Economic reforms don’t need Charter-change!

By Frank Wenceslao
Frankly Speaking

A survey of the Makati Business Club members reported 70% of them aren’t in favor of amending the Constitution especially extending the 6-year presidential term of office. The businessmen know whereof they speak.

Let’s be reminded it’s the anticorruption regimes of Park Chung-hee in South Korea and planted in Singapore by Lee Kwan Yew that made the two countries “Asia’s Economic Dragons” without constitutional amendment becoming a subject of debate in the studies conducted by U.S. think tanks of those “economic miracles.” Charter-change is the Filipinos’ kneejerk reaction to solving our country’s problems when five (5) completely new Constitutions haven’t dented endemic corruption agreeably our most debilitating problem.

When people blame the Constitution for our problems, I’m reminded of the quotes from the immortal Shakespearean drama “Julius Caesar” that our U.P. High School class was asked to memorize especially what Caesar told Brutus, “Men at some time are masters of their fates. The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.”

Since we won’t have leaders like Park or Lee, let’s rely on the improved and effective tools, weapons, prosecutorial discretion, and expeditious judicial proceedings continuously developed in the international cooperation agreements against corruption (ICAACs) such as the UNCAC, OECD agreements on exchange of information on taxation, money laundering, ill-gotten assets, etc. and the country’s bilateral treaties such as the PHL-USA Mutual Legal Assistance Treaty (MLAT) to minimize corruption which is the best that can be done because it’s impossible to eradicate, said Lee.

Lee’s advice is to let windows of economic opportunities open for foreign investment to come in local businessmen will always resist. And let the people realize the advantages of having foreign firms such as Wal-Mart and U.S. or European department store chains our leaders traveling abroad are fond to do shopping that monopolists like Henry Sy and his ilk have been opposing. This is the real problem that hundreds of amendments of the Constitution can’t solve.

The PHL government should now utilize more often the ICAACs, MLAT and other international mandates to fight corruption and see the improving economic situation before embarking on divisive Charter-change. As U.S. Marshalls brought back to the U.S. FilAm fugitives in handcuffs, we have to do the same to current and former public officials, their family members and close associates or private businessmen and individuals that colluded with them and illegally enriched themselves from the proceeds of corruption that the day has come they’d also be extradited back home in handcuffs from foreign countries or vice-versa where they’d be tried according to our international obligations.

The ICAACs and MLAT will be also applied to recover the ill-gotten wealth of Imelda Marcos, her children and siblings especially the late Kokoy Romualdez’s $200-million estate; Gloria M. Arroyo and family; Joseph Estrada and family; dismissed Chief Justice Renato Corona; Janet Napoles with the senators and House members, their aides and other government officials involved in Napoles’ PDAF, Malampaya and DAP scams including Jocjoc Bolante for the P728-million fertilizer scam, etc., more so when in the G20 Summit final agreement to close safe havens for illicit assets and taxes may be reached next year. They better step up and negotiate settlement before they’re left no choice but surrender every centavo they’ve stolen after the safe havens abroad are finally closed by the governments having jurisdiction over them.

Pamusa has meanwhile been informed the U.K.’s Serious Fraud Office has recommended for adoption by Parliament a law similar to the FCPA to stop the flow of illegal funds from the proceeds of foreign corruption into Britain and possessions such as the Caymans, British Virgin Islands, etc. Filipinos have to look for new safe havens to replace the British possessions where to hide ill-gotten assets.

At this juncture, let me refer to a May 2010 issue of FORTUNE Magazine featuring ex-USDOJ’s FCPA Enforcement Chief Mark Mendelsohn, who incidentally signed the letter reconfirming USDOJ’s authorization for Pamusa to work with the FBI in fighting corruption. Per USDOJ authorization Pamusa will submit evidence especially of bribery and fraud for the FBI to determine when federal investigation is warranted and, in the case of FCPA violation, to the USDOJ Criminal Division in Washington, DC. When necessary the USDOJ itself will endorse to foreign counterparts a case better handled by them.

