Money politics & the May 2013 elections: Top execs of barred firms funded Senate bets, parties

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First of Three Parts

IN THEORY, elections are supposed to be the great leveler or equalizer of democracy. The vote of any ordinary man scraping a living off the streets is supposed to have the same clout as that of a tycoon living it up in his penthouse.

But in our rather imperfect world, even way before voters get their hands on ballots, things take place that tend to ensure that the wealthy and powerful will have influence on those poised to set policy and law.

For instance, a review of the documents available from the Statements of Election Contributions and Expenditures (SOCE) submitted by the candidates and their parties to the Commission on Elections (Comelec) show that, aside from contributions by political clans keen on keeping their foothold in politics, some of the biggest donors in the May 2013 senatorial elections are personalities from the mining and extractive industries sector, as well as public works contractors who have major pending government contracts.

These are followed by big businessmen with interests in public utilities, transportation, ports and shipping, energy, and even the legalized gambling industry.

All these sectors are covered by the list of prohibited donors as defined by the Omnibus Election Code.

Section 5 of Comelec Resolution No. 9476, which was issued in June 2012, also revisits many of the earlier bans on contributions spelled out in the Omnibus Election Code. These include the ban on donations by persons operating public utilities, exploiting or possessing natural resources of the nation, those who hold contracts or subcontracts with any government agency, and those who have been given franchises, incentives, exemptions, allocations, “or similar privileges or concessions” by a government entity.

Across all parties

The apparent violations on prohibited campaign donors cut across all party lines and affiliations, with candidates, parties, and political alliances from both the administration and the opposition blocks accepting donations from personalities identified with sectors that are listed by the Election Code as banned donors.

The violations also involve both neophyte politicians, senators who are just now beginning their first term in the Senate, and senators who are already serving their second and final term in the upper chamber.

The violations seem to show that, regardless of party affiliation and experience in public service, many candidates and political parties are still to take campaign finance laws seriously.

At worst, the violations may be seen as the flouting of the laws on campaign donations in a country where the Comelec has long been seen as nothing more than an administrator and a ballot counter than an enforcer of election laws. At the very least, it would show just how unfamiliar many candidates and parties are of the laws that govern their election, laws that have been in force, albeit largely unenforced, for almost three decades now.

But Comelec has since warned both candidates and political parties that it is now taking campaign finance laws more seriously, beginning with the creation of the commission’s Campaign Finance Unit (CFU) in 2012. Comelec started tightening the screws on election contributions and expenditures beginning with the 2013 midterm elections, with the idea of full implementation of the campaign finance laws by the time the 2016 presidential elections come around.

Vested interest groups

“If you receive a contribution from these prohibited donors, it is not only ground for disqualification, it is also a criminal offense,” says Comelec Commissioner Christian Robert Lim, who is also ad hoc CFU Steering Committee head.

The reason behind the prohibitions on donations from certain sectors is quite simple: to prevent special interest groups already vested with significant political and economic influence from exercising even more disproportionate influence over elected government officials.

“It is as if they are buying the politicians,” Lim says. “It’s an investment.”

“The drafters of the law saw the importance of regulating campaign donations in order to prevent a conflict of interest,” says Comelec Commissioner Luie Tito Guia. “We want the donations to be given to a campaign to be based on very personal decisions, that you want a candidate to win because he is good for the country, and not because he is good for your business.”

Yet both opposition and administration coalitions appear unconcerned with the possibility of violating the Omnibus Election Code with regard to donor prohibitions. At best, both sides appear to have turned a blind eye to the possibility of conflict of interest between the donor and his donee.

Government contractors

PCIJ found at least P75 million in donations made to both opposition and administration senatorial candidates made by contractors with pending government projects. While the amount may appear small compared to the P1.6 billion in donations that flowed into the campaign kitties of the winning senators (or four percent of the total), the stakes are enormous – some of the pending contracts held by the donors run from half a billion to a billion pesos per project.

Rona Ann Caritos, acting executive director of the lawyers’ election watchdog group LENTE, or the Legal Network for Truthful Elections, says this practice was banned by the Election Code because of the danger that should they win, candidates would favor such contributors in terms of policy or awards of contracts.

“If they have an existing contract and they gave huge amounts to a candidate who eventually won, that candidate may favor that corporation in future dealings,” explains Caritos. “There are many construction companies that give to politicians and political parties, and they expect that if they give large amounts and the candidate wins, they expect to get contracts in return. That is the danger if you do not ban construction companies from donating to candidates.”

