Sep 172014
 

http://wikileaks.org/cable/2007/11/07MANILA3669.html#
Reference ID Created Released Classification Origin
07MANILA3669
2007-11-15 09:14
2011-08-30 01:44
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Manila

VZCZCXRO7038
OO RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHML #3669/01 3190914
ZNR UUUUU ZZH
O 150914Z NOV 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8879
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS COLLECTIVE
RHHMUNA/CDR USPACOM HONOLULU HI IMMEDIATE
RUEAIIA/CIA WASHINGTON DC IMMEDIATE
RUEHLMC/MCC WASHINGTON DC IMMEDIATE
UNCLAS SECTION 01 OF 04 MANILA 003669

SIPDIS

AIDAC

USAID FOR AA/ANE; AA/EGAT; DA/ANE/EAA/PHIL DESK;
USAID ALSO FOR ANE/SPOS; ANE/TS; DCHA/DG;
STATE FOR EAP/EP; EB/IFD PETER DELP; USAID/COO/ODP

SENSITIVE

SIPDIS

DEPT FOR EAP/MTS

E.O. 12958:N/A
TAGS: PGOV KCOR PINR RP
SUBJECT: CORRUPTION IN THE PHILIPPINES: CHALLENGES AND PROGRESS

REF: MANILA 3086

MANILA 00003669 001.4 OF 004

¶1. (SBU) SUMMARY: Corruption, both real and perceived, remains an
ongoing challenge in the Philippines. The recent conviction for
plunder of former president Joseph Estrada has highlighted the
corruption issue, as have continuing corruption allegations
involving a range of government officials throughout the country. A
free and active media, along with a vibrant civil society, ensure an
increasingly vigorous public debate on corruption-related issues.
Likewise, political leaders are speaking more openly about the need
seriously to combat corruption. Lost in the public debate and
partisan finger-pointing is the progress that the Philippine
government is making to strengthen its ability to prevent and fight
corruption and the improved prospects for addressing a long legacy
of malfeasance. This cable provides a brief overview of the problem
and also discusses USG assistance to help build the Philippine
government’s long-term capacity to prosecute, and for the judiciary
to effectively handle, corruption cases. END SUMMARY.

LONG LEGACY OF CORRUPTION
————————-
¶2. (U) Corruption in the Philippines has had a long legacy. Most
notably during the Marcos era (1965-1986), corruption has been an
endemic problem that has contributed significantly to the weakening
of many national institutions. Marcos is widely believed to have
systematically plundered billions of dollars by taking over large
corporations; creating state monopolies for vital sections of the
economy, such as sugar and coconuts; using offshore dummy companies
to launder his ill-gotten money; extracting kickbacks from foreign
companies doing business in the Philippines; skimming foreign loans;
and directly raiding the public treasury.

¶3. (U) While Marcos’s brand of blatant corruption may be a thing of
the past, corruption remains a pervasive challenge at all levels of
government. According to the most recent Transparency International
survey, the Philippines ranks 131st out of 180 nations in the
perception of corruption by business and country analysts — the
higher the number, the higher the level of corruption. (At 43rd,
neighboring Malaysia ranked far ahead in fighting corruption, while
Indonesia lagged behind Philippines at 143rd.)

PETTY CORRUPTION
—————-
¶4. (U) Corruption is far from limited to high-level government
officials, beginning with poorly paid, low-level local government
workers. An ineffective government bureaucracy — waiting periods
for the most basic actions, such as paying for a traffic ticket, can
take an entire day — perpetuates a system whereby otherwise
law-abiding citizens find it necessary to pay bribes (“lagay”) to
government officials for immediate processing and issuance of
documents. This practice can extend to “fixers,” individuals who
are not government officials but who are related, or have access, to
them. The practice may also involve outright extortion, where the
government official refuses to process paperwork unless he is
compensated.

CONTRACT CORRUPTION
——————-
¶5. (U) Government agencies that handle publicly funded projects,
particularly those involving large sums of money, are fertile ground
for corrupt officials. Officials who award contracts often demand
bribes from would-be bidders. A recent Social Weather Station
business survey found that three out of five business managers
working on government contracts said they were asked for bribes in
¶2006. Ghost projects and payrolls — whereby non-existing projects
are financed by the government while non-existing personnel are paid
salaries and allowances — can be found in those government agencies
involved in formulation and implementation of infrastructure
projects. Evasion of public bidding regulations in the awarding of
contracts ensures many contracts are awarded to favored business
enterprises or contractors, who can provide financial kickbacks.
Infrastructure contracts are passed from one contractor to another
so that in the process each contractor retains a percentage of the
project value, often resulting in the use of substandard materials
or unfinished projects.

LAW ENFORCEMENT CORRUPTION
————————–
¶6. (U) Corruption in law enforcement is equally widespread. At the
street level, it is not uncommon for officers to demand petty bribes

MANILA 00003669 002.4 OF 004

for traffic and other minor offenses, real or simply alleged. Law
enforcement officers are also known to extract protection money
(“tong”) in exchange for permitting businesses to conduct legitimate
business operations without necessary permits, or for illegitimate
businesses, such as gambling and drug lords, to conduct illegal
activities. The law enforcement officer then protects the business
from other law enforcement authorities.

