Cash cow: PAGCOR under then chair Efraim Genuino, as previous state audit reports indicated, seemed to have alloted more funds for its officials' meals, golf club memberships and other perks than for government social development and welfare programs. Its new leaders vow for a more accountable, transparent PAGCOR. Photo courtesy of http://media.photobucket.com

Money was not a problem during the past administration for the only government-owned and controlled corporation (GOCC) to oversee legalized gambling in the country – nor it seems was accountability: There just wasn’t any.

The Philippine Amusement and Gaming Corporation (PAGCOR) operates 13 casinos and several VIP slot clubs in major cities around the country. It also exercises regulatory powers on more than 180 bingo parlors and e-games cafes nationwide.

It is among the largest contributors of revenue after the Tax Authority. PAGCOR was created in 1977 through Presidential Decree 1067-A.

PAGCOR’s net earnings are divided up and paid into the National Treasury (50 per cent), the Bureau of Internal Revenue (5 per cent) and the Philippine Sports Commission’s development programs (5 per cent). Other amounts go to the Department of Justice Board of Claims; the Early Childhood Care and Development Program; National Book Development Trust Fund; local government units where PAGCOR casinos operate -- and the President’s Social Fund.

In 2007, the PAGCOR Charter was amended through Republic Act 9487 that extended the agency’s franchise for another 25 years. This law also mandates it to regulate and operate games of chance, issue licenses, and enter into joint venture, management, or investment agreements with private entities. Such a provision only helps to bolster a commonly-held public view that it is a cash cow for those who hold the reins of government.

Former President Gloria Macapagal-Arroyo appointed Efraim Genuino as PAGCOR chairman and CEO in 2001, replacing long-time chair and CEO Alice Reyes. Genuino was a close friend of the Arroyos and was in charge for the period covered by a series of critical Commission on Audit reports.

The Philippine Public Transparency Reporting Project (PPTRP) went through the relevant sections of these reports, reviewed media archives and talked to former and current insiders at PAGCOR. The revelations are startling with millions of pesos seemingly unaccounted for during this period.

PAGCOR insiders maintain that no less than PhP 265 million (USD 6 million) in organizational funds were spent on election campaigns during the tenure of Genuino at the same time that its operating budget more than doubled from 20 per cent of gross income to 45 per cent.

In its reports, COA determined that in 2006 alone, the total budget for discretionary and miscellaneous expenses of PAGCOR directors and different offices exceeded the combined limitation of all officials (PhP 3.7 million or USD 86,046) by PhP 29.43 million (USD 684,419). The audit agency affirmed that while the total allocation was not fully spent, PAGCOR still overshot the limitation allowed by PhP 20.71 million (USD 481,628) – a fact first disclosed by PPTRP in its website back in March 2010.

However, a lawyer who used to work for PAGCOR under Genuino’s leadership and who requested not to be identified, told PPTRP: “We did all investments and operations above-board. We made all our business meetings and transactions according to our own government’s corporate rules and laws.”

Meal perks, golf club memberships

The COA found that meetings of the PAGCOR Board of Directors (BOD) in 2006 were accentuated by “expenses for food and drinks” with costs ranging from a low of PhP 1,308 (USD 30) to a high of PhP 17,604 (USD 409). These figures shoot up whenever PAGCOR’s Management Committee meets with such expenses ranging from PhP 18,391.55 up to PhP 72,899.90 (USD 428 to 1,695). The total amount charged against Board Meeting Expenses, Management Committee Meeting Expenses and Food Supplies Expenses in 2006 amounted to PhP 1.232 million (USD 28,651).

A PAGCOR employee who requested anonymity told PPTRP that “these lavish meetings are held at least twice a month. There is so much food, drinks and amenities that it is scandalous since we still live in a poor country and we are also a government entity that has laws to follow.”

COA’s reports also highlighted some particularly questionable PAGCOR expenses that were charged to the public -- such as the membership dues of three board members to the Wack Wack Golf and Country Club; and meals taken at that club, at EDSA Shangrila Hotel and Le Souffle Restaurant that totaled PhP 1,231,651.40 (USD 28,643). The corporation also spent and charged PhP 1,444,648.78 (USD 33,596) worth of discretionary funds for meals at “various media functions.”

COA found that at least PhP 652,396.38 (USD 15,172) worth of these expenses were not fully documented and the purpose not stipulated. From this amount, only PhP 81,490.51 (USD 1,895) were supported by photocopies of official receipts.

The former PAGCOR lawyer told PPTRP: “Those expenses were necessary and part of PAGCOR’s corporate communications functions to boost the company’s image and draw in more investors and customers. Besides, from my experience all of those expenditures were within the budget and properly documented. We complied with the PAGCOR Charter.”

The new PAGCOR management led by Cristino Naguiat, Jr. meantime found that in the final days of the Arroyo presidency and the corporation’s leadership of Genuino, a total of PhP 21.119 million (USD 491,139) was spent on cheeseburgers and fried chicken to the Philippine National Police as shown by 28 McDonald’s receipts from Golden Arches Development Corp. issued on eight separate days – January 15, March 11, April 5, April 14, May 4, May 12, May 13 and June 3, 2010.

