Malaysian firm suing PCSO

The local gaming unit of large Malaysian conglomerate Berjaya is taking the state-owned Philippine Charity Sweepstakes Office (PCSO) to court for alleged violation of an exclusive equipment leasing deal and forging a new contract with another company without prior bidding.

Publicly listed Berjaya Philippines has disclosed to the Philippine Stock Exchange that its wholly owned subsidiary, Philippine Gaming Management Corp. (PGMC), passed a resolution authorizing the “filing of civil, criminal or administrative cases before any court, tribunal or quasi-judicial agency in connection with any matter related to or arising from the equipment lease agreement with PCSO dated Jan. 25, 1995.”

PGMC said it based its lawsuit on the alleged violation of its exclusivity agreement between PCSO and PGMC over the Luzon area and a prohibition against entering into government contracts without public bidding.

The local Berjaya unit and the PCSO, as lessee, had entered into an agreement wherein PGMC, as an exclusive provider, leased to the state gaming firm specialized lottery equipment for the operation by PCSO of an online lottery in Luzon. The agreement, which will expire in August 2015, stipulated that PGMC would be the sole provider or exclusive source for all lottery equipment in Luzon.

Such judicially approved agreement provided for PCSO to pay PGMC rentals “from all of (PCSO’s) online lottery operations in (Luzon),” the disclosure claimed.

“However, based on Pacific Online’s disclosure dated June 1, PCSO and Pacific Online entered into an agreement allowing Pacific Online to lease to PCSO lottery equipment for PCSO’s online lottery operations in Luzon,” the disclosure said.

Pacific Online Systems Corp., a unit of leisure estate and gaming firm Belle Corp., develops, designs and manages online computer systems, terminals and software for the Philippine gaming industry. It brokers technology from global suppliers of integrated gaming systems and leases to PCSO the equipment needed for its online lottery operations in the Visayas and Mindanao.

In early June, Pacific Online announced an agreement with the PCSO for the roll-out of an additional 600 lottery terminals in the company’s concession area. These will be on top of the 2,039 lotto outlets the company already operates on the PCSO’s behalf.

For the 600 new stalls, Pacific Online will charge a leasing fee equivalent to 7.85 percent of each terminal’s gross revenue. At the same time, it agreed to slash its lease fee for existing terminals to 9.85 percent for the year 2012 from 10 percent.

Industry sources said that PCSO, for its part, was claiming that this was not a new contract and that there was no exclusivity in territory under the old contract with PGMC.

Nevertheless, PGMC president Paulino Soo was authorized by the board to file the lawsuit against the PCSO.