The Fact-Finding Panel created by Department Order No. 995, s. 2012, composed of National Prosecution Service (NPS) Senior Assistant State Prosecutor ROSALINA P. AQUINO and National Bureau of Investigation (NBI) agents, namely, Atty. MARLON TAULI and Atty. CATHERINE A. CAMPOSANO, recommended the filing of criminal charges against twenty-six (26) individuals, which includes seventeen (17) Filipinos (some of whom are lawyers) and nine (9) Japanese nationals, and ten (10) juridical entities in connection with its investigation into alleged anomalous activities involving the "Entertainment City Project" of the Philippine Amusement and Gaming Corporation (PAGCOR).
The Fact-Finding Panel, which was primarily mandated "to conduct a thorough and in-depth investigation into possible graft and corrupt acts and/or other irregularities that may have attended the transaction/s between PAGCOR on the one hand, and Universal Entertainment, Corp. (“Universal”), a company owned and controlled by Kazuo Okada, an investor in PAGCOR's Entertainment City Project, and/or its affiliate entities, including Aruze USA and Tiger Resorts Leisure and Entertainment ("Tiger Resorts"), on the other," made the recommendation after it discovered apparent violations of the Philippine Anti-Dummy Law (Commonwealth Act No. 108, as amended), in relation to Article XII of the Constitution, and provisions of the Public Land Act and of the Foreign Investments Act of 1991 (Republic Act No. 7042, as amended).
Under the Constitution and the Public Land Act, only Filipino citizens, or entities that are at least sixty percent (60%) owned by Filipinos are qualified to own land in the Philippines. Furthermore, under the Seventh (7th) Regular Foreign Investment Negative List prevailing at the time of the questioned acts and transactions, foreign ownership in "[a]ll forms of gambling" is limited to only up to 40% Foreign Equity" (Item No. 5, List B, Annex "A" of Executive Order No. 584).
These restrictions, altogether, prevented ARUZE USA, INC. ("ARUZE", a corporation duly registered in the United States of America and one of the affiliate companies of UNIVERSAL ENTERTAINMENT CORPORATION, formerly ARUZE CORPORATION and referred herein as "UNIVERSAL", a Japan-based company) from qualifying for a license to operate a casino in the Philippines, it being 100% owned by foreigners. Hence, after submitting in November 2007 its application concept proposal to PAGCOR for the Entertainment City Project (to be named as "OKADA RESORT MANILA BAY"), it sought the services of the Philippine law firm Sycip Salazar Hernandez & Gatmaitan (SSHG). Said law office, through its associate lawyers, successively incorporated three corporations under the Philippine laws, namely, EAGLE 1 LANDHOLDINGS, INC. ("EAGLE I"), EAGLE II HOLDCO., INC. ("EAGLE II"), and TIGER RESORT, LEISURE AND ENTERTAINMENT, INC. ("TIGER"), which were made to appear to be at least 60%-owned by Filipinos and, thus, qualified to implement ARUZE's Entertainment City Proposal, which entailed purchase of lands and obtaining license to operate a gambling business.
However, facts and evidence gathered indicate that these entities, along with several other juridical entities and through the acts of various individuals, were actually dummies or fronts for "UNIVERSAL", meant to circumvent or evade laws of nationalization of certain rights, franchises or privileges.
As explained by the Panel in their 28 June 2013 Report, based on the evidence gathered by the Panel, the following appear to establish a scheme to circumvent the legal restrictions under the Constitution and then prevailing laws:
• The three corporations were incorporated on May 16, May 19 and June 13, 2008, respectively. EAGLE I was created in order to acquire lands for the casino hotel; EAGLE II was to manage the investment or financing aspect; and TIGER was to operate the casino and hotel. They all had the same principal address, i.e., the Makati office address of SSHG. EAGLE I and II shared the exact same five incorporators, all lawyers of SSHG; TIGER also shared three of the same five incorporators and another one of its incorporators with a nominal 1 share was also a lawyer of SSHG. All three also had interlocking officers.
• Despite the purpose for which they were created, they were incorporated with the minimum initial paid-up capital in the amount of P5,000.00 each (5,000 shares at P1/share), with SSHG lawyers paying for the shares, in their own right. By admission from one of the SSHG lawyers, this is pursuant to standard arrangements that are ultimately intended to result in the transfer of such shares to their client.
• Consistent with this, shares in the corporations were transferred successively to various entities, including MOLLY INVESTMENTS COOPERATIVE, U.A. ("MOLLY", a corporation registered in Netherlands and owned by foreigners), but it was made to appear that 60% of the equity belonged to Filipinos or entities owned by Filipinos. Among such entities was LEX DEVELOPMENT CORPORATION ("LEX") and PLATINUM GAMING and ENTERTAINMENT • CORPORATION ("PLATINUM", an entity incorporated way back in November 2001 by RODOLFO V. SORIANO, JR., ROBERTO A. SUSON, MA. LOURDES SUSON GO, VICTOR EMMANUEL C. CAINDIC, and ATTY. LEO B. CAÑARES with a primary purpose of establishing and operating entertainment arcade, and with principal office at Plaridel St., Mandaue City, Cebu).
