Bureaucratic lapses or whitewash?

Conclusion Malacañang may be hard-pressed to argue it did not have enough leads to pursue an investigation on the Bancap scam. It was already receiving intelligence reports as early as a day after the suicide of a bank executive hogged the headlines.

Two confidential reports to President Ramos dated May 19 and May 26, 1994 and one to National Security Adviser Jose Almonte dated May 31, 1994 were sent by a former Palace aide who had deep connections in the secondary market for government securities trading, not to mention the confidence of Bancap president Marilyn Nite.

The same source had also fed generous leads to the National Bureau of Investigation (NBI), which also got copies of the intelligence reports addressed to the Office of the President. The reports, copies of which were obtained by BusinessWorld, contained firsthand information on the background of Bancap’s operations and officers. It also provided insightful leads on the possible syndicate behind the scam, those who allegedly served as mere puppets and those who may have pulled the strings.

Curiously, exactly 367 days after the biggest financial scandal exploded in the public’s eye, not a single information in the dossier has been pursued, and not one big name has appeared in criminal charge sheets. Instead, industry sources claimed, the government machinery churned out information that merely misled the public.

To this day, efforts of victims to put the malefactors behind bars are being stonewalled by a government bureaucracy which cannot even crack the law that effectively invites similar scams. The failure of the State to prosecute perpetrators of the Bancap scam has left more questions than answers.

For example, why has Ms. Nite remained at large in the United States? The NBI has been fed information pointing to the possibility that Ms. Nite is in Burbank, California, in the West Coast where her and her first husband’s relatives reside. Her son by her first husband had been studying in the US long before the scam broke, and a daughter was reportedly brought along. Surely, there must be school records leading to their whereabouts. If reports are to be believed, the couple’s passports have already been canceled and Ms. Nite’s US visa expired as early as November last year. It’s either they may now be crossing borders without passports, which is unlikely, or carrying a different set.

This is in stark contrast to the swift arrest of Barings’ maverick trader Nicholas Leeson in Frankfurt Airport barely a week after he hied off from Singapore. But then, it must be a source of inspiration for Ms. Nite to know even Marcos associate Dewey Dee, whose caper plunged the country into a financial crisis in 1981, remains at large, even as he is reportedly active in business dealings in Vancouver, Canada.

Sources said efforts of the NBI’s Anti-Fraud and Action Division ( AFAD) to reach Ms. Nite in Washington with the assistance of a certain James Owens of the Federal Bureau of Investigation were frustrated when they came face- to- face with Ms. Nite’s lawyers. “Obviously, she is very much protected,” an NBI source said. AFAD Director Fermin Nasol admitted he went to Washington, but said this was merely to coordinate with the FBI. Significantly, after the much- publicized moves of two senators to track down Ms. Nite, nothing has been heard of their efforts.

Why the Securities and Exchange Commission (SEC) dragged its foot in undertaking measures related to Bancap’s operations in the secondary market should also be subject to public scrutiny.

SEC Chairperson Rosario N. Lopez appeared before a Senate investigation on the scam on May 23, 1994 and denied responsibility over Bancap. Yet, she reportedly signed a cease-and-desist order on Bancap’s operations dated May 20, which was served only eight days after the scam hit the headlines. By that time, the scam had already claimed a life, ruined reputations, triggered bank runs, and cost the government P1.5 billion in financial bailouts by the Bangko Sentral. It may have also brought a smile to the lips of Ms. Nite, who, by then, could have been trying to get a tan in a California beach.

Curiously, the SEC also allegedly withheld the release of Bancap’s audited statements for 1988 to 1990 and for 1992 to 1993 at the height of the scam. A source conducting his own investigation on Bancap said as early as mid-April last year, he already sought out Bancap’s records at the SEC and failed to find even a duplicate copy. He later learned from mediamen covering the beat that Ms. Lopez was in possession of the records and released them only when the information was already stale news.

The financial statements point to glaring evidence of Bancap’s deep involvement in the trading of government securities. The year it was registered as Bancapital Development Corp., the firm already declared in Footnote No. 10 of its financial statements “gains on sale of government securities,” which made up 76% of its total revenues. This was even prior to its board meeting on January 28, 1989, when Bancap passed a resolution authorizing the investment of its idle funds in Treasury bills (T-bills). Its gains on the sale of T-bills that year rose by 40% to P1.29 million, comprising 60% of total revenues.

If a thorough review of the audited statements had indeed been conducted, SEC’s Examination and Appraisers Department should have been compelled to check out Bancap’s articles of incorporation, and thereafter see that it did not have the license to deal in government securities.

Unfortunately, what may have contributed to the apparent bureaucratic lapse was the absence of an alert mechanism for regulators such as the defunct Inter-Agency Committee spearheaded by the SEC, and composed of the Central Bank, the Department of Trade and Industry, and the Bureau of Internal Revenue. The main purpose for the special body was to enable regulators to share information on companies suspected of committing certain business irregularities. The committee ceased operations when Ms. Lopez took over as SEC chairperson in 1986.

Perhaps another good example of government bungling was a case involving the