THE CNMI government yesterday issued a freeze order on Bank of Saipan’s assets, and has virtually taken over a financial institution rocked by a multi-million scandal involving its former chairman and CEO.
“The government has issued a freeze order on withdrawals. The government has basically taken over to ensure that the assets of the bank and the interests of its clients and employees are protected,” acting Commerce Secretary Fermin M. Atalig told Variety yesterday.
He said the order will prevent a possible bank run.
Atalig, who is also the CNMI’s banking commissioner, served the order at 10:30 a.m. yesterday to the bank’s chairman and chief executive officer, former Speaker Benigno R. Fitial.
Atalig also informed Fitial that a petition for receivership has been filed in Superior Court.
“The bank is not in sound financial condition and its affairs are being conducted in a manner that places its depositors under danger of being defrauded,” Atalig said.
The freeze order will enable the government to find out the “real financial status” of the bank.
Based on Bank of Saipan’s March 2002 statement of financial condition, the bank had $48 million in deposits.
Close to $16 million, or approximately one-third of the total deposits, belong to the CNMI government.
At least $37 million were recently loaned from the bank, Atalig said. “That figure, including the $6.6 million that was fraudulently taken out from the bank, has contributed to the situation,” he added.
Yesterday the Attorney General’s Office filed in behalf of Atalig an “Ex Parte Petition of Receiver for Bank of Saipan Under 4 CMC 6106 (f).”
Assistant Attorney General Allan L. Dollison signed the petition.
Attorney General Robert T. Torres said the government has an obligation to protect the deposits.
AGO will take all legal, administrative and regulatory remedies to prevent the bank from collapsing, Torres said.
According to the petition, Bank of Saipan may not be in sound financial condition as a result of the April 26 indictment of Tomas B. Aldan, the bank’s former chairman and CEO.
Aldan is facing wire fraud and conspiracy charges.
Bert Douglas Montgomery, Dusean Berkich and Michael T. Wilson were also indicted as co-conspirators. It was earlier reported that the three had purchased the bank.
“We are asking the court to authorize us to appoint a receiver who will handle the operation of that bank to make sure that the depositors will get their money,” Atalig said.
Based on the bank’s statement of assets and liabilities on March 31, 2002, only $8 million was “backed by U.S. Treasury Department securities as collateral.”
This is in direct violation of the Government Deposit Safety Act and “another basis for petitioner to believe that (the bank) is not in sound financial condition (and) that depositors’ funds are at risk,” the petition states.
Some government agencies that have large deposits with the bank tried to withdraw funds on Monday but were told that the bank was unavailable to release the monies, Gov. Juan N. Babauta said in an interview Monday evening.
In a separate interview, attorney Robert O’ Connor said yesterday he did withdraw his time certificate deposit from Bank of Saipan, “but that was several months ago.”
Variety learned from the administration on Monday that O’Connor withdrew over $1 million from the bank.
O’Connor refused to confirm nor deny this.
“I withdrew my time certificate deposit…last year. It was my last major withdrawal and it had nothing to do with the current crisis of the bank,” he said.
O’Connor said his personal banking practices are “confidential” and should “not be discussed in the newspaper, by the governor, the bank or anybody.”
He added, however, that his law firm has an account with the bank.
Guam attorney David J. Lujan, one the bank’s major shareholders, said he is supporting the decision of the CNMI government to temporarily freeze bank withdrawals pending the appointment of a receiver.
“The bank supports the appointment of a receiver and the temporary freezing of withdrawals,” Lujan told Variety yesterday afternoon. “It is a good thing.”
He added that the scandal has also prompted two of the bank’s 11 board members to resign.
He said Jerry Tan and George Chu, both associated with Tan Holdings Corp., resigned Monday night.
Lujan said the Guam-based board members were not told why Tan and Chu resigned.
Lujan said the government’s decision will enable the bank to recover.
He said the ultimate goal of the government is to protect the depositors and assure them that they can recover their deposits.
Asked if he and another major shareholder, former Guam Gov. Paul Calvo, benefited from the controversial purchase of the bank that triggered the fraud allegations, Lujan said “No. We did not benefit from any sale.”
Tan Holdings Corp. attorney Steven Pixley said the governor was not given accurate information regarding the bank’s condition during Babauta’s meeting on Monday with Lujan and Calvo.
“There is information regarding some shareholders that was not disclosed to the governor,” he said.
“All the facts were not presented to the governor accurately,” he added.
According to Pixley, Tan Holdings is concerned about the situation of the bank.
There is a need to be “very careful” and “cautious” about the issue, he added.
“I advised my clients as their attorney to be very careful regarding public statements as we understand that they may sometimes create an environment that causes alarm or concerns,” Pixley said.
He said Jerry Tan and George Chu resigned upon his advice.
“They had to resign because some of their recommendations were not followed by the bank,” Pixley said. He declined to elaborate.
Asked if Tan Holdings’ CEO Willie Tan still has money with the bank, Pixley said, “I’m not too sure—what I know is that we’re very concerned about the bank’s financial integrity.”
The bank has nearly 50 employees. It has two branches on Saipan and one each on Rota and Tinian.
