Closing in On Nani

Aries Rufo
Graft investigators find former Justice Secretary Hernando Perez liable in a US$2 million bribery case. But will the Ombudsman indict her former boss?
Newsbreak file photo

Editor’s Note: This story was originally published in Newsbreak Magazine in December 2006. We are republishing this in the light of the Sandiganbayan’s dismissal of the last remaining charge against former Justice Secretary Hernando “Nani” Perez. The cases against Perez were filed in relation to allegations that he extorted US$2 million from former Manila Representative Mark Jimenez.

MANILA, Philippines – Just before he resigned as Ombudsman last year, Simeon Marcelo had been getting phone calls from a high-ranking official in Malacañang. The caller insisted that Marcelo dismiss the extortion case filed by then Manila Rep. Mark Jimenez against former Department of Justice (DOJ) Secretary Hernando “Nani” Perez.

On September 30, Marcelo surprised many when he announced his resignation, citing health reasons. But he gave himself two months to tie up some loose ends before leaving the job.

A ranking Ombudsman official says that “one of Marcelo’s last acts” was to docket the extortion case. The directive was based on the strength of the finding of the Ombudsman’s Field Investigation Office (FIO) recommending that Perez be further investigated for graft and corruption.

Docketing the case would have ensured that a preliminary investigation would be conducted to determine if there was probable cause to proceed with the case. In a preliminary investigation, the complainants and the respondents submit affidavits and counter-affidavits to support claims or provide alibis.

Apparently, Marcelo wanted to make sure that the case would not gather dust once he left office. “He feared that the next Ombudsman would simply drop the case,” the Ombudsman official says. His replacement, Ombudsman Merceditas Gutierrez, is widely perceived to have been appointed to protect Malacañang’s interests. She bolstered that perception when she recently dismissed the cases against officials of the Commission on Elections (COMELEC) for getting into an onerous poll automation contract with MegaPacific. It was the first time that an FIO recommendation was not sustained.

Perez is being accused of receiving a US$2-million bribe from Jimenez in February 2001 for the approval of the controversial US$470-million IMPSA power plant deal. The onerous contract, originally signed by then President Joseph Estrada, was being reviewed by the newly-installed Arroyo government. Perez, as justice secretary, had the power to approve or reject it. Perez has since been referred to in the opposition circle as “The Two-Million-Dollar Man.”

Given the strength of the evidence against Perez, says the Ombudsman source privy to the case, Gutierrez will likely have difficulty clearing Perez of the charges without compromising the anti-graft body.

If Gutierrez does a repeat of the COMELEC MegaPacific decision, she will be hard put to explain the documents gathered by the Ombudsman FIO from Hong Kong and Swiss authorities tracing the $2-million money that Perez allegedly extorted from Jimenez. If she indicts Perez, it could open a Pandora’s box that could lead to Malacañang.

At a Senate hearing on the Ombudsman budget last November, Gutierrez assured senators that she would act on her agency’s findings on the extortion case “before Christmas.” She confirmed that the Ombudsman’s Preliminary Adjudication and Monitoring Office (PAMO) had already come up with a decision and that it had been submitted to her office for final action.

The investigation took four years to complete, hampered, the source says, by attempts of government officials and lawmakers to delay and cover up the evidence.

Money Laundering Investigation

It was then Bulacan Rep. Wilfredo Villarama, a close associate of Jimenez, who blew the lid on the $2-million extortion case in a privilege speech delivered on Nov. 12, 2002. A few weeks later, Jimenez, then a member of the House, identified in his separate privilege speech then Justice Secretary Perez as the “extortionist.”

Jimenez’s pending extradition case apparently triggered the exposé. Wanted by the US for violating election laws and several criminal laws, Jimenez says he suspected Perez of masterminding his extradition supposedly “to cover up” the $2-million extortion.

In his complaint-affidavit filed before the Ombudsman on Dec.23, 2002, Jimenez details how the payoff came about. He says Perez, shortly after being appointed justice secretary in January 2001, threatened to jail him unless he cooperated in executing affi davits against former President Estrada and his cronies.

