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New Expose on Merci and Wendell

New expose on Merci and Wendell

 

Merci, Wendell allow suspects on P5.2-B tax credit scam to escape

Resigned Ombudsman Merceditas Gutierrez and Special Prosecutor Wendell Paras-Sulit have a lot to explain on the flight from justice of the principal suspects in the P5.2 billion tax credit scam.

Couple Faustino and Gloria Chingkoe have jumped bail and flown out of the country in 2009 in what appeared to be a plot to allow them to escape silently and avoid prosecution, according to informed sources, who spoke on condition of anonymity.

The Chingkoes, who, with former Department of Finance officials, face a string of court cases including a plunder rap before the Sandiganbayan, took a flight out of the country a day after the Sandiganbayan issued warrants for their immediate arrest and imprisonment on April 3, 2009 and never returned ever since, they said.

The Office of the Special Prosecutor (OSP), which Sulit heads and which Gutierrez had tasked to handle the court cases against the Chingkoes and former DoF officials involved in the tax credit scam, has been singled out as responsible for their escape, the sources said.

Sulit and his fellow prosecutors did not take any official move to stop the Chingkoes from leaving the country nor bring them back through extradition or any other means, they said.

Neither did they file any motion to cancel the Chingkoes’ authority to travel to Canada and China nor ask the Department of Foreign Affairs (DFA) to cancel their passports.

Sources said the Office of the Ombudsman, through the OSP, filed in 2008 a criminal case with the Sandiganbayan against the people allegedly involved in the scam. The case remains pending before the 4th Division of the Sandiganbayan.

In a subsequent move in 2009, the OSP, through Sulit, filed a separate plunder rap against the same people. The plunder case was handled by the 1st Division of the Sandiganbayan. It was dismissed in a recent controversial decision.

On March 10, 2009, the 4th Division of the Sandiganbayan granted the motion to travel of the Chingkoes to visit China and Canada from March 25 to April 24, 2009.

The Chingkoe couple were facing graft charges at the 4th Division and had posted bail. They were arraigned and the issuance of travel authority was regarded not legally irregular.

But on March 29, 2009, or nine days later, Sulit filed a separate plunder, graft and estafa charges against the Chingkoes and former DoF officials and the plunder case went to the First Division of Sandiganbayan.

The filing of plunder raps was made six days before Faustino was to leave the country, the sources said.

On April 3, 2009, the 1st Division of the Sandiganbayan issued a warrant of arrest against the Chingkoes and the other respondents. Plunder is a nonbailable office and a hold departure order is automatic for the respondents.

But on April 4, 2009, the Chingkoe couple left the country and they have never returned since that day. They have jumped bail and could be regarded as virtual fugitives from law.

From all indications, Gutierrez and Sulit have committed official negligence in the handling of its prosecutorial functions, sources said.

They said the OSP should have immediately filed an urgent motion for the 4th Division to recall or withdraw the travel authority for the Chingkoes in the light of a new development, which was the filing of plunder raps.

Also, the Office of the Ombudsman filed only one plunder case in 2009 – and that was against the Chingkoes.

It was inconceivable that state prosecutors at the Office of Special Prosecutor did not know the two cases. In fact, the OSP handles the two cases before the Sandiganbayan, they said.

 

 

A BRIEFER ON THE MISHANDLING OF THE P5.2 BLN TAX CREDIT SCAM

 

BACKGROUND

The P5.2 billion tax credit scam has been characterized by a series of erratic handling by the government prosecutors.

In 2002, then Ombudsman Aniano Desierto filed several complaints, deemed to be weak and destined for dismissal. Because of the perceived dive, Desierto faced an impeachment complaint filed by then Misamis Oriental Rep. Oscar Moreno.

In 2004, then Finance Undersecretary Inocencio Ferrer Jr., using the now defunct Presidential Task Force 156, orchestrated the filing of a series of weak complaints in what appeared to be another effort to take a dive. Ferrer was exposed and he was promptly dismissed and replaced.

In 2008, the Office of the Ombudsman, through the Office of Special Prosecutor, which is headed by Special Prosecutor Weldell Sulit, filed a criminal case with the Sandiganbayan against the people allegedly involved in the scam. The case is now pending before the 4th Division of the Sandiganbayan.

In 2009, a plunder rap was filed by Sulit et al against the same people. The plunder case was handled by the 1st Division of the Sandiganbayan. It was recently dismissed n a controversial decision. But this is another story.

ISSUE

Accused Faustino and Gloria Chingkoe, two principal suspects in the tax credit scam, have left the country in 2009 and have not returned since then. They have jumped bail. From all indications, the Office of the Ombudsman, through the OSP and SP Sulit, has committed official negligence in the handling of its prosecutorial functions.

