Probing the relationship between online gambling and corruption of public officials

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AL S. VITANGCOL III

AL S. VITANGCOL III

I MET with some volunteer lawyers a couple of weeks ago in a corporate tower somewhere in Gil Puyat Avenue in Makati City. On my way up the building, I was surprised at the number of young Chinese nationals waiting for their turn to ride the elevators. On reaching the seventh floor, the elevator doors opened, and I saw conspicuously posted on the wall opposite a sign that said, “FOR MR. K EMPLOYEES AND CHINESE ONLY.”
Curious, I asked the elevator attendant what was the nature of the business in that floor. He curtly answered, “Online gaming po.”

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It can be recalled that on November 24, government authorities raided a casino-hotel complex in Angeles City and detained more than 1,300 Chinese citizens, all of whom were allegedly working, without the necessary permits, for an unlicensed online gaming firm. The casino-hotel complex is owned by Jack Lam, a Chinese businessman. Subsequently, President Rodrigo Duterte ordered the arrest of Lam for bribery and economic sabotage.

Three days later, Bureau of Immigration Deputy Commissioners Al C. Argosino and Michael B. Robles, received P48 million from retired police general Wally Sombero. Allegedly, this was a payoff for the release of the Chinese nationals who were detained during the November 24 raid at Lam’s complex. However, this “entrapment/bribery/extortion” came out in public only on December 12. The BI Board of Commissioners had released 592 Chinese employees on December 6.

The question now is whether or not the operation of online gaming is legal. More so, whether or not the grant of licenses to online gaming firms is within the mandate of the Philippine Amusement and Gaming Corporation (PAGCOR).

Creation of PAGCOR

PAGCOR is a government-owned and -controlled corporation the franchise of which was granted under Presidential Decree 1869, popularly known as the PAGCOR Charter. This decree consolidated Presidential Decrees 1067-A, 1067-B, 1067-C, 1399, and 1632.

On June 20, 2007, then President Gloria Macapagal-Arroyo signed into law Republic Act9487, which amended the PAGCOR charter.

The third paragraph of Section 10 of the amended charter delineates the power and authority of PAGCOR, to wit:

“The authority and power of the PAGCOR to authorize, license and regulate games of chance, games of cards and games of numbers shall not extend to: 1) games of chance authorized, licensed and regulated or to be authorized, licensed and regulated by, in, and under existing franchises or other regulatory bodies; 2) games of chance, games of cards and games of numbers authorized, licensed, regulated by, in, and under special laws such as Republic Act No. 7922; and 3) games of chance, games of cards and games of numbers like cockfighting, authorized, licensed and regulated by local government units. The conduct of such games of chance, games of cards and games of numbers covered by existing franchises, regulatory bodies or special laws, to the extent of the jurisdiction and powers granted under such franchises and special laws, shall be outside the licensing authority and regulatory powers of the PAGCOR.”

Section 10 is very clear that the operation and licensing of casinos and similar places shall be “within the territorial jurisdiction of the Republic of the Philippines.”

Republic Act 7922, as mentioned in said Section 10 is actually the Cagayan Special Economic Zone Act of 1995, which operates independently of PAGCOR.

What is online gambling?

An online game is any video game that is played partially, or fully, using the Internet or any computer network. Online game sessions are hosted by a game server, which can be a dedicated computer managed by the game company or a gamer organization, or the computer of one of the players.

The design of online games can range from simple text-based environments to the incorporation of complex graphics and virtual worlds.

Online gambling follows the same technical principles as that of online games. Gambling sessions are hosted by a game server, which is managed by the online gambling company. Online bettors connect to the game server via the Internet or through dedicated computer networks. Bets are placed using crypto money, or online currency converted from credit cards, debit cards, or fund transfers.

The first online casino became operational in 1994. It is estimated that the present size of online gambling market is about US$45 billion.

One of the first online gambling available was poker. Online poker tables were commonly offered in both the tournament and cash game structures. Bettors play against each other rather than the “house,” with the card room making its money through “rake” and online tournament fees. At present, there are a large number of online casinos in which people can play casino games such as roulette, blackjack, baccarat and many others.
These games are played against the “house” which makes money because the odds are always in its favor.

Is online gambling operation in the Philippines legal?

Court decisions related to online gambling is wanting. However, there is one controlling jurisprudence that is worth mentioning. This is the case of Jaworski v. PAGCOR and SAGE (G.R. No. 144463) which was decided by the Supreme Court in 2004.

According to then Senator Robert Jaworski, Internet gambling does not fall under any of the categories of the authorized gambling activities enumerated under Section 10 of PD 1869 which grants PAGCOR the right, privilege and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports gaming pools, within the territorial jurisdiction of the Republic of the Philippines.

Jaworski further contends that Internet gambling could not have been included within the commonly accepted definition of gambling casinos, clubs or other recreation or amusement places as these terms refer to a physical structure in real-space where people who intend to bet or gamble go and play games of chance authorized by law.

This still holds true as of this time. RA 7922 did not include Internet gambling when it amended Section 10 of PD 1869. Likewise, with the very nature of the Internet, players and gamblers, and even the game servers, might not be located within the territorial jurisdiction of the Philippines.

The Court summarized the issues raised in the Jaworski case into a single pivotal question: Does PAGCOR’s legislative franchise include the right to vest another entity, Sports and Games and Entertainment Corp. (SAGE) in this case, with the authority to operate Internet gambling? Put otherwise, does Presidential Decree 1869 authorize PAGCOR to contract any part of its franchise to SAGE by authorizing the latter to operate Internet gambling?

While PAGCOR is allowed under its charter to enter into operators and/or management contracts, it is not allowed under the same charter to relinquish or share its franchise, much less grant a veritable franchise to another entity such as SAGE. PAGCOR cannot delegate its power in view of the legal principle of delegata potestas non potest delegare (no delegated powers can be further delegated), inasmuch as there is nothing in the charter to show that it has been expressly authorized to do so.

The Court added that SAGE has to obtain a separate legislative franchise and not to ride on PAGCOR’s franchise if it were to legally operate online Internet gambling.

Thus, the Supreme Court ruled: “We hold that PAGCOR has acted beyond the limits of its authority when it passed on or shared its franchise to SAGE. xxx The Grant of Authority and Agreement to Operate Sports Betting and Internet Gaming executed by PAGCOR in favor of SAGE is declared NULL and VOID.”

Corruption of public officials

Well, my insight tells me that PAGCOR has no mandate in law to grant licenses to offshore gaming operators, much more in regulating the latter. Corollarily, if PAGCOR does not have such mandate, then operators which are running online gambling are deemed unlicensed and illegal.

If the government, especially PAGCOR, had been faithful to its charter, then the present problems, which I have discussed in the prefatory of this column, would not have happened.

It is in this light that corruption thrives. Online gambling operators, knowing that they have been illegally operating, have to bribe government officials to let them continue their businesses. This government should just legalize all of these, earn much-needed revenues in the process, and likewise curb corruption.

I believe that some civil society groups are preparing to question the legality of PAGCOR’s grant of license to online gambling operators and hold these public officers accountable.

“One day, somebody’s gonna have to make a stand. One day, somebody’s gonna have to say enough.” (Clash of the Titans, 2010)

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