Michael Yang, President Rodrigo Duterte's former economic adviser, acted as financier and guarantor for Pharmally Pharmaceutical Corporation, which is the biggest winner with P10 billion worth of contracts so far in the government's pandemic procurement.
"[Yang] guarantees for us because the analysis is true, our finances [are] really challenging," said Pharmally director Linconn Ong in a mix of English and Filipino during the Senate blue ribbon committee hearing on Friday, September 10.
"So we will not be blacklisted, [Yang] offered to lend us money," added Pharmally chairman Huang Tzu Yen.
Pharmally was a trader of personal protective equipment (PPE) and other pandemic supplies, meaning they got their supplies from China and sold them to the government and earned from markup.
How did they pay the suppliers if they only had P625,000 in capital when they started winning contracts, the first of which was in April 2020 for P54 million?
They didn't, said Ong, but Yang was their guarantor so their Chinese suppliers kept dealing with them. They paid their suppliers after the government paid them, said Ong.
"There are items that we don't have enough funds to settle so Mr. Michael Yang guarantees for us," said Ong.
This was contrary to a statement by Yang minutes before Ong that his only link to Pharmally was to introduce them to "friends" in China.
"Mr. Yang said that he doesn't know and he has no relation to Pharmally.... He is aware he is under oath and it is only through the news that he found out about the existence of Pharmally Pharmaceutical," said Yang's interpreter, who was beside him translating the questions and answers because Yang is supposedly neither fluent in English nor Filipino after living in the Philippines for 21 years.
Senator Panfilo Lacson, however, kept pressing and was able to extract from Yang that the businessman not only met Pharmally chairman Huang Tzu Yen before, but that he was also the one who introduced Ong to Chinese suppliers.
"Mr. Yang said he only introduced and let them discuss things on their own," said Yang's interpreter.
"He never guaranteed?" asked Lacson.
"Mr. Yang only introduced and they negotiated on their own, and probably the initially introduced friends introduced some other friends for them to negotiate all of their dealings," Yang's interpreter answered.
This was belied minutes later by Ong, who, upon Lacson's quizzing, admitted that Yang was really Pharmally's guarantor.
Ong claimed that something was lost in translation by the interpreter and that Yang had already earlier admitted that he was a guarantor.
Later on, Huang Tzu Yen also admitted that he was the one who asked Ong to seek help from Yang. Huang then later admitted that Pharmally borrowed money from Yang.
A Rappler investigation earlier showed that Huang is a director of a different firm, Pharmally Biological Company Inc. Huang’s co-directors in this firm are close associates of Yang – they sit as incorporators in several companies led by Yang himself.
Ong said that they were able to continue trading from Chinese suppliers either because they paid some bills by borrowing from friends, or Yang came to their rescue to act as guarantor.
They didn't use letters of credit, Ong said. A letter of credit is a letter from a bank guaranteeing that the buyer will pay on time.
Ong added they talked to Chinese suppliers only through WeChat.
This is how they were able to keep their business going, such that they were able to bag P7.9 billion in deals in 2020 alone.
"We were expecting these projects to go very quick, so we really asked help from Mr. Yang," Ong said.
Earlier, former head of the Procurement Service of the Department of Budget and Management (PS-DBM), Lloyd Christopher Lao, said their safeguard was to pay contractors only upon full delivery.
Lacson said this seemed to be such a simple system for such big contracts.
"Bilyon ito eh, ganun ba kadali 'yun? Saka government 'yun eh, dapat kumpleto ang inyong papeles siyempre sa Customs mahigpit, hihingan kayo ng letters of credit, pero sabi mo wala...Hindi kapani-paniwala na ganito kadali ang transaksiyon," said Lacson.
(This is billions we're talking about, and it was that easy? And this is a government transaction, you need to have complete documentation, for example, Customs is very strict, they'd ask you for letters of credit, but you said you had none...It's unbelievable that it was that easy.)
"Meron naman po kaming NOA [Notice of Award] noong time na 'yan so it's good proof of confidence in these suppliers," said Ong, adding that Chinese businessmen really deal with each other the way they deal with their suppliers.
(We had a notice of award, so it's good proof of confidence in these suppliers.)
Local manufacturers told the Senate that while they also won contracts, their deliveries were delayed by the PS-DBM and the remainder of their deliveries were negotiated for a much lower price, resulting in a loss for their company. This, according to senators, was a preference for foreign suppliers to the detriment of Filipinos.
Finding Yang and Ong's answers evasive and contradictory, the Senate blue ribbon committee issued arrest warrants against Yang and Ong, both for contempt.
The Senate has the power to arrest and detain for contempt, but the Supreme Court has limited the upper house's detention powers to be valid only for the duration of the hearings.
Read the other stories from the September 10, 2021, Senate blue ribbon committee hearing: