EXECUTIVE SUMMARY

On June 18, 1963, the Philippine Veterans Bank (PVB) through R.A 3518 was established. Under the PVB charter, the banks subscribed capital of P100,000,000.00 would be divided into 510,000 common shares and 490,000 preferred shares, with a par value of P100.00 each. All common shares were subscribed by the government on behalf of the veterans, and their heirs or beneficiaries, while the preferred shares were distributed for free among the veterans. The concept of a bank for veterans of World War II was conceived in 1956, when a war reparations agreement was signed between Japan and the Philippines. The agreement provided for $20-million in cash, P5-million in capital and $10-million in services. Under R.A No. 1789, better known as the Reparations Act, the cash reparations were set aside into a special trust fund for the use of World War II veterans and their families. In which, the term veterans also include the widow, orphan or a compulsory heir of a deceased veteran. During the term of Ferdinand Marcos, amendments to the PVB charter was made through the use of presidential decrees which was enabled the government to control over to those appointed as PVBs officers. The veterans became PVB shareholders in name only. After the Edsa Revolution and expulsion of President Ferdinand Marcos, the new Philippine government passed R.A No. 7169, which would repeal all amendments made during his term to the PVB charter. The PVB charter reverted to its original state and the veterans regained their rights as rightful shareholders of the bank that they did not have possessed during Marcos era. The PVB was established by law as the repository of a $20-million trust for soldiers and guerrillas who fought the Japanese during Japanese regime. Beloso, same with his fellow veterans believe that some bank officials have been plundering the bank for their own benefit same with their cronies. Moreover, leaving them nothing of whom are the true of supposed to be have the right to gain or be benefited to the fund. The PVB was re-opened in 1992 under a private corporation under the Corporation Code of the Philippines, General Banking Act, and other related law. Under this law, there is no limit in terms of percentage of ownership of share of any stockholder. However, the law that reopened the PVB recognizes and restores the full force and legal effect of the original charter. They hired Romeo Roxas as a consultant and later on, became a stockholder of the bank. Col. Emmanuel de Ocampo, as the President of the Veterans Association of the Philippines (VAP) and at the same time the Chairman of the PVB consulted Romeo Roxas for the rehabilitation of the bank and later signed for MOA.

As the only major stockholder and director, Roxas had the full control of the bank. Besides the veterans trust fund, bank insiders say, the PVB handles deposits of government agencies like the Philippine Health Insurance Corp. (PhilHealth), and is a trustee for P2 billion belonging to the preneed company, College Assurance Plan (CAP), now reportedly on the brink of bankruptcy. An influential person, Roxas secure loans for his own companies and for his cronies. With this acts, veterans had questions of all the acts and decisions made by Romeo Roxas. Like of what William Gatchalian approved P550-million loan from PVB, is one of the big questions of the veterans. Believing that the loan got by Gatchalian through the help of Romeo Roxas. Based on the documents presented Gatchalian failed to submit all the requirements needed for processing the loan. But how come it was approved by the PVB, while some small ordinary borrower with a poor credit performance would have been immediately turned down. Roxas has availed himself of the DOSRI (directors, officers, stockholders and related interests) loans as bank director, he borrowed more than of what was actually allowed as per banking rules. In a report in 1998 the Bangko Sentral ng Pilipinas (BSP) found that Roxass Green Square Properties and Green Circle Property and Resources had outstanding loans with the PVB of P66.86 million. The BSP examiner said that the DOSRI availed by Roxas exceeded the ceiling for an individual loan. It was only clear that Roxas and PVB Chairman Emmanuel de Ocamplo are also stockholders of a firm called Green Dreams Holdings, which was granted a P35million loan.

However, the veterans questioned the legality and status same with the integrity if Romeo Roxas was really a true heirs of veteran. They discovered that Romeo Roxas has no right to own shares in the Bank. It took nearly six years, from 1963 to 1969, for the government to track down these veterans and award them or their heirs shares of stocks. Veterans said the name Santiago Roxas, who claimed by Romeo Roxas as his father was not on that list. Neither was it in the files of the Office of The Adjutant General (OTAG) of the Armed Forces of the Philippines in Camp Aguinaldo, the agency with the complete listing of veterans. On certification issued by Lt. Col. Narciso Erna, assistant adjutant general, dated January 3, 2005, says there is no record in the OTAG of Santiago Galang Roxas.

