Venture capitalists or true believers?
AS A veteran fund-raiser for presidential candidates tells it, there are fewer awkward moments in the campaign than a meeting between the candidate and a potential donor, especially if they are seeing each other for the first time.
Recalling one such meeting ahead of the recent May 10 polls, the fund-raiser says that what actually lasted a fleeting 15 minutes seemed to take forever. "They talked about everything else except the money," the moneyman tells the Philippine Center for Investigative Journalism (PCIJ) on condition of anonymity. "At the end, when there was nothing else to talk about, the donor just said 'By the way, here's something for the campaign.'"
Aiming for the presidency costs a lot, so it is rather odd for candidates and their donors to avoid talking more frankly about funding, and whether it is ever enough for the endless needs of a nationwide campaign.
Any open discussion on money, however, seems to be taboo in Philippine political culture. Former banker Antonio Gatmaitan, recalling an episode from the 1960s, says he witnessed a meeting where the donor did not mention or refer to the money at all. After engaging in casual talk with the candidate, he recounts, the donor stood up and headed for the door, leaving behind an attaché case full of cash.
If large donors are shy talking about money with candidates, many if not most are even more hesitant to publicly acknowledge their donations to candidates' election campaigns. Not surprisingly, business leaders find the official list of campaign donors submitted by the presidential candidates and political parties to the Commission on Elections (Comelec) to be "incomplete."
Based on what they have seen, they say the records do not include the names of fellow businessmen known to be big sources of campaign donations. They also suspect that some of the donors listed were just "fronts" for other, wealthier people who did not want their names in the list.
A scrutiny of the financial reports filed by the presidential candidates and political parties alone yields many reasons for skepticism that these present a full picture of how the May 10 presidential campaigns were funded.
Circle of 308
If the candidates and parties' submissions are to be believed, just 308 people out of a total 50.7 million registered voters funded what is considered as the country's costliest presidential campaign yet. The number is smaller still – 48 – if only the donors who gave P10 million and above are counted.
Yet, these four dozen donors account for almost 80 percent of total funds of P1.58 billion raised for the campaign, including the candidates' own money. (In contrast, US president Barack Obama had 690,199 individual donors in 2008, according to the US Federal Election Commission)
The figures were added up from reports submitted by seven presidential candidates – then Senator Benigno 'Noynoy' Aquino III, former President Joseph Estrada, Senator Manuel B. Villar Jr., former defense secretary Gilberto Teodoro Jr., environmentalist Nicanor Perlas, former Senator Richard Gordon, and former Senator Maria Ana Consuelo 'Jamby' Madrigal – and the three major political parties – Liberal Party, Nacionalista Party, and Lakas-CMD/Kampi Party.
Villar and Madrigal claimed they had no donors, and used only personal funds for their campaigns.
The other candidates and parties did not submit their reports even after Comelec had extended the deadline to last June 25. As of this writing, the Comelec had issued notices to Bangon Pilipinas Movement standard bearer Brother Eddie Villanueva and Ang Kapatiran Party's John Carlos de los Reyes, asking them to explain their failure to submit their election expenses reports.
While it is generally presumed that big-time political donations are mainly the realm of wealthy people, the extremely low number of campaign donors suggests that the record of donations submitted to the Comelec may be grossly understated.
"We easily get more than 300 donors for our fund-raisings for books and computer donations to public schools," says Ayala Foundation executive vice president and National Movement for Free Elections (Namfrel) stalwart Bill Luz, who like many in the business community harbors doubts that candidates and political parties submitted complete donors' lists to the Comelec. "In the case of Typhoon Ondoy and Pepeng and other calamities, we (had) thousands of donors."
Wealthy Filipinos certainly outnumber the pithy list of the 308 combined campaign donors of the seven presidential candidates and three political parties.
According to the National Statistical Coordination Board, there were 19,738 households that earned at least P2 million in 2006, the minimum annual income for a family to be counted "rich." Adjusted for inflation, the cut-off point is P2.4 million in 2010.
Neither does the composition of the donors' lists square with the popular registers of the wealthiest such as Forbes magazine's list of 40 richest Filipinos or the Bureau of Internal Revenue (BIR)'s table of top individual income taxpayers.
Only two of the Forbes's "40 richest Filipinos" in 2010 – Andrew Tan and Enrique Razon Jr. – are among the campaign donors.
Only three of the country's 500 top taxpayers in 2008 – showbiz celebrity and presidential sister Kris Aquino-Yap, Philippine Long Distance and Telephone Co. chairman Manuel Pangilinan, and Jose Ma. Lopez of the Negros Occidental-based Lopez family, which owns one of the island's leading sugar mills -- are listed as having donated to presidential candidates.
In fact, if the donors' lists are to be believed, the bulk of campaign donations come from a very narrow base composed mainly of the candidate himself, his family and friends, and a handful of business supporters.