An Estrada crony himself, Jimenez says Perez constantly pressured him until he was forced to come across with $2 million. Initial reports said the $2 million forms part of the bribe for the approval of the power contract with IMPSA. The bribe was reportedly in exchange for a favorable DOJ opinion on the project. Less than a week after assuming office, Perez issued a favorable ruling.

Opposition Senator Panfilo Lacson says that a total of $14 million actually sweetened the contract, with $2 million going to Perez, $1 million to the “NAPOCOR boys,” $4 million to Malacañang, and $7 million to Jimenez as broker.

Lacson says he got the figures from Jimenez himself during one meeting. In his affidavit, Jimenez points to investment banker Ernest Escaler, a friend of Perez’s, as being the one who facilitated the payoff. Jimenez says he received his first instruction from Escaler, through a faxed message, to transfer the money to Escaler’s account in Coutts Bank, Hong Kong.

On February 23, the transfer was finally consummated when the Trade and Commerce Bank in the Cayman Islands sent the amount of $1,999,965 to Escaler’s account in Coutts Bank.

Citing news reports, Jimenez says fund transfers were noted in Escaler’s account, including a transfer of $1 million to the EFG Private Bank branch in Singapore (documents would later show it was Switzerland).

But except for the confirmation receipt from the Trade and Commerce Bank to Coutts Bank, Jimenez presented no other evidence to buttress his claim. Thus, when the scandal broke out, Perez casually dismissed the allegation. “Do I look like someone who just received $2 million?”

President Arroyo herself challenged Jimenez to support his claim against Perez. In what appeared to be a subtle sign of support for the beleaguered secretary, she buzzed and embraced a surprised Perez in front of photographers when he visited Malacañang at the height of the controversy.

A week after Jimenez filed his complaint, Perez quit the justice portfolio on Jan. 2, 2003, supposedly to prevent Ms. Arroyo from being dragged into the scandal. (He ran but lost in the gubernatorial race in Batangas in 2004). But a Pandora’s box had already been opened.

Just as the case was about to be archived for lack of evidence, the Department of Foreign Affairs (DFA) received a communiqué on April 15, 2003, from the embassy of Switzerland requesting legal assistance for a money laundering case being pursued by Swiss authorities.

According to the communiqué, the Department of Public Prosecutor “is leading a police judiciary investigation” against Perez, his wife Rosario, Ramon Arceo, and Escaler for money laundering. Arceo is Perez’s brother-in-law. The investigation was headed by Federal prosecutor Brent Holtkamp.

The report says that Rosario and Arceo opened two accounts—338 118 and 348 118—at the EFG Private Bank in Geneva on March 5, 2001, with Perez granted the power of attorney. Escaler, for his part, also opened an account with the EFG Private Bank on March 27, 2001.

The next day, on March 6, account number 338 118 “did receive an amount of $1 million from the account of Escaler at the Coutts AG Hongkong.” Account Number 348 118, on the other hand, was credited with $699,985 in May, also from Escaler’s Hong Kong account.

Despite the DFA’s knowledge of the investigation, the report was withheld from the Senate committee on government corporations and enterprises, which was then in the thick of investigations on the alleged anomalous power contract with IMPSA. A leak, however, caused the Senate to subpoena the documents. Sen. Sergio Osmeña III, in his privilege speech, described the report as “like manna from heaven. Here finally was a smoking gun.”

FIO Report

Armed with the Swiss report, Marcelo ordered the Ombudsman FIO to conduct a fact-finding investigation. But the FIO probe proceeded at a snail’s pace for some reason.

Former Sen. John Osmeña, in an interview with NEWSBREAK, says efforts to secure official documents in connection with the scandal were stymied by the Senate’s delay in ratifying the mutual legal assistance treaty (MLAT) on criminal matters with Switzerland.

He says that then administration ally Sen. Manuel Villar, who chaired the committee on foreign relations, appeared to have put the Swiss MLAT at the backburner. Records show that the Senate ratified the Swiss MLAT only on Feb. 2, 2004, three months before the national elections.

Also, the DOJ, under then acting secretary Gutierrez, also took time to act on an Ombudsman memo asking the justice department “to make the proper representation” with its Hong Kong Special Administrative Region counterpart in securing pertinent copies concerning Escaler’s Coutts account. The FIO sent the request as early as July 2004.

