The graft complaint earlier dismissed by the Ombudsman against former officials of the Development Bank of the Philippines (DBP) in connection with P634.8 million behest loans has been affirmed by the Supreme Court (SC).

The SC decision the officers of ALFA Integrated Textile Mills, Inc. which received the loan.

In a 19-page decision penned by Associate Justice Marvic Leonen, the SC’s Third Division junked the petition filed by the Presidential Commission on Good Government (PCGG) seeking the reversal of the 31 July 2006 resolution and 21 January 2011 order of the Ombudsman.

The Office of the Ombudsman found no probable cause to charge the officials of the DBP, namely. Cesar Zalamea, Rafael Sison, Alicia Reyes, J.V. De Ocampo, Joseph Edralin, and Rodolfo Manalo.

Likewise, charges against ALFA Integrated Textile Mills Inc. (ALFA Integrated Textile) officers Ramon Lee, Johnny Teng, Antonio DM. Lacdao and Cesar Marcelo for violation of the provisions of Republic Act 3019, or the Anti-Graft and Corrupt Practices Act were dropped.

The Ombudsman said the six loans obtained by ALFA Integrated Textile from Development Bank from 1979 to 1981 were not behest loans.

It held the PCGG failed to prove the loans and accommodations in favor of ALFA Integrated Textile, the rehabilitation plan, and the fixed assets sale were grossly or manifestly disadvantageous or prejudicial to the government.

The Ombudsman ruled that the acts were done in the exercise of the bank officials’ sound business judgment in DBP’s interest.

The PCGG, in seeking the reversal of the Ombudsman’s ruling, insisted the loans to ALFA were behest loans as they were secured by inadequate collateral. The loans were extended despite the company’s continuous losses and the use of the loan proceeds to pay off existing obligations rather than investing denied DBP the opportunity to recover from the loans.

The high bench, though, gave more weight to the Ombudsman findings that there was sufficient collateral securing Alfa’s loans.

The Court said the Ombudsman was correct in holding that the rehabilitation plan the DBP recommended would not be disadvantageous to the government since its terms and conditions were not contrary to law and actually benefited the government,

“Thus, the records of this case support public respondent Office of the Ombudsman’s finding that the DBP exercised sound business judgment and acted under existing banking regulations in its loans to ALFA Integrated Textile,” the SC said.

It said PCGG failed to show how the risk DBP had taken in extending the loans was arbitrary or malicious.

Furthermore, the SC said the PCGG was unable to prove the element of undue injury; that is, the losses that would have been unavoidable in the ordinary course of business.

It also said the PCGG failed to prove that the sale of ALFA’s fixed assets worth P462,323,000 to Cape Industries Inc., a company owned by Eduardo Cojuangco Jr. who was a known crony of the late President Ferdinand Marcos for only P100 million, was gross disadvantageous to the government.

The Ombudsman, the SC said, established that DBP included a repayment schedule of ALFA’s loans from the bank and other obligations in the contract to sell with Cape Industries.

Since the PCGG was unable to substantially prove its allegations, the Court ruled the Ombudsman did not abuse its discretion in finding that there was no probable cause to charge private respondents with violation of Section 3(e) and (g) of the Anti-Graft and Corrupt Practices Act.

The SC said it will not overturn its findings when they are supported by substantial evidence.