The President’s gravy train

How generous is President Arroyo to certain members of Congress?

Generous enough these days to do the unthinkable, even if it is a no-no in government: Issue postdated checks to support the pet projects of favored legislators, who have been getting millions of pesos for such things as high-school scholarship funds (even if high-school education is free) and other questionable projects.

The checks were released from the President’s Social Fund. Also known as the president’s "pork barrel," the fund was created by a Marcos decree that required the Philippine Amusement and Gaming Corp. or Pagcor to remit its earnings to support the president’s development projects. According to the Commission on Audit, the fund stood at P1.16 billion as of Dec. 31, 2004.

Among the recent releases from the President’s Social Fund were three postdated checks, each worth P5 million, that were sent to the Department of Education in late August by no less than the Presidential Management Staff. The checks, all issued to the DepEd, were drawn from Account No. 001512-1027-66 at Land Bank’s Malacañang branch. The first check was dated Sept. 3 and has since fallen due. The two others were dated Dec. 3, 2005 and March 3, 2006. All of them were signed by Erlinda M.B. de Leon, officer in charge of the President’s Social Fund, and Deputy Executive Secretary Susana D. Vargas.

(A Malacañang source, however, said Vargas probably did not know about the postdated checks. The deputy executive secretary customarily pre-signs the checks and lets the president dispose of them as she sees fit, the source said. The president is the sole approving authority of the fund releases.)

PCIJ saw the original copy of the checks and obtained facsimiles which are posted in its blog.

Although the postdated checks named DepEd as payee, their backs clearly pointed to who these were for: "c/o A. M. Diaz Scholarship Program, 2nd Dist. Zambales" or the 78-year-old Antonio Magsaysay Diaz who represents the second district of Zambales.

The checks arrived barely a week after Diaz himself sent to DepEd a current-dated P5 million check also sourced from the president’s pork. In an accompanying letter, he informed DepEd officials that President Arroyo "generously committed P20 million from her Social Fund to supplement the scholarship fund for Zambales" and that the P5 million represented the first tranche.

Diaz and his chief of staff have verbally requested the DepEd central office to deposit the check to its account and transfer the fund to the Zambales schools division, from which they would get the money for distribution to scholars under the "GMA-Diaz Scholarship Program," according to DepEd sources.

Tied to impeachment?

DepEd sources said they strongly suspect the fund releases were tied to the Palace maneuvers to kill the impeachment complaint against President Arroyo. They pointed out that Diaz himself stated in his letter that the first tranche was released last Aug. 21, a Sunday and a non-working day.

The release came two days after the House justice committee closed the debates on the three impeachment complaints and two days before it was to resume hearings to address "prejudicial questions" and vote on the supposedly proper complaint. In the end, the committee decided to act only on the original complaint filed by lawyer Oliver Lozano, but threw it out for lacking in substance.

Rep. Ronaldo Zamora said pro-impeachment congressmen at first thought Diaz, a member of the Liberal Party which had called for Arroyo’s resignation last July 10 over the jueteng and "Hello, Garci" scandals rocking her administration, was sympathetic to them. "He came to us and claimed he was outraged" over the House justice committee proceedings, Zamora recalled.

Last Sept. 6, however, Diaz was among the 158 House members who voted to adopt the House justice committee report junking the Lozano complaint.

On the day the House was set to vote on the committee report, sources said Malacañang also called DepEd about the P5-million check for Zamboanga del Sur Isidoro Real Jr. Like Diaz, Real voted yes. He explained to his colleagues that the President has helped his province. "We have never had it so good," he said.

The Malacañang source said the Office of the President has issued to other government agencies checks that are really intended for the congressmen, and is frantically coordinating with the accounting units of these agencies how to transfer the sums to the legislators and their projects.

The source, however, is not privy to the number of congressmen-recipients of the president’s pork and the amount of the largesse.

Wrong move?

By releasing the checks to government agencies like the DepEd, Malacañang may have bitten more than it can chew.

Up to now, the DepEd central office has yet to transfer Diaz’s first P5 million to the Zambales schools division. Neither has the department given in to Malacañang’s escalating pressure to sign the receipt for the three postdated checks.

Sources said education officials, who have repeatedly asked to be "insulated from politics" amid the political crisis hounding Arroyo, object to the Palace’s move to use DepEd and other agencies to cover the money trail from Malacañang to the congressmen. "This is clearly laundering. DepEd is being used to launder the money for the congressmen," a DepEd official said.

The official also said DepEd would be violating government account practice by accepting the postdated checks issued by the Palace.

Another source also said the DepEd accounting office at first thought the Palace checks were spurious because the entries were handwritten. "It’s crudely done," the official said.

In business, the issuance of postdated checks is a common practice. Postdated checks are used to ensure collection and pay debts, among other purposes. These serve as guarantees of payment.

