Senate Bill No. 2020 certified by President Marcos Jr. to Congress on May 22, 2023 for immediate enactment proposes the creation of the Maharlika Investment Corporation (MIC). It will have a board of directors with powers to invest, loan, and enter into guarantees with respect to the P500,000,000,000 Maharlika Investment Fund (MIF) to be contributed mainly by government financial institutions and the national government. 

While the proposed law announces lofty purposes expressing financial benefit to the country, when examined in detail, it exposes its own serious flaws. It is badly drafted, economically unsound, and with legal loopholes that can facilitate entry points for graft and corruption. Truly, the “devil is in the details.”

The proposed law must be rejected by the Filipino people. The reasons can easily be demonstrated.

First. Considering that the proposed bill, if approved, will be an extraordinary law providing enormous authority to a group of people – members of the MIC Board of Directors without popular mandate – to determine the fate of public funds worth a staggering P500,000,000,000, the rule on power and authority under the proposed law, if passed, must be one of limitation and not expansion, restraint and not discretion. The bill is remiss in this respect.

On the enumerated powers of the Board of Directors, Section 20 (i) provides that the board can do anything provided that “it is incidental to the performance of above-mentioned duties” (those enumerated from (a) to (j) of Section 20). The word “incidental” is a word that  can be subject to a number of interpretations. The meaning is relative. The proposed bill should have defined “incidental,” delineating its proper boundaries. Without such clarity, the discretion of the Board  will, in effect, be absolute subject to their own determination of   what “incidental” encompasses.  This is very dangerous.

Second. While  the proposed bill contains a general restriction in Section 16 providing that “in no case shall the MIC, in whatever manner or devise, invest in areas that are explicitly prohibited under existing laws and conventions to which the Philippines is a party,” it  confusingly includes in the enumeration of investments under Section 20 of the powers of the board “loans and guarantees” which, by nature are indebtedness,  and  not investments. The board therefore is given the power  not only to invest, but also to have funds lent to selected individuals or entities  and to  be a guarantee for  obligations.  The law is incoherent and, as such,  can be used to make justifications for improper “investments” of public funds. This incongruity provides an opening for  future corruption, behest loans and the emergence of new cronies.

Third.  Among others, Section 22  provides that a director of the board can be removed if he is guilty of acts  “which are manifestly opposed to the aims and interests of the MIC.”  Why should such opposition be qualified by “manifestly?” It does not make sense. As long as the act is inimical to the MIC, that is enough ground. The adverb “manifestly” is  a condition creating  an avenue for immunity.  If it is not manifest though inimical, it is not within the proposed law and therefore a leeway for non-culpability. The enormity of the amount involved justifies removal even when committed by simple negligence.  

If an ordinary MIC employee can be terminated  on the basis of mere “negligence” as provided in Section 21 (m) (ii), why should it be required that  a director’s infraction  be “manifestly” done to warrant removal? This is double standard that further reinforces a culture of finding-fault-with-the-small-fry-and-sparing-the-big-fish. This has  become systemic and is now being legally institutionalized. Especially since the management of billions falls upon public officials,  the utmost degree of honesty must be exacted and required of them, whether one is an ordinary employee or a high-salaried director. 

Fourth. According to Section 21 (m) (i),  an MIC  employee may also be removed upon the commission of a “gross violation of the provisions of this Act or investment policies and guidelines set by the Board of Directors.”  To qualify the violation as “gross” again  provides a space for non-liability.  This should not be the case. From the very nature of the offenses under the proposed law, any violation must always be construed as serious as it will  negatively affect public funds.    

Fifth. Section 49 is a window for impunity. It  provides that the crimes in the proposed law “shall prescribe in ten (10) years. However, the right of the state to recover properties unlawfully acquired by the persons involved, nominees or transferees in embezzlement and misappropriation of the funds shall not be barred by prescription, laches, and estoppel.”  This means that a violator cannot be jailed if he or she  is not criminally sued within 10 years.  And while the law provides for imprescriptibility on the recovery of the embezzled funds and properties, historically in the Philippines, the justice system  is not fast enough to provide an immediate final remedy. If at all, it takes years for recovery to be had.  The law should have outright provided that both the crime and recovery of property  do not prescribe.  The government must be given all the opportunities to chase and hale felons into a criminal court and have them meted out the maximum penalty. 

Sixth.  Section 49 also states that the only liable individuals are “persons involved, nominees or transferees in embezzlement and misappropriation of the fund”. Generally in special laws like the proposed bill, conspiracy, is not applicable except when the said law provides. Conspiracy may involve masterminds and other individuals not apparent as participants to the transaction. These are people so ingeniously clever in making themselves not visible as  direct connivers   despite  being so.  The proposed law therefore must expressly provide or at the very least make clear  that, in this particular special law,  the criminal liability  shall  extend to conspirators outside the actual transaction. 

Seventh. Previously convicted criminals can be members of the MIC  board of directors with  powers to invest, loan, and make  guarantees of the P500-billion fund.  Section 20 pertinently provides that a “person shall be disqualified from being a director, if within (5) years prior to his appointment as such, the person was convicted by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years.” Three (3) scenarios can happen:

Scenario A: If Mr. Embezzler were previously convicted of a crime punishable by less than 6 years like technical malversation of public funds, he  can be appointed as  a director. Under Article 220 of  the Revised Penal Code, a public official, who commits the crime of technical malversation – which means utilizing public funds for other public purposes for which they were not legally intended – shall be punishable  by prisión correccional in its minimum period, meaning imprisonment for a maximum time of up to  four years. Though the penalty is  less than  six years of imprisonment, technical malversation is still a serious crime involving  the blatant arrogation of power by a public official without lawful authority. That official, even if convicted, can be a director of the MIC board. 

