Lao, Pharmally mystery backer key to COVID-19 funds controversy

Senate Minority Leader Franklin said the mystery backer of former head of the Procurement Service of the Department of Budget and Management (PS-DBM) Lloyd Christopher Lao and the Pharmally Pharmaceutical Corporation is the missing link that will connect the dots in the alleged corruption that involved the procurement of COVID-19 medical supplies.

“The challenge now is to be able to identify that backer, because that backer is the missing link that will connect the dots in this controversy,” Drilon said on Monday.

“We see a pattern of corruption that was perpetrated by Lao and his cohorts. It cannot be done by Lao alone. Kaya mayroon siyang pinagtatakpan at iyon ang dapat nating alamin kung sino,” Drilon said.

Drilon said the backer is an important piece of the puzzle “in order for us and the Filipino people to find out the truth in this massive corruption of public funds meant to help our fight against the COVID-19 pandemic.”

“Sino ba yung backer ni Lao? Sino ba yung backer ng Pharmally? Huwag n’yo nang itago dahil lalabas din ang katotohanan,” Drilon said as he pressed Lao and Pharmally to reveal their backer and the names of officials who are linked to alleged overpricing of several medical supplies.

As early as September last year and even before the Commission of Audit released its report, Drilon had already flagged the overpricing of supplies that PS-DBM bought from Pharmally.

In 2020, Drilon exposed and questioned why PS-DBM bought 2,000 units of COVID-19 test kits from Pharmally for P344,000 or for a total of P688 million when it could be bought at P240,000 per kit. Drilon said the purchase is overpriced by P208 million.

The minority leader had earlier suspected of a well-planned plot to plunder funds through the PS-DBM.

Drilon said the “circumstantial evidence would show patterns of corruption.”

The plot started with the appointment of Lloyd Christopher Lao to the Department of Budget and Management as early as August 2019 despite a pending extortion case when he was chairman of the Housing and Land Use Regulatory Board. Then, Lao was appointed as head of the Procurement Service of the Department of Budget and Management (PS-DBM) on January 2, 2020.

Meanwhile, the Pharmally Pharmaceutical Corporation was incorporated in September 2019 with the Securities and Exchange of Commission (SEC) with a paid-capital of only P625,000.

The Government Procurement Policy Board issued a resolution on March 17, 2020 to include face masks and PPEs as common use supply to allow PS-DBM to purchase them. Later on, Health Secretary Francisco Duque III ordered the transfer of around P42 billion of DOH COVID-19 funds to PS-DBM starting March 27, 2020.

Drilon labeled it as the “original sin” that allowed the corruption to take place, saying that Duque must be held liable even if he resigns.

“Without the transfer of P42 billion from DOH to PS-DBM, the overpricing could not have happened,” said Drilon.

Just two weeks after DOH transferred the funds to PS-DBM sans a memorandum of agreement, the procurement agency began awarding billions of contracts to Pharmally that reached about P8.6 billion in a span of less than two months from April to June 2020.

Lao bought from Pharmally facemasks at P27.72, when other suppliers sold the same to PS-DBM at P13.5, P16, and P17.50 for the same period, according to Drilon.

Lao also bought overpriced PPEs from Pharmally worth P3.82 billion on May 8, 2020 and test kits worth P2.88 billion on June 9, 2020, he added.

Based on Pharmally’s financial statement submitted to the Securities and Exchange Commission SEC), Pharmally’s income soared to P284.9 million in 2020 from zero declared income in 2019. Its assets also jumped to P284.9 million in 2020 from P599,000 in 2019.

Drilon earlier exposed several warning signs of potential anomaly, corruption or fraud in the procurement of several medical supplies by the Procurement Service of the Department of Budget and Management (PS-DBM).

“I am worried there are so many red flags in the procurement of several medical items. These warning signs indicate possible anomaly, corruption or fraud,” Drilon said during the continuation of the Blue Ribbon investigation on the Commission on Audit (COA) findings on COVID-19 related procurement on Friday.

“Red flags are all over. We should not ignore these red flags,” he said in a statement.

The Senate minority leader cited as anomalous the choice of contractors of questionable qualifications with one contractor earning P284.9 million in 2020, from zero income in 2019, supposedly after bagging P8.68 billion worth of government contracts.

“Indeed, business is booming for these contractors. It appears that PS-DBM gave them the sure ticket to wealth. Nakakalungkot na habang marami ang naghihirap, mukhang marami rin ang nagpapayaman,” Drilon said in his statement.

Drilon said that contrary to the law’s clear requirement that negotiated procurement can only be entered into with persons who have the technical, legal and financial capabilities, PS-DBM entered into contracts with corporations of questionable qualifications.

The opposition senator questioned, for instance, why Pharmally Pharmaceutical Corporation bagged P8.68 billion worth of contracts. Incorporated only in September 2019, Pharmally has paid-up capital of only P625,000, obviously insufficient to assume huge risk for the delivery of P8.68 billion worth of procurement.

After cornering P8.68 billion government contracts, however, Pharmally’s income soared to P284.9 million in 2020 from zero declared income in 2019. Its assets also jumped to P284.9 million in 2020 from P599,000 in 2019.

“Is it all thanks to PS-DBM?” Drilon added.

Drilon reiterated that goods procured from Pharmally are overpriced.

Official records will show that it sold facemasks at a whopping P27.72, when other suppliers sold the same to PS-DBM at P13.5, P16, and P17.50 for the same period. It sold test kits at P1,720 when it could be bought at P925. It sold PPEs at P1,910 each when its market cost was at P945, according to Drilon.

The Senate chief fiscalizer also questioned why electronic companies cornered almost P2 billion worth of facemask deals with PS-DBM.

“The procurement of face shields is also shocking. The procurement of 1.32 million face shields went to a single company, Philippine Blue Cross Biotech Corporation,” Drilon noted.

Aside from face shields, Blue Cross Biotech was able to bag a total of P432.17 million contracts from PS-DBM, he noted.

“Mukha po yatang may mga favored suppliers ang PS-DBM. Dapat malinawagan tayo sa proseso at kuwalipikasyon,” Drilon said.

“Though our emergency law and pertinent rules call for the most judicious, economical and expeditious manner of procurement, these do not serve as free-pass for disregarding rules on propriety, rules on transparency and accountability,” Drilon stressed.

Drilon also defended the investigation being conducted by the Senate, saying “to investigate in aid of legislation is the Senate’s constitutional mandate.”

“It is our responsibility as duly elected representatives of the people to unearth truths, especially concerning disbursement of public funds,” Drilon said.

He added that numerous Senate investigations not only yielded to numerous meaningful legislations but also led to the prosecution of corrupt officials.

“There’s a long list of these instances. The Senate, perhaps, can submit a list to Malacanang,” he said.