Discovering unexplained wealth

Recent news have made much of “unexplained wealth” and the need for government officials to be transparent about their financial status while serving in government. By not declaring one’s wealth, a public officer or employee commits an act of dishonesty because he deprives the duly constituted government of the right to collect the correct taxes accruing in its favor from his undeclared wealth. Unexplained wealth, punishable in the Philippines, represents that portion of a person’s wealth which he cannot explain. Ownership of land and other properties, the total cost of which is way beyond a public officer’s or employee’s capacity to pay, can be questioned on this ground.

What does the law say? “Whenever any public officer or employee has acquired during his incumbency an amount of property which is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income from legitimately acquired property, said property shall be presumed prima facie to have been unlawfully acquired” (Sec. 2, Republic Act 1379). “If the respondent is unable to show to the satisfaction of the court that he has lawfully acquired the property in question, then the court shall declare such property forfeited in favor of the State, and by virtue of such judgment, the property aforesaid shall become property of the State: Provided, That no judgment shall be rendered within six months before any general election or within three months before any special election. The Court may, in addition, refer this case to the corresponding Executive Department for administrative or criminal action, or both” (Sec. 6, RA 1379).

Under the law, unexplained wealth includes:

1. Property unlawfully acquired by the respondent, but its ownership is concealed by its being recorded in the name of, or held by, the respondent’s spouse, ascendants, descendants, relatives, or any other person.

2. Property unlawfully acquired by the respondent, but transferred by him to another person or persons on or after the effectivity of this Act.

3. Property donated to the respondent during his incumbency, unless he can prove to the satisfaction of the court that the donation is lawful.

As a lawyer and after several years of experience in the Commission on Audit doing not only audit but also exhaustive study on the workings of some government agencies and their officials, I have found a way of discovering the probable existence of unexplained wealth on the part of public officers and employees. Although the initial results of this inquiry may not be that conclusive as to stand judicial scrutiny, it could at least warrant the start of a more in-depth investigation under RA 1379, otherwise known as “An act declaring forfeiture in favor of the state any property found to have been unlawfully acquired by any public officer or employee and providing for the proceedings therefor.” These initial results or preliminary findings may provide enough basis for starting a more extensive fact-finding investigation on the properties of a public officer or employee concerned.

The following steps may be taken to establish the existence of unexplained wealth of a public officer or employee:

1. Secure a certificate of property holdings of a public officer or employee from the City or Provincial Assessor’s Office concerned for the past ten years;

2. Secure from the LTO a list of motor vehicles with complete description registered in his name and the total estimated costs thereof for the past ten years;

3. Examine his statement of assets and liabilities and income tax returns (ITRs) for the past ten years;

4. Determine from the ITRs the yearly increase of his income and the yearly increase of his property holdings for the past ten years;

5. Compare the two in no. 4 and note the difference;

6. If the increase in his property holdings cannot be supported by a corresponding increase in his income, then you require him to explain the difference; and

7. If his explanation is not acceptable, report his case to the City or Provincial Fiscal concerned who will proceed according to the instructions contained in RA 1379 or the Office of the Ombudsman pursuant to its authority under the Constitution and RA 6770.

The following example illustrates the above procedure:

Mr. A has acquired one parcel of land costing P1 million every year from 2001 to 2010 or a total of P10 M. During the same 10-year period, he has acquired one car costing P1 million every year or a total of P10 M. His income tax returns from 2001 to 2010 show a yearly declared income of P1,000,000 or a total of P10 million in 10 years. Compare the yearly increase in his total assets of P2 million (P1 million for land and P1 million for car) or a total increase of P20 million in 10 years with the yearly increase in his income of P1 million or a total income of 10 million in 10 years. The difference is P10 million (P20 million total asset increase less P10 million total income increase). With this difference of 10 million, the government can start asking him to explain the difference. If his explanation is acceptable, then he will have no problem. But if his explanation is not acceptable, then a forfeiture case under RA 1379 can be initiated by the Office of the Ombudsman which is empowered to investigate and initiate the proper action for the recovery of ill-gotten and/or unexplained wealth amassed after February 25, 1986 and the prosecution of the parties involved therein under RA 6770.

Once a case for “Unexplained Wealth” under RA 1379 is successfully established, the Office of the Ombudsman can prosecute the case against the public officer or employee concerned while the Bureau of Internal Revenue, if the evidence so warrants, can probably initiate a case for tax evasion against them and collect all the corresponding taxes due on the property.

The discovery of unexplained wealth and the collection of the corresponding taxes due thereon will surely make a difference both in the prosecution of those who are liable under RA 1379 and in the generation of more tax revenues for the government. It is hoped that the appropriate government agencies concerned with discovering unexplained wealth can indeed practice due diligence in ensuring that the country’s wealth does not go into individual pockets but is used for the common good.

(Note: Emmanuel Dalman is a member of the International Council (Board of Trustees) of Couples for Christ and was formerly a commissioner of the Commission on Audit.) He is an advocate of good governance and is active in one of CFC’s social ministries, St. Thomas More & Associates, aimed at promoting transparency and good governance in both public and private entities.)