Investigating Officials

CHAPTER III

INVESTIGATING OFFICIALS
CHECKING ASSETS, LIFESTYLES, BEHAVIOR, AND CONFLICTS OF INTEREST

SHEILA S. CORONEL

Corruption takes place because individuals who have been entrusted with
power take liberties with the law and with the public purse. Pursuing
the trail of wrongdoing inevitably leads to individuals who commit
malfeasance. Sooner or later, therefore, one who is bent on uncovering
corruption will have to check on the lifestyles, assets, and behavior
of public officials.

These are areas that are ripe for investigation. The accumulation of
wealth by those who hold public office is hardly kept secret, and there
is bound to be documentation proving such illicit amassing of riches.
Moreover, even while corrupt deals are transacted behind closed doors,
those who commit wrongdoing invariably leave a trail, either in the
form of botched procedures or behavior that violates codes of ethics.

The following are some techniques that have been successfully used to investigate corrupt public officials:

Check lifestyles

Many citizens take for granted that bureaucrats and officials live in a
grand manner that cannot be explained by their paltry salaries. The
fact that poorly paid tax personnel or customs collectors drive
Mercedes Benzes and live in mansions hardly raises eyebrows.
Extravagant lifestyles are one of the most obvious
indicators of corruption and among the easiest to document. They are
also a violation of the law, if an official is unable to prove where
she got the wherewithal to support such a lifestyle.

The Anti-graft and Corrupt Practices Act (Republic Act 3019) says that
a public official can be dismissed if he “has been found to have
acquired during his incumbency, whether in his name or in the name of
other persons, an amount of property and/or money manifestly out of
proportion to his salary and to his other lawful income.” There is a
presumption of culpability if an official cannot explain where she
acquired income or assets. Among the things mentioned in R.A. 3019 as
indicators of unexplained wealth are unexplained bank deposits,
“manifestly excessive expenditures,” and ostentatious display of
wealth, including frequent travel abroad.

Unlike other techniques of investigating corruption, conducting a
lifestyle and asset check shifts the focus of the investigation from
the act of malfeasance (e.g. awarding an overpriced contract, rigging a
tax audit, favoring a relative for an appointment) to the fruits of
such malfeasance.

When journalist Earl Parreño was investigating the misuse of pork
barrel funds in Eastern Visayas in 1998, among the things he looked at
was the way the congresspersons from the poorest provinces in the
country lived. The result of even a cursory examination of
congressional lifestyles was astonishing. Among the things Parreño
found on his visits to the congresspersons’ districts were fabulous
mansions, one with a jet ski in the garage, the other with a helipad
where the congressman parked a rented helicopter for his weekly visits
to his constituents – all these amid the poverty and misery of Samar
island.

Visits to offices and houses are a good way to begin a lifestyle check.
Among the things to look out for are fancy vehicles (boats, cars, jet
skis, etc.) parked in these homes or used for ferrying officials,
sumptuous parties hosted by them, the retinues they keep (bodyguards,
valets, maids), the suits and jewelry they wear. Other lifestyle
indicators are foreign trips, children sent abroad for schooling, or,
as in the case of former president Estrada, luxury houses built for
mistresses and family members.

After taking note, one can begin asking questions. Remember that public
officials are banned by the anti-graft law from receiving gifts. Find
out whether they have a plausible explanation for the manner in which
they live. What salaries do they get from the government? Did they
inherit or marry into land or other forms of wealth? Did they make
money from a business or profession?

To answer these questions, one must do a background check. Ask for
curriculum vitae; interview family, friends, staff, classmates, and
townmates; scour newspaper archives for articles about these officials.
Try to get a sense of how official lifestyles have changed over time.
Parreño, for example, found that the Eastern Visayas congresspersons he
was investigating acquired markedly more affluent lifestyles after
their election to the legislature. He looked at their statements of
assets and discovered that their assets registered a dramatic
increase after they were elected to the House; the longer they stayed
in Congress, the larger the cumulative gain in their assets.

Look for assets

The first step when checking the assets of those in government is to
get their statements of assets and liabilities. Officials often lie in
their asset statements, tending to understate what they own;
nonetheless, these records are among the most valuable public documents
available when one is investigating corrupt officials. While the data
these documents contain are often incomplete, inaccurate, or otherwise
unreliable, they still offer baseline information for pursuing a more
thorough investigation. [See Chapter IV, “The People and Paper Trail,”
for a more detailed discussion of statements of assets.]

Government officials and employees are required to make annual
declarations of their assets and liabilities. The idea is that such
declarations make it easier to keep track of the accumulation of wealth
by public officials, so that the public can check on, among other
things, potential conflicts of interest or illicit gain from public
office. Making inaccurate declarations is a violation of the law and
has caused the downfall of high officials.

In Thailand, the newspaper Prachachart checked the accuracy of asset
statements by comparing them with corporate and other records. For
example, in 1999, the Thai interior minister was forced to resign after
declaring a fake loan from a company to cover up an unexplained
increase in his assets. The newspaper found out about the fake loan
because it was not registered in the lending firm’s balance sheet.

In 2001, Prime Minister Thaksin Shinawatra came perilously close to
losing his post after he was charged with filing inaccurate asset
declarations and with concealing his assets by transferring his shares
to his maid and his driver. Prachachart did the initial investigation
as well, again by comparing the prime minister’s asset declaration with
corporate financial statements, and by uncovering the identities of the
individuals who had acted as his dummies.

Similarly, the PCIJ’s own investigation in 2000 of President Estrada’s
unexplained wealth – as shown by the disparity between what he declared
in his asset statements and what other public records show he actually
owned – became one of the bases for filing impeachment charges against
him. [See section “Investigating a President” in this chapter.]

