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WHAT WE KNOW SO FAR: Senate probe on DOH use of P67-billion COVID-19 funds flagged by COA

By Paolo Romero and Cecille Suerte-Felipe Published Sep 06, 2021 2:13 pm Updated Sep 07, 2021 4:34 pm

A report from the Commission on Audit noting “deficiencies” on how the Department of Health handled its P67-billion COVID fund has triggered an investigation by the Senate Blue Ribbon Committee in August.

Here is what we know so far based on the details disclosed by senators and resource persons during the ongoing Senate hearings, where Senate Minority Leader Franklin Drilon described as "premeditated plunder" the awarding of contracts to reportedly favored government suppliers.

The personalities

Health Secretary Francisco Duque III authorized last year the transfer of some P42 billion to the Procurement Service of the Department of Budget and Management (PS-DBM) for the emergency purchase of COVID-19 supplies.

COA flagged the authorization as it was done without proper documentation, including the required memorandum of agreement that would stipulate the obligations and deliverables of both agencies.

Health workers protest the delay in the release of their Special Risk Allowance. Photo by Maria Tan/AFP

But Duque told senators that the transfer was approved by the Inter-Agency Task Force on the Management of Emerging Infectious Diseases (IATF) at the time when President Duterte gave orders to ensure the country would have enough supplies to fight the pandemic.

Lloyd Christopher Lao, who previously worked at the Presidential Management Staff (PMS), was head of the PS-DBM when the DOH transferred P42 billion to the agency. He resigned last June.

After PMS, Lao moved to the Housing and Land Use Regulatory Board (HLURB) as a commissioner before moving again to PS-DBM. While at PS-DBM, Lao tried to apply for the post as overall deputy ombudsman, a move that Blue Ribbon committee chairman Richard Gordon also questioned as he has no experience in the judiciary.

Lao withdrew his application to the Ombudsman for the post, which eventually went to Warren Liong, his former colleague at the PS-DBM. Liong and Lao reportedly both worked as legal consultants and election lawyers to Duterte prior to 2016.

During the Senate inquiry, it was also brought up that Lao is being investigated by the Presidential Anti-Corruption Commission in connection with alleged misdeeds while at the HLURB.

Anderson Lo, who is currently Undersecretary at the PMS, is the husband of Judge Jill Rose Jaugan-Lo, who administered Duterte’s oath of office in 2016 and was among the first appointees to the judiciary under his administration. Lo is reportedly shortlisted to be deputy ombudsman for Mindanao, a post that senators warn may be crucial for any possible future investigation of officials from Davao.

Former Duterte aide and now Senator Bong Go.  Photo by Geremy Pintolo/Philippine Star

Sen. Christopher “Bong” Go is reportedly the common denominator of Lao, Lo, and Liong when the lawmaker was still a close aide to Duterte and was running the PMS. Go has denied being close to any of the three.

Michael Yang is the former presidential economic adviser to Duterte. His name was dragged into the controversy after it came out that he is chairman of the Philippine branch of Full Win Group, which is chaired by a certain Zheng Bingqiang, who is wanted for stock manipulation in Taiwan. 

Gordon has also showed a 2017 news clip that showed Yang introducing officials of Pharmally to Duterte

According to senators, Zheng has stakes in Pharmally International Holdings Corp. and Pharmally Pharmaceutical Corp. which was the government’s biggest supplier of face shields and PPEs. Pharmally is one of the companies being investigated by the committee after it was awarded at least P8.6 billion in supply contracts by the PS-DBM despite having been only recently formed and having only P625,000 in paid-up capital.

Chairman of Pharmally International Holdings, Huang Wen Lie, also known as Tony Huang, is wanted for securities fraud, stock manipulation, and embezzlement in Taiwan. His son, Huang Tzu Yen, an incorporator of Pharmally Pharmaceutical Corp and Pharmally Biological Inc. is also wanted for stock manipulation. 

Lloyd Christopher Lao, who previously worked at the Presidential Management Staff (PMS), was head of the PS-DBM when the DOH transferred P42 billion to agencies.

Mohit Dargani, Twinkle Dargani, Lincon Ong, and Justine Garado are listed as co-owners of Pharmally Pharmaceutical Corp. Subpoenas for their appearance before the committee have remained unserved as their listed addresses in government papers are either non-existent or they have not been staying there for several months according to security guards and receptionists.

Rose Lin and Gerald Cruz are also incorporators of Full Win Group, according to Sen. Risa Hontiveros.

During the last hearing, Gordon showed a news clip from 2017 showing Yang introducing officials of Pharmally to Duterte.

Hontiveros shared last week with reporters an online article in 2016 about a meeting between Yang, Zheng, and Duterte that mentioned their close friendship.

The companies

Pharmally Pharmaceutical Corp. is the firm that bagged nearly P10 billion in contracts from the PS-DBM up to June this year—or the same month when Lao resigned from the PS-DBM—to supply face masks, face shields, PPEs, and other COVID-19 supplies.

Official records showed it sold facemasks at P27.72 each when other suppliers sold the same to PS-DBM at P13.5, P16, and P17.50 for the same period. Pharmally also sold test kits at P1,720 when the same could be bought P925 from other sources. It also sold PPEs at P1,910 compared to P945 from other suppliers.

Duterte meets executives of Pharmally, some of whom are wanted for fraud in Taiwan. Pharmally was awarded billions in Philippine government contracts despite having less than P1 million in capitalization.

Philippine Blue Cross Biotech Corp. was able to obtain a contract to supply 1.3 million face shields on April 2, 2020 at P120 each, which Senate Minority Leader Franklin Drilon said was overpriced based on purchases made by the Philippine Red Cross for similar items at around the same period.

XuZhou Construction Machinery Corp. was able to obtain at least P1.9 billion in contracts to supply face shields. Drilon questioned the contract as XuZhou was reportedly not registered with the Securities and Exchange Commission, which is a requirement for government contracts.

Sunwest Construction and Development Corporation; Bowman Technologies, Inc.; Nikka Trading; EMS Component Assembly, Inc. and Cosmic Technologies were described by Sen. Imee Marcos as “unusual choices” of suppliers by the PS-DBM, which awarded them more than P2 billion in contracts for COVID-19 supplies.

Questions raised in the ongoing inquiry

Who ordered Duque to transfer P42 billion to PS-DBM?

What prompted the PS-DBM to classify face masks, face shields, PPEs, test kits and other COVID-19 supplies as common use supplies that obviated the need for biddings and the signing of MOAs with the DOH just before the P42 billion was transferred?

Why was Pharmally given huge supply contracts when it was only formed in September 2019 with a paid-up capital of only P625,000, and has no track record of having multibillion-peso business contracts with government required in such transactions?

Why did the PS-DBM justify the procurement of face shields at what are believed to be high prices when the Philippines was the only country in the world that mandated their use?

Why were construction and electronics companies chosen to supply medical supplies?

President Duterte said he would stand by Health Secretary Francisco Duque despite anomalies found by the Commission on Audit (COA) in COVID-related contracts.  Photo by Joey Dalumpines/official presidential photo

Why was there no basic background checks done on the said suppliers—some of whom have no office at all or are not registered with the Securities and Exchange Commission—given the huge contracts given to them?

Why was there no apparent effort to procure supplies at prices advantageous to the government?

Banner photo of frontliners in tent by Miguel de Guzman/Philippine Star; Bong Go by Geremy Pintolo/Philippine Star; Christopher Lao from PNA; Duterte by Joey Dalumpines