Binay got over P500M in kickbacks, Mercado claims

By RG Cruz, ABS-CBN News

Posted at Feb 18 2015 05:28 PM | Updated as of Feb 19 2015 09:41 AM

But Alphaland officials clear Binay

MANILA (2nd UPDATE) - Now that the congressional investigations into the Mamasapano incident have taken a back seat, senators have returned their sights on Vice President Jejomar Binay with the resumption of the Senate Blue Ribbon Committee investigation into allegations of corruption against the country's second highest official.

At Wednesday's hearing, businessmen Roberto Ongpin and Mario Oreta denied giving any kickbacks to the Vice President in exchange for the allegedly anomalous joint venture agreement between the Binay-led Boy Scouts of the Philippines (BSP) and Alphaland Corporation for the development of a one-hectare property at Malugay corner Ayala Avenue in Makati City.

Whistleblower and former Makati Vice Mayor Ernesto Mercado had accused Binay of pocketing a kickback from the deal, which translates to about 5 percent.

The kickback was supposedly coursed through Oreta's Noble Care Corporation.

Mercado had alleged the kickback, about P200 million, was used to fund Binay's election campaign in 2010.

Ongpin, however, told lawmakers that when he hired Oreta, one of the conditions for his recruitment was that Oreta would have a 5-percent carried interest in the projects he would seal for the company.

"Babes (Oreta) was happy with law practice and wasn't eager. I had to incentivize him by not just making him a salaried employee but a real partner by giving him interest in projects... Among the first projects was the development of the Boy Scout property at Malugay corner Ayala. For that project, I gave Oreta 5 percent as his [carried] interest."

Ongpin later on said, "It's important because as referred to by Mr. Mercado, he assumed the 5 percent I gave Mr. Oreta was given or delivered by Oreta to the Vice President. It's nonsense. Carried interest means Oreta has carried interest because he worked diligently on the project."

Ongpin explained that it has nothing to do with the BSP. "I raise it because of the assertion...I saw the news of the meetings...Mercado averred 20 percent, 5 percent went to Oreta and therefore to the Vice President."

Oreta explained that later on, he asked Ongpin to up his stake from 5 percent of each project to 5 percent of the mother company, Alphaland.


Senator Alan Peter Cayetano, however, argued that the set-up between Oreta and Ongpin is tantamount to tax evasion. The senator said Oreta paid no income tax for the shares.

Oreta argued he paid capital gains tax. But Cayetano feels it was undervalued because at that time, Alphaland prices per share was at P60 but the purchase was just at P20 per share.

"You bought it at P20 per share. The average price noon was more than P60. In-under value niyo. Doon ang problema, naglolokohan tayo. Yan ba ay kickback ni VP or nag-tax evasion kayo?" Cayetano said.

Ongpin emphasized that Alphaland compensated Oreta with shares of Silvertown. "I agreed to exchange those shares with shares of listed company Alphaland. Noble Care wasn't listed, neither was Silvertown. Noble Care reported as capital gains and paid P18 million in tax. Today, Noble Care continues to own Alphaland shares of stock. He hasn't sold them. And when and if he does sell those shares, he pays a final tax."

Asked about the arrangement, Mercado said, "Ang alam ko bahala na si Oreta kung paano itatago ang 5 percent na kita ni VP Binay para gamitin sa pag kampanya sa 2010."


Ongpin, a former trade minister during the Marcos years, chairs Alphaland Corporation, which developed the Alphaland Makati Place project on the property. Oreta is the company president. Ongpin faced the Senate subcommittee for the first time today.

Ongpin maintained the joint venture agreement is aboveboard and legal and will make a significant return for the BSP.

He also gave a background on the relationship between Alphaland and BSP. "Too many slides and assertions have been made by certain individuals who simply don't understand what the transaction was all about."

The businessman said that even before Alphaland was formed in May 2007, the two owners of the one-hectare property in Malugay agreed sometime in 2005 that the value of the property should be split -- 60 percent to BSP, 40 percent to Sime Darby.

