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P38-B passport crony deal a conspiracy orchestrated at Yellow regime’s highest levels

THE secretive, highly anomalous turnover by a government firm to a crony company of the P38-billion monopoly contract to print Philippine passports under the previous administration was a conspiracy that involved several state entities, the Commission on Audit has indicated.

This means that the scheme which would yield for a private company P11 billion income in 10 years – and has already generated P3 billion from 2016 to 2018 – could have only been ordered and orchestrated in the highest offices of the previous regime: either at the level of Executive Secretary or President Aquino himself.

According to the COA’s data, the award of the monopoly business of printing 45 million of the country’s new machine-readable passports from 2016 to 2026 was disguised as the printing contract announced in 2015 between the Department of Foreign Affairs (DFA) and the APO Production Unit (APU). The Bangko Sentral ng Pilipinas (BSP) had previously been doing the job.

APU is a small government firm which was headed during President Aquino 3rd’s watch by Milagros Alora, who had been assistant secretary during the Cory years, and which was under the supervision of Presidential Communications Operations Office head Herminio Coloma, Jr, who was an undersecretary in the Cory regime.

However, kept secret was the fact that APU subcontracted, without any bidding, the passport-printing job to a dubious entity it claimed was a joint venture. The claim that it is a JC is farcical: APU owned only 10 percent of it, which was in the form of the cost of its lease of the land where the printing facility was located.

Malabon company
An obscure, formerly Malabon-based company, United Graphic Expressions Corp. (UGEC) owned 90 percent of the joint venture. APU also only received 10 to 30 percent of the outfit’s profits while UGEC got 70 to 90 percent.

A small printing outfit owned since 1988 by one Henry Cureg and his in-laws, it drastically increased its capital when E. Zobel, Inc. – the holding company of billionaire Iñigo Zobel’s family – and a secretive Haldane Investments NV (based in the tax-haven island nation of Mauritius) invested in 2012 into the firm. Zobel and Haldane Investmetns now hold 40 percent of the firm. The owners of a new investor, United Paragon Corp., which has 36 percent of the company, are so far unknown.

As the Commission on Audit disclosed: “While the printing contract was between APO and the Department of Foreign Affairs, the actual printing and accounting of income generated…were performed and lodged with the JV.” Making about P400 for each of the 3,000-4,000 passports produced daily, UGEC, according to COA data, generated P1.5 billion in profits from 2016-2017.

Some P1 billion of these came as lease payments for the JV’s use of its machines. UGEC’s profit margin largely accounted for the increase in passport fees from P520 to P920 now, and is not due, as DFA has been trying to claim, to its higher cost as an electronic passport.

The COA indicated that the scheme for UGEC to get the monopoly business was undertaken in a conspiracy by APU (or its supervising body the PCOO) with the private firm.

“Analysis of the events disclosed that when UGEC submitted its unsolicited proposal (to set up the joint venture) in May 2014, both APU and UGEC were already aware that the e-passport services were to be awarded (in October 2015) to APU for a ten-year period (2016 to 2026). That is why the JV covers the same period.”

Several government agencies rushed to issue their approvals for APU’s JV with UGEC, so that the two entities inked their agreement on Nov. 24, 2014. Alora through Facebook’s Messenger service claimed that “the National Economic and Development Authority, the Government Procurement Board, the budget department, the science and technology department, and other pertinent agencies” had approved the JV – all within six months after UGEC submitted its unsolicited offer.

Alora though wasn’t telling the whole truth. The procurement board’s approval was categorically for APU to directly print the passports, and not to subcontract it to a private firm.

There was a conspiracy, the COA concluded in so many words. A few months before the JV was set up in November 2014, two government agencies, the DFA led by Alberto del Rosario and the BSP, moved so that APU would get the contract, which it would then de facto turn over to UGEC.

Stinks of conspiracy
The BSP then was headed by Governor Amando Tetangco, who had been appointed to the post by President Arroyo in 2005, and surprisingly reappointed in 2011 by President Aquino.

The chronology of events stinks of conspiracy. On Feb. 24, 2014, the DFA asked the only three entitles authorized to print “government accountable forms” (e.g., excise-tax stamps and passports)—the APU, the BSP, and the National Printing Office—if they were interested in getting the contract to print the new e-passports.

Just six days later on March 6, 2014, the COA reported, the BSP – which had been previously printing the passports for five years – said it didn’t want the job. And in just two months, on May 5, UGEC submitted its unsolicited proposal to set up the joint venture that would eventually get the subcontract to print the 45 million passports for P38 billion.

Why did the BSP in just six days tell the DFA that it was not interested in the job, which automatically made the APU the only available printer since the NPO, which was also under Coloma, didn’t even respond? I was told there was no Monetary Board resolution on that decision. There was also no study by the BSP’s research division, which under its procedures undertakes a comprehensive analysis on any major decision to be made by the Monetary Board.

That the BSP rushed to tell the DFA that it was not interested in printing the passports is certainly anomalous given the following.

Most advanced printer
The BSP has the most advanced printing facility in the country, and even in Southeast Asia, with its assets and machines valued at P12 billion – humongous compared to APU JV’s P300 million. It prints annually over 100 million of our currency and other high-security documents such as treasury bills. Why would it refuse the job of printing just four million passports annually? It had five years of experience in printing passports, and had sub-contracted the work of supervising and ensuring its quality and integrity to a French firm. Why did it refuse what would have been simply a renewal of the contract?

BSP sources told me that officials there were told that to undertake the printing of the new e-passports would require that it invest huge amounts of money. That was a lie: UGEC invested only P193 million in machines, microscopic compared to the BSP’s P12 billion worth of printing machines and facilities.

Sources also disclosed that the DFA deliberately withheld its payments for the passport-printing as a message that if the BSP gets the contract it would report a loss in its books, which would hurt is prestige and that of its governor.

P300 million unpaid
To this day indeed, the DFA hasn’t paid the BSP some P300 million for the passports it had printed. There were also allegations made by congressmen in 2017 that passport issuances were deliberately delayed, and then blamed on the BSP, to pressure it not to bid for the printing of the new e-passports. In contrast, the DFA has been punctual in paying the JV for the passports it has been producing.

Whoever made the decision to tell the DFA that it was not interested in the e-passport printing – I am not certain if it was Tetangco – should have been fired, if not for colluding in a corrupt deal but for stupidity. Why did the BSP refuse a monopoly business which any feasibility study would easily show would generate at least P1 billion in annual profits for it, which in fact UGEC has been making?

My sources, however, disclosed that in the six days between Feb. 24, 2014 (when the DFA asked for bidders for the printing job) and March 6 when the BSP informed it that it wasn’t interested, there were meetings between key BSP officers from the head office and its Security Printing Complex from Quezon City and some key Malacañang communications officers.

If anybody would have the gall to order the BSP, especially its governor Tetangco, and of course del Rosario, to do something anomalous, it could only be the country’s president.


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