Though Aquino had 96 donors who gave a total of P440 million for his campaign, about 40 percent of the amount came from just five of the biggest contributors, including an uncle who accounted for almost a quarter of the donations.
Estrada, who landed far second to Aquino in the presidential race, had 24 contributors who donated P227.5 million. But only five of these accounted for 35 percent of the total amount.
The third placer, Villar, claims to have singlehandedly funded his campaign with P431.6 million of his own money, making him the single-biggest source of campaign money in the recently concluded polls.
Madrigal also spent P55.2 million of her own money for her campaign.
Gordon, for his part, got 30 percent of his P59.3 million contributions from just seven donors, while the other candidates reported negligible donations.
The other candidates reported negligible donations.
The same pattern holds for the main political parties. About 50 percent of the P157.9 million contributed to the Liberal Party came from only 10 donors while the Nacionalista Party raised all of its funds of P80 million from just six people. The Lakas-CMD/Kampi party got P110 million from just two people, one of whom gave P100 million. It reported expenses of P130.7 million, adding that the extra P20.7 million was "contribution from political party," implying internal funds.
For sure, any perceived lack of credibility of the candidates and political parties' election donation reports makes a mockery of the country's election laws and undermines faith in the Comelec, which lacks resources and capacity to enforce the provisions of the law on politicians and their wealthy donors.
And so long as candidates do not report fully and candidly how they are raising campaign money, the suspicion will linger that they are beholden to wealthy (and secret) donors, reinforcing suspicion and cynicism about politicians.
A small group of donors, for instance, could be seen as having the potential to gain undue influence if their candidates win because their pool of contributions accounts for a big chunk of the candidates' campaign funds.
According to fund-raisers and business leaders interviewed by the PCIJ, many donors contribute money in the hope of getting introduced to the candidate and gaining possible access later. Some are happy with just having a photo with the candidate, says a Chinese-Filipino property developer. "You won't believe how important these photos are when the police or the BIR (Bureau of Internal Revenue) come knocking on your door," he says.
"A big contribution helps build access to the official though that is no assurance that your request will be acted upon favorably," another business leader says. "Maybe, you'll be invited to be part of the president's visits to other countries, but that's all."
In part, though, the problem with coming up with a complete campaign donors' lists could be traced to the candidates and the political parties' failure to exercise enough diligence to properly record the donations.
Fund-raisers and campaign insiders admit that the documentation of major donations are often done close to the deadline for filing of election expenses, which is a month after voting day. Some, including a longtime fund raiser for three presidential candidates, act under the mistaken assumption that donors have the option whether or not to report the donation to the Comelec.
Section 99 of the Omnibus Election Code is very clear: "Every person giving contribution to any candidate, treasurer of the party, or authorized representative of such candidate or treasurer shall, not later than thirty days after the day of the election, file with the Commission a report under oath stating the amount of each contribution, agent of the candidate or political party receiving the contribution, and the date of the contribution."
A CLOSE look at election spending reports of seven presidential candidates and three political parties in the May 10 polls reveals that election campaigns are funded in the manner and mold of financing for risky business start-ups.
Money comes mostly from personal funds, family members, and friends rather than a wide network of supporters of the political party, organization, or movement. In business, these private-equity sources of funding are ideal for ventures with low success rates but high pay-offs that are usually shunned by banks and the capital markets.
There is also the political equivalent of the venture capitalist: the wealthy individual who is unrelated to the candidate but who makes a big bet on his or her candidacy either because of genuine conviction or shrewd calculation. But the names of these donors and their contributions, which could run to hundreds of millions of pesos, do not usually appear in the official lists, according to campaign fund raisers.
According to election lawyer Luie Tito F. Guia, however, the impression that reporting is optional persists because no donor, candidate, or party treasurer has ever been investigated or prosecuted for not following this provision of law.
Secret, unlisted donors
Speaking on condition of anonymity, a businessman admits to making a donation to a presidential candidate but not seeing his name on that candidate's donors' list. "I was asked if I was willing to submit an affidavit," says the businessman. "I said okay, but I was out of the country at that time and it was close to the deadline for filing. I don't know how they reported my donation."
A fund-raiser for one of the candidates also says that he did not see the name of a prominent business family who had promised to give a donation even though he was sure the family made good on its promise.
In another case that could throw doubts on the veracity of the amounts being reported, a local government supplier was shocked to discover that her donation of P50,000 was misreported to be a few hundreds of pesos.
The best global practice in managing campaign contributions is for candidates or political parties to designate a single treasurer or agent to record and report all receipts and expenditures. But candidates in the Philippines tend to have multiple fund-raisers operating more or less independently of each other. Admits a presidential-campaign fund-raiser: "I wasn't aware of all the money coming in."
Bags full of cash
Donations also come mostly in the form of cash, contrary to the international best practice of conducting all transactions through one banking account, especially in countries where banking is pervasive. "People come here to my office with bags full of cash that they leave here," says a fund-raiser, pointing to a corner of his office.
