During their meeting on the sidelines at the World Economic Forum (WEF) in Myanmar (formerly, Burma), President Benigno Aquino 3rd reportedly gave the Burmese Nobel laureate and democracy icon Aung San Suu Kyi tips on how to fight corruption and promote transparency.
And in a speech at the closing plenary of the forum, Aquino also boasted that the culture of impunity was over in the Philippines, citing his cancellation of onerous contracts as an example of his administration’s governance reforms and commitment to transparency.
But before Aquino preaches about battling corruption and promoting transparency abroad, he’d better first look closer to home.
True, Aquino cancelled various allegedly anomalous and overpriced contracts signed during the Arroyo administration, among them the $430-million Laguna Lake dredging contract with a Belgian company and the $276-million roll-on, roll-off (RoRo) ports project with a French firm.
There are, however, other highly questionable Arroyo-era deals that are apparently still being pursued right under his very nose. Worse, some of them are being legitimized and sanctioned by his officials.
One such deals is the share purchase agreement (SPA) entered into by Land Bank of the Philippines (Landbank) and San Miguel Global Power Holdings Inc., a San Miguel Corporation (SMC) subsi-diary, in December 2008, for the sale of 46,596,596 Me-ralco shares held by the state-owned bank at P90 a share or a total of P4.19 billion.
In a legal opinion issued on March 3, 2011, the Office of the Government Corporate Counsel (OGCC) pronounced that the SPA is a contract to sell and since San Miguel Global failed to comply with full payment of the pur-chase price, Landbank is under no obligation to convey title and ownership over the shares.
Apparently, San Miguel Global suspended all payments to Landbank after Meralco unilaterally canceled the stock certificates for Landbank’s shares and issued new stock certificates for the same shares in favor of a certain Josefina Lubrica based on an order of the Department of Agrarian Reform Adjudication Board (Darab) in an expropriation case involving Landbank and Lubrica.
As a result of the deferment of its implementation, the OGCC declared that the SPA had been modified from a pure obligation to a condi-tional obligation, and that Landbank can therefore demand a higher value for the shares or at least renegotiate the purchase price.
The OGCC also said that the agreement may be renegotiated on the ground of Landbank’s lost income opportunity, and that pursuing the same is grossly dis-advantageous to the government.
Following the filing of a plunder complaint against the state-owned bank’s officers before the Ombudsman in September 2012, Landbank quickly disavowed its share sale deal with San Miguel Global saying “the tran-saction did not materialize due to the unlawful can-cellation by Adjudicator Miñas of Landbank’s share in Meralco. The Shares Pur-chase Agreement there-fore was not at all implemented in 2008 and even now.”
Yet, Department of Justice (DOJ) Secretary Leila de Lima later issued a 10-page legal opinion declaring that the SPA between Landbank and San Miguel Global remained enforceable. This even if in the same legal opinion, De Lima admitted that the substantial difference in the selling price of P90 per share as against the value of P245 per share as of August 2012 “will translate in a huge loss for the government if ever the SPA is pursued.” Unbelievable!
De Lima’s position is that if the transaction was pur-sued as scheduled, the go-vernment would be earning P32 per share since the Meralco shares were sold at significantly higher than the then prevailing market price P58 per share. Hence, De Lima argues that “it cannot be said that the terms of the agreement [are]manifestly and grossly disadvantageous to the government.”
De Lima failed to mention, however, that even if the deal pushed through, the government would not generate any earnings or profit until after almost three years because of the unusually long installment payment period of 4-5 years.In the meantime, Land-bank had prematurely given up all its voting and dividend rights to the entire 46,596,596 Meralco shares to San Miguel Global, after receiving a mere 20 percent downpayment from the latter.
What’s now piquing the interest of many players about this deal is the recent report that SMC is poised to unload its stake in Meralco for US$3.3-billion (140.2 billion pesos), including, we’re told, those bought from Landbank. Hmmm.
Whatever the case, Aquino should put his money where his mouth is and finally cancel this clearly one-sided and irregular contract—before the government and the Filipino taxpayers wind up getting the short end of the stick.