PGMC accuses PCSO of favoring Pacific Online

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The company supplying the majority of lotto terminals in Luzon on Tuesday accused the Philippine Charity Sweepstakes Office (PCSO) of “bending over backward” to accommodate a rival firm and renewing the latter’s contract without the benefit of a public bidding.

In a press briefing, the lawyer of the Malaysian-owned Philippine Gaming and Management Corp. (PGMC) said that its rival, Pacific Online Systems Corp., and the sweepstakes regulator were “deceiving” the public in extolling the virtues of the new deal signed for lotto operations in Visayas and Mindanao.

“They cannot claim that Pacific Online agreed to a reduction in their fees because this is not a contract renewal and not a contract extension,” PGMC lawyer Jose Bernas said in the briefing Tuesday. “Pacific Online’s contract had already expired. This is a new contract. So they’re going [up] from zero to 7.7 percent.”

By his line of reasoning, Bernas said the “new contract” between PCSO and Pacific Online should have been subjected to a public bidding for the sake of transparency—a process that PGMC was willing to participate in.

The growing spat between PGMC, on one side, and PCSO and Pacific Online, on the other, has its roots in the decision of the sweepstakes operator to renegotiate contracts with licensees in late 2010, soon after President Aquino assumed office.

After its initial hesitation, Pacific Online agreed to cut its fees from 10 percent of all lotto receipts in its Visayas-Mindanao franchise area to 9.85 percent. PGMC—which was long assumed to have held an exclusive franchise for the Luzon area—insisted on being paid its old rate, citing the validity of its existing contract.

Last year, PCSO allowed Pacific Online to lease lotto equipment to operators in the Luzon area, which had been presumed to be the exclusive franchise area of PGMC since the popular betting games were introduced in the country in the mid-1990s.

In allowing Pacific Online to enter Luzon, PCSO officials noted that the long-held belief that PGMC held an exclusive franchise in the lucrative geographic area was, in fact, merely presumed and not explicitly stated in their agreements.

This was disputed yesterday by Bernas, who said that the exclusivity granted to PGMC was explicit.

“[PCSO Chair Margarita] Juico has been on the PCSO board since the time of [the late President Corazon Aquino],” he pointed out, adding that she had never objected to PGMC’s exclusive hold on the Luzon lotto operations in all these years, until recently.

In an earlier statement, however, Juico justified PCSO’s insistence of pushing lotto frachisees to reduce their rates, pointing out that the Senate blue ribbon committee had noted in its final report that existing contracts were disadvantageous to the government.

“While we understand and respect that our service providers are business entrepreneurs who naturally need to have certain returns on invested capital, we urge that they be fair, reasonable and have a heightened sensitivity toward PCSO’s own needs to satisfy all our stakeholders both in the government and private sector,” she said.

Bernas countered that pressuring PGMC to renegotiate a valid contract would have a long-term detrimental effect on foreign investors who might now reconsider their investment plans, given the example being set by a government agency like the PCSO.

PGMC, he said, was considering bringing its plea directly to President Aquino, in addition to preparing legal action against the PCSO officials involved.

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