Also when public officers fail to account for the funds under their custody despite the law requiring them to do so, they can be jailed under Article 218 of the Revised Penal Code. Even if such  a crime involves dishonesty and fraud, persons found guilty of its commission can still be appointed as members of the MIC Board. 

Scenario B. If, in 2010,  Mr. Embezzler were convicted  of estafa  punishable by more than 6 years of imprisonment, he can be appointed director of the board by 2024,  because under Article 20 of the proposed law, his conviction  was not imposed  “within five years prior to his appointment.” 

Scenario C. If one has a pending tax evasion case, he cannot be appointed  a board director  according to Section 20 (d) on disqualification. However, if one has already been convicted of tax evasion under Section 225 of the Internal Revenue Code punishable  by 10 years of imprisonment but  his conviction was not  imposed within five years  prior to his appointment, this convicted tax evader can be an MIC director.  Absurdly, there can be cases where  it would be advantageous for a person to be convicted rather than to have his case just pending for purposes of  qualifying as MIC director. This  is absurd.

It is therefore possible that  many, if not all of the directors  of the MIC board, may have been previously convicted  criminals.  The law should have stated that for  as long as an individual committed a crime, he or she should be disqualified. 

Eight.  Section 23 and 24 of the proposed law – providing for the qualification of the President/the Chief Executive officer and also the Chief Investment and Operating officer – do not provide as a ground for disqualification, previous conviction of a crime.  Considering that they are the public officers to supervise the day-to-day activities of the MIC, they  must be totally above-board. The country cannot risk giving the management of billions of funds  to people  with criminal records. A convicted swindler therefore may be appointed to the said positions.

Ninth. The right to freedom of information of the public  may just be illusory. Section 39 of the proposed law provides that  “all documents  of the MIF and the MIC shall be open, available and accessible to the public as may be allowed by law.” Remember the constitutional proscription on political dynasty  making its operation “as may be defined by the law?” The proviso has been made the justification for its non-implementation because there has yet been no law defining what it is. Under Section 39, the phrase “as may be allowed by law” has  been used. This can ingeniously be invoked to make the Maharlika Fund transparency provision inutile. It can be claimed that, like that of political dynasty, there is no legislation yet granting its allowance. 

Moreover, without any specified standard at all, under Section 15 of the proposed law, the MIC board of directors is given the power to determine the form and manner by which  the terms and conditions of any joint venture with other entities will  be published.  The latitude for discretion given to the board on the extent of transparency appears to be indefinite.

Tenth. Section 38 of the proposed law trumps transparency at its inception. It provides that “the MIC shall make a quarterly CONFIDENTIAL submission of all investments, whether planned or under negotiation, by the MIC and  on the portfolio of the MIF, to the MIF-JOC,” (the Maharlika Investment Fund-Joint Congressional Oversight Committee).  Why should the initial  default mode be one of confidentiality and not transparency? This clearly deprives the public of  the immediate right to determine and eventually investigate  possible conflicts of interest which may involve government officials, including  legislators in Congress. The law should have provided that upon submission of the reports, they  shall  be made immediately available to the public upon mere request. This will enhance accountability  in government. 

Eleventh. The proposed law provides  extraordinary powers to a group of men/women – members of the MIC Board – to transact an enormous amount of public money.  Also, under the proposed law, the Commission on Audit  (COA) is given  authority to make an audit every five years as provided in Section 36. This is not enough.  The COA  must also be granted mandatory approval powers prior to MIC’s  implementation of any investment, loan, or guarantee.  It may be argued that inserting a  COA-prior-approval  requirement will unnecessarily negate the flexibility in the  investment and the celerity of the transactions. These are inconsequential arguments considering that billions of public money are involved. Therefore extra caution must be the order the day. Haste makes waste.   

It is likely that the proposed Maharlika Fund bill when it becomes a law will   be questioned in the Supreme Court. Even if the Supreme Court  declares the law constitutional, such declaration does not necessarily make the law a good and beneficial  law.

The proposed law is beyond common, legal and economic  sense given the present state of affairs in the government and in the country. It has been reported that every year, the country has been losing around P700 billion on graft and corruption constituting about 20% of the national budget. If the country is losing that much from the public coffers, what then is the rationale for  investing an enormous amount of money  taken from such depleted public funds?

The national debt is nearly P14 trillion. Only a cleverly distorted use of semantics can explain why a country-debtor should be allowed to have its remaining supply of money invested in a risky proposition. This is the height of irrationality.

There are other problems that should be given  priority in public funding.  Many retirees from the private sector are initially receiving only a measly amount of a little over P12,000 in monthly pension, making them probably live just on the poverty line if not already below it. Our public school teachers and nurses are continuing their crusade for better pay. Our jeepney drivers are clamoring for  subsidy of more than P150,000 to be able to procure new jeepneys. The number of unemployed and underemployed is still in the millions.  Housing for our urban poor should be addressed. And one  can go on and on.

Indeed, I  cannot see any  reason – legal, economic, or moral – for any optimism with respect to this proposed Maharlika Fund Law. If implemented, the Filipino people may lose money from without and from within: from without due to precarious investments and  from within  due to  graft and corruption. – Rappler.com

Mel Sta Maria is former dean of the Far Eastern University (FEU) Institute of Law. He teaches law at FEU and the Ateneo School of Law, hosts shows on both radio and Youtube, and has authored several books on law, politics, and current events.