Mining money

Comelec data also show that at least P70 million in mining-associated donations were made by private individuals to both administration and opposition senatorial candidates. Officers or owners of public transport utilities such as airlines and bus companies come in third with P62.5 million in donations.

Caritos says the same logic is exercised in the ban against donors who get franchises or permits from the government, whether these are public utilities or exploiters of natural resources.

“Those covered by the prohibition on the exploitation and possession of natural resources are mining companies or those engaged in oil and gold exploration,” she says. “It is prohibited (in order) to prevent undue influence on the officers of the government, because they get their permits from the government. Ang mga mining permits, permits to explore or exploit (resources) are given by the government.”

Among the political parties, the Nationalist People’s Coalition (NPC) of former Ambassador Eduardo ‘Danding’ Cojuangco Jr. received the largest of these questionable campaign donations for the 2013 elections.

NPC tried to play both sides of the coin in last May’s polls, with various officers and members joining campaign sorties with both the administration and the opposition coalitions. In the end, NPC fielded senatorial candidates in both the administration and the opposition coalitions: Senator Loren Legarda ran and won under President Benigno Simeon C. Aquino III’s Team PNoy, while Juan ‘Jack’ Ponce Enrile Jr. ran and lost under the opposition United Nationalist Alliance or UNA.

Big deal for Sta. Elena

Comelec records show that among the donations accepted by NPC was one amounting to P25 million from Alice Galang Eduardo. A check with the Securities and Exchange Commission (SEC) showed that Eduardo is president and board member of Sta. Elena Construction and Development Corporation, a company registered in 2006 to “engage in general construction business, including the enlarging, repairing, developing, or engaging in any work upon buildings, houses, and condominium, roads, plants, bridges, airfields, piers, waterworks, railroads and other structures.”

Sta. Elena Construction currently has several projects with the government, the biggest costing more than P1 billion. In its own website, the company proudly announces its involvement in the third phase for the design and construction of a breakwater for the Cagayan Economic Zone Authority (CEZA) in Port Irene, Sta. Ana, Cagayan province to the tune of P1.07 billion.

The project is listed as involving pre-casting, pile-driving, and construction of the breakwater.
Sta. Elena also did the Phases 1 and 2 of the CEZA project. Phase 1 cost P840 million while Phase 2 had a P1.375-billion price tag.

Sta. Elena has a current P234- million contract as well with the Department of Transportation and Communication (DOTC) for a Coast Guard buoy project in Punta Engano, Mactan, Cebu.

More, more deals

Among Sta. Elena’s concluded government projects of significant value, meanwhile, are:
• Pantal Bridge Project in Dagupan City, for P890 million;
• Sarrat bridge project in Ilocos Norte, for P890 million;
• Leyte wharf expansion project at the Subic Bay Metropolitan Authority, for P400 million;
• Laoag-Bongo River improvement work in Ilocos Norte, for P193.5 million;
• Widening of causeway for the San Vicente Fish Port Terminal of the Cagayan Economic Zone Authority, for P52 million;
• Sabang bridge project, Batangas City, P32 million;
• Piela bridge project in Dasmariñas, Cavite, for P35 million;
• Bacao bridge project in Taysan, Batangas, for P50 million; and
• Salitran bridge project in Dasmariñas, Cavite, for P60 million.

On its website, the company boasts of having “played an instrumental role in the completion of many private projects as well as the fulfillment of the government’s countrywide development goals.”

But because the donation was made under the name of Alice Galang Eduardo, not Sta. Elena Construction and Development, it may benefit from a legal loophole. Indeed, most of the questionable donations looked at more closely by PCIJ were made by owners, officers, incorporators, directors, or shareholders of these companies in their private capacity.

In other words, except for a few of the more glaring cases, it was the owner or the controlling officer who made the donation, and not the company in the barred sector itself.

Touchy point

Comelec Commissioner Luie Guia concedes that this is still a touchy point of the law, one that is largely untested. “The personality of the officer or controlling stockholder is separate from the corporation itself.” Guia says. If only for this, he says, it is yet unclear what action the Comelec will take on these cases.

He even says that they expect that the donors would make this argument in the event they are hauled off to court for violating campaign contribution laws. But Guia says that one interpretation of the law is that a corporation is just an artificial entity, and it may be the decisions of the officers that may be more critical than the action of the firm.

Yet if the company is barred from making a donation, why is the owner of the company or the officers who control it still allowed to make donations?

“We have what we call corporate fiction,” Lim quips. But he adds, “We do not want to go into a situation where we file cases that we will just lose. We want things clear. But we know that this is one loophole that needs to be plugged.”