FACTS

1. On March 10, 2009, the 4th Division of the Sandiganbayan granted the motion to travel of Faustino Chingkoe ostensibly to visit China and Canada from March 25 to April 24, 2009. Faustino was facing graft charges at the 4th Division over another issue and he had already posted bail. He was arraigned at the 4th Division. The issuance of travel authority was not irregular.

2. On March 29, 2009, or nine days later, the Office of the Special Prosecutor filed plunder, graft and estafa charges against spouses Faustino and Gloria Chingkoe and former DoF officials allegedly involved in the illegal issuance of tax credit certificates. The plunder case went to the First Division of Sandiganbayan. Note that the filing of plunder raps was made six days before Faustino was to leave the country.

3. On April 3, 2009, the 1st Division of the Sandiganbayan issued a warrant of arrest against the Chingkoes and the other respondents. Plunder is a nonbailable office and a hold departure order is automatic for the respondents.

4. But on April 4, 2009, Faustino and wife Gloria left the country and they have never return since that day. They have jumped bail and could be regarded as virtual fugitives from law.

 

QUESTIONS

1. What did the Office of the Special Prosecutor do from March 19, 2009, when the plunder raps were filed, to April 4, 2009, the day the Chingkoe couple left?

Did Sulit et al take steps to withdraw the travel authority, which the 4th Division of Sandiganbayan earlier issued? Since the OSP, under Sulit, handled the two cases before the Sandiganbayan, did it ever take any initiative to inform the 4th Division that plunder charges were filed in the 1st Division?

Official records show that Sulit and company did nothing to stop the Chingkoes from leaving. There were no manifestations whatsoever that plunder raps were to be filed to make the Chingkoes a flight risk.

In fact, they did not inform the 4th Division of the plunder charges filed n the First Division. Also, the OSP did not ask the 4th Division to cancel the earlier travel authority.

In short, the OSP did nothing. For that negligent act, Sulit et al allowed the principal suspect to evade arrest not only for the plunder charges, but also for the any other cases at the Sandiganbayan.

2. The OSP should have immediately filed an urgent motion for the 4th Division to recall or withdraw the travel authority for the Chingkoes in the light of a new development, which was the filing of plunder raps.

Please take note that the Office of the Ombudsman filed only one plunder case in 2009 – and that is against the Chingkoes. It is inconceivable that state prosecutors at the Office of Special Prosecutor did not know the two cases.

In fact, the OSP handles the two cases before the Sandiganbayan.

3. What is more anomalous is that Faustino, through his counsel, informed the 4th Division that because of his medical condition, he could not return to Manila on April 24, 2009. His return by April 24, 2009 was a requirement in his travel authority.

Two years later, he has not returned although he has been reported to have been shuttling regularly between China and Canada. The OSP did not file a motion for the cancellation of his bail, issuance of arrest warrant by the 4th Division, and trial in absentia since he had already jumped bail.

The 4th Division has strangely suspended any hearing or trial since 2009. Also, the OSP did not make any representation or request with the Department of Foreign Affairs for the cancellation of passports of the Chingkoes.

Neither did it ever ask the assistance of local law enforcement agencies or the International Police (Interpol) to track them down. Also, the OSP did not move for their extradition either.

 

CONCLUSION

The OSP has committed official negligence, which is a criminal offense. Suit should be removed from office for official incompetence. It is likely that several OSP people have made money from the Chingkoe case. In local parlance, pinasuka sila ng pera at may kumita (somebody had plotted for them to give bribe money and somebody earned a fortune from them).

 

BRIEFER ON THE TAX CREDIT SCAM

Background:

Tax Credits are credits granted by the Philippine government to qualified beneficiaries of various laws notably the National Internal Revenue Code, the Tariff and Customs Code of the Philippines, the Omnibus Investment Code of the Philippines, the Philippine Fisheries Code and other similar special laws, where the government provides an incentive window for private businesses.

These Tax Credits are evidenced by a Tax Credit Certificate and may be used to settle the holders tax liabilities with the Bureau of Internal Revenue and the Bureau of Customs. In simple term, it is essentially a refund of what they have earlier paid for the governmment. It is transferable to other parties.
Laws provide a mechanism to surrender these Tax Credit Certificates to the Philippine government and exchange them for cash; government agencies provide a window, where the original grantees may assign and transfer ownership of these Tax Credits to other parties under certain conditions.

There are at present three (3) offices in the government that processes applications for Tax Credits and correspondingly issues Tax Credit Certificates for approved claims. These are the Department of Finance’ One Stop Shop Inter Agency Tax Credit and Duty Drawback Center ( “OSS Center” for brevity ), the Bureau of Internal Revenue and the Bureau of Customs.