He said the property was appraised at P1 billion. Thus, the value of the 60 percent was P600 million and the value of 40 percent of Sime Darby was P400 million.

Ongpin said that in 2008, Alphaland bought Sime Darby's interest for cash consideration of P400 million. From that point on, Alphaland stepped into the shoes as 40-percent owner of the Malugay property.

Subsequently, Alphaland and BSP, as the two owners, entered into a joint venture agreement for the development of the entire property into a mixed use residential and commerical facility, as negotiated and closed by Oreta and Mercado.

Mercado was then chairman of the corporate assets management committee of the BSP.

Ongpin said the total construction cost of the development would be P4 billion. However, if the cost of the land at P1 billion was to be added, the total project cost would be P5 billion.

Ongpin said the total construction cost would be funded by Alphaland, not one cent from BSP. Thus, the total construction cost of P5 billion, when compared with the P600-million valuation of the contribution of the BSP to the deal, would have amounted to 12 percent.

He said that because of negotiations, the share was increased to 15 percent. In view of new project cost of P8 billion, the BSP share of P600 million would only amount to 7.5 percent. "And yet despite this, the 15-percent share of the BSP hasn't been changed, diminished or reduced as falsely alleged by Mr. Mercado."

Ongpin explained that part of the agreement means that of the project that consists of 5 floors of basement parking, a podium with 6 floors, and 3 residential towers on top of the podium, the basement parking which has 1,000 parking slots, the BSP's 15-percent share would equate to 150 parking slots. At a market price of P1 million, this portion of shares of BSP equates to P150 million just for parking.

He said for the podium with a total gross floor area of 35,921 square meters, the BSP opted to have one entire floor for the organization. The agreement was for the BSP to have the third floor, measuring 6,161 square feet, close to 17 percent. This has been appraised at P200,000 per square meter. The total value of 15 percent is P1.2 billion.

After coming out with the third and largest portion of the projects which are 3 residential towers, Alphaland has been renting 1,061 square meters of the property of the BSP for P530,740 per month since January 2014. When this podium was finished last January this year, Alphaland rented 206 square meters for about P103,000. The total monthly rental Alphaland pays is P631,000.

"To be accused they're being fried in their lard is nonsense, total nonsense," Ongpin said.

Ongpin further explained that for the residential towers, the BSP is entitled to 900 square meters of the total. With Alphaland selling residential towers at P200,000 per square meter, the BSP share of 9,208 square meters in three towers would be worth P183 billion.

"We state without any hesitation that the Makati Place project is one of the best investments of the Boy Scouts," he said.


Ongpin said he objects to Mercado's allegations that the BSP got a raw deal in this project.

He maintained that the BSP's P600 million is now worth P3 billion, which is more than five times the original value.

"Finally, we repeat, there is nothing irregular or underhanded in Alphaland. Everything was and is aboveboard as Boy Scouts have themselves said. Both Alphaland and Boy Scouts will be making a lot of money. The BSP contributed P600 million. We funded everything. There's a 26-percent return of investment. Anyway you look at it, that's great. Mercado should be congratulated for negotiating [this deal]," Ongpin said.

He said they have filed a libel case against Mercado for his allegations.

He added that the property's values will increase as time goes by.


However, upon questioning by Senator Koko Pimentel, chair of the Senate subcommittee probing the transaction, Ongpin confirmed that the BSP has not received any remittances from the deal.

"Yes, actually the agreement is, they tell us if they want it in kind. We agreed to that. We have regular meetings with them. I think they very smartly decided, let's wait...If we deliver now, it could be valued P200,000 [per square meter] which is the selling price today. But as we finish, we keep increasing the prices every month."

Oreta, in his own statement, confirmed his boss' statements.

"The parties shall mutually agree on the method of allocating units. Hindi ho monthly sum. We're talking of 15 percent of units, they will choose. Hindi pa nag-de-decide BSP which units, kaya wala ho talaga. If they choose the units we've sold so far, we will remit [the money]. It's not bottomline 15 percent of whatever is earned, it's 15 percent of total project. If there's interest income, we will consider that," he said.

