Press Release
January 24, 2012

Chairman Committee on Accountability of Public Officers & Investigations
Sponsorship Speech

PCSO Blue Ribbon Committee Report (C.R. No. 95)
January 24, 2012, Tuesday

Mr. President, Colleagues, ladies and gentlemen, good morning.

Ang mandato ng PCSO ay ang pagtulong sa kapwang nangaingailangan. And tunay na diwa ng PCSO, samakatuwid ay ang pagkakawanggawa.

Ngunit ang naibunyag sa mga pandinig ng Blue Ribbon ay ang pagwawaldas ng pondo ng PCSO sa mga bagay na walang anumang kinalaman sa pagkakawanggawa. Maraming kumita. Marami ang dapat parusahan.

The Blue Ribbon Committee hereby presents Committee Report No. 95, filed on December 19, 2011, pursuant to Senate Resolution No. 519 introduced by Senator Panfilo Lacson and this representation, which directed the Blue Ribbon Committee to "conduct an inquiry, in aid of legislation, into the alleged numerous violations of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act by the previous board of the PCSO with the end in view of crafting legislative measures to curb corruption and promote transparency and accountability in government."

The Blue Ribbon hereby presents the essential findings of its Report.

Intelligence Funds:

The Senate Blue Ribbon Committee strongly recommends that a case for plunder be filed against former president, Gloria Macapagal-Arroyo and former Vice-chairman and General Manager of PCSO, Mrs. Rosario Uriarte.

While they were public officers, Gloria Arroyo and Rosario Uriarte teamed up to rob this nation of at least P244.5M. Mrs. Arroyo made mere marginal notes and caused the release of millions of pesos to her partner, Mrs. Uriarte who was in charged with the disbursement, use, and liquidation of excessive amounts of intelligence funds.

Mrs. Uriarte's memoranda of request for millions of pesos cited the need to address threats against the operations of the PCSO. However, her own certifications immediately revealed that the funds were allegedly also used to address terrorism, bomb threats, and bilateral security relations.

Because of the excessive amounts released, the Blue Ribbon Committee asked for proof of lawful use of public funds. However, neither Gloria Arroyo nor Rosario Uriarte ever presented the actual receipts and documents to prove that these funds were indeed used lawfully.

The Committee strongly believes that there is probable cause to believe that these funds were in fact illegally diverted into the pockets of Gloria Macapagal-Arroyo. Despite facing a possible case for plunder, not a single receipt has been presented by Gloria Arroyo or Rosario Uriarte to save themselves. The Committee emphasizes the fact that particularly for the year 2010, an election year, the PCSO already used up Php 137.5M out of the Php 150M that was approved by the former president at the beginning of the year. For the same year, PCSO's intelligence fund budget was larger than the intelligence fund budget of the Philippine Army, ISAFP-GHQ, DND, Navy, and the NBI.

Additionally, Gloria Macapagal-Arroyo and Rosario Uriarte should likewise be charged of technical malversation for using confidential/intelligence funds as "blood money" for two OFWs sentenced to death in Kuwait.

Donations of vehicles to members of the Catholic Church:

The Blue Ribbon finds that the donations of vehicles to various Catholic priests did not violate the constitution because: a. The donation was for a public , and not a religious, purpose; b. The donation was not for the personal use of any religious leader;

Excessive Public Relations/Advertising Spending: The findings of the Commission on Audit, together with the testimonies laid down in the Blue Ribbon hearings, revealed PCSO's excessive and unnecessary spending on public relations. Billions were spent on promoting betting in lotteries that could have been spent more wisely on charity.

The extravagant expenses for the sole purpose of promoting legal gambling are superfluous and pointless by the fact that there will always be people who will do anything to take a stake for the chance of winning big.

Equipment Lease Agreement (ELA) for PCSO's online lottery system:

The Blue Ribbon hearings revealed that a company named International Totalizator System (ITS) initially offered to sell lotto equipment to PCSO for US$25M. However, instead of buying the equipment from ITS, the PCSO conducted a public bidding to lease - not buy - the same equipment from private suppliers. The decision to lease instead of purchase continues to impose a great financial burden to the Philippines. Instead of spending US$25M to purchase the machines, the government instead has paid the private suppliers approximately US$148M in rental fees and will continue to pay exorbitant amounts until the contract ends in 2015.

Despite proper bidding, the resulting award of the contract not only to the winning bidder but also the two other losing bidders is questionable. The Blue Ribbon strongly recommends further investigation by the Ombudsman.

For signing the ELA, Manuel Morato, former PCSO Chairman and Rosario Uriarte, former PCSO General Manager should be charged with a violation of the Anti-Graft and Corrupt Practices Act for allegedly entering, on behalf of the government, into any contract that is manifestly and grossly disadvantageous to the government.

STL Remittances, Ambulance donations, and co-mingling of Funds:

There have been unaccountable remittances of the Small Town Lottery (STL) Share to Congressmen and to the Philippine National Police (PNP).