But the bigger reason why the donor lists are incomplete is that wealthy, big-time contributors are loathe to publicly disclose their role in funding candidates' campaigns. One explanation for this is that many simply want to avoid the glare of public attention that accompanies a big contribution, which could bring in more requests for donations not only from politicians, but also from charities and other parties.
Fear of harassment by winning rival candidates is another reason why businessmen, especially those whose enterprises are heavily regulated or taxed by the state, refuse to publicly acknowledge their campaign donations.
Lucio Tan, the tobacco magnate and the country's second richest man, is seen by some members of the Chinese-Filipino business community as the perfect example of somebody who got into trouble for backing a losing candidate.
In the 1992 polls, Tan came out rather strongly and publicly in his support for Ramon Mitra, the frontrunner in pre-election surveys but who eventually lost to the former defense secretary Fidel V. Ramos. A year into the Ramos term, the government amended tax laws to cover loopholes that supposedly benefited Tan's cigarette and liquor companies, and the BIR filed a P25-billion tax evasion court suit against Tan.
Ramos-era officials continue to assert that Tan deserved to be prosecuted; in the Philippines, however, that may be a necessary and yet insufficient condition for actually going ahead with a case.
At any rate, Tan's fortunes turned for the better under the next administration of President Joseph Estrada, whose candidacy in 1998 also benefited from the tobacco magnate's support. As Estrada himself admitted recently, the tobacco magnate had gained such influence that he heeded Tan's suggestion on who to appoint as the next chief justice of the Supreme Court, which later upheld the dismissal of the tax case against Tan and his tobacco companies.
Political donors also suffer from negative perception from the public and their peers. Contributions, especially big amounts in the tens or hundreds of millions of pesos, are often seen as attempts to buy future government favors or posts.
"Donations are seen in the same light as bribery" says a prominent business leader, who laments how recent media reports seem to have focused more on a Cabinet appointee's donation to Aquino rather than on his qualifications. The trouble is that these perceptions have been proven right a number of times that they taint well-meaning donors who are giving money out of conviction rather than expectation of future gain.
Lawyer Guia meanwhile says that this donors' reluctance to disclose contributions is matched by the candidates' tendency to understate campaign expenditures as well as donations because of unrealistically low level of election spending caps that were set more than a decade ago.
Though there are no limits on donations, the candidate is not likely to report all the donations if these are way above the legal spending caps. Neither will candidates disclose donations if made by ineligible parties such as foreigners or government suppliers, or if some of the funds were used in unethical or patently unlawful activities, such as intimidation or bribery of voters and election officials.
Experts say that more disclosures in campaign donations are the most effective way to address the public's misgivings and concerns about the role of large donors in funding election campaigns.
Sunshine & caps
Magnus Öhman and Hani Zainulbhai, editors of the 2009 book Political Finance Regulation: The Global Experience, write, "While undue influence is difficult to detect and even harder to prevent, enhancing transparency can be a useful way of reducing the problems. Disclosure laws can minimize them by providing voters with information as to who contributes to political parties and election campaigns."
Another way is to impose reasonable caps on individual and total donations to match limits on election spending, according to Namfrel's Luz. He adds that the ceilings on election spending should be updated to more realistic levels to encourage more compliance with the law.
Luz says that ceilings on donations will "democratize campaign finance" by compelling candidates to seek contributions from more people rather than just a handful.
"With donation caps, perhaps more businessmen will be willing to contribute because there is a limit to what can be asked from them," he argues. "This will also encourage more disclosure and reporting because the amounts are no longer embarrassingly huge."
Limits on donations may also help check the tendency of some politicians to pocket campaign funds and spend freely. Former congressman Juan Miguel 'Mikey' Arroyo, former President Gloria Macapagal Arroyo's son, himself had pointed to excess campaign contributions to help explain a sudden increase in his personal wealth.
Comments Luz: "Having caps on spending but not on donations allow the politicians to walk away with so much money from donations."
One positive sign, however, is the rising media and public attention on campaign finance. In the run-up to the recently concluded elections, voters frequently asked candidates: "How are you planning to recoup all that money you're spending?" Allegations of overspending diminished the electorate's support for some presidential candidates.
Still, there's a long way to go in getting donors and candidates to set their records straight. Apart from new or better campaign finance rules, the institutional capacity of Comelec to enforce regulations needs beefing up.
At present, there are just a handful of staffers at the commission's law department that handles campaign finance reports, leaving the election body virtually incapable to examine veracity of the documents submitted by the candidates and political parties.
"Nongovernment organizations are subject to stricter corporate governance regulation than political parties," says Luz, noting that NGOs' financial statements are audited by external accountants and could be examined by the Securities and Exchange Commission (SEC). – PCIJ, July 2010