A monument to institutional failure

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Ben D. Kritz

Ben D. Kritz

What’s wrong with this picture? A little bit of everything.

Last week, the Power Sector Assets and Liabilities Management (PSALM) Corporation received a bit of a shock—no pun intended—when it learned that the Regional Trial Court of Quezon City had dispatched its constables with notices of garnishment to PSALM’s customers, banks, and other creditors to the tune of a cool P60.24 billion, the final total judgment won by former employees of the National Power Corporation (NPC, or Napocor) represented in a class-action suit filed by the NPC Drivers and Mechanics Association (NPC-DAMA).

The lawsuit, which involved 8,018 people in the plaintiff class, alleged—successfully, as it turned out—that Napocor had illegally terminated the employees when the state-owned power producer was reorganized in 2003; the hefty amount assessed as damages included 11 years’ worth of back wages and other compensation for the former employees themselves, plus legal fees for the plaintiffs’ lawyers amounting to a little more than P6 billion, and court fees of about P1.8 billion. The NPC-DAMA group had actually won the case in 2011, but naturally had to wait until the appeals had run their course, which they did on June 30 of this year when the Supreme Court’s Third Special Division upheld the lower court judgment against Napocor.

Now that the judgment is apparently as final as it is going to get, the original court in Quezon City means to collect. PSALM, however, has no intention of cooperating. Last Friday, PSALM President and CEO Emmanuel R. Ledesma, Jr. issued a statement declaring the notices of garnishment “legally baseless, violative of due process, premature at best, and hence patently void.”


Here’s an interesting piece of news for Mr. Ledesma: No, they’re not.

He believes they are because of a 2009 Supreme Court ruling that acknowledged PSALM’s subsidiary liability and specifically noted that the agency was entitled to due process to prevent the seizure of assets that it did not acquire from Napocor. Ledesma also pointed out that judicial claims involving public funds should be coursed through the Commission on Audit. Finally, he said that the court sheriff should first provide an accounting showing that the court has already expropriated everything it could from Napocor, and that the settlement amount has properly accounted for “separation pay previously received from NPC or PSALM and/or income earned through new employment in NPC, PSALM or other government entities.”

The problem PSALM and its agitated CEO have is, first of all, an existential one. PSALM is not a court. It is not a court-appointed assessor tasked with determining the proper way of calculating and collecting a monetary settlement. Rather, the sole reason for PSALM’s existence, according to its very own gov.ph website, is:

“[T]o take over the ownership of all existing generation assets of the National Power Corporation (NPC), independent power producer (IPP) contracts, real estate, and all other disposable assets including the transmission business of the National Transmission Corporation. By the same token, PSALM assumed all outstanding obligations of NPC arising from loans, issuances of bonds, securities, and other instruments of indebtedness. The principal purpose of PSALM, as mandated by the EPIRA, is to manage the orderly sale and privatization of these assets with the objective of liquidating all of NPC’s financial obligations in an optimal manner,” as provided for in the damnable Electric Power Industry Reform Act (Epira) of 2001.

Therefore, if it’s Napocor’s problem, it automatically becomes PSALM’s problem. And while it certainly is true PSALM’s own, non-Napocor assets should be bypassed by the settlement order, in theory, PSALM shouldn’t even have any of those. Even describing PSALM as having “subsidiary liability” in this case is probably letting the agency off the hook to some extent; there are reports floating around that PSALM was in fact a party to the decision to illegally terminate the Napocor employees. Those reports are unverifiable at this point, but they are certainly plausible—PSALM was formed immediately after the enactment of Epira in June 2001, and the reorganization of Napocor’s workforce happened two years later, by which time PSALM would have had not only the opportunity but would have been legally required to oversee Napocor changes of that magnitude.

A news brief over the weekend reported that PSALM and relevant government personalities were meeting to come up with a “coordinated response” to the demand for payment, warning that a loss of PSALM’s receivables would cause it to “lose its capability to operate and prevent it from contracting backup power in 2015, when the energy crisis is expected to take a turn for the worse.” Which, unfortunately, is probably true, as PSALM has always followed the day-late-and-a-dollar short approach to planning; this is an agency that, having been charged with the task of resolving Napocor’s huge debts, spent its first decade of operations increasing those debts by about $340 million, and which thinks leaving Napocor “only” $4 billion in debt by 2026 at the end of PSALM’s 25-year corporate life will be some kind of achievement.

If the payment of the court-ordered settlement leaves PSALM in the lurch and deepens the impending power crisis, PSALM itself should be held responsible. Emmanuel Ledesma and his management team are bright enough to generate a list of reasons why PSALM should not be compelled to pay the settlement due Napocor’s former employees, but they are not conscientious enough to raise the issue in an appropriate venue (Hint: The appropriate venue is not the “News Room” page of the agency’s website) at the appropriate time, which would have been, at the latest, the instant the final ruling on the case was made known on June 30, or ideally, sometime in 2009 when PSALM was impleaded into the Napocor case and more or less told in so many words that it should prepare itself for what is happening now.

If they’re lucky, the former Napocor employees entitled to compensation and who have waited for 11 years already will receive it shortly before the heat death of the universe, and in the meantime, the electricity-consuming public will be saddled with yet another huge lump sum of expenses to be paid off in annoying little bits as a “universal charge” on the monthly electric bill, which, as an added bonus, will probably be delivered in the dark by this time next year.

Bad labor relations, slow-moving courts, an agency accomplishing pretty much the exact opposite of what it’s supposed to be doing, and unnecessary added costs to consumers: Someone needs to build a nice pedestal for this whole case, and install it in the park—it’s the perfect monument to institutional failure.

ben.kritz@manilatimes.net

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8 Comments

  1. Marie Jocelyn Ajoc on

    The primary personalities that should shoulder the claims should be the CEO of PSALM and its management staff for their failure to recognize this problem. I believe that they are well compensated for the positions they are holding because of the assumption that they are the bright guys to do the job which they failed to do.

