Oreta hits ‘grand deception’ by treasury on PEACE bond float

The Bureau of Treasury (BTr) appears to have foisted a "grand deception" on bidders when it auctioned off P35-billion worth of Poverty Eradication and Alleviation Certificates (PEACE) bonds in October 2001, Sen. Tessie Aquino Oreta said yesterday.

"This apparent grand deception was done when the BTr first announced a plan to issue a first set of zero-coupon instruments in the amount of P3.5 billion on Sept. 26, followed by a mock auction on Oct. 5 that was subject to a 20-percent final withholding tax," she said.

The opposition senator based her conclusion on the testimony of National Treasurer Sergio Edeza the other day at the Senate committee on finance headed by Sen. John Osmeña.

She said what happened was that the BTr floated the P3.5-billion worth of bonds as a "decoy" to confuse the bidders on the true features and the sweeteners attached to the much bigger P35-billion PEACE bonds.

"This was seemingly done to deliberately mislead the bidders and make them think that the P3.5 billion zeroes, which were subject to the withholding tax, were the same as the PEACE bonds when the truth was, they had very separate distinct features," she added.

She claimed that the Caucus of Development NGO knew months ahead of the true features of the bigger PEACE bonds, which are tax-exempt.

"The P3.5-billion worth of zero coupon notes, had only served to confuse government securities eligible dealers (GSEDs), save for the Rizal Commercial Banking Corp. which was the agent bank of Code-NGO," she said.

She noted that when the BTr announced on Oct. 9 the auction of up to P50-billion worth of PEACE bonds, the bidders except for RCBC had no inkling yet that these were exempted from the 20-percent final withholding tax, unlike the P3.5 billion zero coupon bond float.

Oreta said that a "clear" proof of this "deception" was the wide range in the difference of the bids submitted by GSEDs during the PEACE bond auction – from a low of 12.248 percent to a high of 18 percent.

"This was not only highly unusual but also statistically abnormal," she remarked.

She explained that in previous government auction of bonds, the bids were always so close that the difference between them was less than half a percentage point.

She said that the six percent difference between the highest and the lowest bidder indicated that not all of the bidders knew of all the sweeteners attached to the PEACE bonds, particularly the sweeteners.

"This deliberate attempt to confuse the bidders could be part of the strategy to make sure that Code-NGO, through its agent-bank RCBC would corner the sale of the PEACE bonds," Oreta claimed.

She said it was no surprise that RCBC submitted the lowest bids because Code-NGO knew as early as five months before the actual auction about the tax exemptions and other sweeteners in the PEACE bond deal. – Efren Danao