In a privileged speech, the son of ousted President Joseph Estrada alleged that Pagcor had opened 12 slot machine arcades with private partners and investors, with five more set to open.
Quoting reports from slot machine arcade operators, Estrada said almost P2 billion in revenues for the government had instead gone to the private partners.
Estrada called on the Senate to investigate Pagcor’s deals in aid of legislation.
However, Edward King, Pagcor spokesman, said the allegations by Estrada are a "rehash story" which had already been raised and answered.
"Given the magnitude of investments, what we pay (lease) is an appropriate and sound decision of Pagcor," he said. "All these issues were raised and answered in the past."
King said Pagcor pays 38 percent of its proceeds as rent to owners of slot machines and that all of its earnings go to the national government.
Operating the slot machines does not violate the Pagcor charter because it is not in partnership with foreign firms, but is a lease arrangement, he added.
Estrada had charged that Pagcor, by circumventing the provisions of its charter, or Presidential Decree 1869, "changed the contracts by secretly doing away with the agreements with its partners and replacing them with lease contracts for slot machines."
PD 1869 specifies that Pagcor has the exclusive franchise to operate casinos and slot machines in the country except in the special economic zones as authorized by law, he added.
Estrada claimed Pagcor made it appear in the contract that it was merely leasing the slot machine equipment from foreign manufacturers with the rental fee stipulated at 40 percent of the gross revenues derived from the arcades.
"This… is patently deceptive," Estrada said.
"It is a mere cosmetic makeover of a deal that was not only illegal, but also immoral and flawed from the very beginning. It is a mere ploy that hopes to avoid criminal liability," he said.
The 40 percent reportedly offered by Pagcor for the rental fees was excessive "because the cost of new slot machines and lease improvements can be recovered in full in several months," he added.
Estrada said when Pagcor sought the legal opinion of Government Corporate Counsel Amado Valdez in 2002, the firm was told that the nature of the agreements "essentially grants a franchise under the guise of supplying slot machines."
Valdez also noted that the 40-percent income granted to private investors is in excess of the maximum 10 percent allowed under Section 11 of PD 1869.
Estrada said Pagcor had also disregarded an Aug., 2002 order by President Arroyo to abort its slot machine arcade project on the basis of morality.
"Whatever happened to the directive of Mrs. Arroyo?" he asked. "Is Mr. (Efraim) Genuino (Pagcor chairman and chief executive officer) playing deaf or did he just ignore the order of his boss? Is Mrs. Arroyo aware of this?"
Mrs. Arroyo’s statement came only after a series of media exposés on the project were aired in relation to the participation of private entities, he added.
Estrada said the 12 Pagcor slot machine arcades are located at City Hotel, Pan Pacific Hotel, Hyatt Marina Hotel, and Ambassador Hotel in Ermita, Binondo Leisure Hotel and the Premiere Hotel in Sta. Cruz, all in Manila;
Westin Philippine Plaza, Networld Hotel and Atrium Hotel in Pasay City; Garwood Hotel in Cebu City, Apo Hotel in Davao City, and Cavite Coliseum in Bacoor, Cavite.
Five other slot machines are to be set up in Cebu City, Manila Jockey Club in Carmona, Cavite; Hotel Sogo in San Pedro, Laguna; Subic International Hotel at the Subic Free Port, and in Palayan City, Nueva Ecija, he added.
Estrada claimed among the private firms or individuals involved in the slot machine arcade projects are Skylove Recreation House of the British Virgin Islands, Six-in-One Amusement and Entertainment Corp. and the Alfredo Benitez Group.
The slot machine arcades are competing with the existing slot machine operations of Pagcor, the revenues of which go to the government, he added.
King said it was a "wise decision" to lease the arcades because Pagcor could not buy its own slot machines.
"We would need a huge amount to put up an arcade, but we do not have money because we are not allowed to have retained earnings under the Pagcor charter," he said.
King said it is also impractical to buy the slot machines, which can easily "become obsolete" through the years.
"In fact, in the General Appropriations Act of 2002, it is indicated that government agencies should go into leasing of IT equipment rather than buying," he said.
"The degree of risk of becoming obsolete call for us to go for lease. If we did not go into this arrangement, where would we get P1.3 billion? We are in fact still able to provide the government revenues."
Amid Estrada’s revelations, Press Secretary Ignacio Bunye said yesterday "it is within Pagcor’s authority" to promote cockfight betting through the internet.
Bunye said the internet gaming company Philweb Corp. was commissioned to take charge of Pagcor’s internet-based games.
On the other hand, Rene Figueroa, Pagcor vice president, said telesabong is intended to increase the revenues of the gaming firm’s internet operations.
Philweb will act as its technical and marketing consultant, he added.
Telesabong could generate as much as P60 billion a year in earnings for Pagcor, Philweb said. — With reports from Pia Lee-Brago, Aurea Calica