Ombudsman indicts local execs over fertilizer fund scam

Central Office of the Ombudsman Building, Agham Road, North Triangle Diliman, Quezon City
(Photo from Wikipedia/Judgefloro)

MANILA – The Office of the Ombudsman has found probable cause to indict two former governors and other local officials of Rizal, Masbate, Butuan City, and Buenavista, Agusan del Norte, including private suppliers, for their involvement in the PhP728-million fertilizer fund scam.

Ombudsman Conchita Carpio Morales ordered the filing of cases for violations of Sections 3(e) and 3(g) of Republic Act No. 3019, or the “Anti-Graft and Corrupt Practices Act”; and Sections 65.3(1) and 65.2 (d) of the Implementing Rules and Regulations of RA No. 9184, or the “Government Procurement Reform Act” against the following:

Province of Masbate

Antonio Kho, ex-Governor; Roger Rapsing, ex-Provincial Administrator/Bids and Awards Committee Chairman; Alex Rivera, President of Hexaphil; Victoria Ajero, Area Agriventures, Inc. Manager and Collector;

Butuan City

Leonides Theresa Plaza, ex-Mayor; Salvador Satorre, City Agriculturist; Adulfo Llagas, City Treasurer; Arthur Castro, Assistant City Treasurer; Rodolfo Evanoso, General Services Officer; Bebiano Calo, Accountant; Danilo Furia, City Budget Officer; Melita Loida Galbo, Supply Officer; Lucio Lapidez, Representative of Feshan Philippines, Inc.;

Buenavista, Agusan del Norte

Percianita Racho, ex-Mayor; Lucio Lapidez, Representative of Feshan Philippines, Inc.;

Province of Rizal

Casimiro Ynares, Jr., ex-Governor; Danilo Rumbawa, OIC-Provincial Agriculturist and Bids and Awards Committee member; BAC members Romulo Arcilla, Eugene Durusan, Victorina Olea, Eduardo Torres, Danilo Collantes and Virgilio Esguerra; and Mallyne Araos, representative of Feshan Philippines, Inc.

Aside from graft charges, Morales also dismissed from the service were: Rapsing, Castro, Llagas, Furia, Galbo, Rumbawa, Almajose, Arcilla, Jr., Durusan, Olea, Torres, Collantes and Esguerra, for grave misconduct, dishonesty, and conduct prejudicial to the best interest of the service and were meted out the accessory penalties of cancellation of civil service eligibility, forfeiture of retirement benefits, and perpetual disqualification from reemployment in the government service.

The case arose from the unlawful disbursement of funds which formed part of the PhP728-million fertilizer fund allocated for the implementation of the Farm Inputs and Farm Implements Program (FIFIP) of the Department of Agriculture (DA) released by the Department of Budget and Management (DBM) in February 2004 under Notice of Cash Allocation No. 222447-I.

On April 22, 2004, the provincial government of Masbate represented by Kho, entered into a Memorandum of Agreement (MOA) with the DA-Regional Field Unit V, as one of the beneficiaries of the FIFIP entitling the province to a Php5,000,000 sub-allotment from the DBM.

Pursuant to the MOA, Kho approved two purchase requests for 7,143.33 bottles of Hexaplus (11-7-1) liquid fertilizers with a cost of PhP700.08 per bottle, or for a total amount of PhP5 million, procured through direct contracting in favor of Hexaplus as exclusive distributor.

The purchase order for 2,499 bottles of Hexaplus was issued and paid on April 28, 2004 while the remaining 4,642.33 bottles were paid on Dec. 29, 2004.

Based on the investigation, several irregularities in the procurement were uncovered such as reference to specific brand names; no sufficient justification presented in resorting to direct contracting; and the eligibility requirements of Hexaphil were spurious as it submitted fake or expired business permits and licenses from the Fertilizer and Pesticide Authority and the Securities and Exchange Commission.

Investigation found that the city of Butuan was also a beneficiary of PhP5,000,000 under the FIFIP.

To facilitate the utilization of the fund, a MOA between the city represented by Plaza and DA-RFU XIII was executed on April 12, 2004.

Two days later, a purchase request for 3,333 bottles of liquid organic fertilizer at PhP1,500 per liter/bottle was approved by Plaza.

The contract was awarded to Feshan on April 23, 2004 after four local suppliers purportedly declined to submit quotations.

Documents show that the fertilizers were delivered and paid prior to the award.

The 15-page resolution said that public respondents Plaza, et al. manifested partiality, evident bad faith or, at the very least, gross inexcusable negligence while discharging their official functions.

The reference to a specific brand resulted to the disqualification of other suppliers as the product was exclusively distributed by Feshan.

The municipality of Buenavista as FIFIP beneficiary received PhP3,000,000 through a MOA entered into between the municipality represented by Racho and DA-RFU XIII.

However, records show that the transaction was made without any authority from the Sangguniang Bayan of Buenavista.

The amount was received by the municipality in two tranches: PhP1,950,000 on March 31, 2004; and PhP1,050,000 on May 7, 2004.

Using this fund, Racho approved on March 9, 2004 the purchase request for 2,000 bottles of Bio-Nature at PhP1,500 per liter/bottle.

Racho subsequently approved the purchase order in favor of Feshan despite non-compliance with the technical specifications of the municipality.

Notwithstanding the product specification discrepancy, the municipality issued two checks dated April 6, 2004 and May 7, 2004 in favor of Feshan totaling PhP2,880,000 and were encashed on the same dates.

The 2004 Annual Audit Report made by the Commission on Audit said that the purchase of the 2,000 bottles of Bio-Nature organic liquid fertilizers was overpriced by as much as PhP2,750,000 as the cost of fertilizer per bottle in the market was only PhP125.

The 12-page resolution said that “the manner and speed by which the transaction was consummated show that Racho acted with manifest partiality and evident bad faith in conspiracy with Lapidez in causing undue injury to Buenavista, giving Feshan unwarranted benefits.”

It can be recalled that in April 2015, Racho was ordered dismissed from the service after she was found guilty of grave Misconduct in connection with the anomalous procurement of fire hydrants in 2004.

The Office of the Ombudsman found probable cause to indict a former governor of Rizal province, including members of its Bids and Awards Committee (BAC) involved in the fraudulent bidding and purchase of 2,455 bottles of liquid fertilizer in 2004 amounting to PhP3,682,500.

Records show that on April 19, 2004, the province of Rizal represented by Ynares entered into a MOA with the DA Region IV-A and received the amount of PhP5,000,000 under the Ginintuang Masaganang Ani (GMA) program of the DA.

Ynares authorized the procurement of the fertilizers through direct contracting notwithstanding the presence of other suitable suppliers.

The 28-page resolution said that Ynares, et al. consummated the transaction despite badges of irregularities such as Feshan’s expired license to operate; the requirement for open competitive bidding was disregarded giving Feshan the opportunity to demand higher prices; and that there was overpricing by as much as PhP3,237,341 as the prevailing market prices of similar items ranged from PhP160 to PhP170 per bottle only.

“The failure of the public respondents to conduct a public bidding and their adherence to Bio Nature Liquid Fertilizer violated procurement laws leading to a lost opportunity to get the most advantageous deal for the government,” Morales said.