Malversation Charges Filed Against Officers of Camp John Hay Dev't Corp.

08 May 2013

In a Resolution dated 1 April 2013, the National Prosecution Service (NPS) of the Department of Justice (DOJ) ordered the filing of Informations for two (2) counts of violations of Article  217 in relation to Article 222 of the Revised Penal Code (RPC), pertaining to the alleged Malversation of Public Funds or Property in the amount of P1,490,717.26 and P2,839,969.40 by several officers of the Camp John Hay Development Corporation (CJH DevCo) and its subsidiary, the Camp John Hay Hotel (CJH Hotel), including:

1. ROBERT JOHN L. SOBREPEÑA (Chairman of the Board and Chief Executive Officer of CJH DevCo);

2. FERDINAND T. SANTOS (President and Member of the Board of Directors of CJH DevCo and CJH Hotel);

3. ALFREDO R. YÑIGUEZ  III (Executive Vice-President, Chief Operating Officer and Member of the Board of Directors of CJH DevCo and CJH Hotel); and

4. EMILY ROCES-FALCO (Chief Finance Officer of CJH DevCo and CJH Hotel)

Investigating Prosecution Attorney OMAR CRIS F. CASIMIRO, with the approval of the Prosecutor General, found probable cause for the filing of Informations against the above-named officers but, at the same time, ordered the dismissal of the Complaint against twelve (12) other executives and officers of the CJH DevCo for insufficiency of evidence.

The case arose when, over the course of nearly twelve (12) years - from the execution of a Lease Agreement ("Lease") between BCDA and CJH DevCo on 19 October 1996 to the execution of a Revised Memorandum of Agreement (2008 RMOA) on 1 July 2008 - CJH DevCo had difficulties meeting, or outrightly failed to meet, its contractual obligations to BCDA in relation to the development of a portion of the Camp John Hay Reservation known as the John Hay Special Economic Zone.

The 2008 RMOA - essentially a compromise agreement - sought to settle these obligations, particularly the accrued and outstanding rental payments owed by CJH DevCo to BCDA by, among others, providing for a dacion en pago whereby payment was made by transferring ownership over twenty-six (26) rooms/units in the Manor Hotel and Suites Hotel (16 and to, respectively) from CJH DevCo to the BCDA.

Having transferred ownership over the rooms to BCDA, CJH DevCo sought to get BCDA to sign a Leaseback Agreement ("Leaseback") that would authorize the CJH DevCo to, among others, continue renting the rooms to paying guests, in exchange for which BCDA will receive a percentage share of the profits earned from all pooled units/rooms, with the guarantee that BCDA will not incur expenses in the maintenance of the hotel room units. BCDA, however, did not sign the Leaseback Agreement on the grounds that some of its stipulations were disadvantageous to the government.

Notwithstanding the non-execution of the Leaseback Agreement, CJH DevCo, through its officers, proceeded to rent the rooms owned by BCDA to paying guests, as if the Lease Agreement had indeed been executed. This arrangement even allegedly resulted in considerable embarrassment to the purported owner, BCDA, when it was refused the use of, or access to, the rooms it supposedly owned, when all of its 25-27 July 2012 reservations were unilaterally and arbitrarily cancelled by respondents Yñiguez and Manuel T. Ubarra.

On several occasions over the following years, CJH DevCo remitted to the BCDA a number of checks purporting to cover its share in the income from the operations of the sixteen rooms in Manor Hotel based on the Leaseback Agreement. In one instance, in 22 July 2010, CJH DevCo remitted an amount that purportedly covered only half (50%) of BCDA's share in the profits from the operations of the Manor Hotel units for the year 2009 in order to offset drawing for payments made to suppliers. Up to the time of the filing of the Complaint, however, no remittances were ever made for the share of BCDA in the rental of the ten (10) rooms in Suites Hotel on the claim that said hotel was operating at a loss.

BCDA accepted the checks provisionally and with reservation, on the grounds that it was constrained to do so despite its lack of consent to the Leaseback Agreement because, under the law, moneys officially received by a public office in any capacity or upon any occasion must be accounted for as government funds. It did, however, made repeated demands from responsible officers of CJH DevCo for the submission of the audited financial statements of CJH Hotel and for an accounting of the basis for the profits remitted. Although audited financial statements of CJH Hotel for the calendar year 2008 were transmitted to BCDA, all other demands, particularly for an accounting, were ignored by CJH DevCo's officers. Instead, on 8 February 2011, CJH DevCo tendered the purported unpaid balance for the year 2009 (the year for which it only remitted 50% of BCDA's purported share).