The Blue Ribbon also finds that there has been mismanagement in the execution of PCSO's Ambulance Program. LGUs of a higher class category were prioritized compared to the lower class category of LGUs.

Co-minggling of funds by PCSO was also revealed. This violates the PCSO Charter which apportions the net receipts into 3 funds: 91) Prize Fund; (2) Charity Fund; and (3) Operating Fund.

Joint Venture Agreement:

The Contractual Joint Venture Agreement (CJVA) between TMA Group of Companies (TMA) and the PCSO entered into for the purpose of establishing the first thermal coating plant in the Philippines should be cancelled for being grossly prejudicial to the Philippines. Violations of the Anti-Graft and Corrupt Practices were in fact committed by members of the former board of the PCSO.

The Blue Ribbon Committee finds that the profit-oriented CJVA entered into by PCSO violates the latter's own Charter, which limits the agency's ability to engage in profit-oriented ventures only to "health and welfare, related investments, programs, projects and activities."

Likewise, the Committee finds the contract grossly disadvantageous to the government because while it requires a Php 4.4 billion investment by the private company and a P42 billion worth of contribution on the part of the PCSO, the profit-sharing agreement flips the scenario and gives the private company an 80% share in the profits while leaving only 20% for the Philippine government.

Possible conflicts of interest in relation to properties of Manuel Morato

When the Prime Gaming Philippines (PGPI) purchased the property of TF Ventures - a company partly owned by Manuel Morato - the latter was relieved of the burden of paying for the corporate debts owned by TF Ventures to the banks. It can be inferred that PGPI's resulting assumption of the debts of Morato's company is partly an act of gratitude extended to Morato, who was a member of the Board that approved the Equipment Lease Agreement of PGPI's related company, PGMC.

Further investigation must be pursued on possible conflicts of interest by Morato and his dealing with PGPI.

Possible Election Offenses Committed by Manuel Morato

This representation did not participate in the drafting of this portion of the report because Mr. Morato's alegations involved an assertion against me. Senator Drilon's concurring opinion is hereby adapted as part of the Main Report.

The Blue Ribbon hearings revealed that Morato has committed violations of the Omnibus Election Code and the Philippine Constitution. During an episode of "Dial M" - a production of PCSO paid for by public funds, he was shown campaigning in favour of a certain presidential candidate and criticizing several other candidates as well. This is a form of electioneering or partisan political activity aggravated by the blatant use of public funds, an act the is punishable under section 79(b) of the Election Code.


The Blue Ribbon Committee, as a result of this legislative inquiry, has made the following recommendations:

FIRST. The PCSO Charter must contain penal provisions, imposing criminal, civil, and administrative liabilities for acts in violation of the charter, committed by its employees and private individuals.

SECOND. The PCSO management must improve its accounting system to ensure that no further unlawful co-minggling of funds shall occur in the future.

THIRD. PCSO funds must be allocated only to various national programs which are relevant to the mandate of the agency.The current board of the PCSO must immediately undetake an extensive assesment and evaluation of the programs and projects to ensure that public funds are used within the scope of this agency's mandate.

FOURTH. The Commission on Audit should come up with new auditing guidelines for confidential and intelligence funds which should include, among others, the following provisions:

  • A requirement to submit, in classified and sealed envelopes, the vouchers/receipts/other documents evidencing the expenses charged against a specific allocation of confidential or intelligence fund.

  • A certification by the officer in charge of liquidation that these envelopes can be accessed for lawful purposes.

  • A sealed copy of the proposals/requests submitted in support of the request for confidential or intelligence funds, which may be accessed for lawful purposes.

FIFTH. A law must be passed establishing a Treasury Single Account which can help government track and discover, on a timely basis, transactions which may appear irregular based on the frequency of fund releases and the amount of the said releases.

SIXTH. The PCSO's budget for public relations/advertising purposes should not exceed 1.8% of its gross sales. The PCSO is not a private corporation that needs a huge advertising budget.

SEVENTH. Passage of a law that would augment PhilHealth funds with PCSO funds.

EIGHTH: PCSO should stop giving shares of the proceeds of its operations to the PNP because it is not primarily mandated to implement projects within the mandate of the PCSO.

NINTH. Shares from PCSO's operations that are released to congressional and/or other local government units should be strictly regulated. Without proper liquidation, future releases should not be made.

TENTH. The PCSO management should ensure that the strictest standards are established and observed to ensure that public funds are devoted only for public and non-secular purposes.

Let this serve as a reminder to all that public funds are sacred as it is imbued with public interest. Public funds could only be spent for authorized public purposes and can never be used as a private piggy bank.

Ang kaban ng bayan ay para sa sambayanan at hindi sa mga ganid sa kapangyarihan.

Mr. President, ladies and gentlemen, thank you and good morning.

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