But Gutierrez did not act upon the FIO request even after her appointment as presidential legal counsel in September 2004. Her replacement at the DOJ, Raul Gonzalez, also sat on the FIO request. It was only sometime in June last year that the DOJ, through Chief State Counsel Ricardo Paras, made representations with Hong Kong authorities. On Nov.11, 2005, the FIO wrapped up its fact-finding and recommended the investigation and filing of charges against Perez, his wife, Escaler, and Arceo for conspiracy to commit graft and corruption.

The FIO report also found Perez liable for perjury and falsification of documents and recommended the forfeiture of the questioned bank deposits. The FIO report says bank records and documents gathered from Hong Kong and Switzerland “strongly lend credence to Mr. Jimenez’s claim on the extortion.” It establishes that, as Jimenez had claimed, Escaler’s account was credited with $1,999,965 from the Trade and Commerce Bank in the Cayman Islands. The money was then subjected to fund transfers to Swiss accounts held by Rosario Perez and Arceo (see diagram).

Also lending sufficient basis to indict Perez et. al was the fact that Perez, Rosario, and Escaler went to Hong Kong “at a crucial time when the transfer (of money) took place.”

Perez and his wife went to Hong Kong on Feb. 22, 2001, and Escaler followed on February 23. The three boarded the same flight back to the Philippines on February 25.

In their consolidated joint counter-affidavit, the Perez couple and Arceo, a former bank official, admitted they owned the questioned Swiss accounts. They also admitted that the accounts received $1.7 million from Escaler’s Coutts account, and that the money was Escaler’s partial payment for his purchase of the Perezes’ shareholdings in Malvarosa Ventures, pursuant to a Memorandum of Agreement (MOA). The money, however, was returned to Escaler a few months later after certain conditions in the MOA could not be effected.

This defense only proved Perez was lying before the scandal became public. For one, Perez initially said he did not know Escaler. The alibi also contrasts with the data they provided in the client information profile with EFG that the funds deposited in the bank form part of the family wealth of Arceo and Perez’s wife. They also claimed that the money was being held locally and that they wanted to place it offshore “due to the unstable condition in the Philippines.”

NEWSBREAK sought an interview with Perez, through his law firm Balgos and Perez, but his office declined an appointment. NEWSBREAK also sought an interview with Jimenez’s lawyer, Eduardo Escueta, but got no response.

The Ties That Bind

Given the official bank records establishing the money trail, has the law finally caught up with Perez?

As far as the Swiss federal prosecutor’s office is concerned, the investigation on money laundering is now closed after establishing that EFG bank officials had exercised “due diligence” in determining the money’s origin, NEWSBREAK learned. The Swiss probe was restricted only to the possible liability of its citizens in the alleged money-laundering activity.

The probe was concluded November last year. But the Swiss accounts under question have remained frozen pending the outcome of the graft case filed by Jimenez against Perez and company.

The Ombudsman source says the official bank documents proving the money movement “provide the best evidence that not even a hundred angels cannot controvert.” But the fact that Perez’s fate now lies in Gutierrez’s hand has raised concerns that he may yet slip away.

Gutierrez was expected to inhibit herself from the case, considering that Perez was her former boss at the DOJ, but she did not. Sources at the justice department say Perez and Gutierrez had mutual trust and respect during their stint at the department. Whenever Perez was on official leave, he appointed Gutierrez as acting chief.

As DOJ undersecretary handling immigration and extradition matters, Gutierrez was also responsible for facilitating Jimenez’s extradition to the US, which, according to Jimenez, was Perez’s ultimate means to prevent him from exposing the $2-million bribe.

As presidential legal counsel later, Gutierrez defended Perez’s approval of the IMPSA contract. One issue bugging the power contract was the alleged sovereign guarantee given by the government for the project.

The source says the Ombudsman PAMO panel that studied the case consists of “men and women of integrity” and are very likely to sustain the FIO report recommending Perez’s indictment.

But then again, the last word remains with Gutierrez. And the time she is taking to decide could provide a clue on the outcome of the case. – Newsbreak