Essentially, there are three windows under which tax credits may be given, namely:

As a form of outright incentive to qualified enterprises

As a form of refund for taxpayers who have made an overpayment of their tax payments to the Philippine government

As a refund of internal revenue taxes and customs duties paid on materials and inputs used in the production of an export product. Under this scheme, exporters are able to avail of tax and duty exemptions on the inputs in their production by way of

c.1 Locating their operations inside a PEZA declared zone, i.e. export processing zone.

c2. Operating a bonded warehouse or becoming a member of a bonded warehouse.

c3. By paying first for the all the taxes and duties that are due and then applying for a refund of all the taxes and duties paid ,these refunds will come out in the form of Tax Credit Certificates.

 

THE OSS CENTER

Established in February 1992 under Administrative Order No. 266 with the primary mandate of simplifying and expediting the claim for tax credit while preventing the occurrence of undue claims ( i.e. fake tax credits ).

Under EO 38, the OSS Center became a permanent unit at the DOF sometime in 2004.

The OSS Center administers three major incentive programs, namely:
Art. 39 of the Omnibus Incentive law for boi registered enterprises;
Sec 106 of the Tariff and Customs Code for duty drawback claims; and
Sec 112 of the National Internal Revenue Code for vat refund claims.

The OSS Center is managed by an Executive Director and assisted by a Deputy Executive Director. It is composed of an inter agency manpower complement with personnel drawn from the DOF, BOC and BIR. The highest policy making body rests with the Executive Committee.

 

The Tax Credit Scam

Between 1995 to 1998, a total of 61 BOI registered corporation where able to fraudulently acquire around 1,600 Tax Credit Certificates from the OSS Center valued at P 5.2 billion..

These fraudulently issued TCC’s were then transferred to legitimate BOI registered companies which used these TCC’s to settle their tax obligations with the Philippine government. The two largest buyers of these fraudulent tax credits were the 2 largest oil companies in the country – Petron and Pilipinas Shell.

The claims for tax credits of these 61 companies were all supported by fictitious and fake export and import documents as well as fictitious bank remittance documents. Majority of these companies were non operational but were existing and operating in name only.

The era for 1995 to 1998 has been called the First Tax Credit Scam period since the syndicates involved capitalized on the inherent weakness of the tax credit issuance system of the country as the OSS Center failed to detect that these tax credit applications that were filed in that office were spurious and supported by non existent raw material purchases as well as non existent export transactions.

The scam was first discovered and made public in mid 1998. This was limited to the OSS Center and did not involve personnel from the BIR or BOC.
Sometime in 2001 to around 2003, a new round of irregularities were uncovered this time involving the utilization side of he country’s tax credit system unlike the first one which involved the issuance side of the system.

During this period, 3 new modus operandi were uncovered , namely:
Recycling of previously used TCC’s – meaning, TCC’s that had no creditable value somehow found its way to the market and were used over and over again to pay for the tax obligations of a taxpayer who then pays the criminal syndicate a smaller amount as opposed to paying the entire tax obligation

Fake tax credit certificates were also discovered being peddled in the market to unsuspecting buyers. The syndicates capitalized on the lack of security features of the tax credit certificates being used at the BIR/BOC thus allowing them to produce identical replicas of previously issued TCC’s.

No TCC’s – syndicates only used the numbers of previously issued TCC’s and in connivance with BOC personnel, proceeded to issue receipts ostensibly showing that the importer has settled their tax obligations at the BOC.

 

The Investigation

Upon discovery of the scam ( both the first and the second ), the government proceeded on three major strategies:

Identify the individuals who participated in defrauding the government ( both public officials as well as private individuals ) and file criminal charges against them.

Since the tax credit scam resulted in actual financial losses to the Philippine government, the government placed equal importance in moving for the recovery of what has been lost due to the scam.

Finally, the tax credit system was continuously reviewed, studied, overhauled to prevent a repeat of the scam and to address the weaknesses in the system that allowed the parties to defraud the government.

After almost 12 years, the scoreboard of the government would be:

Zero conviction

Less than 1% recovery of what has been lost, worse, some of these recovery were made on the basis of questionable and illegal compromise settlements.

Why this dismal failure? Incompetence of the investigating bodies tasked to investigate these anomalies, gather the required quantum of evidence needed to convict those involved.

Corruption – a second scam occurred – this time involving the very parties tasked to investigate these cases who ended up instead selling the government’s cases against those suspected of being involved.

Questionable legal strategies were pursued leading to a virtual dead end in the prosecution of those involved.

Witness burning – government ended up running after people who had helped them build these cases rather than running after the parties identified to have been involved in the scam.

Inherent weaknesses in our judicial system notably the clogged court schedules.

Absence of continuity in the parties involved in the investigation and prosecution of these cases.

Problems at the Office of the Ombudsman itself as graft investigators, prosecutors were not technically equipped to handle cases involving technical financial matters.

Unresolved turf issues resulting in the failure of the agencies involved to coordinate and share information / evidence that each agency had. end

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