SIGNS OF PROGRESS
—————–
¶7. (U) The Office of the Ombudsman’s prosecution of Estrada for
plunder and the Sandiganbayan anti-graft court’s unprecedented
conviction and 40-year sentencing of the former president clearly
indicate that the Philippine government is taking significant steps
to address the problem. (While Estrada was pardoned, he was
required to forfeit bank accounts and property amassed illegally
during his two-year tenure, as decreed by the graft court that found
him guilty.) With substantial Philippine government support, as
well as other donors including the U.S. Government, the Ombudsman’s
Office and the Sandiganbayan anti-graft court, have been steadily
making significant progress along with other Philippine government
agencies.

THE OFFICE OF THE OMBUDSMAN
—————————
¶8. (U) As the constitutionally independent institution for
anti-corruption efforts, the Office of the Ombudsman has the
authority to investigate and prosecute corruption cases in the
public sector. It initiates its own investigations and prosecutions
but also receives cases from other institutions, such as the
Department of Finance’s Revenue Integrity Protection Service, the
Presidential Anti-Graft Commission, and the Armed Forces of the
Philippines.

¶9. (U) Starting from an abysmal six percent conviction rate in
2002, the Ombudsman has registered significant gains in prosecuting
corrupt public officials. With the help of newly recruited
investigators and prosecutors trained with USAID assistance, the
Ombudsman succeeded in raising the conviction rate to 33 percent by
the end of 2005. While the cumulative conviction rate of cases
decided between December 2005 and June 2007 rose slightly to 35
percent, the conviction rate for the first six months of 2007 alone
rose to 63 percent.

¶10. (U) Notwithstanding this progress, the Ombudsman continues to
face certain challenges. Investigations are hampered by Philippine
banking secrecy laws that limit access to certain crucial financial
information, and by poor protection for would-be whistleblowers.
Many investigations are initiated based on “lifestyle checks” –
indications that government staff are living beyond their means and
cannot explain the source of their assets. These may be carried out
by Ombudsman investigators or by other government agencies, but are
generally re-investigated by the Ombudsman before being submitted
for prosecution.

THE SANDIGANBAYAN ANTI-GRAFT COURT
———————————-
¶11. (U) The Ombudsman prosecutes cases of high-level officials at
the Sandiganbayan anti-graft court, while Department of Justice
attorneys are deputized to prosecute corruption cases of lower-level
officials in regional trial courts throughout the country. The
Sandiganbayan is composed of a presiding justice and 14 associate
justices, sitting in five divisions of three justices each. It is
served by the Office of the Ombudsman (to which the Office of the
Special Prosecutor belongs), which investigates and prosecutes
crimes under the Anti-Graft and Corrupt Practices Act. By the end
of 2006, the Sandiganbayan had a total caseload of 2,114 cases, or
an average caseload of 423 cases per division.

¶12. (U) The high caseload and the general practice in Philippine
courts to try cases on a piecemeal basis combine to make trials at
the Sandiganbayan last an average of 6.7 years from filing to
promulgation. Delay is often a means by which the guilty avoid
punishment for their crimes, and in the case of corruption, continue
enriching themselves with public funds. Delay in the disposition of
cases also erodes the effectiveness of the Sandiganbayan as a
powerful deterrent to graft and corruption. While delay remains a
significant problem, the Sandiganbayan, assisted by the U.S.
Government, has taken steps recently to address the issue by
improving case management and making several important procedural

MANILA 00003669 003.4 OF 004

changes, most notably through the move to continuous trials (see
paragraph 19 below).

DEPARTMENT OF FINANCE –
REVENUE INTEGRITY PROTECTION SERVICE (RIPS)
——————————————-
¶13. (U) The Revenue Integrity Protection Service detects,
investigates, and prevents corruption in the revenue generating
agencies of government under the Department of Finance. Its current
successes include filing of 34 graft cases so far in 2007, compared
to 18 cases for the entire year in 2006. To date, 18 officials of
the Bureau of Internal Revenue or Bureau of Customs have been
suspended by the Ombudsman under the program. Six Bureau of Customs
officials recently were suspended for alleged smuggling of 16 luxury
vehicles and cases were filed against two Customs officials for the
illegal release of another 14 high-end luxury vehicles at the Subic
Bay Freeport Economic Zone in Olongapo City. This is partly in
response to the complaints lodged by American car manufacturers.

BUREAU OF INTERNAL REVENUE –
RUN AFTER THE TAX EVADERS PROGRAM (RATE)
—————————————-
¶14. (U) The RATE Program, created by the Bureau of Internal Revenue
in 2005, pursues tax evaders and those involved in facilitating tax
evasion. According to the National Tax Research Center, an
estimated P179 billion in revenues has been lost through tax evasion
from 2001 to 2006 alone. From the time the program began in 2005,
some 87 RATE cases have been filed with the Philippine Department of
Justice against Bureau of Internal Revenue officials. The Program
achieved a 12.2 percent increase in corporate tax return filers as
of June 2007 and 3.9 percent in individual taxpayer returns not
counting suspended accounts which will be tallied at end-year.

