been convinced by the manager of the BSA's Makati branch to place their retirement money in the bank in January 1997. But the couple, then still in Bahrain, was puzzled when the BSA issued their daughter postdated checks and acknowledgment receipts of the ASB Real Estate Development, and later those of the ASB Holdings when BSA became the Development Bank of Singapore (DBS).

But the bank manager and other personnel had told their daughter that she and her parents need not worry. The bank and the ASB, they said, were both owned by Roxas, and the checks enjoyed the bank's protection. They told Dina Rocio the same thing when she personally queried them about the security of what she still considered as "deposits" during trips she made home prior to their final return to the Philippines.

Julie Uy, a Hope Christian High School alumnus like Roxas, also says that shortly after she opened time deposits with the BSA St. Francis Square branch in 1996, the manager there encouraged her to put her money in Roxas's ASB account. The manager, whom Uy has known since the 1980s, told her, "This is safer because you'd be issued Mr. Roxas's checks and these are guaranteed by the bank."

Uy says a bank personnel always handed her the ASB checks and receipts. When the checks changed from those of ASB Real Estate Development to ASB Holdings, the bank manager assured Uy that it was just a change of name so all of Roxas's companies would be under ASB Holdings, including what had already become DBS.

Elizabeth Chan, whose family operates a school-supplies store in Binondo, tells a similar story. She says the BSA branch manager in Binondo initially issued her time-deposit certificates for the money she had entrusted to the bank. When the bank in 1997 replaced the certificates with ASB's postdated checks and acknowledgement receipts, Chan had asked the manager for an explanation. She recalls being told "that BSA and ASB are the same, and I took her word for it since I've known her since the eighties."

In 1998, a bank employee handling Chan's account told her she was transferring to ASB Holdings, but would continue to look after Chan's money. When the bank employee, who had now joined ASB, phoned Chan in late March 2000 to say the firm had run into problems and requested her to proceed to ASB's office in Makati for more information, Chan recalls being confused. She asked, "Why should I be worried? My money's with DBS, and there's no problem with the bank. I was really under the impression that the bank held my money."

When the truth finally hit her, she wept.

Roxas has repeatedly said that the ASB Group had initially sourced its funds from various banks but later borrowed from a select group of individuals at an agreed interest rate after "realizing it is more convenient to arrange private loans with certain individuals." In documents submitted to the DOJ, he said, "Because of the impressive performance of ASB, the individuals, with whom ASB initially had loan transactions, were so happy that they began spreading the word, so to speak. Consequently, several individuals approached ASB Group and volunteered to lend their money to ASB Group with the same terms as those of the initial individual creditors of ASB Group."

In a statement he sent to the PCIJ, Roxas also denied using either the BSA or the DBS to raise money for his companies. "The creditors made their checks payable to 'ASB Holdings Inc.' and not to 'BSA,'" he said.

"The checks that were issued to creditors were checks of ASB Holdings Inc. and not that of 'BSA.' As a matter of fact, it is not believable that a realty company is one and the same entity as a banking institution."

But a former top official of a Roxas firm says the developer had initially used ASB Real Estate Development, a single proprietorship under ASB Realty Corp., as vehicle for the money market placements. He says the ASB Real Estate rode on the network of branches and clientele of the BSA to solicit funds from individuals and private companies.

In May 1997, Roxas had incorporated a company called ASB Real Estate Development Inc. In August the year before, Roxas formed ASB Holdings with an authorized capital of P500,000 but with a paid-up capital of only P125,000. In his statement, Roxas admitted that ASB Real Estate was set up as a single proprietorship, but asserted that it was not intended to borrow from investors.

Yet the ex-Roxas executive insists "some BSA people would aggressively refer bank clients to ASB Real Estate. Sometimes they themselves would have their personal placements because the rates were so attractive," averaging at around three percent over other banks' 30-day time deposit rates.

In some instances, the interest rates reached as high as 25 percent. It is no wonder then that among his unsecured creditors are his own ASB Group employees, as well as lawyers, engineers, doctors and even one of his former high school teachers.

Roxas got loans as well from the Quezon City Christian Academy and Hope Christian High School alumni.

Families also pooled their money and lent it to ASB in hopes of getting a better return. One big account, amounting to P185 million, consisted of money that an entire clan of some 21 households, had raised. About a tenth of ASB Holdings' unsecured creditors are retirees, such as Gen. Romeo Espino. Some of them, like Rocio and Chua, had put nearly all their nest eggs in the ASB.

