'Badges of fraud' in the time of coronavirus
OF SUBSTANCE AND SPIRIT
If what is coming out of the Commission on Audit’s (COA) findings of potential fraud on the part of various public agencies is proven true, this is nothing but betrayal of public trust. Fraud involving the misuse of public funds exceeding P50 million constitutes plunder and the sanction is reclusion perpetua to death, presumably a penalty commensurate to the gravity of the offense.
If some people amassed, accumulated or acquired ill-gotten wealth through a combination of series of overt criminal acts involving misappropriation, conversion, misuse or malversation of public funds they should be prepared to be charged and prosecuted at the Sandiganbayan, or regular courts of justice in certain cases. The law on plunder also assigns criminal liability to any one for receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks or any other form of monetary benefit for reason of his public office.
Is it the culture of impunity that has emboldened some public servants to treat public money with wild abandon and little concern during this time of the pandemic?
On the P42 billion alone transferred by the Department of Health (DOH) to the Department of Budget Management’s (DBM) Procurement Service (PS), what are the badges of fraud, to borrow Senate Minority Floor Leader Frank Drilon’s very apt marker?
Nothing justifies the transfer of procurement of face masks and other COVID-19 medical supplies to PS. More than any other public agency, it is the DOH that should have the expertise to decide on the specifications of the medical supplies to be procured. It did not help that former DBM Undersecretary Lloyd Christopher Lao explained that before the pandemic in March 2020, the Government Procurement Policy Board (GPPB) resolved to declare personal protective equipment (PPEs) including face masks and face shields as common supplies and therefore procurable by PS.
At whose instance were these supplies reclassified as common supplies, an act that would have dispensed with a memorandum of agreement between the DOH and the DBM?
But in the recent Senate hearing, Drilon maintained that the procurement law’s implementing rules and regulations allow this option “through the execution of a memorandum of agreement.” Prudence dictates the need for documenting any transfer of such enormous amount.
What then was the basis of Health Secretary Francisco Duque’s order to transfer funds to DBM?
In my nearly 15 years as sector head at the Bangko Sentral ng Pilipinas (BSP), whenever we bid out contracts for the printing of peso notes and minting of coinblanks, or for the construction of branch offices in the regions, one of the knock-out criteria observed by our independent Bids and Awards Committee, is the financial capability of potential suppliers. Another is their track record. The main idea here is to ensure they could deliver.
In this case, some P8.7 billion worth of contracts for the supply of face masks, face shields, PPEs and test kits were awarded to a small company, Pharmally Pharmaceutical Corporation, with offices in Taguig. Pharmally was incorporated with a paid-up capital of only P625,000 with presumably very little track record. It was established only in September 2019. Within six months, it started to win billion-peso contracts from PS-DBM under Lao.
What happened to those knock-out criteria?
That is not all. Pharmally appeared to have used fake addresses in its registration documents. Senate subpoenas to its officers were not served because the units indicated in the company’s general information sheet turned out vacant since 2018. For this, Lao only admitted negligence; his office failed to do due diligence because it rushed the procurement of supplies at the height of the pandemic. With photos of the officers of Pharmally taken with the President and his presidential adviser on economic affairs going around social media, several senators did not see negligence, they saw collusion between DBM and Pharmally.
Most important, the purchased items were said to be excessively overpriced and for some items, substandard. In the hearing, Drilon also claimed that while DBM procured surgical masks from Pharmally at P22.5, P27.72 and P22 at different dates in April, DBM also succeeded in securing the same items at around the same dates at lower prices from different suppliers at P13, P16 and P17. DBM awarded several contracts to Pharmally totalling P8.7 billion representing various pandemic-related medical supplies. The civil society expects both the COA and the Senate would be able to establish whether the Philippine government was disadvantaged due to possible overpricing and delivery of substandard items.
Moreover, our fiscal authorities have recently admitted they are running out of public assets to sell to beef up our resources as we continue to face a bleak future. Even if additional support from the IMF through a grant of special drawing rights could potentially add P140 billion to financing the budget deficit, it may not be enough. For 2021 alone, we need to borrow P2 trillion. More and more, we are finding ourselves in a fiscal mess.
The least we need nowadays are badges of fraud in the use of public money.Since the start of this pandemic, around 33,000 Filipinos have died and around two million have been infected. That the much-criticized response of our health authorities aggravated these grim statistics is for our discernment. All evidence points to our fast-shrinking fund to cover the cost of fighting our unseen enemy. To dissipate public funds by overpricing and misallocating billions of pesos is unconscionable. Lest we forget, many of our people have yet to get their vaccines. Our medical frontliners have yet to receive their promised benefits. Sadly, some have already died waiting.