Arroyo officials tagged in PCSO scam

By RG Cruz, ABS-CBN News

Posted at May 30 2011 09:21 PM | Updated as of May 31 2011 05:56 PM

MANILA, Philippines - Bayan Muna Rep. Neri Colmenares has tagged Arroyo administration officials in other alleged scams, this time with the Philippine Charity Sweepstakes Office (PCSO).

In a privilege speech, Colmenares cited information and evidence received by Bayan Muna showing that the previous PCSO administration committed the following anomalous transactions:

- The PCSO surreptitiously deducted from its charity fund to pay for enormous and anomalous operational expenses and overpriced contracts.

- Huge amounts of funds amounting to approximately P5.3 billion since 2001 unnecessarily spent on advertising and PR

- Diversion of P150 million of PR funds to intelligence fund, which the PCSO is not entitled to, 40% commission from advertising agencies who were given contracts under PCSO's billion-pesos PR and advertising fund.

- Unexplained failure to transfer to the charity fund P699 million in 2006-2008. Co-mingling of the charity fund with operating expenses

- Anomalous contracts that are overpriced and greatly disadvantageous to the PCSO and the government. 

Lotto machine controversy

Colmenares, in a separate statement, said one of the anomalous contracts that the previous PCSO boards undertook, and which cost PCSO billions of pesos, is the lease of the lotto machines of Philippine Gaming and Management Corporation (PGMC)-Berjaya.  

He said in 1995, the PCSO, instead of buying 3,525 lotto machines, executed a lease agreement with the PGMC-Berjaya for the lease of its lotto machines. 

"The PGMC will be paid an amount equivalent to 4.3% of the total gross sales of these lotto machines.  The PCSO was given the option to purchase these machines at the end of the 8-year contract for P25 million," he added.

However, instead of exercising its option to purchase the machines at P25 million when the contract ended in 2004, the PCSO renewed the lease for another 8 years, this time at 6.85% of the gross sales of lotto tickets.

The new contract will supposedly run up to 2015 because of the extended amended lease agreements signed by PCSO, Colmenares said.

"Worse, PCSO gave PGMC-Berjaya another 3% of the lotto gross sales telecom services and 0.15% for maintenance and repair of the machines for a total of 10%," he added.

"In 2009, the gross sales of lotto amounted to P27 billion and 10% of this is a staggering P2.7 billion for PGMC in one year alone.  The total sale of lotto from 2001-2004 is P28,889,896,330.00 and 2004 to 2010 is P91,342,952,040.00 which means that instead of buying the machines at P6,000 each and upgrading the same for a few hundred million, the PCSO gave away  P11.9 billion pesos," the lawmaker revealed.

"This was given to PGMC when they could have helped 12,000 cancer therapy patients, could have been used to buy 12,000 units of ambulances, or could've been used to fund 12,000 organ transplants. What makes this transaction worse is that PCSO relinquished control of the lotto system, making it possible for manipulation to be conducted in the PGMC computer center in Ortigas without PCSO's knowledge. There was a reported brownout in the last week of June 2010 in the PGMC which the PCSO and this Congress should investigate," he added.

The other allegedly anomalous deals are:

- A thermal paper contract wherein PCSO tied itself up to a 50-year joint venture to pay an Australian firm P42 billion for its thermal paper.

- Overpriced hand-held small-town lottery (STL) machines.  Colmenares said while the price of the STL handheld machines is only P7,000, the PCSO had an overpriced contract for P40,000 for each machine with UBICON, a Korean firm.  It also forced STL operators and agents to purchase these machines at the overpriced cost. 

"These STL operators should immediately file criminal and civil cases against the entire PCSO board for anomalously forcing them to purchase overpriced handheld STL machines," the lawmaker added.
PCSO mandate

He said the PCSO's mandate is clear under Republic Act 1169 as amended by Batas Pambansa 42:
"SECTION 1. The Philippine Charity Sweepstakes Office. - The Philippine Charity Sweepstakes Office xxx, shall be the principal government agency for raising and providing for funds for health programs, medical assistance and services and charities of national character, xxx, and shall have the authority:"

"A. To hold and conduct charity sweepstakes races, lotteries, and other similar activities, xxx."

"B. xxx to engage in health and welfare-related investments, programs, projects and activities which may be profit-oriented, by itself or in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign, except for the activities mentioned in the preceding paragraph (A), for the purpose of providing for permanent and continuing sources of funds for health programs, xxx and/or charitable grants: Provided, That such investments will not compete with the private sector in areas where investments are adequate xxx."

SEC. 6 Allocation of Net Receipts. - From the gross receipts from the sale of sweepstakes tickets, whether for sweepstakes races, lotteries, or other similar activities, shall be deducted the printing cost of such tickets, which in no case shall exceed two percent of such gross receipts to arrive at the net receipts. The net receipts shall be allocated as follows:"

"A. Fifty-five percent (55%) shall be set aside as a prize fund for the payment of prizes, including those for the owners, jockeys of running horses, and sellers of winning tickets."

"Prizes not claimed by the public within one year from date of draw shall be considered forfeited, and shall form part of the charity fund for disposition as stated below."

"B. Thirty percent (30%) shall be set aside as contributions to the charity fund from which the Board xxx shall make payments or grants for health programs, xxx medical assistance and services and/or charities of national character, xxx  "

"C. Fifteen percent (15%) shall be set aside as contributions to the operating expenses xxx."

"D. All balances of any funds in the Philippine Charity Sweepstakes Office shall revert to and form part of the charity fund xxx. The disbursements of the allocations herein authorized shall be subject to the usual auditing rules and regulations.

Did PCSO follow its mandate?

"Was PCSO faithful to this mandate?" Colmenares asked.

"No. The PCSO co-mingled the charity fund, prize fund and operational funds, which secretly allowed to it deduct from the 30% slice for charity to bloat its operation expenses.

"No, it spent P5.3 billion in PR funds further dwindling its charity fund. No, it executed overpriced contracts with PGMC and TMA to avoid bidding procedures and cost losses of at least P10 billion," he said.

"I call on my colleagues to investigate this unforgivable corruption so that it will be eradicated in an institution that constitutes as the last resort for financial assistance of our poor and powerless people," Colmenares said.