Oreta told Cayetano that they have been in discussions with the BSP's committee for the purpose.

Atty. Wendel Avisado, who was with the BSP national executive board in 2011, revealed that the panel is chaired by former Bulacan Governor Obet Pagdanganan. "We're still identifying which part of three towers will have to be covered by a deed of conveyance."

Oreta also disputed Mercado's claim that the BSP should have been given P600 million in cash."The BSP chose to have shares. Alphaland would have been happy to give BSP P600 million, but they wanted to have shares in this joint venture."


Oreta emphasized the Vice President has nothing to do with his company Noble Care, which was the vehicle he used to receive his 5-percent interest.

"The assets of Noble Care are all beneficially owned by us. To emphasize, VP Binay or any other person...has no interest in Noble Care or its assets. We own the assets. I have kept the transactions legal and above board," Oreta said.

"Yes, 5 percent of total project and this was paid to me in terms of shares sa Silvertown. I used my company Noble Care as the vehicle to accept the shares. It was paid by Silvertown to Noble Care," he said.

Cayetano, however, feels the BSP should have gotten more. "Dapat 20 to 25 percent ang share sa joint venture agreement. They should have gotten more in terms of percentages. Nung tumaas ang gross floor area, 50 percent din ang tinaas ng value. Pinayagan kayo mas maraming floor areas kaya malaki ang value."

Oreta also said there is no connection between Silvertown's P100-million loan to Noble Care and the BSP deal, explaining that was for a different transaction.


Cayetano then reiterated their invitation for the Vice President to face the Senate.

He noted Binay had asked resigned Philippine National Police (PNP) chief Alan Purisima to talk about the Mamasapano incident, so Binay too must face the Senate for his own controversy.

Cayetano asked Avisado if he was sure Binay got no kickback and Avisado replied, "I'm not privy."

The senator then said, "Kasi kung nag-usap si Vice Mayor at Mayor Binay, di niyo alam iyon... As far as the kickback, none of you in the BSP can answer us. Pero di niyo malalaman yun eh. Kahit si Mercado, ang sinabi niya, konti lang ang may alam sa deal na ito."

Cayetano asked Oreta to waive the bank secrecy protection of Noble Care's accounts. Oreta replied in the negative.


Mercado claimed before the Senate that Binay has received over half a billion pesos in kickbacks from the BSP-Alphaland deal.

"Hindi lang po P200-million ang kickback dito ni VP Binay... Depende kung nabenta ang share, kailan nabenta...Ang kickback ni VP Binay, maglalaro sa P133 million hanggang P551 million."

Earlier in the hearing, Mercado also recapped his allegations against Binay.

"Sabi ko po diyan, kinuhaan ng 5 pecent ang Boy Scouts sa Alphaland para gamitin sa kampaniya ni VP Binay nung 2010. Ayoko pumayag sa 15-percent share ng BSP. Pumayag ako eventually, humingi kao ng tawad. Sabi ni (Gerry) Limilingan, 'Pumayag ka na, 20 percent talaga ito, 5 percent para kay boss.' Sabi pang-kampaniya para presidente dahil nung panahon noon, ang aim niya ay presidente ng bansa. Ang 5 percent, umaabot ng P200 million, habang ang Boy Scout wala pang natatanggap ni singko hanggang ngayon," Mercado said.

"Tinago ang pera sa Noble Care Management Corporation na pag-aari ni Babes Oreta. August 2008, binigyan ng Alphaland ng 2,031 shares sa Silvertown (5 percent), nagkakahalaga po ng P20,310. Hindi lang po iyon, pinautang ng P100.4 million ang Noble Care ng Alphaland nung November 2010. Binuy-back ng Alphaland ng...binura ang utang na P100 million," he added.

