LBC: Sending message of untrustworthiness

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LBC: Sending message of untrustworthiness
Sep 23, 04:35 PM

On Sept. 9, the Philippine central bank shuttered the Araneta
family-owned LBC Development Bank because of insolvency. The bank, a
member of the LBC Group of Companies, went bankrupt because, according
to the country’s monetary board, it was advancing the remittances made
through its money courier affiliate, LBC Express, Inc., within the
Philippines or from abroad.

The rationale was that by doing so, LBC Express could ensure faster
delivery of the remittance to the beneficiary anywhere in the homeland
–- even as reports abound of the gross delays remittances suffered in
the company’s hands.

The intention was noble nevertheless; the idea, more so, of two sister
firms striking a synergy, in the name of customer service, was commendable.

But in the circa-2000s Araneta tradition of giving people a run for
their own money, the synergy had all the makings of evil partnership.
The advances that LBC Bank made to LBC Express, taken out of depositors’
deposits, ran into billions of pesos, which the remittance firm had
failed to return.

The thrift bank called the monies it diverted to pay LBC Express’
remittance beneficiaries, advances.

The central bank saw them as bad loans.

But for the thousands of LBC Bank depositors, who had been lured by the
bank’s very-odd high interest rates on deposits, they were nothing less
than their money ….. their own hard-earned money.

Bank closures are commonplace in the Philippines, especially during
these hard economic times. Fact is, at the time the order was being
carried out to padlock LBC Bank’s headquarters in Makati and all 19
branches nationwide, the state-run Philippine Deposit Insurance Corp.
(PDIC) announced it has started servicing deposit insurance claims of
clients of three community rural banks previously placed under receivership.

But for a bank affiliated with an institution in Philippine business
like LBC — a name established in the ‘50s that was supposed to be
synonymous with trust — its forced lockdown due to misappropriation of
monies belonging to ordinary folks is unthinkable.

Or maybe not.

LBC and the Aranetas have achieved financial notoriety in the last four
years, playing lead roles in two major scandals that both involved
misuse of other people’s resources.

In March 2010, a Philippine court ordered the arrest for fraud of Juan
Carlos Araneta and seven other LBC officials, stemming from a lawsuit
filed by The Professional Group Inc. (TPG), a Philippine pre-need firm.
The accused were LBC president Juan Carlos Araneta, LBC chairman Carlos
Araneta, LBC Express Remittance executive director Javier Montecon, LBC
director Joseph Jeffrey Rodriguez, LBC collection head Marilen Aben, LBC
Express Remittance vice president Theresa Raneses, LBC Express
Remittance president Marilou Olan, and LBC Bank president Eliza Berenguer.

Court records showed that TPG had allowed LBC to sell pre-need plans and
collect premium payments, but which allegedly were never remitted (to
TPG). The amount in question was more than PhP 60 million (over
$1.5million) — a paltry sum compared to the futures of plan holders that
LBC trampled upon and plundered.

Earlier in 2007, a Delaware (U.S.) court ordered Carlos R. Araneta, the
majority owner of the joint venture LBC Global Corp., to pay partners
ATR Kim Financial Corp. the sum of $24.49 million for allegedly
transferring company assets to his children without knowledge of its
stockholders.

Today, the PDIC may have answered LBC Bank depositors’ basic question of
when and how they can get their money back; it has put in motion the
procedures for the expeditious release of the deposits to their rightful
individual owners.
Yet a litany of critical questions begs straightforward answers.

Why did LBC Bank have to extend loans to LBC Express so the latter could
“ensure faster delivery of the remittances” sent through it?

Put more accurately, why did LBC Express have to milk LBC Bank of
depositors’ money in order to pay off (deliver) its obligations
(remittances) that were, in fact, already paid (remitted) by money senders?

Where were the remittances going?

How will LBC Express now deliver remittances, having bled LBC Bank to
death? Where will it now get the money for delivery to beneficiaries?
What will replace the dead goose that laid the golden eggs?

The Filipino people in the homeland and around the world deserve to know.

We call on the Bangko Sentral ng Pilipinas, the Philippine Department of
Trade and Industry, Philippine courier industry stalwarts, and all other
relevant private and government regulatory agencies in the Philippines –
and yes, LBC Express competitor firms in the home country and abroad —
to help the public thresh out the mess. And, more important, to protect
and preserve the integrity of the courier business by helping institute
safeguards against bilking our money- and cargo-sending kababayan.

We call on these organizations to help ensure that monies remitted
through LBC Express are not diverted in any manner, shape, or form to
pay for the company’s operating, overhead, and advertising expenses as
it apparently did – knowing then there were billions in bank depositors’
money they could use with impunity

Above all, we call on LBC Express, Inc., its officers and staff, and
agents in the Philippines, the United States, and elsewhere around the
world to stop peddling the moronic argument that LBC’s courier and
banking businesses were independent of one another, and that LBC
Development Bank’s closure does not and will not affect LBC Express’
money remittance and cargo forwarding operations.

It is a slap on the face of every Filipino, an ultimate insult to
everyone’s intelligence.

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