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How the Malampaya fund was plundered

Aries Rufo
Rappler follows the trail of P900 million from the Malampaya Fund lost to the pockets of fake NGOs linked to Janet Napoles. Former Agrarian Reform Secretary Nasser Pangandaman's party list group AA-Kasosyo is also linked to Napoles NGOs.

MANILA, Philippines – Sometime in the latter part of 2009, Janet Lim Napoles gathered her staff to break good news. “Nakausap ko na si Secretary. May pera tayo. May nahingi ako na pondo,” her former aide and record keeper Benhur Luy remembered her saying. (I’ve talked with the Secretary. We have money. I was able to ask for funds.)

Having heard her utter those words a number of times in the past, Luy half expected what her former boss would say next. But she was unusually excited this time and he sensed urgency.

Ayusin niyo na mga dokumento (Prepare the documents),” Napoles directed her staff as she reminded each one of them of their respective to-do lists. To Luy, that meant recycling the list of names of fictitious beneficiaries and forging some signatures.

Luy wasn’t sure who the secretary Napoles was referring to was, but later developments would show it was former Agrarian Reform Secretary Nasser C. Pangandaman she had talked to. Besides, this was not the first time that Napoles had discussed business with Pangandaman.

Napoles’ ties with Pangandaman, who assumed the DAR post in June 2007, actually went beyond his term as DAR chief.

In 2007 and 2008, based on earlier reports, the Department of Agrarian Reform (DAR) released P200 million of its savings to at least 7 non-governmental organizations linked to Napoles.

The Ombudsman Field Investigation Office, which is looking into this alleged misuse of funds, noted that “projects appeared to have been delivered to certain municipalities in Cagayan, Pangasinan, Cavite, Dinagat Island, Surigao del Norte, Surigao del Sur, Agusan del Norte and Agusan del Sur, but the supposed beneficiaries denied having signed or received anything.”

Pangandaman, along with other DAR officials, was named as respondents in the case.

Immunity

Luy, in an interview with Rappler, said transactions with Pangandaman went on even after he left DAR and joined the House of Representatives in July 2011 as representative of the party-list group AA-Kasosyo. At the time, the original sitting representative of AA-Kasosyo was his brother Solaiman, who, in a surprise move, vacated his post in favor of Nasser.

It was suspected that Nasser replaced his brother to seek legislative immunity from possible charges after former Autonomous Region in Muslim Mindanao Governor Zaldy Ampatuan offered to spill the beans on the P200-million misuse of DAR savings. 

In news reports, Ampatuan – who was charged with his father, former Maguindanao Andal Ampatuan, and brother Andal Jr for the 2009 massacre of 58 people – previously tagged Pangandaman as President Gloria Macapagal-Arroyo’s bagman.

Only a month after he assumed office as AA-Kasosyo representative  in 2011, Pangandaman, in fact, already allocated P12 million of AA-Kasosyo’s pork barrel (or Priority Development Assistance Fund) to Kaupdanan Mangunguma Foundation Inc (KMFI) – an NGO identified with Napoles.

A check with the Department of Budget and Management (DBM) website showed that P12 million was released by the agency as Pangandaman’s PDAF on August 8, 2011 with the Department of Agriculture as the implementing agency, and KMFI as its partner.

Of the P12 million, Luy said P5 million was supposedly given to the local government units of Balungao in Pangasinan and P7 million to Sual, also in Pangasinan. But as in other operations, the money did not reach LGUs.

But in the P900 million Malampaya Fund, except for a budget execution form, there is no paper trail that could pin down Pangandaman – at least in terms of signed documents related to the final implementation.

Two underlings – Narciso Nieto, then DAR Undersecretary for Finance, and Teresita Panlilio, then the Director III of DAR’s Finance Management – ran the show.

Ondoy, Pepeng and Malampaya

As it is, the P900 million proceeds from the Malampaya Fund is the biggest single contract cornered by Napoles since she began siphoning off government funds to dubious NGOs. The Malampaya Fund consists of royalties collected from operations of the Malampaya gas and oil fields in the waters off Palawan province.

In less than 3 months, all the money was channeled to her NGOs and deposited to her two bank accounts.

To piece together the mystery of the P900 million, Rappler talked with at least 6 sources who knew about the issue.

Why P900 million in the first place?

After a series of typhoons battered the country, President Arroyo issued Executive Order 848 on Oct 13, 2009 to expand the use of the Special Account (Fund 151) in the General Fund of the Department of Energy. This essentially allowed them to tap the Malampaya Fund for rehabilitation and reconstruction purposes.

Former budget secretary Rolando Andaya told Rappler that a series of Cabinet meetings were held to discuss the implementation of EO 848. In one of those meetings, Pangandaman actually requested for more than  P1 billion supposedly to help assist farmers who were affected by the natural calamities, Andaya added.

The DAR estimated that the agricultural damage wrought by the successive typhoons Ondoy and Pepeng had reached P10 billion.

But Andaya rejected the original amount sought by Pangandaman because other agencies were also requesting for money to be sourced from the Malampaya Fund. “We have to divide the money to the different departments according to need,” Andaya said.

In the end, it was agreed in the Cabinet meeting that DAR would get P900 million, Andaya said.

Pangandaman’s P900 million

Ten days after EO 848 was issued, on October 23, DAR acting secretary Narciso Nieto wrote Andaya to follow up the release of the P900 million.

A source who requested not to be identified said Nieto was verbally instructed by Pangandaman, then out of the country, to follow up the P900-million funding.

Nieto, not knowing then how much to follow up, asked Pangandaman for the exact amount. “That’s why in Nieto’s letter to the DBM, he mentioned P900 million because this was the figure given by Pangandaman,” the source said.

Rappler has been trying to contact Pangandaman to get his side of the story but has not been successful thus far. We have been calling his phone but he has not been picking up.

