The ailing Philippine National Bank (PNB) looks to be very close to losing its grip of funds under a letter of credit (L/C) that has been at the centre of a 17-year old dispute.

The bank has launched what may be a last ditch attempt delay the transfer a US$4.4 million sum to an interest bearing account at the Land Bank of the Philippines (LBP).

Court order

The Sandiganbayan Fifth Division last month ordered the transfer of the funds in the account of Vicente Chuidian to LBP under a special time deposit. The 18 July order followed another order issued in October 2002 directing the PNB to transfer the proceeds of the L/C to an escrow account at the LBP until the true ownership of the funds is determined.

In making its order last month the court dismissed cash-strapped PNB's argument that the government should first provide for the funds, and described its position as "untenable" in this respect. It also said there was no need for the court to issue a writ of execution since the order was a directive and not an award.

Dummy account

The funds are centre of investigations opened in 1986 by the Presidential Commission on Good Government and Chuidian.

It has been alleged that the account in which the funds are lodged is associated with a dummy organisation connected to the disgraced former president of the Philippines, Ferdinand Marcos. The account has been in the custody of the anti-corruption court since the dispute began.

Huge amount

The most recent motion submitted by the PNB asks the court to consider the size of the sum in question and to extend a 5-day grace period before it enforces the transfer of the sequestered funds.

The motion pleads that since the amount concerned is "huge", the PNB should be granted time to comply with "certain bank procedures as well as some central bank regulations" before it remits the funds.

Bank rehabilitation

"While we still maintain that the liability has been transferred to the national government under a Deed of Transfer dated February 27, 1987, the PNB has no intention whatsoever to disobey such resolution. However, it begs the indulgence of this Honourable Court that it be given an extension to comply with the same considering the huge amount involved as it would have serious consequences on the bank which is still under rehabilitation," the motion filed by the bank pleads.

The partly privatised bank's rehabilitation plans include proposals to sell off its real estate while Ernst & Young Asia Pacific Financial Solutions has recently been called in to advise PNB on its strategy for the disposal off about US$1.3 billion of non-performing assets.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.