Verify

It is that time of the electoral cycle again the time when a cottage industry of corruption allegations pops up.

The reason that cottage industry thrives is that it is so easy to peddle corruption allegations. It works on the lowest common denominator of voters. We have few institutions that actually expend resources verifying the wildest allegations.

The more scandalous the allegations, the more media space it wins. Therefore making allegations is a fruitful exercise for those who want to establish themselves in the minds of voters as anti-corruption crusaders.

For instance, Manny Pacquiao claims over P10 billion in direct subsidies (ayuda) was lost and accused a financial services provider of making money from the mess. As it turns out, the provider offered its services to the public for free.

The payments service was not successful. Beneficiaries wanted to be paid in cash rather than tinker with some app. Most beneficiaries did not have gadgets to begin with. The DSWD accounted for all the funds. The COA has not found anything anomalous.

In another instance, Antonio Trillanes recently resurrected allegations of plunder against Sen. Bong Go. In those allegations Trillanes claims “plunder” was committed when construction companies linked to Go’s relatives won over P6 billion in government construction contacts.

Winning contracts through fair bidding does not per se constitute plunder. The P6 billion in project money went into projects and did not disappear into thin air. If there was nothing to show on the ground and the project money was totally pocketed – as in the case of many Napoles “projects” – then it is right to allege plunder.

What Trillanes has to do is to prove the bidding rules were violated and the projects were not delivered. But that is not as sexy as insinuating P6 billion was “lost.” There is no COA report that supports that.

Anyone who makes an allegation of corruption must produce an audit trail. Stringent bidding and audit rules guide all expenditure in our public sector. There is always an audit trail to bank on.

Our media should not uncritically reproduce wild allegations made for political effect if these are not supported by an audit trail. Otherwise, irresponsible behavior by aspirants playing on the lowest common denominator will be encouraged. That is not the way to enable our democratic processes to mature.

Misplaced trust

Over the past few years, the biggest corruption scandals happened in the private sector where audit controls tend to be weaker. In nearly all these instances of embezzlement, the wise maxim of “Trust but Verify” was not dutifully observed. In the most salient instances, trust was betrayed.

The most startling case involves the loss of P4 billion. This happened when members of the Gaisano clan chose to invest their money with a financial brokerage firm, DW Capital Inc. (DWCI). The firm was named after and operated by Derwin Wong who was married to a Gaisano.

In 2017, members of the Gaisano clan filed multiple estafa charges against Wong and some of his relatives. They accused Wong of “unauthorized, fraudulent and deceitful acts” when DWCI traded shares owned by Gaisano family members without their consent.

The missing shares were discovered only in 2017.  By then, the proceeds of the unauthorized shares have already been diverted. Wong is now under arrest and his relatives involved in the diversion are in hiding.

Although involving a lesser amount, the loss of P700 million to fraud is spectacular because it involved one of the oldest stock brokerages in the country. As in the case of DWCI, the loss of hundreds of millions from the accounts of R&L Investments happened over a period of time without the auditors and the regulatory authorities noticing.

Last month, the Securities and Exchange Commission (SEC) finally revoked the license of R&L and slapped the company P25 million in penalties. The SEC regulates all firms involved in trading securities.

The inquiry into R&L began after Lucy Lee, the company treasurer, reported on October 2019 that 1 million shares of stock amounting to P700 million were missing. She blamed the loss on long-term company employee Marlon Moron, who dutifully issued a written confession.

But something was obviously amiss in this story. Moron was only a clerk in the company hired to run errands. He could not have pilfered and sold stocks on his own.

It turned out that Moron was given the company’s access codes and allowed to trade shares upon the instruction of Lee. This happened over some amount of time even as Moron did not have a license to trade on the floor. This obviously violated procedure.

Moron later withdrew his “confession.” He claimed the “missing” stocks were actually transferred to other brokers on instructions of Lee. They were all sold through a certain Julieto Sulapas, a contact of Lucy Lee.

According to his new version of what happened, it was Sulapas who cashed the checks issued by the buyers of the stocks and gave the proceeds to Lee. Sulapas and Moron were then given commissions from the unauthorized shares.

The Lee family claims the loss was entirely the result of collusion between Moron and Sulapas. This is unlikely, considering that Lee controlled the codes. A fraud of this magnitude occurring over a period of time could not have happened without Lee noticing.

Further, the loss of stocks was “discovered” only in October 2019 when R&L was being sold. The new owners would have conducted a diligent inventory of the company’s stock holdings.

The PNP investigation now focuses on conspiracy to commit fraud.