Romeo Roxas, on the other hand, persistent on his statement that Santiago Roxas was one of the veterans, that his father was a food and supplies officer during the war. In the suit he filed before the Manila RTC, veteran Pearanda said that the person being recognized by PVB wass Santiago Roxas born in 1921. During the war, this Santiago Roxas was a sergeant in the Manila Barrions Division, which was later issued Veterans Bank Stock Certificate 412604 who included in the Master List of veterans. But Santiago Roxas is from Meycauayan, Bulacan, and was childless. Clearly written in the charter that it guarantees all veterans regardless of their rank or assignment would share equal status in the bank since no one can amass huge numbers of shares. Inverse with what Romeo Roxas, Roxas has managed to acquire at least 1.6 million shares that make him as the major stockholder of the bank. The original law put a limit of 20 shares per veteran. Now has risen with the issuance of various stock dividends. The Bangko Sentral ng Pilipinas (BSP) noted that Ownership of the banks shares of stock are limited to veterans, widows, orphans or compulsory heirs of a veteran who can own not more than thirty-six (36) shares of stock. By on the examination report, the BSP was now saying, Director Romeo G. Roxas is the only major stockholder owning 8.28 percent of the banks common shares. Common shares give the stockholder voting rights in the bank.

Last February 16, 2000 the PVB President B. Teodoro Eusebio reported to President Joseph Estrada regarding the rampant violations of the BSP regulations being committed at the bank, which includes the abuses made by directors including Romeo Roxas. Eusebio wrote that he had met twice with BSP Gov. Rafael Buenaventura to map out a plan to save the bank. And have been informed bank officials concerned to retire or resign to prevent scandalous dismissal by the BSP Monetary Board. The directors have been fined P34,500 each, and bank officials P69,000. In March 2000, resolution, the Board required the PVB directors and officials to sign a memorandum of understanding (MOU), which includes the assignment of BSP Resident Examiners at the Bank to Monitor PVBs compliance with the banking laws, rules and regulations, instructions issued by the Monetary Board, and observance of safe and sound banking practices.

Inspite of the MOU, Roxas still availed another DOSRI loan. Another load was availed by Roxas, he borrowed P68.1 million from the PVB for his Green Square Properties. And later transferred to sister company Green Circle before on its due, which agreed to assume the obligation. Romeo Roxas was a graduate of University of the Philippines College of Law, one of the members of the powerful and influential Sigma Rho Fraternity, in where members hold some of the most important positions in government, including Ombudsman Simeon Marcelo, Senate President Franklin Drilon and Supreme Court Justice Antonio Carpio. Aside of his connections on Sigma Rho Fraternity, Roxas also has in the past boasted of support from the highest officials of the land. His projects in Quezon and Aurora have had the blessings of the influential and well know personality in politics they are President Fidel Ramos, Joseph Estrada and Gloria Arroyo who were former presidents of the Philippines. One of the veterans, Charlie Beloso, 87 years old and was ill, is still his fighting his rights and his co-veterans to enjoy the benefits. During his time, the Philippine Veterans Banks officials were former soldiers and guerillas, have been committing abuses in the name of World War II veterans, that some are now impoverished. The veteran, Auxencio Pearanda, included in the case Roxass fellow PVB directors, who he says, are condoning Roxass actions. Charlie Beloso himself had several request to members of the House of Representatives and the Senate to further investigate the alleged anomalies at the PVB. He has also filed plunder charges against PVB officials before the Office of the Ombudsman. The Philippine Veterans Legion (PVL) officials have also written BSP Governor Buenaventura, asking him and members of the Monetary Board to disqualify Atty. Romeo Galo Roxas for the misrepresentation he made that enabled him to accumulate shares of stock of the bank that allows him substantial control over the affairs of the bank. The veterans insist that Roxas has no right to own shares in the bank. In the PVB database Romeo Roxas is listed as compulsory heir and holder of Common Stock. Romeo Roxas insisted that his father went to Bulacan on 1947 where an affair had with another woman and thereafter kept a second family. And kept his relationship with other woman and afraid of that time that might be charged of immorality being a member of the civil service, he must have intentionally vague his records in order to deflect this circumstance. This will explain the entry into the records of a Santiago Roxas from Mecauayan, Bulacan. CONCLUSION = Take note that it was only in 1992 when the PVB reopened, in such Roxas was already connected with the bank, did he begin saying

