BuCor-Tadeco deal illegal, should be cancelled – DOJ, COA panels

Mara Cepeda
BuCor-Tadeco deal illegal, should be cancelled – DOJ, COA panels
The panels' separate investigations say the joint venture agreement is disadvantageous to government

MANILA, Philippines – Initial findings of the Department of Justice (DOJ) and the Commission on Audit (COA) found the deal between the Bureau of Corrections (BuCor) and the Tagum Agricultural Development Corporation (Tadeco) illegal. 

The DOJ formed a fact-finding team as requested by Speaker Pantaleon Alvarez, who had questioned the allegedly anomalous contract between BuCor and Tadeco owned by Davao del Norte 2nd District Representative Antonio Floirendo Jr, his longtime friend before their recent parting of ways

Justice Undersecretary Raymund Mecate, in his letter to Alvarez, said the initial report was “without prejudice to the final review and approval of the Secretary of Justice.”

The COA also formed a special audit team to probe the deal headed by team leader Josefina Gonzales and supervising auditor Flordeliza Arez. 

A July 11, 1969 deal allowed Tadeco to lease BuCor-owned land – in short, a government property – located at the Davao Prison and Penal Farm (DPPF).

This was renewed on May 21, 2003, with BuCor guaranteed an annual production share of P26,541,809, which will automatically increase by 10% every 5 years. The joint venture agreement (JVA) also states that BuCor must receive profit shares with respect to the leased lands where the bananas are planted.

The COA and the DOJ said the JVA is unconstitutional because it did not comply with the provisions under the 1987 Constitution that only allows 1,000 hectares of public agricultural land to be leased to a private corporation. 

Section 3, Article 12 of the 1987 Constitution reads: “Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area.” 

COA auditors said that when the JVA was extended for another 25 years on May 21, 2003, the land leased to Tadeco exceeded the limit because it covered 5,308.36 hectares. 

“What is obvious is the excessive holding of agricultural land by Tadeco, which under the May 21, 2003 JVA consisted of 5,308.36 hectares. This being so, the JVA is unconstitutional,” said the state auditors.

“We recommend that Management take appropriate action for the cancellation of the May 21, 2003 JVA or make representation with Tadeco for the amendment thereof to confirm to provision of Section 3, Article XII of the 1987 Constitution,” they added. 

The spat between Alvarez and Floirendo, which has escalated into a graft complaint and a looming House probe against the latter, reportedly stemmed from a fight between their girlfriends. 

Deal detrimental to gov’t

COA’s Audit Observation Memorandum Number 2017-013, dated April 25, 2017, said that while Tadeco and BuCor signed agreements in 1969 and 2003, provisions were changed several times to the detriment of the government. 

The 1969 agreement allowed BuCor to collect rent at P250 per hectare annually for a 3,000-hectare banana plantation. The government was also supposed to receive 10% share of the profit. 

When the deal was tweaked on July 10, 1873, the land coverage was increased by another 1,000 hectares.

In October 1974, 500 hectares were added for the planting of grain like rice, corn, and sorghum. Then 500 more hectares were added for banana crops, making a total of 5,000 hectares of land coverage under the JVA. 

Five years later, the rent per hectare was increased to P275, but Tadeco’s leasehold over the government-owned lands was already at 5,945 hectares. Of this number, 4,850 hectares were used for bananas and 1,095 hectares for grain crops.

 The Davao Penal Colony sits on a total land area of 30,000 hectares, 8,000 of which are reserved for the prison.

Not a JVA? 

According to the DOJ, the BuCor-Tadeco deal should not even be considered a JVA based on the following grounds:

  • “There is no community of interest in the business by both parties.”
  • “No categorical indication of a true and realistic sharing of the profits and losses.”
  • BuCor’s participation in the banana plantation’s management is “substantially minimal.”
  • The current JVA does not even mandate the inclusion of a BuCor representative to the Tadeco management team. 

The DOJ’s fact-finding team also said no public bidding was conducted for the land, which they said violated Commonwealth Act Number 141, or the Public Land Act.   

Just like the COA, the DOJ said the deal was disadvantageous to the government as well. 

“Under the BuCor-Tadeco JVA, the production and profit share of the BuCor in 2016 amounted to only P44,854, 726.00, or a rate of P8,449.83 per hectare per year. Compared to the prevailing lease rates of P10, 000-P18, 000 per hectare per year of Tanglaw and Cooperative leaseback rates located in the general area where the DPFF lands are located, the BuCor-Tadeco JVA appears to be disadvantageous in terms of per hectare rate,” they said. 

Solicitor General Jose Calida already released a similar opinion ahead of the DOJ’s and COA’s findings, saying the BuCur-Tadeco contract is illegal and must be voided. 

– Rappler.com

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Mara Cepeda

Mara Cepeda specializes in stories about politics and local governance. She covers the Office of the Vice President, the Senate, and the Philippine opposition. She is a 2021 fellow of the Asia Journalism Fellowship and the Reham al-Farra Memorial Journalism Fellowship of the UN. Got tips? Email her at mara.cepeda@rappler.com or tweet @maracepeda.