Since the FBI’s plate is always full, Pamusa can expedite determination if a case should be endorsed to the next rung of bringing it to court by our legal counsel helping the FBI with private investigator (asset-search firm) or Pamusa may retain one to hasten evidence gathering. The DOJ and/or the Ombudsman can help by conducting interviews of respondents because at the point when a respondent hears of FBI investigation and knows he/she is guilty, the decision is almost always to negotiate settlement and pay the fines approved by the court rather than risk an enormously expensive court battle and jail.

Lawyers of big companies should study whether their clients are liable to violation of the FCPA and related U.S. laws of cross-border application like money laundering, bribery of foreign officials that include fellow Filipinos, unexplained growth of assets and net worth. Pamusa’s volunteer legal advisers consider many PHL companies liable to FCPA violation when they sell stocks to American citizens; do business and banking transactions; company officials discuss plans in the U.S. that lead to corrupt practices and other acts in furtherance of corruption.

As widely known now, the USDOJ fined Germany’s Siemens AG $1.6 billion to settle and stop investigation of “probable” FCPA violation of Siemens’ fully autonomous foreign companies, namely: Siemens Argentina, Siemens Venezuela and Siemens Bangladesh just because they sold securities and transact businesses within the USA. The fine was later reduced to half or $800 million divided equally by Germany and the U.S.

One may imagine if San Miguel Corporation or Henry Sy’s SM Corporation were fined like Siemens, Daimler (Mercedes Benz maker), Avon Cosmetics, Marubeni Corporation, etc., of hundreds of millions of dollars which are all non-US companies except Avon. Big PHL companies could go under carrying such heavy fines. Hence, big and small PHL companies should have a self-policing system that will review of their foreign transactions especially in the U.S. whether or not a given company will be in FCPA violation which may be soon replicated in the U.K. naturally followed by other UNCAC member countries in Europe.

Unbeknownst to many the worst corrupt practices dragging down the PHL economy that can’t be cured by Charter-change are the big businessmen wittingly or unwittingly aided by the government holding down cottage, small and medium-size businesses (CSMBs) grow faster, expand and create new jobs. The richest Filipinos who own or control chains of merchandising and retail stores, fast foods restaurants and similarly labor-intensive establishments are the worst exploiters of CSMBs in productive activities and destabilize their prices and income leaving CSMB owners and workers no room for growth and expansion, let alone raising real income to improve their quality of life.

IF representatives find Pamusa wrong, we wish to hear from retail giants defend themselves like Henry Sy and his ilk who own the big malls, department stores, fast foods restaurants and similarly-labor intensive establishments that they induce cut-throat competition among CSMBs right at the procurement point in supplying the goods and materials they need. For instance, a department store purchasing agent stirs up competition by showing their prices to competing suppliers of similar products until they arrive at rock bottom price the agent is willing to pay and who may also ask for a kickback. A CSMB owner lacking proper cost accounting celebrates after a big sale to an SM mall not realizing he cut his price with whatever profit margin he has in it at the open competition stirred by the purchasing agent knowing a CSMB owner’s fear to bring home unsold finished products. He couldn’t bear the loss of face to his family, neighbors and workers who will have no work to do.

Hence, competing CSMB owners compute mentally their selling price and profit margin in it without realizing they’re bound to lose more down the road. The CSMB owners are paid with 90-day post-dated checks at 2% monthly or a total of 6% discount rate. Since they are always cash-strapped they discount the check’s full amount immediately at the mall’s bank, say, Banco de Oro after delivering the goods at the full 6% discount for the 90-day period although they only need a smaller amount to pay for a few-days payroll and materials they need to pay in cash to prepare for the next delivery.

Thus, in addition to the price cuts lost to the demand of the purchasing agent, SM or Banco de Oro easily makes additional 6% on a CSMB owner’s money. Before the goods are retailed the store adds at least 50% mark-up over the buying price. But since the given item is “on sale,” a 10% discount is granted to the final buyer. Whether or not SM is paying the taxes on their “secret” profits is naturally part of corrupting the BIR not to look deeper into SM’s accounting books which are always being cooked anyway.

