PAGC asked to probe GSIS re-insurance scam

The knife cuts both ways.

President Arroyo has asked her newly reconstituted Presidential Anti-Graft Commission (PAGC) to look into a reinsurance scam Government Service Insurance System (GSIS) president Winston Garcia said he has scuttled to save government funds.

She has also asked the PAGC to investigate all allegations of wrongdoing leveled against Garcia.

Garcia said he has been working to stop the reinsurance scam and that this effort resulted in the National Power Corp. (Napocor) saving at least P500 million in property insurance costs.

The GSIS chief welcomed the President’s order for the PAGC to investigate the mismanagement charges against him and to look into the alleged re-insurance scam.

The President told Palace reporters that she has asked the three-member body led by PAGC Chairwoman Constancia de Guzman to look into the matter even before graft complaints have been filed against the GSIS chief before the Office of the Ombudsman.

The President expressed satisfaction that Garcia personally and publicly confronted the issues and accusations thrown at him by his detractors.

The President said Garcia has clearly presented the GSIS’ healthy financial condition under his stewardship over the past three and a half years. The GSIS achieved its highest gross revenues of P75.2 billion and highest net revenues of P37.5 billion in 2003.

"Whether or not I am satisfied (with Garcia’s performance) is beside the point," the President added. "I’m going to ask my PAGC to look into it also... and when I asked my PAGC to look at the allegations against (Garcia), I will also ask them to look at the reinsurance scams that Garcia says he was reforming and which (Garcia said) is the reason for all this black propaganda against him."

Without going into detail, the President alluded to the admissions made by Leyte Rep. Eduardo Veloso that he and his wife, who is an insurance broker by profession, met personally with Garcia to lobby for their family’s reinsurance business.

The President has kept her distance from the issue regarding the call for Garcia’s ouster from GSIS. However, she instructed Garcia to defend himself before the bar of public opinion after the allegations against him began coming out in media.

In a separate statement, Garcia said he hopes the PAGC investigation "would stop, once and for all, the baseless speculations and the trial by publicity that I have been subjected to as a result of the reforms I have instituted in the GSIS to stop bureaucratic corruption and inefficiency."

He expressed confidence that the PAGC "would be able to ferret out the truth as it has done in the past."

He thanked Mrs. Arroyo for not giving in to "the demand of the mob" for his removal from GSIS without a formal investigation of the charges against him. He also thanked the President for acknowledging his accomplishments in GSIS.

Garcia is the son of former Cebu governor Pablo Garcia, a staunch political ally of Mrs. Arroyo in Cebu, where she won by the most number of votes in the May 10 elections.

The President said the allegations against Garcia began when the issue of high-salaried executives in government-owned and controlled corporations and government financial institutions was raised against the GOCCs and GFIs that are losing money and relying on government subsidy to survive.

The President recalled how she was pressured to remove certain Cabinet members and other government officials through organized mass actions - as is now the case with Garcia.

"But let me say that when the red flags start coming out and demanding the ouster of anybody, (mass actions are) the least effective thing," she said, referring to the militant groups supposedly representing government employees’ unions picketing the GSIS and demanding Garcia’s removal for allegedly improper transactions through the agency.

For the first time, Mrs. Arroyo admitted that former Social Security System (SSS) chairman Vitaliano Naniagas was "sacrificed" because of such protest pickets.

However, the President added that she removed former Bureau of Internal Revenue commissioner Rene Bañes not to cater to wishes of picketing BIR employees seeking his ouster.

Bañes’ was sacked, she said. "because of an objective thing on revenues, because our tax collections went down by half and we missed our deficit ceiling by one-half."

The President cited similar ouster calls she was confronted with in the past though she stood her ground and retained former tourism secretary Richard Gordon and former education secretary Raul Roco.

She described Roco as a "good public servant" and credited Gordon, who is now a senator, with being the person responsible for the double-digit growth of the tourism industry.

Meanwhile, Garcia has filed administrative charges against GSIS senior vice president Nora Saludares of grave neglect of duty, grave misconduct, conduct prejudicial to the best interests of the service and violation of reasonable office rules and regulations.

He said Saludares committed at least five counts of misconduct in her capacity as manager of the surety department and chairman of the GSIS Board of Reinsurance Treaty Underwriting Committee, which handles millions of pesos in reinsurance business.

Garcia said that between September 1999 and January 2000, Saludares approved the applications of Gammon Shipping Ltd. and Dorfin Marine S.A. for judicial high-risk bonds. This resulted in the cancellation of two writs of attachments issued by the courts over one ship, the MV Lucky Oceans, later renamed MV Glorious, which was not flying the Philippine flag.

"As a result of the transaction, the GSIS was exposed to a risk of losses amounting to a total of P9.2 million," Garcia said. "Per underwriting guidelines, the documents submitted by the said applicants were inadequate."

Saludares also allegedly approved two surety bonds issued on behalf of Teledyne Marketing and Construction Corp. despite the "irregularities and deficiencies," he added.

The collateral securities were also not sufficient to cover the value of the two surety bonds issued in favor of Westmont Bank and Land Bank of the Philippines, Garcia said. This resulted in the exposure of the GSIS to risk of losses amounting to P33 million and $150,000 for the two bonds, he said.

Another charge against Saludares is that she allegedly approved the issuance of a surety bond on behalf of Biddeford Co. Inc. in favor of the Napocor "contrary to the guidelines and procedures of proper underwriting" and despite certain "irregularities," he said.

Saludares was ordered to answer the complaint within three days, after which an investigation into the matter will begin.