HGC lawyer rejects compromise with R-II Builders over failed Smokey Mountain project

MANILA — Why compromise when you’re winning?

The lawyer of the state-owned Home Guaranty Corp. (HGC) reacted sharply when lawmakers attempted to broker a compromise deal between the agency and private contractor R-II Builders on the failed Smokey Mountain Development and Reclamation Project (SMDRP).

Why, said lawyer Dexter Lacuanan, were some members of the House subcommittee on housing forcing him to compromise with Reghis Romero’s R-II Builders when he was winning his cases for the government?

In an interview with Philippine Daily Inquirer after the hearing, Lacuanan, head of the HGC’s litigation department, scoffed at the proposal of R-II Builders to reimburse HGC billions of pesos for its guaranty exposure, saying, “Why would I compromise if in the end I win, I get everything?”

“I’m willing to compromise if I’m losing,” he said…That’s why they’re offering that. They’re losing the cases,” he huffed.

“Now a congresswoman says, ‘you come to an agreement,’ Lacuanan said, referring to A TEACHER party-list Rep. Julieta Cortuna, who, during the meeting, blamed HGC for “sitting” on the mediation effort.

HGC and R-II Builders, along with the Social Security System (SSS) and the National Housing Authority (NHA), have been compelled by the House subcommittee to return to the negotiating table after being locked in at least 12 pending court cases for more than a decade.

The subcommittee, chaired by Ako-Bicol party-list Rep. Rodel Batocabe, is looking into the mediation proceedings among the parties in the Smokey Mountain fiasco because the government is reportedly losing half a million pesos a day in interest payments alone as a result of HGC’s pending obligations to SMDRP creditors.

During the hearing, R-II Builders executive vice president Jerome Canlas reiterated his company’s willingness to end the legal disputes by reimbursing HGC for its guaranty exposure as well as settling its obligations to the SSS.

Canlas did not mention a figure, but Romero, the R-II Builders chair, said in July 2015 that the offer could go as high as P5 billion “if justified” by valuation, although he doubted it would reach that much.

Lacuanan, however, said “any deal” to be reached with R-II Builders should be “advantageous to government, legal, and legally defensible.”

One complication, he said, has been the power struggle between Romero and his son Michael over the control of HCPTI. “In most of these cases, our opponent is HCPTI, not R-II Builders,” Lacuanan said. “Why should we deal with Reghis, if he’s no longer the owner, as proven later in the judicial case between father and son? That’s what I’m saying. You can’t rush this.”

In 1993, R-II Builders Inc. and NHA entered into a joint venture to develop the Smokey Mountain trash site into a habitable housing project. R-II Builders, however, failed to finance all aspects of the development, forcing the government to step in by issuing bonds called the Smokey Mountain Project Participation Certificates (SMPPC) backed up by an asset pool and the guaranty of the HGC. SSS was among the investors and put in P 1.15 billion in the project.

The project, however, failed despite the SMPPCs, thus HGC, as guarantor, assumed all obligations to investors who bought the SMPPCs amounting to more than P4 billion, including interest. In exchange, the entire asset pool, including the 21.2-hectare Smokey Mountain property and the 79-hectare Manila Bay foreshore property was conveyed to HGC.

The government has since filed multiple cases against Romero and his other corporation, Harbour Centre Port Terminal Inc. (HCPTI).

The Romeros also went to court, arguing that HGC failed to fulfill its obligation as the guarantor.  SFM