Auditors hit untaxed excess allowances of OGCC lawyers

MANILA, Philippines – The Commission on Audit (COA) said 5 government corporate lawyers in the Office of the Government Corporate Counsel (OGCC) directly received allowances from their state clients, which were all untaxed and exceeded the allowable amount. 

The 5 lawyers, including Deputy Government Corporate Counsel Elpidio Vega, received a total of P3.7 million in allowances from their clients, which were government-owned and -controlled corporations (GOCCs). The OGCC is the statutory law office of GOCCs.

Of the P3.7 million, P1.46 million was remitted to the OGCC account, while P2.25 million was directly paid to the lawyers.

COA has a rule that allowances should not exceed 50% of the annual salary. Using that computation, the 5 lawyers received in excess a total of P621,717.

EXCESS ALLOWANCE. The Commission on Audit wants OGCC lawyers to refund excess allowances worth P621,717. Screenshot from COA report

EXCESS ALLOWANCE. The Commission on Audit wants OGCC lawyers to refund excess allowances worth P621,717.

Screenshot from COA report

"We recommend that the management refund the excess amount received by the OGCC lawyers," COA said in its 2017 audit report of the OGCC which was recently uploaded on its website.

COA also indicated that the amount, which was directly paid to the lawyers, was  untaxed.

"The lawyers concerned should have remitted the allowances paid by the client GOCCs to OGCC for proper monitoring and withholding of taxes. As shown in the aforementioned table, upon our validation/confirmation from COA Audit Team Leaders of GOCCs, checks were directly paid to the lawyers who rendered legal services to client GOCCs and not remitted to the OGCC; thus, proper accounting and liquidation requirements cannot be made," COA said.

COA did not agree to the justifications made by the lawyers that the COA rule limiting allowances does not apply to them.

The lawyers also argued that an executive order authorized OGCC lawyers who perform additional and special tasks to receive additional compensation. "Executive Order 878 does not provide for a limit on the amount of honoraria that OGCC lawyers may receive," the OGCC told COA in a reply.

COA stood firm, saying: "We agree but it should not exceed the 50% limitation of their basic annual salaries as provided for in COA Circular No. 85-25-E."

Rudolf Jurado's firing

This issue has caused tension within the OGCC that culminated Monday night, May 28, when President Rodrigo Duterte announced that he was firing OGCC chief Rudolf Jurado over alleged corruption.

Jurado earlier claimed that the OGCC lawyers who received the allowances "maligned" his reputation.

According to COA, it was Jurado and Vega who sent the reply to the audit team on March 26, 2018, justifying the allowances.

Documents obtained by Rappler showed that Jurado policed the allowances and compelled the lawyers to return them. Jurado also wrote GOCC clients to refrain from directly paying allowances to their lawyers.

Here is a timeline:

March 14, 2018 – Resident auditors flagged the allowances, and notified the OGCC management.

March 16, 2018 – Jurado issued an office order telling lawyers to strictly comply with the COA circular. He also told the lawyers to refrain from directly receiving allowances, and instructed them to tell their clients that allowances should henceforth be coursed through the OGCC. On the COA order to refund the excess, Jurado asked the lawyers to submit their position papers.

March 26, 2018 – Jurado and Vega wrote the audit team about the justification for the allowances.

April 23, 2018 – Vega and Assistant Government Corporate Counsels (AGCCs) Bel Derayunan, Maria Dolores Rigonan, Dominador Isidoro, Marilyn Estaris, Romelina Apostol, Efren Gonzales, and Jose Marie Capili manifested in a memorandum that they did not comply with Jurado's orders. "They claim that it is premature to instruct the clients pending the recommendations of the COA," Jurado told Executive Secretary Salvador Medialdea and Justice Secretary Menardo Guevarra in a letter dated May 11, a copy of which was obtained by Rappler.

May 10, 2018 – Jurado wrote GOCC clients himself, telling them of the COA observations and asking them to stop paying allowances directly to lawyers. The allowances, he wrote, should be paid through the office "to withhold and remit the correct amount of income tax to the Bureau of Internal Revenue."

May 11, 2018 – Jurado sent a memorandum to Medialdea and Guevarra explaining the situation. "In view of these events and circumstances, please be assured that I will keep the faith of the people in my Office as the defender of the GOCCs and ensure that my ranks are in accord with the vision of the President for a clean government for this country," Jurado said.

May 23, 2018 – A letter from "OGCC lawyers" was read out over radio dzMM alleging corruption against Jurado, which includes supposed favors to the Aurora Pacific Economic Zone (Apeco) and the approval of a 75-year casino permit.

May 24, 2018 – Jurado broke his silence and sent a letter to dzMM explaining his side, saying that after the allowances issue, "these OGCC lawyers are trying to malign my reputation by alleging that I am supposedly incompetent and corrupt."

Morning of May 28, 2018 – Jurado reached out to Duterte through a letter sent to Medialdea explaining his side on the Apeco legal opinion that he had issued. In that letter, Jurado said Apeco's "authority to operate or license online gaming facilities is expressly granted by its charter." Jurado explained that it was Congress that passed Apeco's charter and that the "legislature is presumed to know the meaning of the words, to have used them advisedly, and to have expressed the intent by use of such words as are found in the statute."

Evening of May 28, 2018 – Duterte announced that he has fired Jurado for "granting a franchise" to Apeco.

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Balance from 2016, and irregular team-building

COA also said in its audit report that the OGCC has not remitted to the treasury P2.8 million worth of allowances, a standing balance from 2016. 

The OGCC told the audit team that the P2.8 million was used "to pay for the legitimate expenses of the agency."

COA also flagged the OGCC's team-building activity at the Las Casas Filipinas de Acuzar in Bataan, which cost them P622,950.

"It is deemed not consistent with Section 9 (ii) and 9 b (1), Annex H of the 2016 Revised Implementing Rules and Regulations of RA 9184 as an alternative mode of procurement. Moreover, said activity was not included in the Annual Procurement Plan (APP) for CY 2017, contrary to Section 7 of Rule II of the Implementing Rules and Regulations of RA 9184," COA said.

The team-building activity was held from April 20 to 22, 2017.

Jurado took his oath on April 25, 2017, and assumed office the next day. – Rappler.com 

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email lian.buan@rappler.com or tweet @lianbuan.

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