Lloyd Christopher Lao —PHOTO FROM DBM WEBSITE
Investigators found former Budget Undersecretary Lloyd Christopher Lao and 12 others liable for graft in the biggest corruption scandal during the pandemic and recommended their criminal prosecution for conspiring to award P4 billion in contracts for COVID-19 test kits to Pharmally Pharmaceutical Corp. which they treated as a “favored” supplier.
According to documents made public on Thursday, Ombudsman Samuel Martires on Aug. 18 approved an Aug. 14 resolution by a prosecution panel to charge the 13 officials and private individuals with causing “undue injury” and giving “unwarranted benefits, advantage or preference” to a private party under the antigraft law.
Martires also approved a separate decision by the prosecution panel to penalize Lao, Overall Deputy Ombudsman Warren Rex Liong, procurement management officer Paul Jasper de Guzman and former procurement division chief Webster Laureñana who also were found guilty of administrative charges, including grave misconduct, gross neglect of duty, serious dishonesty and conduct prejudicial to the best interest of the service.
Liong, who was suspended from his post in the Office of the Ombudsman in March this year, De Guzman and Laureñana all served under Lao when the budget undersecretary was acting chief of the Procurement Service of the Department of Budget and Management (PS-DBM) during the pandemic.
The administrative penalty imposed on them included dismissal from the service, forfeiture of all their retirement benefits and a lifetime ban from government service.
Former PS-DBM officers Christine Marie Suntay, Jasonmer Uayan and August Ylagan were found guilty of gross neglect of duty and conduct prejudicial to the best interest of the service, and slapped with the same penalties.
The Ombudsman’s investigation was prompted by separate letters from Sen. Risa Hontiveros and former Sen. Richard Gordon, who was chair of the Senate blue ribbon committee which led the investigation of the Pharmally scandal from 2021 to 2022.
The letters, dated June 2 and Oct. 10 of 2022, referred the Office of the Ombudsman to the Senate’s partial committee report on its own inquiry into the Commission on Audit’s 2020 report on the expenditures of the Department of Health in the fight against COVID-19.
The private persons to be charged alongside Lao and the other government officials are Pharmally president Twinkle Dargani, treasurer and secretary Mohit Dargani, company directors Linconn Ong and Justine Garado, board member Huang Tzu Yen and company employee Krizle Grace Mago.
The prosecutors’ resolution said it was Liong who recommended the approval of three contracts with Pharmally for 51,400 COVID-19 RT-PCR (reverse transcription-polymerase chain reaction) test kits. Lao approved the award despite the company’s small capitalization and lack of experience in government transactions.
The contracts include 8,000 BGI Real Time Fluorescent RT-PCR test kits amounting to P600 million; 2,000 A*Star Fortitude RT-PCR test kits worth P688 million; and 41,400 BGI Real Time Fluorescent RT-PCR kits worth P2.877 billion, for a total amount of P4.165 billion.
Lao’s failure
In the P2.877-billion deal, Ombudsman investigators said Lao had “intentionally failed to secure the most advantageous price and terms of contract for the government” and awarded the contract to Pharmally.
Liong recommended the approval of the price analysis report and evaluation reports which prosecutors said “unduly disqualified” another company, Integrated Energy Systems, and gave “undue advantage” to Pharmally by moving the deadline for submission of offers and qualifying the latter “despite lack of authority from the manufacturer and inadequate compliance with the documentary requirements imposed by PS-DBM.”
The blue ribbon committee investigation found that Pharmally won contracts amounting to P11.5 billion, the single biggest chunk of government contracts for pandemic supplies awarded to private companies at the time.
“Respondents’ concerted and conspiratorial acts enabled the award of a multibillion worth of contracts to Pharmally notwithstanding the existence of other corporations that are financially and technically capable to supply and deliver test kits at an equal or lower prices,” the resolution said.
It added that Lao and the other government officials “favored Pharmally over One Top Medical Systems Resources which offered the same prices as Pharmally and Biosite Medical Instruments Inc.,” which was included in the Suppliers Directory for the Bayanihan law.
Pharmally was incorporated on Sept. 4, 2019 with an authorized capital of P10 million and paid-up capital of only P625,000.
“It is said that paid-up capital is a crucial indicator of a company’s health. It reveals how much a company’s shareholders have invested and if it has enough money to function,” the Ombudsman prosecutors noted.
‘Measly capital’
The prosecutors also pointed out that despite Pharmally’s “measly” capital, it entered into contracts with the government for the test kits worth over P4 billion, which is “way beyond” the company’s financial capability to acquire from foreign manufacturers or suppliers.
“They (public respondents) apparently acted with manifest partiality and in bad faith for unlawfully and willingly awarding the contracts to a newly incorporated corporation and without any business experience with the government,” the resolution said.
In separate statements, Hontiveros and former Senators Franklin Drilon and Panfilo Lacson welcomed the Ombudsman’s “much-awaited” decision on the corruption allegations.
“May this day serve as a warning to all those who are plotting to rob the coffers of the government: the day of reckoning will come,” Hontiveros said.
‘Sickening wastage’
She said the resolution was a “significant step” in seeking accountability from the people behind the “sickening” wastage and misuse of scarce government funds during the pandemic.
It validates the findings of the blue ribbon committee, which recommended the filing of plunder and graft charges against government officials who crafted anomalous transactions for pandemic supplies, Hontiveros said.
“We can never forget the sins of the public officials and business people who chose to enrich themselves using the funds intended to aid the Filipino people who were drubbed by the COVID-19 pandemic and the lockdowns,” she said.
In a Viber message to the Inquirer, Lacson found the Ombudsman’s resolution wanting.
“While somebody whose name was prominently and repeatedly mentioned during the Senate hearings as the alleged financier of the syndicate is apparently missing in the list of those recommended for indictment, it is still good enough to commend the Ombudsman for this latest development,” he said.
Asked if he was referring to former Presidential Economic Adviser Michael Yang, Lacson said, “Yes.”
“I am willing to concede that maybe the evidence is not sufficient to establish probable cause against him,” he added.
Stern warning
Drilon, who was the minority leader of the Senate then said the Ombudsman’s action “should serve as a stern warning to bureaucrats at all levels of government.”
The blue ribbon committee held 18 hearings over seven months ending in January 2022.Its report failed to get the signatures of the majority of its 20 members, most of them supporters of then President Rodrigo Duterte. As a result, the report was archived and its recommendations could not be acted upon by the proper authorities.
It recommended the prosecution of the former President for alleged betrayal of public trust in appointing Yang, a foreign national, as presidential adviser in 2018, who afterward, introduced numerous Chinese suppliers with whom the government transacted “and in the process enriched himself immensely.”
“As the Senate investigation unfolded, revealing the participation of well-placed officials in government, the President took the surprising position of undermining the ongoing proceedings,” the report said.
On Oct. 4, 2021, Duterte prohibited officials from attending the Senate probe.