"Nawalan ng lupa ang BSP, pinabenta ang lupa sa napakababang halaga. Binago ang joint venture nung June 2011. Ang joint venture agreement na pinirmahan ko, hindi po tinatanggi ay binago. In-authorize ng national executive board na ibenta sa Alphaland. Ang P600 million na dapat pera ng Boy Scout pinasok ulit sa Alphaland... Dito na niluto sa sariling mantika ang BSP. Malaking tanong: bakit P600 million lang para s lupa ng Boy Scout, samantalang na-reclassify ito nung 2008. Dapat...tataas ang value."

"Ikaapat, ang P600 million dapat bayaran sa BSP, di pa rin natatanggap hanggang ngayon. Ikalima, pinayagan mabawasan ang share ng Boy Scout sa Alphaland deal, dapat sa buong project. Ang share ng Boy Scout, pinaliit ng Alphaland. Sa 2011 amendment, ang 15-percent share of Boy Scout from total completed, Tower 1, 2 and 3, but in 2013, Alphaland unilaterally decided the 15-percent share will be reduced from tower 1-2 and podium to tower 3 and podium. Nawawalan ng share sa tower 1 and 2 na intended for share. Tower 3, intended for lease. Aasa na lang ang Boy Scouts sa uupa...The joint venture agreement identifies Alphaland as property manager. Alphaland will control the leases. Tower 3 hindi pa natatapos," he said.


Avisado reiterated the transaction is above board. "To be sure, these allegations peddled by Ernesto Mercado have been addressed by BSP officials. This statement meant to amplify these efforts...This agreement is aboveboard. The agreement negotiated and signed by Mercado when he was with BSP, he was fully aware of it, the agreement was thoroughly discussed and approved by the national executive board, the intent is to make the property earn money."

"He doesn't mind dragging BSP to the extent of destroying it with his malicious allegations, sowing confusion and mistrust in the BSP. Has no other transaction with Alphaland outside of the joint venture. Mercado, as chairman of the BSP corporate assets management committee, made through a study and recommended," he added.

Avisado, who is also assistant secretary of the Housing and Urban Development Coordinating Council (HUDCC), also confirmed that BSP has 15 percent of gross floor area of Alphaland Makati Place project, 15 percent of gross floor area, parking, podium in each of the three towers.

Avisado maintained that that the BSP's investment is now worth P909 million as of August 2014.

He denied accusations that BSP amended its by-laws to allow Binay to stay on top of the BSP.

Avisado believes Mercado's allegations are all political.

"We remember they were together before, they were very close. In 2010, they parted ways. The fact is, according to Mr. Mercado, he would have been the one running for mayor in Makati... I'm referring to that point only, it's politics, between the two of them," he said.


Binay's spokesman, JV Bautista of the United Nationalist Alliance (UNA), criticized the hearing.

"Hindi naman yan ang concern ngayon eh. Boy Scouts, that's not the concern ngayon. Ang concern gusto malaman katotohanan sa Mamasapano massacre. I don't know why the Senate subcommittee is spending too much energy on this. Kung meron kayo nakikita, file niyo na lang sa Ombudsman," Bautista said.

"Long delayed na mag-file na sila ng report to the Senate blue ribbon committee para magawa na committee report," he added.

"Etong Alphaland Corporation ni dating Minister Ongpin, pinag-iinitan. This isn't conductive to investments. Sinisira na nga image ng Makati, dini-dissuade pa investors by subjecting them to harassment."

Bautista also lambasted Senator Antonio Trillanes for berating Ongpin and warning him against threatening Mercado of libel.

"I wonder how he can say that...kapag ang resource person kamukha ni Junjun Binay, tine-threaten niya... You can see the double standard. You can see political motivation," he said.

"Hindi po namin alam kung saan pinaghuhugot ni VM Mercado pinagsasasabi niyang figures. Di katiwa-tiwala pinagsasasabi ni Mercado...upang makapanira sa VP. May bad faith," he added. "Si Ongpin and Oreta would be able to bring to light katotohanan dito. Walang nangyayaring kababalaghan as Mercado is asserting."