THE government may recommend the filing of criminal charges against certain major shareholders and directors of Bank of Saipan.
Acting Secretary of Commerce Fermin M. Atalig yesterday said possible criminal violations had been committed by these shareholders and bank officials.
Atalig informed the bank’s board of directors that once all facts are known, he intends to request the attorney general to make a determination on whether or not the directors and shareholders that received or authorized the disbursement of $3,587,886 in payments from the bank violated criminal law.
Atalig said the law on unlawful concealment of transactions states that “it is unlawful for an officer, director, employee, attorney or agent of a bank to conceal any transaction of the bank, to conceal or endeavor to conceal any transaction or employee of the department to whom it should be properly be disclosed.”
“Until a determination is made on this issue it is necessary for an independent receiver to remain in control of the bank,” Atalig said in a letter to the bank’s board of directors.
Atalig said that during the continued receivership, a plan will be fully developed to address the issues outlined in an independent report detailing alleged misappropriation of bank funds in the amount of $3,587,886 by the Calvos and JLH Pacific Trust.
The canceled checks, he said, indicated that these checks were drawn from the bank.
“There is no board action authorizing the use of bank funds nor was this financing of the sale disclosed to the Banking Division,” said Atalig, adding that the transcripts of the board minutes last Dec. 12 showed that the selling shareholders/directors attempted to conceal such transaction from the other non-participating directors.
“Again, given the actions and inaction by the current directors, the acting secretary finds a need for a continuing receivership,” Atalig said.
Historically, the bank has engaged in unsound business practices that have culminated in the unsound financial condition, he said.
According to Atalig, the bank was told by the Federal Deposit Insurance Corp. in 1997 that it was in poor overall financial condition.
“Asset quality is unsatisfactory, the bank is structurally unprofitable, risk management and forward planning are nonexistent, and capital is insufficient given the significant weaknesses with which the bank is confronted,” the FDIC said in its findings.
The bank’s directors, however, did not take any substantive actions to remedy its condition, Atalig said.
The FDIC’s assessment is corroborated by the 1997, 1998, 1999, 2000 audits conducted by Deloitte Touche Tohmatsu.
Atalig said he can only conclude that the present directors are either generally incapable or suitably unwilling to perform their statutory and fiduciary duties toward the depositors.
“Most disturbing of all is the total lack of concern the directors have shown for the depositors,” he said.
Citing the directors’ meetings from May 26, 2001 to Feb. 2002, Atalig said there was little or no serious discussion of improving the bank or implementing the reforms that were urged four years before by the FDIC.
“(They) appear to be more concerned about selling their shares at above market price than (with) the overall running of the bank,” he said.
The transcripts, Atalig added, “reflected no attempt at performing due diligence, by either the board or its counsel, to make sure the bank was not being sold to con artists, despite a fiduciary duty to do so.
