No conflict of interest

Managing or avoiding conflict of interest in the public sector has always been a very difficult, if not an impossible task.

The Organization for Economic Cooperation and Development (OECD) defines conflict of interest as one that involves a conflict between a public official’s personal interests, specifically what they could gain which is not necessarily financial, and their duty as a civil servant.

It emphasized that conflicts of interests in the public sector are particularly important because they can undermine the fundamental integrity of officials, decisions, agencies and governments. And when it speaks of integrity in the public sector, it means the proper use of funds, resources, assets and powers for the official purposes for which they are intended to be used. So that in a sense, the opposite of integrity is corruption or abuse.

The Philippine Constitution is replete with safeguards to try to avoid conflicts of interests.

For instance, Article VI, Section 14 provides that no senator of member of the House of Representatives shall be, directly or indirectly, be interested financially in any contract with, or in any franchise or special privilege granted by the government, or any subdivision, agency or instrumentality thereof, including any government-owned or controlled corporation, or its subsidiary, during his term of office. He shall not intervene in any matter before any office of the government for his pecuniary benefit or where he may be called upon to act on account of his office.

Meanwhile, Section 12 requires all members of the Senate and the House of Representatives, upon assumption of office, to make a full disclosure of their financial and business interests and to notify the House concerned of a potential conflict of interest that may arise from the filing of a proposed legislation of which they are authors.

The Anti-Graft and Corrupt Practices Act considers as unlawful “directly or indirectly receiving any share, percentage, benefit in connection with any contract or transaction between the government wherein the public officer in his official capacity has to intervene under the law,” as well as “directly or indirectly having financial or pecuniary interest in any business, contract or transaction in connection with which a public officer intervenes or takes part in his official capacity.”

However, the Supreme Court in a recent decision explained that having a nominal shareholding in a company that has entered into a contract with the government is not a violation of the said prohibitions.

And if the public officer is not involved in advancing an interest, as when they have not actively participated in a transaction, then it cannot be said that a violation of the constitutional prohibition occurred, the SC added.

The SC has reversed the conviction meted out to former Davao del Norte Rep. Antonio Floirendo Jr. by the Sandiganbayan in 2020 involving a violation of the anti-graft law and a case filed against Floirendo by former House Speaker and Davao del Norte Rep. Pantaleon Alvarez.

The dispute involved the renewal in 2003 of a long-standing joint venture between Tagum Agricultural Development Co. (Tadeco) and the Bureau of Corrections for the use of BuCor land as a banana plantation.

According to the Court, “the Constitution must not have envisioned such a myopic view, for members of Congress would be at the mercy of the anti-graft law for their nominal shareholdings in just about any corporation in whose favor the government has actually granted and will in the future grant contracts to, even without doing any act in relation to, nor benefitting from the same.”

The Sandiganbayan earlier ruled that while House members were not prohibited from having direct or indirect financial interest per se, they were however prohibited from having direct or indirect financial interest in any contract with the government during their terms of office and that Floirendo’s mistake was that he failed to divest his shares from the companies owned by his family.

Floirendo owned 75,000 common shares in Tadeco or about 0.89 percent of Tadeco’s outstanding capital stock, and 537,950 shares in Anflocor, which according to the Sandiganbayan meant a financial interest. Anflocor owns 56 percent of Tadeco.

When the JVA was renewed for another 25 years, Floirendo was already a congressman. Tadeco’s joint venture agreement with BuCor started in 1969 covering 3000 hectares of the Davao Penal Colony as a banana plantation.

But when the agreement was renewed in 2003, Floirendo was neither a member of Tadeco’s board nor an officer of Tadeco.

But the SC accused the graft court of hastily concluding that just because Tadeco and the BuCor entered into the 2003 JVA renewal contract with the objective of obtaining profit, then automatically, Floirendo had financial interest by simply owning shares.

It said that prosecution failed to present evidence that Floirendo obtained a monetary gain or benefit from the contract and that the records do not show that he used his influence to push the 2003 JVA nor that he used his membership in Congress as a leverage to have the contract executed.

The SC emphasized that “if the public officer is not involved in advancing an interest, as when they have not actively participated in a transaction, then it cannot be said that a violation of the constitutional prohibition occurred.”

The High Tribunal said that the prosecution failed to prove conflict of interest since the constitutional prohibition pertains to “financial or monetary interest where there is an active participation or intervention that need to be performed by the public officer for a pecuniary benefit.”

It emphasized that the Sandiganbayan should have acquitted Floirendo because of lack of sufficient evidence that proves he received any financial benefit from the contract and that he used his position to benefit from the joint venture.

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