• However, as to LEX, its supposed 60% share appear to have actually been financed by MOLLY as well. As to PLATINUM, per SEC verification, it appears that no General Information Sheet (GIS) was submitted by PLATINUM all throughout its existence, and that the only document that was submitted was PLATINUM's financial statement for the year ended December 31, 2004 in which it was indicated that its address is at Premier Hotel, Tetuan Cor. Tomas Mapua St., Sta. Cruz, Manila. NBI investigators went to the indicated addresses of PLATINUM but these addresses no longer exist. Certification also from Barangay Alang-alang, Mandaue City showed that PLATINUM's address does not exist and there was no record in the Barangay since December 2010 to 2013. In the same manner, the Office of the City Treasurer of Mandaue City issued a certification that PLATINUM has no business activity since 2000 up to the present.
• The financial statements of PLATINUM, LEX and other dummy corporations such as ULTRALEX HOLDINGS CORPORATION (which, like LEX, is also owned by SSHG lawyers), show that they have no financial capacity to engage in projects as huge as the proposed hotel, casino and resort within the reclaimed area in Parañaque City.
• Furthermore, financial documents also reflect that UNIVERSAL had indeed financed the capitalization and operational costs of the project under construction known as "OKADA RESORTS".
All the pieces of evidence taken together, according to the Panel, "it can be concluded that right from the beginning, UNIVERSAL is behind the operations of the three corporations, specifically, EAGLE I, EAGLE II, and TIGER RESORT. The synthesis of the different components of these corporations had clearly established that the resources which fueled the operations of the corporations under investigation actually came from UNIVERSAL." Thus, the recommendation to charge the individuals and entities named therein for violations of the Philippine Anti-Dummy Law.
The Panel also investigated claims of bribery involving an alleged total amount of US$40Mil1ion paid in 2010 to a then consultant of PAGCOR, RODOLFO V. SORIANO, JR., who, as mentioned above, is also one of the incorporators of PLATINUM, identified as one of the possible dummies of UNIVERSAL in the Entertainment City Project. These transactions also happen to be the subject of an ongoing investigation of the United States Federal Bureau of Investigation (FBI), arising from the Report of U.S. law firm FREEH SPORKIN & SULLIVAN, LLP (the so-called "FREEH REPORT"), which was engaged by Wynn Resports, Ltd for the conduct of an independent investigation to determine whether KAZUO OKADA, among other things, breached his fiduciary duties to Wynn Resorts in connection with the creation of a gaming establishment in the Philippines.
However, while the Panel succeeded in gathering sufficient evidence to verify the fact of payment, which was made through various and successive wire transfers from UNIVERSAL or its affiliates which can eventually be traced to SORIANO, there has yet to be gathered sufficient evidence ragarding the purpose for such payment, mainly due to the reluctance of potential witnesses to testify.
There are indications, however, that the payment is not strictly what it purports to be. Specifically, some sources allege that the payments were reflected in the books of UNIVERSAL as either consultancy fees or payment in consideration for the settlement of road lot issues encountered by EAGLE I. However, doubts are cast on the correctness of the same, considering that the Panel was able to verify that the issue was resolved in 2009 without any cash transactions involved, through the execution of a Memorandum of Agreement (MOA). Under said MOA, Asiaworld Properties Philippine Corporation ("ASIAWORLD") donated the subject property to the City of Parañaque (represented by then Mayor FLORENCIO BERNABE), with the understanding that EAGLE I shall develop said road lots, since the same is practically part of the site where OKADA RESORTS will be built.
Indications about the suspicious nature of the payments are also further reinforced when, sometime in January 2013, UNIVERSAL itself created a Third Party Committee ("Committee"), purportedly mandated to conduct its own independent inquiry regarding the allegations in the Freeh Report and the US$40Million payment that are alleged to be payoffs or bribes. Said Committee recently came up with a report, dated 21 June 2013, characterizing US$25Million thereof as payment by mistake, another $5Million as unauthorized payment, and US$10Million as having been circulated back to UNIVERSAL as compensation for loss.
While the facts and evidence gathered thus far are insufficient to justify the filing of bribery charges against the subjects of the investigation, the Panel, nevertheless, gathered documentary evidence and identified potential witnesses and sources, which may serve as leads for further investigation and/or case build-up.
Hence, at this time, only the charges for violations of the Philippine Anti-Dummy Act may be referred to the National Prosecution Service (NPS) for the conduct of preliminary investigation.