“That is something I do not know [about],” the lawyer told PPTRP. “Maybe PAGCOR was asked to help in the food expenses of the PNP on those days. All I know is that [it] sometimes helps provide gas for PNP vehicles. That is allowed.”

Prime housing lots, condo units

Scrutinizing COA annual reports for 2008 and 2009, PPTRP discovered that the PAGCOR Board of Directors acquired high-end real property for housing of officers and employees amounting to a total of PhP 1,145,468,220 (USD 26.63 million). The list can be found in Table 1.

 Table 1. Properties acquired by PAGCOR 

Source: COA Annual Reports on PAGCOR, 2008 and 2009 

COA noted that “there was no allocation in its corporate budget for acquiring property -- nor any approval from the President through the Department of Budget and Management (DBM)” and admonished PAGCOR management “to avoid unnecessary expenditures” that are contrary to the PAGCOR Charter and “to be sensitive to the economic crisis besetting the country.”

Monetary perks higher than already high basic salaries

Aside from high government salary rates, PAGCOR officials and Board members also raked in the kind of monetary perks most of the country’s 1.4 million government employees could only dream of.

Table 2. PAGCOR’s millionaire officials, salaries and perks in 2009 

Source: COA 2009 Report on Salaries and Allowances Received by Principal Officers and Members of Governing Boards of Government-Owned and/or Controlled Corporations * Perks include different bonuses, incentives, clothing, medical, representation and transportation allowances, amelioration pay, honoraria and per diems. ** SVP - Senior Vice President; VP - Vice President; GM - General Manager

No fewer than 23 PAGCOR officials received a combined basic pay totaling PhP 13,828,316.77 (USD 321,589) while also gaining an average of 41 per cent more in perks (PhP 33,774,610.45 or USD 785,456) in 2009. All officials received far more in perks than their actual basic pay.

The COA noted that PAGCOR is not exempt from COA Circulars 85-55A and 2006-001, Section 25 of the General Provisions of the General Appropriations Act (GAA) for national government agencies, and Section 325 (h) of RA 7160 for local government units (LGUs).

The laws and circulars set limits on extraordinary and miscellaneous expenses for meetings, seminars and conferences; official entertainments and public relations; contributions to civic and charitable institutions; and other similar expenses not supported by the regular budget allocation.

The rules also call for the judicious spending of funds for the purposes intended and the proper documentation of all expenses.

“PAGCOR is a GOCC that is unlike others since it has a heavy burden to contribute to the nation’s coffers. That is why it is a corporate entity that is exempted from certain administrative rules, including some COA rules, including limits on salaries and other expenses. I am sure that even the current management will eventually do the same as we did,” the former PAGCOR lawyer told PPTRP.

Yet, for its part, COA concluded that “PAGCOR’s existing systems on the allocation and utilization of funds intended for extraordinary and miscellaneous expenses were not effective in ensuring that the limitations prescribed under existing rules and regulations were observed and that funds were used for the purposes intended.”

PAGCOR management’s comments revealed that accountability is the least of its concerns in their explanations on the issues raised by COA. The general attitude of the Genuino-led PAGCOR management towards the COA audits appears to have been to seek exemptions from COA Circular 2006-001 “due to PAGCOR’s highly unusual business and the purpose for which it was created.” PAGCOR’s then management also claimed the issues regarding non-judicious spending were “a mere case of failure to use a more appropriate account due to the limitation in the Chart of Accounts.”

Another major observation was PAGCOR’s “non-compliance to certain laws in its failure to fully allocate and remit its contributions as mandated.” PAGCOR management could not justify why it has not been able to remit the contributions as mandated by three specific laws and detailed in Table 3.

Table 3. Allocations PAGCOR failed to remit as of end 2009

Source: COA 2009 Audit Report on PAGCOR 

Genuino’s cell phones, guns  

The excesses of PAGCOR officials during the past administration as illustrated by the size of salaries, perks, expenses and non-compliance with different circulars and laws seems to demonstrate a lack of real accountability or care over public funds.  

A September 29, 2009 memorandum from PAGCOR’s Procurement and Property Department which was leaked to PPTRP, suggests Genuino acquired assets using corporate funds which “were not located during the 2008 physical inventory” and which do not appear to have been returned.  

These include 11 top-end Nokia cellular phones (acquired at a total of PhP 395,123.58 or USD 9,189), a Toshiba laptop computer (PhP 117,100 or USD 2,723) – and even four HK 9 mm submachine guns, and one 9mm Glock pistol (PhP 42,000 USD 977).  

“We never knew then that the big boss (Genuino) had guns. He did have some high-tech cell phones, but no. We never saw the guns,” another PAGCOR employee said.  

When shown the memorandum, the former PAGCOR lawyer defended Genuino: “The phones and all other properties under his name were up for restitution and as far as I know, the boss had all of the phones returned. I must apologize though since I did not know of the guns until I saw this document.”  