Their loans to Roxas were really short-term funds meant to finance the construction of four condominium projects, which were then being built all at the same time in Makati. In banking, this activity creates a funding mismatch as the borrower is forced to pay higher interest for short-term money to finance a long-term project.

Like other real estate developers, Roxas was doing great at the time and was apparently thinking even bigger. Two of his firms, the ASB Realty Corp. and ASB Development Corp., were then among the country's top 1,000 corporations by gross revenues.

To bankers, Roxas was a prime borrower. Says an account officer of a top commercial bank: "Bankers knocked on his doors, offering loans." By 1996, a dozen big banks, including the likes of George Ty's Metropolitan Bank and Trust Corp. and the Yuchengcos' Rizal Commercial Banking Corp., had extended credit to Roxas's ASB companies.

The former Roxas company executive says that it was when all his credit lines with banks had been exhausted and prime collateral had been pledged that Roxas started luring individuals to lend him money for above-market interest.

Some clients and creditors have since admitted that they felt "safe" knowing that their money was with Roxas, since he had God and the President on his side.

The charismatic Roxas likes invoking the word of God in his business contracts. One of his Makati condominiums even has a lit sign on top that proclaims "In God We Trust." He built the Makati Hope Christian School and the Caliraya Recreation Center in Laguna for "Born Again" Christian groups. A lawyer for one of Roxas's creditors also relates, "He would give out copies of the Daily Bread (a religious pamphlet) to clients."

In addition, Roxas got into the good graces of then President Fidel Ramos when he announced plans to set up the country's biggest school for Protestants in the former Fort Bonifacio military base. The ex-president's uncle, former congressman Simeon Valdez, sat on the board of the Bank of Southeast Asia, from which Roxas later divested and which was sold to the Development Bank of the Singapore.

Roxas has traced his group's liquidity problem to the sudden nonrenewal and massive withdrawal by creditors of their loans to the firm, the glut in the real estate market, the severe drop in sale of real properties, the depreciation of peso vis-ŕ-vis the dollar, and decreased investor confidence in the economy. In his statement, Roxas denied that the ASB Group's financial problems began when ASB Real Estate overborrowed to fund ASB Realty's aggressive expansion in real estate.

In fairness, ASB Holdings managed to pay its creditors up until March 28, 2000, although its troubles had begun way before that.

It was in 1997, when the property bubble in Bangkok burst that ASB Development Corp. began to see its growth slow down. Concerns over the banking system's heavy exposure to the real-estate sector heightened after Thai banks collapsed and, in the Philippines, medium-sized Orient Commercial Banking Corp. (Orient Bank) voluntarily closed shop. The bank belonged to the Ever Gotesco Group, which had also expanded into real estate.

After Orient Bank's troubles became public, creditors started shunning away from banks whose owners were into real estate. This put a squeeze on BSA's operations and so Roxas had to inject more capital into the bank where he was majority shareholder.

It hardly helped that BSA and Roxas had been "victims" of a financial scam that took place earlier that year.

Roxas had ended up reimbursing Petron Corp. P540 million after a syndicate at the Bureau of Customs allegedly connived with BSA branch personnel to divert checks of Petron intended for Customs and the Philippine Ports Authority. This is the case lawyer Francisco says Roxas had wanted Desierto to sit on, leading to the alleged bribe, fearing the news would prompt a run at his bank.

Then early last year, just as Roxas was struggling to meet loan demands and finishing his real-estate projects, the troubles of a local investment house shook the financial system anew. After the news broke out about Westmont Investment Corporation's default on its P7-billion loan to 1,200 individual creditors, Roxas's own creditors began making a beeline for BSA branches and ASB offices. Before ASB's financial troubles hit the headlines in April 2000, the firm had already issued a stop-payment order on its checks.

Curiously, pronouncing that BSA's branches may have been used to solicit funds from the public, the Bangko Sentral did not pursue any investigation on the bank (then already renamed DBS Bank Philippines Inc.) as fiercely as it did on Wincorp. Sought for comment, Bangko Sentral Gov. Rafael Buenaventura said ASB or BSA's clients would first have to file a formal complaint that they had been misled by the institutions into placing their funds before the monetary authority could investigate. But he said that the clients may have thought it a waste of time "since it is probably difficult to prove."

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