BUREAU OF CUSTOMS –
RUN AFTER THE SMUGGLERS PROGRAM (RATS)
————————————–
¶15. (U) The RATS Program, established by the Bureau of Customs in
July 2005 and formally launched in 2006, is mandated to detect and
prosecute smugglers and other customs and tariff law violators.
Despite being a relatively new program, RATS has already achieved
significant successes. Thru September 2007, some 52 cases have been
filed with the Philippine Department of Justice under against the
target set by the MCC Threshold Program of 32 during this period.
Some 11 high value cases have already been filed with the Court of
Tax Appeals. To further help prevent smuggling, the Bureau of
Customs has taken its initial first steps to shift all operations to
“paperless” transactions.

U.S. GOVERNMENT ASSISTANCE
————————–
¶16. (U) The U.S. Government’s Millennium Challenge Corporation’s
(MCC) Threshold Program in the Philippines, managed by USAID,
assists the Ombudsman in strengthening its anti-corruption efforts
in a number of ways. First, it has helped improve the abilities of
staff to investigate and prosecute corruption cases through training
in substantive law, investigation and prosecution skills, legal
writing and research, and case preparation. The project has also
improved the Ombudsman’s information technology capabilities by
developing a sound connectivity plan, improving office processes in
preparation for automation, and deploying a World Bank-funded case
management system. The MCC program has also provided assistance in
the areas of investigation and surveillance. Finally, it has helped
inform school curricula by providing teaching materials on
corruption.

¶17. (U) The MCC Threshold Program is also working to strengthen and
institutionalize anti-corruption programs. Almost 1,000 government
officials have been trained under the program, with some training
provided by U.S. agencies such as the Internal Revenue Service, the
Federal Bureau of Investigation and the U.S. Department of Justice.
The information technology component will enable all 115 district
Offices of the Philippine Bureau of Internal Revenue to be brought
on-line, and will automate the human resource records of its 11,000
employees. Finally, the MCC Threshold Program is engaging civil
society in the fight against corruption by supporting the
Multi-Sectoral Anti-Corruption Council and various focus groups that
act as watchdogs to prevent corruption in government. The USG is
also providing advisory assistance to the Philippine Anti-Money
Laundering Council, which is investigating seven corruption cases
involving P1.4 billion.

MANILA 00003669 004.4 OF 004

¶18. (U) USAID assists the Sandiganbayan to increase the court’s
efficiency and reduce delay. USAID helped the Sandiganbayan develop
a computerized case management information system, making it easier
for Sandiganbayan justices and their staff to track the status of
cases and identify those that are overdue or require timelier
attention. USAID also has assisted Sandiganbayan justices in
improving their courtroom management and enabling them, for the
first time, to conduct continuous trials, which has produced
encouraging results. Justices reported that processes such as the
presentation of prosecution evidence took only a week under
continuous trial, as opposed to almost a year under a piecemeal
trial.

¶19. (U) Hearing the testimony of witnesses over several successive
days (rather than several months of infrequent appearances) has
increased judicial ability to gauge the reliability of witnesses and
rule effectively. Moreover, with the prospect of dilatory tactics
eliminated, the accused in almost half (22) of the 54 pilot cases
selected for continuous trial opted to enter plea agreements,
effectively concluding their cases. With the success of the pilot
test, the Sandiganbayan’s presiding justice is now considering
full-blown implementation of continuous trial for all cases
beginning in 2008.

¶20. (SBU) The USG is also providing case-specific assistance to the
Ombudsman. An example is the prosecution of Carlos Garcia, a former
Major General and Comptroller of the Army of the Philippines, for
using his position to obtain over approximately P375 million through
false billing of Army contracts and kickbacks from contractors. The
Ombudsman’s Special Prosecutor considers the Garcia and Estrada
cases as important examples that the rule of law can reach both
high-ranking civil and military officials. The USG is providing the
testimony of DHS-ICE agents and physical evidence to support the
charge of plunder.

COMMENT
——-
¶21. (SBU) Tackling corruption remains a central challenge to good
governance in the Philippines and ensuring broad-based economic
growth. Corruption is also a deterrent to foreign investment,
particularly in terms of providing a level playing field for
investors and especially for U.S. companies that must comply with
the Foreign Corrupt Practices Act. The good news is that there is a
widening recognition of the problem in the Philippines and
increasing groundswell of support to address the issue. Similarly,
there are new efforts underway by the government to address key
corruption issues and to strengthen those institutions most critical
to anti-corruption efforts, including the Office of the Ombudsman,
the Bureau of Internal Revenue, the Bureau of Customs, and the
judiciary. To demonstrate its seriousness in fighting corruption,
the Philippine government has disbursed one billion pesos to various
government agencies for this effort. While no one expects the
corruption problem to disappear in the short-term, the Philippine
government is beginning to make real strides towards that goal.

Visit Embassy Manila’s Classified SIPRNET website:
http://www.state.sgov.gov/p/eap/manila/index. cfm

You can also access this site through the State Department’s
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KENNEY

   

 

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