he was a veterans son. And why not before of 1990 Roxas and together with his siblings never appeared on and claimed their rights if they were a real veterans heirs. Veterans also questioned the hiring of Roxas for the rehabilitation of the bank amounting to P43 million in 1990 as an illegal, remember that PVB was still closed at that time and had no legal personality to hire anyone. Roxas explained that it was not the bank who retained his service it was the Veterans Federation in their desire to reopen the bank. And I advanced all the expenses, Mr. Chairman, you know, necessary for the re-opening of the bank. For the record and all the veterans will affirm that. I was the one who financed the reopening single-handedly of the bank. The MOA shows that it was de Ocampo who contracted Roxas in behalf of the bank. And said that it was PVBs P750 million in cash and assets that were taken over by the BSP in 1985. Said the PVB chair in a 2002 Senate hearing: Before the bank closed, there was so much money deposited with the central bank and this was part of the money that earned interest so that there was now more than one billion to the credit of the Veterans Bank. That is where we got the P750 million. Indeed, despite its problematic history, the PVB continues to be flush with money. Aside from earnings that are supposed to benefit veterans, it also holds deposits of the national government and local government units. When the bank shut down in 1985, the national treasury still had some P1.4 billion in deposits with it. PVB Chairman Emmanuel de Ocampo receives a monthly compensation of P650,000 for running the bank. In a Senate hearing in 2002, de Ocampo described the work he was doing to merit himself for that amount as salary "I had to do some marketing, I have to do some management, I have to help, Your Honor. And besides, the P650,000 includes expenses in the board which I have to sign as chairman." Veterans opposed for the highest salary he receives and failed to protect the veterans interests at the PVB. Remember that de Ocampo also a war veteran who retired colonel was already a bank director before the 1985 closure, when cronies of the late President Ferdinand Marcos, like Heminio Disini, were running away with the banks money. Requested loans to such Marcos friends led to the bank's closure.

PROBLEMS Main Problem The main problem is the rehabilitation or re-organization of the Philippine Veterans Bank.

The PVBs charter cleary states that it only allows veterans or veterans heirs to own stocks at PVB. Romeo Roxas insisted that he was a veterans beneficiaries of Santiago Roxas from Mecauyan, Bulacan who based on records of Veterans Affairs Office was childless. As a big question of how Atty. Roxas came in to the PVB as heirs of one of the veterans. The existence of the fraternal brotherhood and kababayan mentality that common in our country. Other Problems: Management / People No background investigation was conducted when Romeo Roxas was hired. PVB Chairman Emmanuel de Ocampo merely relied on the connection of Romeo Roxas with the government of Bulacan Board of Directors. The Board was so lenient that they did not question the huge amount loaned by Romeo Roxas and the incomplete documents as loan requirements for William Gatchalian who was a crony of former President Joseph Estrada. Chairman Emmanuel de Ocampo has been receiving excessive compensation at the expense of the company Veterans and their heirs lack of aggressiveness to fight for their rights and lack of knowledge about the bank operations Negligence of PVB Chairman Emmanuel de Ocampo to protect their interest of the veterans who fought for the Philippines. He was selfish that he did not consider the rights of other veterans, hence, abused his position. Abusive used of power by Romeo Roxas, by availing himself of the DOSRI loans as PVB director, borrowing more that what was allowable under banking rules. Abusive and misused of power and privileges by the elected officials/board of directors of PVB.

Leniency of Management to background check loan borrowers and its outstanding loan balances with the bank. Lack of signatures to authenticate the approval of loan as shown in the released Credit Approval Memorandum to Green Square Properties Corp.