On 4 July 2012, BCDA, premised on a cease-and-desist order (CDO) issued by the Securities and Exchange Commission (SEC) halting CJH DevCo's business of selling securities, which includes the  Leaseback Agreement, demanded the turnover of 26 hotel rooms to the government and the monies derived from their utilization.  Instead of complying, CJH DevCo merely forwarded another check, which was said to cover the shares due to BCDA for the year 2010. The demand was reiterated on various occasions, including 27 July 2012 through a demand letter 4 giving the respondents until 12 noon of 1 August 2012 to comply. Yet, again, CJH DevCo merely forwarded another check to BCDA, this time for the profits from the operation and management of the Manor Hotel for the year 2011.

The repeated non-compliance by officers of CJH DevCo with the demand to turnover monies and properties claimed to belong to an instrumentality of the national government finally prompted BCDA to file the instant criminal case for malversation of public funds or property.

In their defense, respondents claimed, inter alia, that the hotel rooms are not public property since they are not owned by the government. This, they claimed, is because the BCDA is a government-owned or controlled corporation “with a personality separate and distinct from the Government.” Thus, they also claimed that Article 222 of the RPC does not apply to them as they are not in charge of funds, revenues, or property of the government within the contemplation of the RPC.

In finding for the existence of probable cause, the NPS ruled that the 26 hotel rooms in the Manor and the Suites Hotel were public properties. Contrary to respondents' claim that BCDA is a corporation with a personality separate and distinct from the Government, the NPS, citing both statutory provision and jurisprudence, held that BCDA remains to be an instrumentality of the National Government, exercising not only governmental but also corporate powers; hence, the properties transferred to it by virtue of the dacion en pugo are proceeds or benefits from the utilization of the John Hay Special Economic Zone and are, thus, public funds and property intended for governmental purpose, i.e., for the promotion of the economic and social development of Central Luzon and the Philippines in general. It stressed, citing another case, that "even private funds as long as they are impressed with public character can be a proper subject of malversation."

Proceeding therefrom, the NPS also disagreed with the respondents' claim that they were not the private individuals contemplated by Article 222 of the RPC. Referring to the Leaseback Agreement relied upon by respondents themselves, the NPS held that it is clear that CJH DevCo had the control and the power to administer the BCDA-owned units, and the obligation to pay BCDA rental income. As such, respondents, as responsible officers of CJH DevCo, are accountable for both the BCDA-owned hotel room units and the income derived from their utilization. Hence, Article 222 of the RPC is applicable.

The finding of probable cause was further supported by the existence of prima facie evidence of malversation. According to the Resolution, when CJH DevCo failed to remit to the BCDA the public funds in its possession after due demand was made, the presumption under Article 217 of the RPC came into operation.

The Resolution however, meticulously pointed out that the malversation only pertained to the income due under the Leaseback Agreement from the use of the 16 units in the Manor Hotel. There was no malversation with respect to the proceeds due under the Leaseback Agreement from the Suites Hotel, since the records revealed that it was indeed operating at a loss at the time. Neither was here malversation with respect to the hotel rooms as CJH DevCo's refusal to turn over the properties were justified by the Leaseback Agreement insofar as it prohibited pre-termination of the agreement during the initial fifteen year period.

The Resolution also took pains to limit the finding of probable cause to those mentioned above, namely: Sobrepeña, Santos, Yñiguez III, and Roces- Falco. Both Sobrepeña and Yñiguez were shown  to have transmitted the Leaseback Agreement to the BCDA. Roces- Falco was also a representative of the JHC DevCo in the same Leaseback Agreement and was at the same time, and addressee of one of the letters sent by the BCDA acknowledging temporary acceptance of the tendered payments. Santos, for his part, cannot deny knowledge of the acts complained of as he was found to have been a signatory to the one of the checks for payment of BCDA's share in the rental income for the year 2010. All the others were accordingly absolved and the complaint dismissed as to them.


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