PALAU BANK DIRECTORS CHARGED IN PENSION FRAUD

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By Nazario Rodriguez Jr.

KOROR, Palau (Palau Horizon, Feb. 18, 2008) — The Palau Office of the Independent Counsel (OIC) has filed criminal charges against directors and officers of the former Pacific Savings Bank Ltd. (PSB) and members of the Trustees for the Civil Service Pension Plan (CSPP) regarding the pension plan’s placement of $1 million into the bank in September 2006.

This is according to a two-page statement released by the OIC on Tuesday Feb. 12, copies of which reporters got hold of through Sen. Joshua Koshiba before a Senate special session on Wednesday Feb. 13.

The statement said the charge was a result of investigations conducted by Margarete Martin, who is attached to the Independent Counsel, Lewis K. Harley.

Harley concluded in the statement that it is integral to the public trust that the public’s money be invested prudently and that the true financial condition of financial institutions is disclosed accurately.

On the other hand, Martin said that the CSPP’s $1 million placement into PSB has hurt the contributors and eroded their confidence as to how trust funds are invested.

Accordingly, Tim Taunton, who was the PSB President, initially proposed that CSPP invest the sum of $3 million for a period of five years based on a criminal complaint in Jan. 25, 2006.

The OIC noted that the Financial Institutions Commission (FIC) issued a "Warning of Unsafe Conditions or Practices" to defendants Mario Gulibert, Tadao Ngotel, Hideo Termeteet and Margo Llecholch following its ongoing investigation on Jan. 31, 2006.

It said that the warning was issued due to the bank’s lack of liquidity, evidence of insider and related party transactions, issues regarding the improper extension of credit, concerns regarding the pledging of assets directly and indirectly owned by PSB, payments made to insiders, payment of bonuses, expenses and advances.

"The warning was to direct PSB to immediately provide improvements on its financial conditions and operations" the OIC said.

It also noted that in March 29, 2006, defendants Evence Imetengel, Irene Francisco, Elbuchel Sadang, Leo Ben Teriong, John Wong and Wilbert Kamerang as CSPP’s Board of Trustees held a meeting and discussed PSB proposal and decided to consider it.

OIC said that it was agreed by CSPP that the proposal would be reviewed by its investment consultant, then, on July 26, 2006 CSPP agreed to put $1 million to PSB and asked defendant Etibek to inform PSB of its decision.

Also on July 28, 2006, OIC said that Taunton sent over the drafted agreement to Etibek.

OIC noted that on Aug. 25, 2006, an adopted FIC Resolution 1-2006-08 was signed by its board members, including Teriong, who was at the time a FIC board member, and an Order Imposing Restriction on Operation was issued to PSB.

"This order was put in place because of the PSB continued unsafe conditions and practices due to lack of liquidity, evidence of insider and related party transactions, issues regarding the improper extension credit, issues regarding the improper acceptance of deposits, concerns regarding the pledging of assets directly and indirectly owned by PSB," OIC said.

"Certain restrictions were imposed on PSB on accepting deposits or borrowing money from any source. PSB was ordered not o receive any deposits in excess of $10,000 for business, commercial or non-personal checking, savings, or time deposit and or pledging of bank’s assets as security for any deposits."

OIC also found out that on the same date of Aug. 25, 2006, Taunton, Gulibert, Koichi Wong, Ngotel, Termeteet, Mesubed have signed an agreement for the $1 million as a loan from Civil Service Pension funds.

OIC said that this was done in defiance of the mandatory restriction, which prohibited this type of transaction.

It also noted that at a special meeting on Sept. 6,2006 with the FIC Koichi Wong, Gulibert, Sadang, Imetengel and Etibek met for the purpose of sharing information with Pension Plan’s intentions regarding the $1 million.

OIC said that FIC informed Sadang, Imetengel and Etibek that they need to be aware of all considerations in relation to proposed injection.

"Defendants were further advised by FIC of terms of the Restriction Order on PSB then in effect and the possibility that CSPP would lose its $1 million in the event of a bank failure," OIC stressed.

It further explained that despite the FIC warnings and restrictions, Gulibert, Koichi Wong, Ngotel, Termeteet, Taunton, Mesubed and Margo Llecholch received the $1 million from Pension Plan and deposited into PSB.

"Despite these same warnings and concerns and the fact that the Agreement for the loan of $1 million has not been signed by Imetengel, Francisco, Sadang, John Wong, Kamerang, Teriong, Etibek and Naomi Ueki released the Civil Service Pension funds of $1 million to PSB."

OIC said that at the time the $1 million was placed into PSB, the bank was under mandatory restriction, which prohibited this type of deposit.

"On Sept. 26, 2006, Imetengel (Chairman), Francisco (Vice Chairman), John Wong, Kamerang, Teriong and Etibek signed the agreement of $1 million as a loan to PSB."

"Upon signing of the agreement defendants were fully aware of the conditions and restrictions placed on PSB from the special meeting that took place on Sept. 6,2006."

"Taunton, Gulibert, Koichi Wong, Ngotel, Termeteet, Mesubed and Llecholch were all aware of PSB’s capital and liquidity insolvency and warnings of unsafe conditions and practices and the restrictions issued by FIC."

"Despite these warnings, conditions and restrictions placed on PSB from the special meeting that took place on Sept. 6, 2006."

"Imetengel, Francisco, Sadang, John Wong, Kamerang, Teriong, Etibek and Ueki failed to safeguard and insure the preservation of the $1 million the Pension Plan’s funds."

"These funds were used to further conceal the unlawful activities of PSB and its Directors and Officers and enable PSB and its Directors and officers to continue to deceive the public with regards to its financial condition."

Marianas Variety: www.mvariety.com

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