Another set of documents show that PAGCOR funds were used to pay the Batang Iwas Droga Foundation (BIDA, or Children against Drugs) for different expenses. The organization was founded by Genuino along with family members and his associates. As a government-funded initiative, it illegally entered the party-list polls in the 2010 elections and fielded Genuino’s daughter Sheryl Genuino-See as its ranking nominee.  

PAGCOR paid the BIDA Foundation Inc. a total of PhP 28.2 million (USD 655,813) in check payments – PhP 26.7 million (USD 620,930) on December 23, 2008 and PhP 1.5 million (USD 34,883) on March 17, 2009. It also paid BIDA Production Incorporated, a total of PhP 24.98 million (USD 580,930) for services rendered to the PAGCOR project Maligayang Barangay (Happy Village), as well as for promotional and video materials for the same project; promotional materials and judging for the Pinakamaligayang Barangay (Happiest Village) project; and BIDA members’ IDs and pins, as well as tarpaulins and collaterals. Payments for BIDA members’ pins alone amounted to PhP 8.82 million (USD 205,116).  

The current COA management, the Senate and the House of Representatives are currently investigating all of these payments.  

When asked if he knew of the said funds given to BIDA, the former PAGCOR lawyer said: “I was not privy to fund donations to non-government organizations and foundations. But knowing (then) Chairman Genuino, he conducted all PAGCOR activities and investments above-board. The fact that no one in the previous board has been sued shows that management has been above-board.”  

New management sets tone  

President Benigno Aquino III appointed Cristino Naguiat, Jr. as the new PAGCOR Chairman and CEO on July 1, 2010 and Jorge Sarmiento as its new President and Chief Operating Officer along with new Board directors Enriquito Nuguid, Eugene Manalastas and Jose Tanjuatco, on July 19, 2010.  

The first six months of the new PAGCOR management generated PhP 945 million (USD 22 million) in savings and saw a 3.79 percent hike in gross revenues.  

“In exercising prudent fund management under the leadership of Chairman and CEO Naguiat, apart from generating substantial savings, the gaming agency also posted gross revenues of PhP 31.46 billion in 2010 which was PhP 1.15 billion higher compared to its PhP 30.31 billion gross income in 2009. This is in stark contrast to the performance of the previous management during the first six months of 2010 where PAGCOR overspent PhP 18 million (USD 418,604) more than its allocated budget for the period,” PAGCOR Assistant Vice President for Corporate Communications Maricar Bautista said.  

PAGCOR continues to be one of the biggest revenue generators of the government. It remitted a total of PhP 14.71 billion (USD 342 million) to its mandated beneficiaries in 2010.  

“With the new PAGCOR management’s thrust towards judicious spending and transparency, the agency’s operating expenses was also much lower by PhP 740 million (10 per cent) in the second semester of 2010 than that of the first semester,” Bautista added.  

PAGCOR contributions to the national government mandated by law, reached PhP 10.39 billion (USD 241,628). Of this amount, PhP 1.09 billion (USD 25.34 million) was remitted to the BIR in the form of franchise tax, while over PhP 519 million (USD 12 million) was forwarded to the PSC to sustain the government’s sports development initiatives.  

PAGCOR’s other beneficiaries in 2010 include the President’s Social Fund (PhP 1.61 billion or USD 37 million) which sustains the President’s socio-civic projects; financial assistance to PAGCOR’s socio-civic and charitable projects (PhP 163.13 million or USD 3.8 million); Early Childhood Care and Development (PhP 152.41 million or USD 3.5 million); National Sports Development (PhP 15 million or USD 348,837); National Book Development Trust Fund (PhP 50 million or USD 1.1 million); the Department of Justice Board of Claims (PhP 27.81 million or USD 646,744) for victims of violence and unjust imprisonment; Programang Gulayan para sa Masa Project (PhP 1.76 million or USD 40,930) and share to LGUs/host cities where PAGCOR casinos operate (PhP 507.72 million or USD 11.8 million).  

In March, 2011, PAGCOR signed an agreement to pay the National Museum its PhP 178 million (USD 4 million) outstanding balance between April and December of this year.  

Better days at PAGCOR?  

Things now look brighter for the government in terms of PAGCOR as the Department of Finance (DOF) expects PAGCOR to remit PhP 10.9 billion (USD 253 million) in revenues to government – five percent higher compared with the full year remittance of PhP 10.343 billion (USD 240 million) last year.  

Last year, the PAGCOR revenue contributions to government coffers fell short of the PhP 11 billion (USD 256 million) target by almost PhP 1.6 billion (USD 37 million). In the first two months of 2011, PAGCOR contributed PhP 1.7 billion (USD 39 million) in revenues to the national government - six per cent higher compared to the same period last year.  

The only thing presently lacking is a substantive and independent investigation into the activities and spending of senior PAGCOR officials and board members during the previous administration. Philippine Public Transparency Reporting Project  

(The author is a freelance writer and researcher on government policies and trends.)