HGC officials in hot water

Certain officials of the Home Guarantee Corp. (HGC), a government owned and controlled corporation, are facing possible graft charges for allegedly selling property at a huge loss to government.

The Office of the Ombudsman has ordered a formal investigation into the participation of certain HGC officials led by its president Benjamin Bongolan in the alleged anomalous transaction involving the sale of a government property in Manila way below its fair market value.

The sale in 2008 by HGC to La Paz Milling Corp. involves two parcels of land totaling 2.8 hectares located at the Manila Harbour Center in Tondo, Manila, which it said unduly deprived the government of some P300 million in lost income.

The 2.8 hectare property involved is where the Manila Harbour Center now stands and which was developed jointly through a private sector undertaking.

A certain Jerome Canlas in his complaint alleged that the property was sold for only P13,000 per square meter or a total of P384.7 million. Property consultant EValue Plus reported that parcels of land adjoining the HGC property had a fair market value of P24,000 per square meter. Based on this price, the HGC should have sold its property for around P694.2 million or a loss to government of more than P300 million.

In 1999, the Philippine National Bank sold for P22,000 per square meter Lot 2, Block 1 which is adjoining the properties sold by HGC. Based on this, HGC should have sold the lots for at least P636 million.

In August 2001, the National Housing Authority also sold another adjoining property in the same area for P17,500 per square meter.

With the Manila Harbour Center now being developed as a major commercial and industrial area, the property could easily fetch a P30,000 per square meter price tag.

It seems however that pricing is not the only problem.

In 1994, the NHA and RII Builders entered into a joint venture agreement for the implementation of the Smokey Development and Reclamation Project (SMDRP). Under the JVA, R-II will finance the development of the Smokey Mountain site by constructing temporary and permanent housing units, commercial areas and industrial sites.

To secure more funding for the project, the NHA and R-II agreed to the creation of an asset pool where they placed their respective interests and rights in SMDRP consisting of tracts of real property within the Smokey Mountain Area and reclaimed land for the NHA and the investments made by R-II in the project as developer. The 2.8 hectare property is part of this asset pool.

The asset pool then became the asset backing when they issued interest-earning asset participation certificates (APCs) to several investors. The said securitization scheme was embodied in a trust agreement called the Smokey Mountain Pool Formation Trust Agreement. The parties in the agreement were the NHA, R-II, HGC as guarantor and PNB (later on Planters Development Bank) as trustee.

When the certificates reached maturity in October 2002, the PDB due to lack of funds was constrained to call on HGC to pay for the maturing certificates. Subsequently, PDB executed a deed of assignment and conveyance covering the entire asset pool in favor of HGC which enabled the latter to obtain physical possession of the asset pool properties, including the 2.8 hectare property.

When R-II learned that HCG was attempting to sell some of the properties that are part of the asset pool, a move that it said will deplete its interest in the development, it sought and was granted a court injunction prohibiting HGC from disposing any property in the asset pool.

However, despite the permanent injunction, HGC sold the 2.8 hectare property belonging to the asset pool to La Paz. R-II had since filed a case for indirect contempt against La Paz and HGC with prayer to void the sale and subsequent restitution of the 2.8 hectare property to the asset pool.

Cargo operators speak up

Existing cargo operators in Subic are saying that they are not submitting proposals to challenge the recently approved Subic Bay Metropolitan Authority (SBMA) joint venture contract with Harbour Centre Port Terminal, Inc. (HCPTI), since SBMA’s conditions for the submission of counterpart proposals are unacceptable.

Under the Subic-Agro-Industrial Logistics Port project between SBMA and HCPTI, the latter will be SBMA’s exclusive cargo handler of bulk (excluding fertilizer), break-bulk and general cargo for a period of 25 years.

According to Mario Lorenzo Yapjoco, president of Amerasia International Terminal Services, Inc. (AITSI), one of the oldest cargo operators at the Freeport and handling 70 percent of the break bulk and general cargo, aside from SBMA not sending yet an invitation to participate in the Swiss Challenge, an unofficial copy of the SBMA terms and conditions for the Swiss Challenge point to conditions which are unfair for existing cargo operators.

In October 2007, Amerasia was granted by SBMA a 25-year lease contract covering a 3,500 sq.m. area at the Naval Supply Depot (NSD), the Freeport’s biggest bulk and break-bulk cargo terminal.

Yapjoco said that the terms and conditions provide, among others, that a submission of a counterpart proposal would constitute the waiving of existing contracts with SBMA, and that the proposal should also be accompanied by an undertaking not to sue SBMA.

The requirement for the Swiss Challenge of a minimum of P2 billion paid-up capital, according to Yapjoco, is simply not feasible for most, if not all, cargo operators at the Freeport.

AITSI, together with other Subic cargo handlers like Subic Seaport Terminal, Inc. and Mega Subic Terminal Services, Inc. are reportedly poised to file complaints against SBMA officials before the Office of the Ombudsman.

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