Brewing controversy

The soured relationship between former friends and business partners that has metamorphosed into an unfortunate legal battle has created such a huge buzz within the business community that we cannot help but delve more deeply into this brewing controversy.

Clifford and Alexander Lichaytoo, who control Clay & Feather International, have been accused of diverting company funds into their personal bank accounts by their friends and partners, fellow clay shooting enthusiasts Raul Arambulo and Adam Jimenez. The Makati prosecutor’s office has indicted the two for the crime of estafa.

The Lichaytoos would like to clarify certain points raised in our previous column on the matter.

First, that based on corporate records, Arambulo and Jimenez own only 20 percent and 10 percent of C&F respectively.

Second, as far as the P404,500 check deposited in the Lichaytoo account, PBCom has admitted that the check was erroneously deposited in the Lichaytoo account by one of their tellers, which the bank only discovered sometime in 2007. It is claimed that is no evidence whatsoever that said mistaken deposit was made at the instance or with the involvement of the Lichaytoos. As of press time, PBcom has not filed any third party complaint against the Lichaytoos.

Third, the reason for the Lichaytoo’s attempt to transfer funds from the company’s BPI account was in order to discharge the lawful obligations of C&F. From January to June 2008, the Lichayoos claim that Arambulo had successfully held the company hostage by refusing to sign checks for rent, security guards, electricity, water and other utilities thereby putting the company in jeopardy of suits from its service providers. The company even owes the Lichaytoos more than P20 million in shareholder advances for its inventory and operations.

Fourth, with regard to the personal accounts in the names of the Lichaytoos, Arambulo had conveniently omitted to mention that the said account was maintained to segregate the proceeds of sale of ammunition, the importation of which the Lichaytoos primarily financed. The maintenance of a separate account was intended merely for the prompt and immediate repayment of the advances made by said financiers in order to minimize interest charges.

The Lichaytoos emphasized that the company had always maintained accounts in the personal names of the partners to which the proceeds of other sales were deposited. The arrangement regarding said bank accounts in the personal names of the partners was agreed upon by all the stockholders from inception of the company.

Lastly, the falsification case against Arambulo and Jimenez is not a countercharge. It is an independent suit filed by the Lichaytoos when they discovered that Arambulo had earlier misrepresented to RC Cartridges, the Italian supplier of ammunition to C&F, that the company’s authority to import cartridges had expired. It is claimed that Arambulo instructed RC Cartridges to deal with Final Option, a company owned by Jimenez, for the importation of cartridges thereby diverting business belonging to C&F to their own company, Final Option. The Lichaytoos emphasize that Arambulo and Jimenez have been peddling said cartridges to shotgun clay shooters in breach of their fiduciary duty to Clay & Feather as directors thereof. And in a further show of conflict of interest, Arambulo and Jimenez had also imported Beretta firearms which they are now selling to the public through Jimenez’s firearm company.

Hence, the Lichaytoos are now being harassed with baseless lawsuits and claims in order for them to give up the business and C&F so that Arambulo and Jimenez can pursue the same exclusively through their own companies, the former alleges.

IT contract under attack

Another controversy that has caught the business community’s eye is that involving Stradcom and its P4-billion information technology project with the Land Transportation Office.

Agusan Del Sur Rep. Rodolfo Plaza has filed a resolution calling for an investigation into this contract, claiming that it is grossly disadvantageous to the government. Plaza based his arguments on COA report saying that the IT project which aims to connect 250 LTO branches and to automate the core services of LTO lacked project continuity

The project was designed to automate and integrate motor vehicle registration, drivers’ licensing, the accreditation of manufactures, assemblers, importers and dealers of vehicles, the law enforcement and traffic adjudication system and the revenue collection of the LTO. Stradcom also has IT projects with the LTO-connected emissions testing centers and vehicle insurance dealers.  

What is said to be grossly disadvantageous to the government was that Stradcom’s IT facilities would remain the company’s property after its 10-year contract with LTO, despite the company already having recovered its investments through computer fees.

The COA report hit the agreement for not providing penalties and contract stipulations in case the company encounters delays or fails to complete the implementation of the project. The commission also noted that the agreement failed to protect the interest of the public by imposing Stradcom’s fees “without taking into account its acceptability to the end-users and establishments of the rate of return pursuant to the BOT law.”

There are also some groups which are asking Stradcom to divulge how much money it has made out of the project and how much taxes it has paid since the contract was awarded to it in 2003.

But is it true that another LTO contractor is said to be behind efforts to discredit the Stradcom project? 

The story swirling around LTO offices is that this contractor wanted to draw public attention away from its provision of driver’s license cards that fade away within a year while easily being damaged.

The LTO-IT system itself is being targeted, according to those in the know, in a case of Stradcom cooking the rice, and somebody else wanting to eat it.

One issue being raised against the system is that it allows Stradcom to make a killing from the P168 processing fee per transaction. But considering that the company has to recoup its P4 billion in the short time of its BOO contract, the P168 is a reasonable price to pay, it is claimed.

When the NEDA-ICC laid down the ground rules of the project’s bidding, it put a maximum fee of P300 that a provider of the LTO-IT may charge, which can be increased by 10 percent a year.The fact that Stradcom did not charge the maximum 10 percent fee interest for those five years speaks volume about its social responsibility, it is said. 

As to criticisms on why Stradcom gets to own its equipment after its contract with the LTO, it is explained that this is a BOO contract, aside from the fact that since computers having high rates of obsolescence, it’s not like the government would have any use for such computers at their end-of-life stage.

A comparison was made with the build-operate-transfer (BOT) computerization scheme of the Social Security System which is now working at snail pace after being transferred to the SSS at the end of the BOT contract. It’s because the government does not have the funds or the expertise to continuously update the said system.

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