A senior state auditor said there are no rules prohibiting or allowing postdated checks in government "because there is no transaction of this nature in government." Told about the postdated checks from the President’s Social Fund, he said: "I’ve never seen one (a government-issued postdated check) in my 26 years as an auditor. That is a highly abnormal transaction. Government never issues postdated checks."

Zamora, who was former President Joseph Estrada’s executive secretary, said it is the first time he has ever heard of a government agency issuing postdated checks. "A government check is good immediately. Very clearly, they (Malacañang) don’t have the money," he said.

Accountability is another major reason the DepEd has refused to cooperate with either Diaz or Malacañang. "There would be no accountability at all. Diaz does not officially appear as the recipient. How do we liquidate the amount? How can we compel him to liquidate? What do we tell COA?" the DepEd official said.

Without DepEd’s help, Diaz cannot get the P20 million the Palace has committed to him. The checks can only be deposited at the DepEd central office’s trust account. None of its field offices have trust accounts.

If Diaz were to deposit his checks with DepEd field offices, these would have to be booked as income in the general fund and, as a result, revert to the National Treasury. Diaz would still have to wait for the Department of Budget and Management to issue an authority to transfer the money back to the DepEd through a special allotment release order and notice of cash allocation.

Diaz’s fame

In the House of Representatives, Diaz is famous for his fondness for giving out his pork barrel to scholars in his province.

Zamora said colleagues have questioned Diaz’s scholarship programs because these were construed as vote-buying. The Zambales representative would have as many as 20,000 scholars in a year, each receiving as little as P150, he said.

A COA source said Diaz makes it a point to personally hand out the checks to his scholars instead of the scholar’s school billing the DepEd division, which is the normal procedure.

Diaz’s initial P5 million under the GMA-Diaz Scholarship Program is supposed to be given out to 14,285 scholars in 22 public high schools in his district. This means each scholar wound end up with P350. "It’s nutty. High-school education in public schools is free," said an education official. "The president was ill-advised to approve this."

Diaz has gained fame for other reasons.

Last February, "Viva Hot Babe" Ana Lea Javier filed a sexual harassment and oral defamation case against the congressman before the justice department and the House ethics committee for "shamelessly kissing" her in public and making sexual advances to her in his beach resort in Iba, Zambales. Javier is the same starlet whom Metro Manila Development Authority chair Bayani Fernando was caught kissing at a fund-raising event.

In September last year, Diaz threatened to resign as congressman when he failed to get the post of deputy speaker for Luzon (this went to Tarlac Rep. Benigno Aquino III), only to change his mind a day after when he failed to get support and sympathy from his colleagues. He had also claimed to be disillusioned because of the public’s low public regard for congressmen, lawmakers abusing their privileges and the delay in the release of their pork barrel.

Even earlier, Diaz gained the moniker "Furusato King" for holding meetings of the oversight committee on Mt. Pinatubo which he chairs at the expensive Japanese restaurant Furusato. He quickly wrote a personal check equivalent to the total expenses of the oversight committee after he was roundly criticized. Diaz is also chairman of the committee on science and technology and vice chairman of the committee on public works and highways.

The President’s pork

When she was president, Corazon Aquino, through Executive Order 338, deemed it best to have all the Pagcor earnings her office was entitled to deposited with the National Treasury. This meant the funds were released in the same way most government funds were.

Fidel V. Ramos, however, authorized Pagcor earnings to be deposited under a separate account at any government bank through Memorandum Order 22-A issued in the same month he assumed the presidency. His move was supposed to give Malacañang flexibility in managing the President’s Social Fund.

From the Aquino to the Estrada’s presidencies, the Social Fund was managed and administered by the Presidential Management Staff. On March 15, 2002, however, President Arroyo ordered the fund transferred to the Office of the President through Memorandum Order 56. At the time of the transfer, the President’s pork totaled P1.09 billion.

The fund has not entirely escaped COA’s notice, especially its accounting. For example, when the money was transferred in 2002, no corresponding entry for the transfer was made in the Office of the President’s books of accounts.

The Palace invests a portion of the fund in treasury bills, other marketable securities and high-yield accounts. COA noted that the P2.3-million interest earned on a P119.4-million time deposit sourced out of the President’s Social Fund and placed with Land Bank last year was not taken up in Malacañang’s books. Neither was P603 million that represented marketable securities and their proceeds recorded in its books, it said.

It has also taken the Office of the President awhile to conform with a COA circular on how to book Pagcor earnings for the President’s Social Fund under the new government accounting system. It had persisted in treating Pagcor money as liability when it should be classified as income, specifically as a share from Pagcor/PCSO (Philippine Charity Sweepstakes Office).

The Office of the President has since made the corrections — after repeated reminders from COA, topped by an audit observation memo the audit agency issued the Palace last Feb. 14.