Morato grilled on ties to Malaysian company

Manuel Morato’s ties with the supplier of online lotto machines whose contract was renewed by the Philippine Charity Sweepstakes Office (PCSO) in 2006 without public bidding were unraveled on Monday.

The former PCSO chair, under grilling by senators, admitted that a Makati hotel he owned was sold to the supplier’s mother company, but through a German bank.

Some senators inquiring into the alleged misuse of PCSO funds said it was a possible case of conflict of interest, but Morato maintained that there was no relation between the renewal of the contract and the sale.

“Yes, there was a clear case of conflict of interest,” Senate President Pro Tempore Jinggoy Estrada later told reporters.

But Morato said there was nothing “immoral” about this. “If I were the chairman, I’d be a little hesitant. They were the ones buying the foreclosed stock. If I were the chair, it would be improper.”

Morato served as PCSO chair during the Ramos administration and as director during the Arroyo administration.

Owner of TF Ventures

Morato told the blue ribbon committee that he was chair/president and majority stockholder of TF Ventures Inc. which owned the Best Western Astor Hotel on Makati Avenue in Makati City.

And due to a P1.3-billion loan to Deutsche Bank, TF Ventures came under receivership for 10 years and faced default in 2008. The Makati Regional Trial Court then approved a “dacion en pago,” he said.

(Dacion en pago is used in the context of mortgage arrears and is defined as “handing back the keys to the lender, and in exchange the lender will fully discharge all mortgage debt.”)

Prime Gaming Philippines Inc. (PGPI) or Berjaya Philippines Inc. bought the debt paper of Deutsch Bank at a discount and took the hotel as dacion, purchasing it, Morato said.

Without bidding

PGPI is the mother company of Philippine Gaming Management Corp. (PGMC) which was contracted by the PCSO in the 1990s to supply online lotto machines, and whose contract was renewed in 2006 without bidding.

At the time of the renewal, Morato was director of the PCSO.

Anticipating questions between the renewal of the contract and the sale of the hotel, Morato declared early on: “Being a stockholder/director of TF Ventures Inc… is not in conflict with my position as director of PCSO. PGPI only came up in 2010 and purchased the Deutsche Bank notes without my participation and initiative.”

He added: “I had nothing to do with their transaction. It was purely and exclusively a business transaction between PGPI and Deutsche Bank in which TVFI had no participation.”

Extension of contract

Morato said the PGMC contract was extended in 2006, years ahead of the sale of the hotel to PGMC’s mother company.

He said he was no longer a stockholder of the company.

Asked by Sen. Franklin Drilon how PGPI came to know about the property, Morato said PGPI’s subsidiary Perdana Land Philippines Inc. “found out” about the Deutsche Bank notes.

At one point, Drilon said: “May we ask Mr. Morato to submit all pertinent documents in relation to the sale of this property which he had interest in, in favor of PGMC, in favor of Berjaya. Because it would appear that Berjaya was doing business clearly with PCSO and there are private transactions between Morato and PGMC and Berjaya.

“We would like to know more about this. We’re not saying there’s conflict of interest,” Drilon added.

With the aid of a PowerPoint, Estrada presented a copy of a memorandum of agreement between TF Ventures and Perdana for the purchase of the hotel for P785 million.

Discrepancy

Estrada later produced an April 10, 2010, deed of assignment between TF Ventures and Perdana of the property for some P70 million. It was signed by Morato for TF Ventures, and Tan Eng Hwa for Perdana.

The discrepancy between the two amounts baffled Senate President Juan Ponce Enrile, who observed that the price was lowered to P70 million in the deed of assignment “to avoid tax on the P785 million.”

But Morato said that this went through the courts.

Earning from sale

While he earlier claimed that he did not receive any cash from the sale of the hotel, Morato grudgingly admitted that he did earn from it.

“It would look that way,” Morato said when asked by Drilon if it was safe to say that he received P35 million and one peso from the sale since he was TV Venture’s majority stockholder.

Enrile warned Morato: “Be careful in answering these questions… If you say that you did not receive P70 million, you donated it? You’ll be subject to tax.”

Enrile asked the blue ribbon committee to invite the owners of Berjaya Philippines Inc. in view of documents showing that this was fully owned by Malaysians, not by Filipinos.

“We’d like to invite these people, so we will unravel this. Evidently, there’s a violation of our nationality laws,” he said.

Before Morato’s ties with the supplier’s mother company were raised, the renewal of PGMC’s contract took up the bulk of the questioning.

In 1995, the PCSO forged a contract with PGMC-Berjaya for the lease of its machines and agreed to pay the consortium a sum equivalent to 4.3 percent of gross lotto sales.

The PCSO had the option to buy the machines for P25 million on the final year of its eight-year contract, but decided to renew the contract and award the supplier a higher rate.

The new contract is supposed to run up to 2015 because of extension of the lease agreement, lawmakers said.