Senators suspect ‘ghost deliveries’ in Pharmally contracts

MANILA, Philippines — Documents proving the delivery of billions of pesos worth of medical supplies bought by the Procurement Service of the Department of Budget and Management (PS-DBM) from Pharmally Pharmaceutical Corp. were prepared and signed even while the goods were still to be shipped from China, officers of the government agency told senators on Monday.

This admission from the PS-DBM personnel raised suspicion among members of the Senate blue ribbon committee investigating the alleged misuse of pandemic funds on the possibility that the supply contracts involving Pharmally were ghost deliveries.

Jorge Mendoza III, former chief of the PS-DBM inspection division, testified that on at least two occasions, he was told to sign inspection reports even without having seen the actual delivery of the items.

“There was that time that there was no delivery yet, but we were advised or instructed to prepare the inspection documents, considering that it will be an attachment for the China suppliers as an assurance that they will get paid once the items arrive in the Philippines,” he said.

The Senate blue ribbon committee on Monday resumed its investigation into the alleged misuse of P67.3 billion pandemic funds lodged with the Department of Health (DOH), including P42 billion that was transferred to the PS-DBM for the supposed purchase of medical supplies, including face masks, face shields, personal protective equipment (PPE) and COVID-19 test kits.

Pharmally, the under-capitalized company at the center of a Senate investigation, bagged P11 billion worth of government contracts in 2020 and 2021, or more than a fourth of the P42 billion transferred by the DOH to the PS-DBM. The transfer was flagged by the Commission on Audit for lack of a memorandum of agreement and other supporting documents, prompting Sen. Richard Gordon’s panel to launch an inquiry.

Mendoza made the admission on questioning by Sen. Francis Pangilinan on whether or not the PS-DBM was sure that the ordered medical supplies bought from China actually arrived in the Philippines.

The former inspection chief said he was instructed by “management,” but did not specify the person who gave the directive.

When Pangilinan asked who in management, Mendoza said those from the “finance department” during a meeting presided by former accounting chief Raul Catalan.

Mendoza’s statements were corroborated by Mervin Ian Tanquintic, current PS-DBM inspector.

Lloyd Christopher Lao, former PS-DBM chief, said they had to issue signed inspection reports supposedly because this was demanded by Chinese suppliers.

Gordon, chair of the blue ribbon committee, ordered the validation of the existing inventories in DOH warehouses as testified on by Health Secretary Francisco Duque III, who claimed that the agency had already received P37 billion worth of the medical supplies it had asked the PS-DBM to procure.

This was after Senate President Pro Tempore Ralph Recto raised doubt that the DOH had already received all the P42 billion worth of medical supplies that it had sought to buy.

“This is a big issue that needs to be clarified, (as) this has already caused confusion among end-users of these medical supplies. We have heard complaints from medical front-liners why they were being made to pay for the supplies when these are bought using DOH funds,” he said.

Discrepancies

He also raised suspicion that with the admission by its former head of inspection, the PS-DBM could be “making up inventories.”

Also bolstering suspicion of ghost purchases, Sen. Imee Marcos exposed “discrepancies” in the recording of deliveries by Pharmally to the PS-DBM for two supply contracts of test kits amounting to more than P1.7 billion: one contract for 17,000 test kits at P44,550 each, and a second contract for 26,970 kits bought at P37,450.

On Marcos’ questioning, lawyer Jasonmer Uayan, PS-DBM officer in charge, responded that the PS-DBM had recorded “partial” deliveries of more than 9,000 test kits on the first contract, but no deliveries on the second, adding that Pharmally asked for an extension of time to deliver the goods.

This was refuted by Pharmally treasurer Mohit Dargani, who claimed that Pharmally had made full deliveries of the test kits.

“The company can submit to the committee proof of our deliveries to the PS-DBM, we shall comply with it ASAP. As to the discrepancies, I cannot answer; I’m really sorry,” he said.

Limited role

At the resumption of the Senate inquiry, a Pharmally executive also told the committee that President Rodrigo Duterte’s former economic adviser, Michael Yang, came to the aid of the company only to fulfill its big-ticket contracts with the government for pandemic supplies amounting to P7.3 billion in 2020.

Pharmally director Linconn Ong, who told senators he had received death threats after his last testimony, said Yang, a Chinese businessman known to be close to the President, “helped” Pharmally settle its obligations to Chinese suppliers for at least three contracts: a P3.82-billion deal for PPE sets, a P2.88-billion deal for COVID-19 test kits, and a P600-million contract for reverse transcription polymerase chain reaction test kits.

In the Sept. 10 hearing, Ong and Pharmally’s Singaporean chair and president, Huang Tzu Yen, said Yang had personally loaned money to the company, belying the latter’s claim that he was not involved in its transactions.

Yang was a no-show at the resumption of the Senate inquiry on Monday, with his lawyer saying his blood pressure had spiked, as the panel unraveled his alleged involvement in Pharmally.

Denial

In a letter to Gordon and Senate President Vicente Sotto III sent by his lawyer Raymond Fortun, Yang admitted that he was acquainted with Lao, who was the head of PS-DBM when Pharmally won the contracts.

But he insisted it was only a casual relationship.

“I know (Lao) of the PS-DBM, since both of us worked for the Duterte administration. But other than casual greetings during social functions, I do not have any close personal relationships with him,” Yang said.

“I had not texted, called, sent any letter or email or made personal visits to Undersecretary Lao for the purpose of influencing his decision to award any procurement contracts in favor of Pharmally. I also did not use any other person for the same purpose,” he added.

Yang maintained that his involvement with Pharmally was limited to helping Ong “to the extent of referring Pharmally to my friends in China who are either suppliers of the items in the contract, as well as referring him to other friends who could help on the financial side of the supply contracts.”

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