On November 19, the DBM issued a Special Allotment Release Order (SARO) of P900 million to the DAR. It specified that the money would “provide support services to the Agrarian Reform Communities to help them recover from the losses/damages brought about by typhoons Ondoy and Pepeng.”

On December 21, the DBM issued the Notice of Cash Allocation to DAR for the P900 million. This meant that the money was already credited to the Land Bank account of DAR, ready to be tapped.

Forgery operations

While the P900 million was being processed by the DBM, Napoles set her operation in motion. Even before the SARO was released, her staff, armed with forged signatures of local government officials, entered into a Memorandum of Agreement with DAR to implement projects funded by the P900 million.

Under the MOA, DAR would transfer the funds to LGUs requesting for them. These LGUs would, in turn, identify an NGO as “fund conduit” for the implementation of projects.

Preparing the necessary paper requirements was a walk in the park for Napoles’ team.

Luy, in a separate phone interview, said he and other Napoles staff merely scanned news reports to identify the supposed recipient LGUs ravaged by typhoons. Once the list was completed, they used the letterheads of LGUs which they had compiled earlier in sending letter-requests to the DAR.

Forging the signatures of the LGU officials in the fake letter-requests was easy since Luy and the other staff already had samples of their signatures. A former staff of a senator helped in the gathering of the signature specimen.

As for the beneficiaries, Luy said they only had to “rehash” the names of alleged recipients in their projects.

Between November 12-17, 2009, MOAs were signed with 12 NGOs and 97 LGUs who were supposed to be recipients of the funds. Of the 12 NGOs, 10 were supposedly linked to Napoles.

Signatories to the MOA were Nieto, the presidents of the NGOs concerned, and the supposed LGU officials.

Wiped out funds

Curiously, on November 26, 2009, even before the DBM informed DAR thru the NCA that the fund had been credited to its Landbank account, DAR had started releasing checks to the NGOs. Amounts ranged from P10 million, P17.5 million, to P20 million.

On that single day, checks amounting to more than P200 million were released to the NGOs.

A separate source who had intimate knowledge of the transaction told Rappler that Napoles shelled out P200 million in “rebates” or kickbacks to other parties, leaving the rest as her own “commission.”

Could the P200 million in checks be an insurance for Napoles that she would get her money back if the “special projects” did not push through?

Three more check releases were done in December, with the last batch released on Dec 23, 2009. The checks were signed by either Nieto or Panlilio.

On Christmas eve, or only 3 days after the NCA was issued, the money was already wiped out.

Fooled by Napoles?

Sources we interviewed said both Nieto and Panlilio insisted they only performed ministerial functions and that “there is presumption of regularity” in their duties. In the case of Nieto, he was given authority by Pangandaman to transact with the supposed NGOs.

In the case of Panlilio, she was acting DAR finance unit chief when two batches of checks were sent to her for signing. At the time, Nieto was on a holiday vacation, while Panlilio was finance unit chief in an acting capacity only.

While the NGOs were transacting with the DAR, all the papers “appeared to be genuine and above board,” a source quoted Nieto as saying. “They only learned that the documents were forged or fake, after reports of the pork barrel scam surfaced.”

In signing the checks, both Nieto and Panlilio told sources they had no other option but to sign them. “They argued that if they did not sign the checks for payment to the NGOs, the money would be reverted back to the Treasury and they could be liable for not performing their duty.”

In the scheme of things, it was the DAR officials who were the victims here, having been fooled by Napoles and her cohorts, one of the sources pointed out.

Bidding requirements

But were they really just innocent victims? Not so fast, according to Andaya.

Andaya said DAR entering into MOAs with NGOs was questionable in itself since the projects for implementation in the Malampaya fund should have undergone bidding in the first place.

“There is no such animal as a MOA. There should have been a competitive bidding. Even if the contract cites that an NGO should implement the project, there should be a bidding,” Andaya explained.

Andaya also argued that the implementing agency should have also checked the background of the NGOs and demanded all pertinent documents. “They should have asked for financial statements, tax clearance, income tax report, listing of government contracts.”

Nieto, who had opted for early retirement, ran but lost in the mayoral race in San Isidro, Nueva Ecija in the May 2013 midterm polls. Panlilio is now acting head of the DAR’s Presidential Agrarian Reform Council Secretariat.

Father and son

Several sources said Napoles was good in identifying and befriending people who could prove useful to her. Although both were mid-level government officials, Nieto and Panlilio were the finance gatekeepers in DAR, fitting the profile that Napoles needed for her scheme.

And where does former DAR chief Pangandaman figure in the Malampaya fund scam? Luy said Napoles got to know Pangandaman early on during his stint with the DAR and it was a friendship that extended to the Pangandaman family.

Apart from allocating his party list’s PDAF to an NGO identified with Napoles, it appears the links to Napoles extended to his son, Mohammed Hussein Pangandaman, who was a one-term 1st district representative of Lanao del Sur.

Luy said the younger Pangandaman also allocated a total of P30 million of his pork barrel to Napoles-linked NGOs in 2011. Both were coursed through the non-governmental organization KMFI.

A check with the DBM website shows that the younger Pangandaman allocated P15 million of his pork barrel on June 9, 2011 to the DA as the implementing agency for 4 towns in Lanao del Sur. Another P15 million of his pork barrel was released through the DA on Dec 14, 2011.

In the 2013 polls, father and son failed to bag seats in the House of Representatives. 

Nasser Pangandaman’s AA-Kasosyo group failed to muster enough votes for the party-list race, while his son Mohammed Hussein was defeated by Liberal Party bet Ansaruddin Adiong.

Their rise and fall in politics paralleled the ugly twists and turns of Napoles’ own fortune. – Rappler.com