Outgoing Rep. Prospero A. Pichay Jr. has been convicted by the Sandiganbayan of three graft charges in connection with the purchase of the Express Savings Bank, Inc. (ESBI) when he was the administrator of the Local Water Utilities Administration (LWUA) in 2009.

Pichay sought re-election in the 1st district of Surigao del Sur last May 9 local and national elections but he lost.

Also convicted was LWUA Acting Deputy Administrator Wilfredo M. Feleo.

Pichay and Feleo were sentenced to a prison term ranging from 18 to 30 for the three graft charges with perpetual disqualification to hold public office.

But they were acquitted of the charges involving alleged violations of Section X126.2(c)(1)(2) of the Manual of Regulation for Banks in relation to Section 36 and 37 of Republic Act No. 7653 (the New Central Bank Act) for failure of the prosecution to prove their guilt beyond reasonable doubt.

The criminal charges arose from LWUA’s purchase of ESBI, a local thrift bank based in Laguna through WELLEX Group Inc. (WGI) and Forum Pacific Inc. (FPI).

The anti-graft court said that as head of the LWUA board, Pichay approved the acquisition of ESBI even without securing the regulatory approvals from the Monetary Board of the Bangko Sentral ng Pilipinas (MB-BSP), the Department of Finance (DOF), and the Office of the President.

"It cannot be denied that accused Pichay and Feleo knew of this requirement as they have been in consultation with the Office of the President, DOF, and BSP. They were specifically advised to secure prior approval of the Monetary Board. This advice was given before LWUA purchased the ESBI shares," the court said.

The court said that Pichay and Feleo may not have been impelled by "patently fraudulent and dishonest purpose," since they were merely carrying out a lawful mandate. However, the court pointed out that they carried out the task with "haphazardness and nonconforming ways."

"Even assuming that accused did not act in bad faith or with manifest partiality, their negligence under the circumstances was not only gross but also inexcusable," the court stressed.

Because the acts of Pichay and Feleo, the court said that LWUA acquired a 60 percent stake of ESBI worth P80 million, made a P300 million deposit in the bank, and a capital infusion worth P400 million.

They were faulted for giving unwarranted benefits, advantage, or preference to ESBI owners and corporate and individual stockholders by transferring P780 million of LWUA funds to ESBI to increase the bank's authorized capital stock.

The transfer was made even if the bank had a realized value of negative P12,932,429 as of March 2009. For the years 2005 to 2009, the prosecution said ESBI faced continuous "substantial net losses and capital deficits."

The charges against their two co-accused, LWUA Board of Trustees member Enrique S. Montilla III and Acting Administrator Daniel Landingin, had been dismissed on account of their deaths.

The 66-page decision was written by Associate Justice Lorifel L. Pahimna with the concurrence of Fourth Division Chairperson Alex L. Quiroz and Associate Justice Edgardo M. Caldona.