FACTS = LENIENCY Lack of transparency on the funds and other related concerns of the bank. a) True identity or status of PVB, either public government or private institution. PVB was initially meant to be a public corporation with supervision and control by defense secretary, is a private bank accepting government deposits and exempt from transparency and scrutiny. b) Veterans have no idea how money given to it is handled by the Board of Trustees.

FACTS At that time other Gatchalian-owned company had an unpaid loan from the PVB of P28 million. Whereas, Gatchalian listed one of the Roxass property as collateral. Some or maybe all Board of Directors condone Roxas action when it comes on approving loans from the later cronies. Conclusion == The service of Romeo Roxas to rehabilitate the bank approved only by the Chairman Emmanuel de Ocampo (in questioned if it was also approved by the Board of Directors) in behalf of the bank which at that time the bank was still closed. Aside from being a chairman he also heads the Veterans Federation of the Philippines (VFP) and Board of Trustees of the Veterans of World War II.

Government Possible connivance between the BSP Officials and PVB directors Negligence of the Armed Forces of the Philippines or other government concerned to properly scrutinize the legitimacy of the veterans heirs. Negligence of Commission on Audit to audit all expenses and allocation of funds of PVB and its government-owned and controlled corporation (VFP and BSP).

The Institution (PVB) 4. Ethics As an elected official and with a higher position in any Government Institutions, an Ethical Leader must possess a high values and morals in their life.

DATA ANALYSIS

Organization Finance
as

Operations

Management
Fishbone Diagram (also called Cause-and-Effect Diagram, Ishikawa Diagram)

Minor
Bogus soldiers son

Charter

Loans and Contract

Documents and Contract

Management the key persons are:

PVB Chairman Emmanuel de Ocampo Atty. Romeo Roxas Charlie Beloso Veterans PVB Board of Directors

Documents and Contract

Republic Act. No 3518 (creation of the bank) Memorandum of Agreement between PVB and R.G Roxas and Associates Armed Forces of the Philippines Certification on non-existence of Santiago G. Roxass records Curriculum Vitaee of Santiago G. Roxas PVB President B. Teodoro Eusebio letter to then Pres. Joseph Ejercito Estrada PVB Credit Approval Memorandum regarding P70 M-loan of Green Square Properties Corp. Memorandum of Understanding with the BSP Certification of the minutes of the regular minutes

Operations
Approved P70-million Credit Approval Memorandum of Green Square Properties Corp. Accorded P28-million loan to Roxas crony and businessman William Gatchalian Approved P35-million loan to Green Dreams Holdings

Loans and Contract

Dacion En Pago, whereas, a parcel of land used as mode payment by Green Square Properties Corp Roxas availed himself of the DOSRI loans where exceeded the ceiling for an individual loan to DOSRI

 Non-compliance by Gatchalian to submit needed requirements for processing his loan, but it was still approved The real estate property of Romeo Roxas was listed as collateral by Gatchalian

Finance
P1-billion fund (from the original of $20-million trust fund) PVB handles deposits of Philippine Health Insurance Corp. (Philhealth) Trustee of College Assurance Plan (CAP)

Organization
private corporation

Charter
functions of the reopened bank as private commercial but it restores the full force and legal effect of the original charter limitation of 36 shares per veteran (from the original limit of 20 shares per veteran) BSP noted that the banks ownerships are limited to the veterans, widows, orphans or compulsory heirs of veteran

Minor
dismissal by the BSP Monetary Board to directors and bank officials plunder charge case to PVB officials illegal hiring of Roxas for bank rehabilitation private companies with approved of million loans Green Square Properties Corp., Green Circle Property and Resources and Green Dreams Holdings monthly stipend of the PVB Chairman amounting to P650 is such huge amount failure of the board of directors to protect the veterans interest, instead they put themselves first in order to have and gain from the bank PVB Chairman de Ocampos influential power and wealth holds not just one position but also heads of the Veterans Federation of the Philippines (VFP) and Board of Trustees of the Veterans of World War II.

