Winston faces graft charges
(The Freeman) - December 1, 2015 - 9:00am

CEBU, Philippines - The Office of the Ombudsman has filed graft charges against gubernatorial candidate Winston Garcia and 10 other former Government Service Insurance System (GSIS) officials over an alleged anomalous awarding of a project in 2004.

The Ombudsman filed one count of graft before the Sandiganbayan against Garcia, former GSIS president; Enriqueta Disuanco, executive vice president for operations; Benjamin Vivas Jr, senior vice president for information technology; and retired Supreme Court Justice Hermogenes Concepcion Jr, chairman of the board of trustees.

The others were former GSIS trustees Elmer Bautista, Fulgencio Factoran, Florino Ibañez, Aida Nocete, Reynaldo Palmiery, Elenita Tumala-Martinez, and Leonora Vasquez-de Jesus.

The Ombudsman said the former GSIS officials “took advantage of their official positions through manifest partiality or evident bad faith or gross inexcusable negligence” by awarding the GSIS eCard project to the Union Bank of the Philippines in May 2004, “without complying with the requirements/procedures” provided by law.

The filing was based on a Commission on Audit special audit report that concluded that the award of the eCard project to Union Bank was anomalous as it disregarded the law on public bidding. 

The act, COA said, also caused “undue injury” to Land Bank of the Philippines, which it said was deprived of transaction fees it would have received from the previous check administration system.

Garcia, though, said the filing of the case was based solely on COA’s "reckless findings".

"This case has been languishing in the Office of the Ombudsman for more than 10 years and was only decided this year, less than a year before the May 2016 elections. The award of the eCard project to Union Bank, which formed the basis for the charges, is the same eCard project presently implemented by the incumbent officials of GSIS despite efforts of the later officials to look for better terms from other banks,” said Garcia, who is challenging incumbent Governor Hilario Davide III for his post.

He is running under the One Cebu Party while Davide is under the banner of administration Liberal Party.

Garcia said the eCard project continues to be implemented by the GSIS up to the present without any objection from the COA.

"How can the eCard project be disadvantageous to the government when until now the GSIS is still using it? They tried to replace it but nobody is capable of providing such a system," he said.

In fact, Garcia said, the eCard project continues to be the most successful program of GSIS, having generated billions of savings and earnings after replacing the costly check system in the disbursement of loans, claims, and pensions.

The filing of the graft charge, he said, "establishes a dangerous precedent which will place in jeopardy similar banking transactions of other government institutions and corporations."

Garcia explained that the graft charges filed by the Ombudsman "has the effect of requiring government agencies to conduct public bidding in their choice of banks.”

He said "the standard rule is to give discretion to government institutions in their choice of banks for deposits and disbursement of funds without the need of public bidding for as long as the banks have been approved by the BSP to handle government deposits."

He said the rationale behind the no-bidding requirement in the choice of a bank by government institutions is the “recognition of the cardinal norm that banking is always based on the trust and confidence of a client on the bank.”

“These qualities cannot be quantified nor subjected to a specific amount where a bidding process can be based," Garcia said.

Before the eCard system, pension and claim payments, including loan proceeds, were processed through the check system principally administered by Land Bank, which Garcia said was costly and inefficient.

Since GSIS was processing no less than five million pension and claim payments and approved no less than 12 million loans annually, the cost in using the check system in disbursing these payments was “staggering”.

He said that with the eCard, GSIS saved P200 million per year and was able to lower the maintaining average daily deposit by P6 billion a year.  In terms of interest income alone, GSIS was allegedly able to generate at least P300 million a year from the diversion of the P6 million to other high-yielding interest instruments rather than maintaining it as a deposit maintaining balance with Land Bank.

In addition, Garcia said, administering the check system led to “insurmountable inefficiency”.

He argued that the only requirement before a government agency can transact with a bank is BSP Circular 110, which requires that the bank it would be dealing with must be BSP-approved to accept government deposits.

He also said that even if no bidding was made in the choice of Union Bank, GSIS conducted a selection process where it invited all BSP-approved banks.

Only three banks reportedly accepted the invitation: Union Bank, Bank of the Philippine Island, and Development Bank of the Philippines. Land Bank allegedly refused to participate despite the invitation.

Garcia explained that Union Bank was selected by the GSIS technical committee for several reasons. One, it provided seamless disbursement of the proceeds of loans, claims, and pensions from the time they are processed and approved.  Another was that Union Bank required a lower maintaining balance (P1 billion) compared to either BPI or DBP (P2 billion).

The third reason, Garcia said, was that the card offered by Union Bank was more expansive in terms of use and accessibility, as it can be used as an ATM card not only in the Philippines but also abroad. This feature allowed pensioners living abroad to access their pensions outside the country. BPI and DBP cards, on the other hand, allegedly can only access ATMs in the Philippines through the use of the Plus and Visa network.

Garcia also said that the eCard issued to members would not require any maintaining balance. Another argument Garcia mentioned was that Union Bank is also partially owned by the Social Security System, another government-owned corporation handling pensions of the private sector. — /RHM (FREEMAN)

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