By Roy Pelovello

HOUSE Speaker Prospero Nograles yesterday admitted he had millions of pesos invested in the Legacy Group, which is accused of swindling creditors out of billions of pesos, but denied intervening on its behalf.

Nograles? revelation came as the House committee on banks and financial intermediaries approved his bill increasing from P250,000 to P500,000 the insurance coverage on deposits by the Philippine Deposit Insurance Corp.

Reports claim that Nograles tried to talk former PDIC president Ricardo Tan into going easy on the investigation of Celso Delos Angeles, head of the Legacy Group, supposedly for his help in electing Vice President Noli de Castro.

?Nom I did not intervene,? Nograles said in a text message yesterday.

?Yes, I am a creditor of Legacy and my papers are in the SEC... listed as creditor.

?My advocacy has always been why... close small rural banks and bail out big commercial banks with the same violations of capital ratio deficiency? That was part of the House investigation by our oversight committee last 2004 and 2005, and it was an executive hearing so as not to disrupt the banking industry.?

In its hearing yesterday, the House committee on banks and financial intermediaries, led by Manila Rep. Jaime Lopez, approved the proposal to let the government pay the additional P250,000 in the next three years, with the rest of the insurance coverage on deposit to be shouldered by the PDIC.

The group was accused of running a version of the pyramid scheme, luring investors with promises of high interest and ensuring clients? deposits were within the PDIC?s P250,000 maximum coverage so that when the banks closed, the PDIC would have to cover the deposits.

But Nograles distanced himself from Delos Angeles, saying his family was also claiming millions from Legacy, which owes depositors at least P14.4 billion.

?My bill has nothing do with Legacy. The fact is, it?s certified urgent by the Palace because that?s what economic managers want,? he said.

Nograles said Delos Angeles managed to convince him to invest in Legacy?s operations by promising high returns.

?Legacy has big operations in Davao and many of us invested and made placements because of [promised] high returns,? Nograles said.

?That?s how I met Legacy [apparently referring to Delos Angeles] because he threw a party in Davao, inviting [those of] us who made placements there.?

Nograles refused to say how much he invested in Legacy.

He also denied report that he set up a dinner with Delos Angeles in 2005, saying it was Land Bank of the Philippines director George Regalado who arranged the dinner to discuss the closure of a rural bank in Davao, the Banco Davao All Asia Bank.

Delos Angeles, former chairman of Legacy Consolidated Plans, controlled 13 banks with 29 branches nationwide, including Rural Bank of Para?aque that the central bank closed down last month.

The Bangko Sentral has shut down and placed under the PDIC control the following Legacy-affiliated banks: Rural Bank of Bais (in Negros Oriental); Pilipino Rural Bank (in Cebu); Rural Bank of San Jose (in Batangas); Philippine Countryside Bank (in Cebu); Dynamic Bank (Rural Bank of Calatagan,Batangas); San Pablo City Development Bank; Nation Bank (in Bacolod City) and the Bank of East Asia (in Cebu).

Lopez said his panel would begin investigating Delos Angeles and the Legacy bank closures when it convenes again this morning in an executive session. He said it was the request of Bangko Sentral Governor Amando Tetangco Jr. that a closed-door session be held for fear a public hearing might cause a bank run.

The Speaker?s brother, Jose Nograles, incumbent PDIC president, did not attend the committee hearing yesterday.

The consolidated measure also provides for ?bridge banking? by allowing the PDIC to ?form, establish, organize and operate and/or contract to operate subsidiaries or corporations whose primary purpose is to operate as a bridge bank and/or manage acquired assets of the corporation.?

This would allow a bank licensed by the Bangko Sentral to acquire assets and assume the liabilities of a failed bank?including the insurance claims?a provision that might allow banks like Legacy to regain control at the expense of the government.

Rep. Luis Villafuerte supported the proposed increase in PDIC coverage but expressed some reservations, saying it could embolden dishonest bankers to pull off syndicated scams knowing the money had a sovereign guaranty.

?I have a difficulty concurring with the House version [of the bill],? he said, adding while he wanted to protect depositors from scammers, he was also wary the measure could abet bank fraud.

Villafuerte, a lawyer and a banker, said there might be a need to increase the criminal liability of bank owners and officials to prevent banks from engaging in unsound practices like making unrealistic promises to depositors.

He also raised the need to empower the Bangko Sentral by giving it access to bank records, a move that central bank officials said could violate the Bank Secrecy Law.

Villafuerte said the Bangko Sentral should also set a ceiling on the interest that banks could offer depositors to stop banks from making such offers.

He also opposed the PDIC?s plan to borrow additional funds from the Bangko Sentral after he found that its P60 billion revolving fund was intact, and that it was earning at least P7 billion each year from its investments.

Christina Orbeta, PDIC executive vice president, said her agency had to borrow additional money because the recent bank closures had been ?extraordinary.?

Ernest Leung, former finance secretary and PDIC president, said he also opposed the proposal to increase the maximum insurance coverage since it would be wrong to resort to it while the country was trying to keep the economy moving.

?It?s an unfair, nonsense proposal,? he told the committee, referring to the original proposal for the government to shoulder the increase over five years.