GENERATING ALTERNATIVES Establish an Internal controls, within the field of accounting internal controls are processes and procedures that direct, monitor and measure a companys resources so that financial goals are met while all appropriate regulations are followed. With the strong internal controls, it will ensure that the companys

resources are properly utilized for the intended purposes and will minimize misuse of companys resources. It also prevents any financial irregularities by detecting them quickly and thus resolving any issues that arise in a timely manner. An effective control system should be composed of both financial and non-financial controls. Establish an audit committee that is independent of management and empowered by the board of directors. Audit committee oversees the work of the internal audit committee, identifies areas of potential vulnerability and offers strategies to address those weaknesses. Preventing organizational cronyism and deal with a troubled director. Soliciting friends for positions on the board of directors can foster cronyism. It is important to keep the relationships between board members and the executive director a professional one to avoid cronyism in the organization. Careful review the Credit Approval Memorandum, if all needed documents to process the loan has a complete attachment and the validity possess. Implementation on submission of officials statement of assets and liabilities and net worth is an effective mechanism to curb plunder, graft and corruption. And careful examine the veracity of the data presented by the officers/board.

SELECTING DECISION CRITERIA The decision criteria will be based on the following issues raised in this case study that could resolve the problems listed above. Existence of cronyism and kababayan practices.

Under fiduciary law they must avoid conflict of interest or self-dealing but rather safeguard the interest of any party or entity. Negligence of government to monitor funds and members of the board of directors and bank officials. Same with how policies and rules being implemented in accordance with the law. The use of power and privileges by elected directors and officers to benefit themselves, cronies and friends. Non-compliance on with the prescribed limit of using DOSRI set by BSP. Careful examine the true reasons why Philippine Veterans Bank has established.

EVALUATION OF ALTERNATIVES Financial irregularities happened in any organization especially in government institution. Graft and corruption is not that so easy to be eliminated especially if the wrongdoers are the members of the ruling political power.

As what previously mentioned a strong internal controls help to minimize misuse of companys resources and prevents any financial irregularities by detecting them quickly. Examine well the accounting system like of having a numerous signatories in approving of documents, which gives a numerous opportunities for corruption, bribery and even for plunder cases. It says double standard is another opportunity to corruption. Internal control and internal audit are profoundly close and commonly intertwined terms, which often used interchangeable. Internal controls are the systems put in place to ensure sound financial management and service delivery whereas internal audit is the check of those systems. Internal control processes are intended to provide generic assurances to mitigate the probable risks of beforehand of expenditure checks whereas internal auditors are engaged in after compliance, performance, and financial audits. The feature that most distinguishes internal audit from internal control is that internal audit operates independently from the administration and internal control structure. Conflict of Interest - When the private interest of a person clashes with his official responsibilities in a position of trust it is usually his personal interest that is always protected as a matter of self-observation. In reality, man wish for a comfortable, secured and easy life. An official will use his power and influence to covertly favor and support his family, friends and close associates. Officers should avoid conflict of interest to protect the bank. The fiduciary duties of the board are clearly defined in the Code of Corporation Governance, the power vested to the directors in the management of the corporation bars judicial inquiry so long as the directors act within the scope of their authority, exercise honest judgment, and act in good faith in the furtherance of the corporate purposes.

RECOMMENDATION Atty. Romeo Roxas Plunder Case (R.A 7080) may be filed for Roxas and be convicted for it and revoke his license.

Chair. Emmanuel de Ocampo As public officer, he can be charged for Plunder Case, removal from office and will no longer receive any benefits from government. And no longer be recognized as public official. Charlie Beloso, war veterans and surviving heirs Continue on what they were doing and never give up fighting for their right. Board of Directors As an elected board of directors who is responsible to the stakeholders. Create a work climate that balances trust and respect for the individual with the need to protect the banks financial resources. Careful reviews of contracts, financial documents, and accounting policies and practice can help catch irregularities and deter potential defrauders. Prevent cronyism and deal with those directors who do wrong act. Keep the relationship as professional one to avoid cronyism. Bangko Sentral ng Pilipinas Monetary Board Close supervision when it comes on implementation of what was being stipulated in the charter.