Love of money is the route

THE GUYS down here in my barangay (village) already knew that some scandalous deals in the Aquino (Part II) administration involved certain low profile supporters of the ruling Liberal Party (LP), which happened to be headed by our leader Benigno Simeon, aka BS.

The latest, of course, was none other than the Inquirer scoop on the unethical and illegal “wash sales” of more than P14 billion worth of treasury bonds, done by state-owned Development Bank of the Philippines, or DBP.

That our leader, BS, allowed some wealthy supporters of the LP to implant their minions in DBP, occupying top sensitive positions in the bank, has not been a well-kept secret in banking.

This was only the government financial institution with total resources of more than P450 billion, ranked as the 6th largest bank in the Philippines.

DBP reportedly incurred some P700 million in losses from the “wash sales,” but —to top it all—the transactions were actually part of a window dressing maneuver to hide even bigger losses from its government bond holdings.

From what I gathered, the bank resorted to the “wash sales” to stop the bleeding in its treasury unit that earlier poured some P17 billion—cash, of course—into long-term treasury bonds.

They were 20-year bonds—the government securities with the longest maturity. Look, 20 years would be enough time to raise an entire generation.

That was actually the first doubtful move by the bank, with its treasury unit going “all in” for 20-year instruments, which naturally should offer the highest interest rates, precisely because … well, who else would want to tie down cash for 20 years, right?

Our contacts in banking argued that DBP, as a state-owned institution with specific missions in its charter, had no business stashing that kind of money in government securities, because it was already the government.

DBP actually planned to deal the 20-year bonds in the capital markets, and just like in any buy-and-sell operation, the bank had to take risks. For one, the market price of the bonds could easily change and go against the bank.

And that it did. Barely a year after DBP went into that vault-emptying 20-year-bond buying binge, the yields on 20-year bonds turned against its position. Huge losses would surely show in its financial statements.

Thus it had to resort to the fake transactions known as “wash sales,” making it appear that DBP already unloaded the entire P17 billion worth of 20-year bond holdings.

As part of the script, the bank then supposedly bought the same amount of 20-year bonds, no longer for dealing in the markets, but as an off book item, meaning, the big losses in trading would no longer show.

It was just that the bank had to cherish and hold them until the maturity date— more than 18 years from today.

The DBP website said that “its primary objective is to provide banking services principally to cater to the medium and long-term needs of agricultural and industrial enterprises with emphasis on small and medium-scale industries.”

There—its mandate has always been to lend money to promote industries, particularly those that private banks would not want to touch. Instead of lending out the money, DBP preferred to tie down some P14 billion on bonds for next three or four administrations.

In a way, DBP just fell in love with cash. Yes, it took the route of DPWH and other government outfits that would rather keep the money than spend it on vital projects. DBP would be the banking version of the phenomenon called “underspending” under the Aquino (Part II) administration.

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Recently the issuance of passports by the Department of Foreign Affairs (DFA), suffered a rather noticeable slowdown. It could be the bureaucratic red tape, but then again …

The reason could be this rare blunder done by the DFA, because from what I gathered, the DFA entered into a one-year contract with a new printer for the high tech security passports: Apo Production Unit.

For the longest time, the DFA hired the Bangko Sentral (BSP) exclusively to print the passports. For one, BSP owned and operated its security printing plant complex in Quezon City, making security documents like bank notes—yes, the paper peso bills.

The DFA even relied on the BSP in the passport modernization project, such as the machine-readable passports in 2007 and in 2009, the high tech biometric passports.

The so-called e-passports carried encoded images, or even ultra-thin holographic laminates, or even tamper-proof electronic microchips.

In other words, the BSP has always operated the only government printing facility that could make security documents.

Question: Why did the DFA suddenly drop the BSP?

More interesting still was that the replacement, Apo itself, has been widely known in the government as an inept outfit.

Most interesting of course was that the DFA awarded the one-year contract to Apo without public bidding.

The website of Apo claimed that it could handle “the printing of accountable forms and sensitive high quality [and] volume printing needs of Philippine government agencies and offices.”

The track record of Apo nevertheless should tell us an entirely different story. It was the same printer of the LTO for vehicle plate stickers. The job has been delayed.

Also, Apo bagged the BIR contract to print the cigarette tax stamp, which the BIR wanted on every cigarette pack sold by the tobacco companies to check on tax payments. Guess what—the project was also delayed.

Another delayed Apo job was the seaman’s books, which was contracted, for and in behalf of Marina, by the ever-bungling DOTC. The United Filipino Seafarers in fact filed graft charges against public officials, claiming that Apo won the contract as the lowest bidder, simply because Apo did away with vital security features in the seaman’s books, which were actually required by the International Maritime Organization (IMO) and the International Labor Organization (ILO).

Moreover, under the cute administration of former President Gloria Macapagal Arroyo, the same Apo was caught printing campaign materials for one of its board members and the relatives of two other company officers, who were then running for various public offices. The last time I checked, that was illegal.

As an excuse, Apo insisted that it was a “private” corporation and therefore it could print campaign materials even for its own officers. Proof: Apo was registered with the SEC as a nonstock, nonprofit corporation. Another proof: Its employees were members of the SSS, and not the GSIS.

Nobody reminded Apo that it was under the government unit, Philippine Information Agency (PIA), which was as government could be.

Funny, boss, because Apo recently changed its classification from “private” to “government” corporation, since our dear leader, BS, supposedly already issued as executive order placing Apo under the Presidential Communications Operations Office (PCOO).

And so, being a government corporation, Apo could just obtain any contract from any government outfit without the benefit of public bidding, no matter what the rules on procurement would have to say.

But the more important issue actually should be its capability—you know, would it really deliver on the DFA contract for millions of high-tech e-passports?

Yet our beloved Department of Budget and Management, or the DBM, was said to be ready to award to Apo an even longer contract for the e-passport printing job—something like 10 years. Our source even called the award as “imminent.”

From what I gathered, Foreign Affairs Secretary Albert del Rosario actually had misgivings about the Apo contract, but a ranking PCOO official (i.e. somebody in the Palace) prevailed upon him.

Of course Del Rosario did not sign the contract himself. One of the DFA undersecretaries signed it.

Finally, just what mysterious group was behind this anomaly, perhaps the group supplying the expensive materials for the e-passports, would be the group that would make a lot of money in the end.