In April 1912, the Royal Mail Ship (RMS) Titanic, Great Britain’s most opulent luxury passenger ship, sank after hitting an iceberg in what could be the worst peacetime sea disaster at that time.
The Commission on Audit (COA) may have detected an iceberg that could sink populist Rodrigo Duterte’s ship after stumbling upon about P42 billion of his government’s 2020 funds under the General Appropriations Act (GAA) that were transferred to the Procurement Service-Department of Budget and Management (PS-DBM).
The PS-DBM awarded juicy supply contracts to the undercapitalized Pharmally Pharmaceuticals Corp., controlled by Davao City-based Chinese businessmen with close links to the president and his former economic adviser, Michael Yang.
The company was set up only in 2019 and had no track record in transacting business with the government, a red flag that PS-DBM ignored because it was only looking at the company’s political connections.
Pharmally’s P11-billion contract for surgical face masks, plastic face shields, test kits and personal protective equipment (PPEs) was just the tip of the iceberg.
It appears the people behind Pharmally also got more contracts using shell companies to make it appear PS-DBM awarded contracts to other companies. In fact, another company with links to Pharmally got a P37-million deal for medical-grade face shields from the health department.
The Senate Blue Ribbon committee has to dig deeper into the Pharmally medical supply scandal to find out how many more deals the company got from PS-DBM and the health department under other names.
Michael Yang and his associates could have gotten other deals not only from the health department.
At the lower house of Congress, the teachers’ representatives, Alliance of Concerned Teachers (ACT), found that the Department of Education had transferred more than P6 billion to PS-DBM to buy computers, accessories, and learning materials.
It turned out only 7 percent of the computers had been distributed to teachers in Metro Manila. The transferred funds remained unspent and could have been returned to the national treasury, wasting resources that could have been spent on teachers’ computers.
During the coronavirus pandemic, how much funds have been transferred from the line agencies to PS-DBM? It would appear the PS-DBM is a government within a government, spending at will the funds approved by Congress for line agencies.
Since its creation in 1978, the PS-DBM has been procuring small and common materials for the entire executive branch, like pens, bond papers, clips, and other office supplies.
It made money by marking up prices for these office supplies, which could be a waste of resources as the line agencies could go directly to manufacturers and supplies to buy the items, saving on the costs added by PS-DBM.
Some sectors found the PS-DBM office to be redundant and an opportunity to make money — a case of graft. It would appear the PS-DBM is the government’s “laundromat” as prices of the “common supplies” could be inflated. There could also be “ghost” and recycled deliveries.
The public would not know the extent of business dealings between PS-DBM and Michael Yang and his business associates who made profits from lucrative government contracts not only from the health department but from other line agencies that had transferred their funds.
At the center of PS-DBM is a lawyer, Lloyd Christopher Lao, who was strategically appointed to the position just in time for the health department’s buying spree to address the coronavirus crisis.
Lao used to work under the office of Christopher Lawrence “Bong” Go before he was elected to the Senate in 2019. Go had occupied an office created for him when Duterte was catapulted to power on an anti-crime and anti-corruption platform.
Lao was investigated in an extortion case in the housing board when he was appointed to that government agency. But he managed to get appointments to other agencies because of his political connections. He helped in Duterte’s 2016 presidential campaign.
Lao had also applied for a position in the Office of Ombudsman in Mindanao.
At the PS-DBM, Lao was given a free hand on how to spend all money transferred to his office from line agencies. He was not even reporting to the budget secretary, Wendel Avisado, who quit his position before the scandal broke out.
Could Lao be reporting directly to the president and his former boss, Go, who has oversight on the health department as head of the Senate health committee?
Could a loyal Lao be taking instructions only from his bosses when he ignored due diligence and awarded billions of pesos worth of contracts for medical supplies to Pharmally?
Could he have looked the other way when the PS-DBM inspection team signed deliveries of surgical face masks even without physically seeing the products? Or when the PS-DBM staff accepted the deliveries of face masks even without a purchase order?
Lao could not answer so many questions from senators on why he deliberately ignored government procurement procedures to favor contracts with Pharmally.
His only excuse was the pandemic. His office was rushing the procurement of medical supplies because there was a demand and the costs were very high.
But the pandemic was not an excuse to throw away due diligence and government procurement laws. There are procedures spelled out in many government memoranda and circulars on how to protect government funds.
If Lao did not strictly observe these rules, could he have recklessly ignored the procedures because he knew he was protected by people above his pay grade?
There would be no Lloyd Lao who willfully cut corners if there were no Duterte and Go, who made sure they had someone who did the dirty linen for them.
Lao played a key role in the scheme to defraud the government, awarding deals involving a Chinese businessman who is very close to the president.
It was this businessman who created Pharmally with a group of young Davao City-based businessmen who were naive enough to flaunt their affluence, buying luxury sports cars and wearing branded clothes in Senate hearings.
In the eyes of the public, Duterte and Go showed they were living very simple lives. Duterte was even proud of his mosquito net but not everyone knows if they got any of the fat profits Yang and his young Chinese businessmen made from government deals.
The senators must dig some more. They might unearth a smoking gun linking Duterte and Go to the anomalous dealings between Lao and Yang.
The senators have barely scratched the surface on the Pharmally deals. But they hit an iceberg like the one that sank the Titanic. It could eventually sink Duterte’s populist government.