Guia, for his part, acknowledges that it would be unrealistic to separate the interests of a company and its officers, especially if the officer in question happens to own the company, or is the major or controlling stockholder.

Loophole in law

“In the ideal world, you should be able to connect them, because the corporation is just an artificial entity,” he says. “In the end, it is the stockholder who will be profiting, or whoever is in charge or has the most interest in the corporation.”

“Unfortunately,” Guia says, “the law is not yet clear. It is a grey area, maybe it is a loophole, if you may call it that.”

“It would be good if the Comelec tries to determine if the private donor is also the controlling stockholder of the corporation,” he says.

In the case of Alice Eduardo, documents show her as having controlling shares of Sta. Elena. In fact, almost the entire board of the company appears to be made up of her direct family.

In the latest General Information Sheet submitted by Sta. Elena Construction and Development Corporation in May this year, Eduardo was listed as president, stockholder, and board member of the company. Three of the other four members of the board belong to the Eduardo family: Andres A. Eduardo, who sits as vice president, and Elisa G. Eduardo and Joel G. Eduardo as treasurer and secretary respectively. All four Eduardos share the same address in ritzy Dasmariñas Village, Makati City.

SEC records show that the Eduardo family owns 99 percent of the company, with Alice Eduardo having the biggest share at 34 percent. Andres and Elisa own 25 percent each, and Joel Eduardo controls 15 percent.

Alice Eduardo is also listed in SEC records as an incorporator, stockholder, and board member of Philsite Gaming Inc., whose main purpose is “to engage in the business of computer gaming and other entertainment activities.” The company was registered with the SEC in June 2010. Eduardo owns 80 percent of the subscribed shares of stock of the company.

PCIJ tried to get a spokesman of the NPC to comment on the matter. The matter is now with NPC legal counsel and former Comelec Commissioner Gregorio Larrazabal.

PCIJ also sent letters and made follow-up calls to the office of Alice Eduardo for comment. As of this writing, however, Eduardo’s office has yet to issue a response.

GMA7 ‘donation’

Falling in a grey area as well is the P440,774 donation by GMA Network, Inc., one of the largest television networks in the country, to the campaign of Loren Legarda, as revealed by the schedule of campaign ads her office submitted to Comelec. GMA holds a broadcast franchise granted by Congress, and as such could be included in the list of banned donors.

The donation apparently came in the form of four ad spots, which are exclusive of the P21 million worth of television ads that Legarda purchased from GMA Network during the campaign period. The document was signed by Antonio B. Legarda Jr., identified as Legarda’s disbursing officer.

Far clearer, however, is the case of bus firm Victory Liner, which donated P 500,000 to the campaign of Bagumbayan Volunteers for a New Philippines Movement, Inc. of former Senator Richard Gordon. The amount is quite small compared to the other donations received by other political parties. Then again, Victory Liner, as a public utility, is prohibited from making campaign donations.

Oro East Mining Co. Inc, meanwhile, donated P100,000 to the campaign coffers of the opposition coalition United Nationalist Alliance (UNA). SEC records show that Oro East’s business is “to carry on the business of operating coal mines, and of prospecting, exploration and of mining, milling, concentrating, converting, smelting, treating, refining, preparing for market, manufacturing, buying, selling, exchanging and otherwise producing and dealing in all other kinds of ores, metals, and minerals…”

Donor now city engineer

Another mining firm, International Global Mining Exchange (IGME), donated P5 million to the campaign kitty of the Pwersa ng Masang Pilipino (PMP) of former President and now Manila Mayor Joseph Estrada.

Estrada would later appoint IGME’s former president as city engineer of Manila.

For these cases, Lim says, Comelec will “move up to the next stage of the audit.”

This involves holding hearings where donors and their political parties and candidates are given the chance to explain their side. Lim says that while on the surface some of these parties, candidates, or donors may have already incriminated themselves or each other in their official reports to Comelec, the other side may always contest the facts of the report.

“For example,” he says, “if Loren Legarda says that GMA Network contributed to me, and then GMA says it did not contribute, we have to investigate both parties and hear all the sides, and then proceed from there.”

In the meantime, Lim is proposing new rules that would bar not just owners and controlling shareholders, but all officers of a prohibited corporation from making donations in an election campaign. The proposal will be included in a new campaign finance bill that is being drafted by lawyers’ groups that are cooperating with Comelec in fine tuning campaign finance regulations. (Ed Lingao, Cong Corrales, and Edz V. dela Cruz, Philippine Center for Investigative Journalism) Published with permission from the PCIJ, September 2013

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