Former Health Secretary Francisco Duque III and former PS-DBM officer Lloyd Christopher Lao. 

(UPDATED) The Ombudsman has recommended graft charges against former Health Secretary Francisco Duque III and Lloyd Christopher Lao, erstwhile Undersecretary of the PS-DBM (Procurement Service-Department of Budget and Management).

The recommendation was issued by the Office of the Ombudsman on May 6, 2024, which was made public Friday. 

“There is probable cause to prosecute Duque and Lao for violation under Section 3 (e) of RA 3019, as amended,” the Order stated, referring to the Anti-Graft and Corrupt Practices Act. 

“The totality of evidence considered, this Office finds probable cause against Duque and Lao for violation under Section 3 (e) of RA 3019... let  the corresponding Informations be filed against them in the proper court,” it added. 

Section 3 e of RA 3019 states: “Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions.”

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Aside from the recommendation to file graft charges against Duque and Lao, the Office of the Ombudsman also found the two “guilty of grave misconduct and conduct prejudicial to the best interest of the service.”

The Ombudsman ruled that Duque and Lao be dismissed from the service “with forfeiture of all their retirement benefits and perpetual disqualification for reemployment in the government service.”

“In the event that the penalty of Dismissal can no longer be enforced against the said respondents due to their separation from the service, the same shall be converted into Fine in the amount equivalent  to their salaries for one (1) year, payable to the Office of the Ombudsman, and may be deductible from respondent’s retirement benefits, accrued leave credits or any receivable from his/her office,” the  ruling stated.

“It shall be understood that the accessory penalties attached to the principal penalty of Dismissal shall continue to be imposed,” it added.

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The charges against Duque and Lao stemmed from the complaint filed before the Office of the Ombudsman by then Senator Richard Gordon and Senator Risa Hontiveros regarding the Duterte administration’s procurement of pandemic medical supplies and equipment  – through the Department of Health – at the height of COVID-19.

The procurement involves a budget totaling to P41,463,867,117.52, which Duque transferred to the PS-DBM. 

In the 49-page decision penned by the agency’s Special Panel of Investigators and approved by Ombudsman Samuel Martires, the Office find Duque and Lao’s “conspiracy” from how the then DOH Secretary questionably transferred the more than P41-billion COVID emergency response fund to the PS-DBM, to procure the needed supplies.

“The presence of conspiracy is manifest among Respondents Duque and Lao who were responsible for the consummation of the illegal transfer of funds. Respondents’ acts were interconnected with the purpose of attaining the same end which was to effect fund transfer from DOH to PS-DBM without complying with fund transfer requirements,” portion of the Ombudsman’s ruling stated. 

The transfer was made in the absence of a Memorandum of Agreement (MOA) and there was also “no certification of previous liquidations of previous transfers” which would have identified and bind the two agencies’ obligations in procuring the supplies, the decision said.

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The Ombudsman also noted that included in the items ordered by the DOH to PS-DBM cannot be categorized as “Common Supplies and Equipment (CSE)” which is a major requirement to tap the latter’s services.

Among the DOH-requested items which it categorized as CSE were: alcohol, sanitizers, tissue, thermometer, sodium hydrochloride, protective personnel equipment (PPE), povidone iodine, gloves, masks, common medicines and testing kits.

"It is evident that DOH did not 'source' the COVID-19 related supplies from PS-DBM but instead 'outsourced' the procurement activity to PS-DBM since the latter’s “store” did not have the medical supplies that DOH intended to buy at the time the fund transfers were made,” it pointed out.

The DOH has 4 or 5 BACs (Bids and Awards Committee).

Still, Duque decided to transfer the fund to PS-DBM, which further slowed down the procurement process given that the PS-DBM, aside from the need to outsource the items, also do not have the expertise to evaluate those needed items, the Ombudsman decision pointed out.  

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“Logically, the more simplified process of procurement was for DOH, which has the money, to buy directly from the suppliers (of) the COVID-19 supplies and equipment. In this case, however, the DOH has opted to transfer the  funds to PS-DBM in order for the latter to acquire the items needed by the DOH from the supplies,” the decision stated.

“Thus, the resulting arrangement added another layer by bringing in PS-DBM as DOH’s Procurement Agent. Instead of a simplified process, the procurement mechanism that involved PS-DBM became more complicated and therefore, inconsistent with the purpose to hasten the project implementation,” it added.

“The foregoing shows that the DOH (and its Procurement Service) has the proficiency and capability to successfully undertake procurement of COVID-related medical supplies and devices,” the Order pointed out.

The PS-DBM acted as the DOH’s ‘agent,” charging the Health department a “4 percent service fee” for the procurement of the supply, the Ombudsman said.

The 4 percent service charge, the Ombudsman said, approximately amounted to P1,688,554,684.70.

‘This means that the medical facilities, hospitals, personnel and communities under the DOH, some even indicating Emergency Procurement as method procurement in their requests, have consequently been deprived of sizeable number of COVID-19 supplies and equipment that could been utilized during the pandemic,” the ruling stated.

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“Such imposition of the service fee was unwarranted in this case given that the fund transfers were invalid, unjustified, and illegal. In fact, there was also no MOA providing for the imposition of the service fee,” it also pointed out. 

“Besides, the DOH is the agency possessing the expertise and knowledge relating to the technical requirements of the items to be procured. It cannot be gainsaid that it was in the best position to negotiate with suppliers as regards he features and specifications that would meet their needs,” it added. 

The same Ombudsman's ruling meantime dismissed the complaint against respondents Ma. Carolina V. Taiño, Myrna C. Cabotaje, Roger P. Tong-An, Leopoldo J. Vega, Napoleon Arevalo, Enrique A. Tayag, Filipina Velasquez, Lorica C. Rabago and Crispinita A. Valdez. 

The administrative charges of the above-mentioned officials were also dismissed.

The camp of Duque, represented by the Yorac Law Firm, said it will contest the Ombudsman’s decision.

 “We are deeply disappointed by the decision rendered by the Ombudsman regarding the criminal charge against Dr. Francisco Duque. We are fully committed to pursuing all available legal avenues to contest this decision. Rest assured, we will promptly file the necessary pleadings to appeal the Ombudsman's ruling,” it said in a statement.

 “We remain confident that the facts and evidence will unequivocally demonstrate his innocence. As we move forward with the appeals process, we trust in the integrity and impartiality of the judicial system and we are optimistic that justice will prevail.”