SC halts P6-B deal between PNCC, Radstock

By Purple Romero, abs-cbnNEWS.com/Newsbreak

Posted at Dec 04 2009 07:14 PM | Updated as of Dec 05 2009 03:16 AM

MANILA - The Supreme Court struck down a deal that could have required state-owned Philippine National Construction Company (PNCC) to pay over P6 billion worth of loans, and assign the rights to its business revenues, to a private company.

In a vote of 8-4, the SC voided the compromise agreement between PNCC and British lending firm Radstock Securities Limited.

The decision’s ponente, Justice Antonio Carpio, assailed the agreement as “pillage of the public coffers that ranks among one of the most brazen and hideous in the history of this country.”

Former PNCC president Luis Sison questioned the compromise agreement before the SC, citing the fact that the state-owned company honored an allegedly dubious debt, which was not approved by the stockholders. (Read: The PNCC’s Legacy of Debt)

The case has also raised questions on the legality of PNCC’s authority to collect toll fees. A provision in the agreement would commit half of the toll fees collected by PNCC from the North Luzon Expressway (NLEX) to Radstock.

The catch is, the PNCC franchise has lapsed two years ago – consequently, it is the government which should have the oversight on the operations of the facilities and the collection of revenues.

PNCC has continued to collect toll fees up until now based only on a temporary permit issued by the Toll Regulatory Board.

Damaging agreement

The disputed agreement was given a go by then government corporate counsel Agnes Devanadera.

The agreement was over the settlement of a 26-year old debt that PNCC guaranteed. The loan was extended by Marubeni Corporation of Japan to a mining subsidiary of PNCC’s predecessor, the Construction Development Corporation of the Philippines (CDCP). The P2 billion loan was availed in the early ‘70s. 

PNCC questioned and did not recognize its debt to the Japanese firm. However, in 2000 the PNCC board of directors issued a resolution ratifying its obligations to Marubeni which by then has already ballooned to P10.7 billion.

During that time, Radstock bought out Maruben’s rights to PNCC’s obligation for P100 million. Immediately, Radstock filed a collection case at the Mandaluyong Regional trial court in 2001 to compel PNCC to fulfill its loan obligations. The court ruled in favor of Radstock the following year, and directed PNCC to pay P13 billion.

PNCC brought the case to the Court of Appeals and the SC, which both declared that the lower court did not err in junking the government corporation’s motion to have the case dismissed. By 2006, the value of the debt has increased to P17 billion.

With the validity of the obligations affirmed by the courts, PNCC and Radstock entered into the compromise agreement.

Back to gov’t

Critics assailed the agreement for three primary reasons. One, it could render the PNCC insolvent because the PNCC, based on the 2005 records of the Commission on Audit, only had a networth of P2 billion (It had P8.49 billion assets and P6.9 billion outstanding obligations).

Second, PNCC will be settling its debt with Radstock before it even pays the government, to which it owes P41 billion. Third, Congress is yet to extend the 30-year-old PNCC franchise.

During the oral arguments last January, government corporate counsel Alberto Agra pointed out that PNCC has not been declared insolvent, and that settling its debts to the government tops its priority list.

Agra also said that the administrative franchise has given PNCC the right to continue its collection and supervision over toll fees.

But the Court maintained that PNCC’s revenues have already been transferred to the government the minute its franchise expired.  

“The TRB does not have the power to give back to PNCC the toll assets and facilities which were automatically turned over to the Government, by operation of law, upon the expiration of the franchise of the PNCC on 1 May 2007,” the SC explained.  

Asked to inhibit

Meanwhile, the credibility of an SC aspirant and one of its 15 sitting magistrates were put into question following their reported involvement in the approval of the P6 billion compromise agreement.

Sison filed a motion of inhibition against Supreme Court Justice Presbitero Velasco because he allegedly pulled some strings for Radstock.

Sison claimed that Velasco ‘lobbied’ or ‘lawyered’ for the approval of the contentious compromise agreement in behalf of Radstock before he was appointed to the SC in March 2006.

Sison maintained that ‘talk is rife’ in legal circles of Velasco’s assistance to the private company, hence he should desist from participating in the deliberations over the case. 

Abs-cbnnews.com/Newsbreak called the office of SC spokesperson Jose Midas Marques and also sent him a text message to clarify the response of the Court on the matter, but he has not yet responded to our queries.

Sison also earlier opposed the application of Devanadera for the post vacated by Justice Adolfo Azcuna in February 2009 because she gave the green light for the compromise agreement in her capacity as government counsel.  

Sison, in his opposition letter, said that Devanadera should not apply to the SC while the case is still pending at the High Tribunal.

However, Sison said that if the SC decides against him, his objection to Devanadera should be considered ‘withdrawn.’

Devanadera, though, has been disqualified from the race because she has pending cases at the Office of the Ombudsman.