FORMER House Speaker Benigno R. Fitial and the Calvo & Clark law firm are blaming Gov. Juan N. Babauta for allegedly causing the “run” on Bank of Saipan.
The law firm and Fitial, who lost to Babauta in the November elections, said the governor’s comment that Bank of Saipan “is in trouble” triggered the start of the “run” on the bank.
The April 30 issue of Variety reported Babauta’s decision to recommend placing Bank of Saipan under receivership as he cited the need to protect the government’s close to $16 million deposit and the interests of the bank’s other clients and employees.
The governor declined to comment yesterday.
Lt. Gov. Diego T. Benavente, for his part, said “I don’t know why they had to raise that issue.”
In his declaration filed in the Superior Court, Fitial said when Randall T. Fennell was appointed temporary receiver of Bank of Saipan, the bank’s financial position was “tenable” as long as restrictions were placed on the withdrawal of deposits by government and autonomous agencies.
Fitial resigned as the bank’s CEO after the government froze its assets.
“Prior to that time, the bank had asked the acting director of banking repeatedly for such restrictions,” Fitial said.
“Such restrictions were issued on the morning of April 30, (after the start of the run caused by the governor’s comments to Variety),” Fitial said in court papers filed by Calvo & Clark in support of their motion to remove Fennell.
Fitial said he believed that with such restrictions in place, there was no need for a receivership.
Attorney Robert Goldberg of Calvo & Clark said the “story” started “when two unscrupulous characters, Douglas Montgomery and Dusean Berkich, arrived on island and attempted to purchase and defraud the bank.”
Upon discovering the fraud, Goldberg said the bank’s board immediately reported it and provided all information it had to local and federal law enforcement authorities.
The board’s “diligent efforts, culminated in a federal indictment of Montgomery, Berkich and those working with them,” Goldberg said.
The bank “weathered the storm, and is still solvent,” he claimed, adding that the board had proceeded to implement an effective plan to ensure the bank’s long-term financial health and to ameliorate the effects of the fraud.
“There is no crisis, and the bank maintains business as usual. Unfortunately, the story does not end there. Inexplicably, the governor tells (Variety) that the bank is in trouble and that he is planning to appoint a receiver,” Goldberg said.
“This of course causes panic and an immediate run on the bank. Consequently, the bank is closed,” he said.
Acting Commerce Secretary Fermin M. Atalig said the statements of Fitial and Goldberg “are totally unfounded.”
He added, “Even if the governor did not saying anything, what transpired in the indictment would have caused the run—if there’s such a thing called run. The bank’s management caused the problems that led this mess,” Atalig said.
He said the government will help the bank become a member of the Federal Deposit Insurance Corp.
FDIC rejected Bank of Saipan’s membership application in 1997, saying that the financial institution was in “poor overall financial condition.”
The bank’s board of directors was made aware of the FDIC’s findings, yet there was no action initiated either by the management of the bank or the board of directors, Atalig told Variety in an earlier interview.