According to a USDOJ forensic auditor, cooking accounting books was one of the main causes of the collapse of America’s corporate giants such as Enron, Worldcom, Arthur Andersen, etc. and could also bury Henry Sy and others like him when Pamusa charges them for FCPA violation and related crimes.

The Dept. of Labor and Employment should wake up and stop the exploitation of the men and women hired as sales personnel by malls and department stores, fast foods and similar establishments for a maximum of only 5 months and thereupon terminated not to be rehired. Labor inspectors are sleeping on the job not seeing through this employment policy is simply to avoid a temporary hire to reach 6-month employment, or he/she becomes permanent and entitled to the rights, privileges and benefits under the law. The employment policy is tantamount to abusing these young women and men who may be their families’ breadwinners or self-supporting students who are forced to stop their schooling abruptly.

The DOLE should require employers to make adjustments by cutting excessive profits and revising investment plans to convert part of their profits to pay in accordance with law a 5-month temporary personnel who permanent after 6-month employment. They must be given a chance to plan their lives on a longer-term basis instead of working for 5 months if they’re hired and be jobless for the rest of the year perhaps 7 months or longer. Just imagine the human resources wasted while Henry Sy and his ilk compete for the stature of being the richest Filipinos while their workers earning the money for them expand their holdings, corporate assets and net worth wallow in poverty.

Is this not a criminal act equivalent to treason? It will be a criminal act when Pamusa under the authority granted by the USDOJ sue Henry Sy and his ilk for violation of the FCPA and related crimes for unexplainable growth of their corporate holdings and personal net worth which can be forensically proved to be beyond the realm of statistical probability or as defined by the USDOJ of coming from “a process or series of actions through which income of illegal origin is concealed, disguised, or made to appear legitimate (main objective); and to evade detection, seizure and taxation.”

The signals are loud and clear that monopolists like Henry Sy and his ilk better shape up or natural forces might sweep them off like what typhoon “Yolanda” did in Leyte and Samar. This is also a warning to Imelda Marcos, her children and siblings (Kokoy Romualdez’s heirs) to step up and negotiate the return of their ill-gotten wealth to the Philippine Treasury. Henry Sy and his ilk should also negotiate a compromise agreement to return to the Philippine Treasury the amount of taxes they’ve evaded by not declaring secret incomes in their merchandizing business in collusion with BIR officials who’d turn state witnesses and point to the incomes and taxes evaded by Henry Sy and his ilk when current and former BIR officials see their unexplained wealth would be dug up also under the ICAACs and MLAT.

Or else, for starters, the President should invoke the MLAT and make an urgent request to the USDOJ to investigate Henry Sy’s SM Corporation and other companies for probable violation of the U.S. Foreign Corrupt Practices Act (FCPA). This can be followed up and expedited through the Joint DOJ-USDOJ Anticorruption Program ready for Sec. de Lima’s signature. It’s not an exaggeration the President will usher in his improved “Tuwid na Landas” that will be his greatest legacy for the Filipino people to reciprocate the opportunity to be President of the Philippines.

Meanwhile, contributions of US-Pinoys and Filipinos at home driven by indignation that the biggest perpetrators of corruption are the richest Filipinos the FORBES Magazine is regularly publishing would soon enable Pamusa to run the Program on its own overseen by the USDOJ. We are hoping though President Aquino will “grab the bull by the horn” and see this opportunity to reform and open up the PHL economy to foreign investors while putting monopolistic Filipino businessmen who don’t play on level field in the right places.

Finally, the research and studies conducted by US-Pinoys who’ve done well serving the U.S. and other foreign governments show that with the correct choices of policies and programs from now President Aquino may yet accomplish an “Economic Miracle” before the end of his term even under existing PHL laws and the country’s international agreements, of course, without amending the Constitution which his successors would keep on course in the coming years.

Aug. 30/14.