COA hits PAGCOR authority to waive contractor's penalties

The Commission on Audit questioned the waiver of penalties amounting to $67,000 that the Philippine Amusement and Gaming Corporation granted to a contractor operating in its two casinos in Cebu.

In its 2005 report, a copy of which was obtained by The Freeman, COA said PAGCOR's authority to waive the penalties under the junket contract with Jimei International Travel and Amusement Company Ltd. was contrary to the law.

Jimei, according to the COA report, owed Casino Filipino Cebu at least $25,983.59 penalty that consists its overdue rents, manpower costs, 10 percent excess of gross winnings and over reimbursable rents, and salaries. For Casino Filipino Mactan, the company's penalty amounted to $41,630.45.

The COA said that instead of enforcing immediate collection, the PAGCOR board had the penalties waived at the request of Jimei.

PAGCOR entered into a contract with Jimei, a foreign corporation, to operate a junket or a gaming facility exclusively for foreign players in Casino Filipino Cebu and Casino Filipino Mactan.

The Casino Filipino Cebu contract provides that Jimei would pay a monthly rental of US$70,000 in the first three months, and $75,000 in the fourth to 12th month.

In the case of Casino Filipino Mactan, Jimei would have a monthly rental of $50,000 in the first three months, and $55,000 in the fourth to 12th month.

The contract stipulated that Jimie should also reimburse the cost of manpower services of the Casino Filipino Cebu and Casino Filipino Mactan personnel.

It also stated that Jimei should pay the difference between PAGCOR's 10 percent share of its gross winnings and the total of the monthly minimum guaranteed fees, reimbursable salaries and employee benefits computed over six months interval.

However, based on test transactions from October 2004 to February 2005 in the two Casino Filipino branches, COA found out that the contractor's accounts on rentals, reimbursable cost of manpower services, the difference between the 10 percent PAGCOR share in excess of the contractors gross winnings, and manpower service had been up to five months overdue.

According to COA, the authority of the PAGCOR board to waive the proponent's indebtedness had no basis since the authority to compromise claims against the government is only within the audit commission, which has the power to forgive or condone indebtedness due the government.

The authority covers the penalty discharge and interest of P10,000 less but if the amount is more than P10,000 but beyond P100,000, a presidential approval is required.

"As for application in excess of P100,000 both the favorable recommendations of COA and the President of the Philippines are required before the same is given due course by Congress," COA said.

The COA noted that the contractor's monthly operations in Casino Filipino Cebu and Casino Filipino Mactan had consistently posted favorable results, so there was no reason to warrant the extension of the privilege while its business was doing well at that time.

It said the waiver disregarded the rent and manpower cost advanced by PAGCOR to keep the proponent's operation going. "PAGCOR should have at least recovered from the aforementioned expenses."

But the PAGCOR Legal Department argued that like COA, government owned and controlled corporations are empowered to release claims under their respective charters. - Ferliza C. Contratista/LPM