    Good for them that they enjoyed the benefits of their position for 11 years while some terminated employees had died waiting for this moment.

    They should refund their salary and benefits for their inefficiency to do their job that is why the claims ballooned to 60B.

  2. My father is one of those former employees and he waited for so long.I pity them because they are all waiting in vain at laging paasa lang ang mga hayop na to. Not even SC’s decision would be tough enough for these douchebags,nope,devils pa nga kung tutuusin.With what they’ve done, I hope they rot in hell.That’s the least I could wish for all of them.

  3. Yes, the NAPOCOR-DAMA case is the biggest labor case in the history of the Philippines in terms of money, cost to the government and impact to the lives of government employees and its families. It also shows how our SC judiciary did find the conscience to correct what is wrong and have been denied by the previous administration when it influenced through the former Finance Minister (who lost the election of governorship of Negros Oriental) the SC Justice Corona to issue an Ante Order to the SC decision in 2009.
    The former NPC president Mr. del Callar did tried to control the damage done when he prepared to have to have the case closed in 2007 and pay the employees (including the pending NAPOCOR-COLA case).
    Arrogance however did take over, to the point that NPC assets were all taken away in 2009 through an anomalous OMA contract with PSALM, the reason why Mr. del Callar resigned. He has much to tell and we thank him for his courage and dignity to bring back NPC. Aside from Mr. Itchon, former NPC President, Mr. del Callar is one NPC President to be proud of. Ask any NPC employee and they will vouch for him and they all missed him.
    The recent PSALM actions are true to your observations of institutional monumental failure in terms of discipline and observance of the rule of law. ARROGANCE and IGNORANCE to the highest level Well, not new, since SC was also criticized for its ruling on the DAP issue. Simply Technical Malversation. Only in the Philippines ha, and it is all about money!
    PSALM will get its rightful judgment in due time, just wait and see!
    There are two court cases related to NPC employees. The Efren Hererra Case and Enrique Betoy Case. The 1st case caused the stoppage by GSIS of the pension of NPC employees, while the 2nd case caused its resumption. The 2nd case corrected the “defective” decision through an EN BANC decision also confirming the DAMA case. Mr. Betoy submitted a “certiorari” in 2004 foretelling of things to come because of the EPIRA…

  4. victor m. hernandez on

    Indeed, it’ a monumental failure. NAPOCOR, given its achievement was a big sucess compared to the present performance of the agencies in charge of power development and generation. Most, if not all of its generating plants and geothermal plants have been privatized, Now due to the profit motive of the private commercial owners, electric prices have been i ncreasing since then. EPIRA is a collusion among government officials, legislators, and business interest to bring electricity to consumers, households,and industry. ERC is likewise a tool of the private business to allow prie increase, which is aided by WESM. Nobody an say that NAPOCOR and its engineers do not know any better than the engineers of the present power generating companies. This is not only a monumental failure of government, it is also a monumental financial success of the big business and politicians to hoodwink the consumers of a single basic necessity for living.

  5. psalm “has no intention of cooperating” pala, kaya pala kung saan-saan na niya pinatatago ang pera? nasan na ba ang pinagbilhan ng mga planta ng npc? bakit hindi sila sumunod sa decison ng Sc noon pa na ang amount is on 36.7B lang? ngayon lomobo sa 60B, he will defy SC’s decision again? no one is above him? o gusto niyang “ipamana” ang problema sa papalit sa kanya?

  6. Good analysis. You are right. PSALM did not do its job. They just wait and wait and just say to themselves we will not pay whatever happens because we are the law. They dont think the consequences. Now they are crying to high heavens and dont know what to do. Easy way out is to resign MR.CEO.

  7. A P60B debt is about USD1.5B. Well, that can still be managed but PSALM may just have to allow itself to be bought – and Señor Emmanuel et al may just have to go and start to be more humble at this point.

    • The recent SC decision to retract its decision on the DAMA case seems a dejavu and a time-warp during the terms of SCC Corona and former finance secretary Tevez. Was the SC made to believe the DRAMA? PSALM has yet to explain where the money from the sale of NAPOCOR assets went. The MALAMPAYA Fund was also plundered but our government has no money to pay for its monumental institutional negligence and justice for its people. Quite dangerous move!
      Now we have a banana and monkey court. When will really the Filipino people have justice in their own country when the guilty are allowed to choose their own judgment and sentencing? Oh! You are found guilty but anyway, as a bonus, you can choose your own cell! I wish the death penalty is reinstated so we can all say “You are found guilty! How do you wish to die?” Our past religious and cultural influences did put a lot of influence in our behaviour. We do have a bleeped-up brain. The Visayans and Mindanaoans have a different sense of justice and morality. They are simple minded and applies justice equally. The Luzonians behave differently. They tend to compromise in the guise of being “godly”, “church-going” and “kind”. But in reality, they are looking for “ano yong sa akin?” or “Paano naman kami?”. We did lost a lot of our Patriotism and Nationalism image, that we still have to say in our allegiance to our own flag “I am a Filipino”. Of course we all are! Why say it? Of all the countries in the world we are the only one who started the pledge of allegiance with “I am a Filipino”. Quite queer! Anyway, when we sins, we can always go to confession or “buy candles” for our sins like in the Spanish times! We can also “buy Mass Cards” if you want to go to Heaven! Iba talaga ang Filipino! Only in the Philippines! Our social scientists should make a book on “Why Filipinos Behave Differently!”