All these investigations were based on a thorough check of asset
declarations and proving their inaccuracy by using other public
records. In Estrada’s case, the PCIJ found that the president’s
declared net worth and income could not explain how he, his wives, and
his children were able to live a lavish lifestyle (including fancy cars
and high-priced mansions) and form so many companies, most of which
were not listed in his statements of assets.

Examine conflicts of interest

The law recognizes that the tremendous powers given to officials have
to be tamed in various ways, including ensuring that they do not use
these powers to protect and promote their own interest rather
than the public’s. Conflicts of interest arise when those entrusted
with power or authority have pecuniary interests that may either
benefit from, or be damaged by, the exercise of such power.

The Constitution has measures to guard against conflicts of interest in
the legislature, the executive, and the judiciary. Any official who
violates these measures can be charged with violating the Constitution.
[See sidebar.] Thus, in investigating officials, it may not be
necessary to prove that they received bribes or otherwise benefited
from an anomalous action, policy, or decision. Showing that they were
in a conflict-of-interest situation often suffices.

For example, in a 2002 investigation of the justice department, the
PCIJ’s Malou Mangahas found that Justice Secretary Hernando Perez
declared ownership of shares in Belle Corp. among his assets. She also
discovered that Perez had served as chair of Belle in the early 1990s.
Yet Perez, as justice secretary, was overseeing the corruption charges
against former president Estrada, which included the purchase by state
pension funds, at Estrada’s behest, of millions of pesos of Belle
shares. At the very least, Perez should have inhibited himself from the
case. Yet, the PCIJ investigation showed that he who negotiated for the
chair of Belle and the heads of the two pension funds to become state
witnesses in Estrada’s trial. The three men failed to help the
government nail Estrada with their testimonies even as they saved their
own skins.

The Constitution requires that the President, the Vice President, and
Cabinet secretaries divest themselves of their business interests so
that they will not be caught in conflict-of-interest situations.
Officials, however, cannot divest to their wives or relatives within
the fourth degree.

Even after divestment, officials very often operate in a gray area,
which is also an area that is ripe for investigation. In 1992, for
example, Howie G. Severino documented a conflict of interest in the
case of the newly appointed environment secretary, Edelmiro Amante, a
former logger and lawyer for logging firms as well as the former
representative of the country’s foremost logging province. Severino
cited conflict of interest among the issues that raised doubts about
Amante’s suitability for the post of environment chief at a time when
the future of logging was being hotly debated.

In addition to the Constitution, the Anti-graft and Corrupt Practices
Act prohibits officials from directly or indirectly benefiting from
transactions requiring the approval of government bodies of which they
are part. The Act explicitly says that officials cannot be members of
such bodies even if they do not participate in the deliberations on
transactions in which they may benefit.

Apart from these laws, institutional or professional codes of ethics
guard against conflicts of interests. For example, the Code of Judicial
Conduct requires judges to inhibit or recuse themselves from cases in
which their relatives or former clients are involved. [See Chapter VII,
“Investigating the Courts,” for further discussion.] The classic
example of conflict of interest in the judiciary is Severino’s 1994
exposé of how a Makati trial judge issued several rulings in favor of
Hoechst, a German multinational company that manufactures Thiodan, one
of the most harmful pesticides in the market. Severino examined
corporate records, court documents, and minutes of Hoechst board
meetings to prove that the judge had once been a lawyer for a Hoechst
affiliate while his wife owned substantial shares in another Hoechst
subsidiary.

One can document conflicts of interest by doing an asset check of
officials and examining how they make decisions on transactions
involving companies, property, or economic sectors (e.g., power,
manufacturing, agriculture) in which they or their relatives have an
interest. For example, in 1995, Marites Dañguilan Vitug obtained a list
of projects funded from the pork-barrel allocation of Surigao del Norte
Rep. Glenda Ecleo. Among the major recipients of Ecleo’s largesse was a
mining cooperative. Vitug then checked Ecleo’s statement of assets and
was not all that surprised to find that the legislator had listed
interests in the same mining cooperative among her assets.

Congress is a particularly difficult nut to crack as far as conflicts
of interest are concerned. The divestment requirement does not apply to
members of Congress, although the law [see sidebar] puts other limits
on the actions of legislators. Unlike members of the Executive
Department, senators and congressmen are not barred from practicing
their profession. They are only expressly prohibited by the
Constitution from appearing in court; otherwise, they are allowed to
continue practicing law even while serving in Congress.

The difficulty lies in the fact that most legislators have economic and
professional backgrounds that put them in potential
conflict-of-interest situations. As shown in The Ties that Bind, the
PCIJ’s ongoing research on the proprietary and family interests in
Congress, most legislators own businesses or property which can benefit
from the laws they pass. But it is hard to call them to account because
they can always say that these laws were drafted on behalf of certain
constituencies they represent. Or a representative in a
conflict-of-interest situation may simply ask a colleague to file a
bill on his or her behalf. At any rate, the mere pinpointing of such
potential conflicts through an asset check of legislators and its
comparison with their voting record or the bills they filed, is an
invaluable public service and will make the lawmaking process more
transparent.

Sidebar: Guarantees against Conflict of Interest

What the Constitution says:

 The President, Vice President, Cabinet members and
their deputies or assistants cannot hold any other office or employment
during their tenure. They cannot directly or indirectly practice any
other profession, participate in any business, or be financially
interested in any contract, franchise, or special privilege granted by
any government entity.

 Members of Congress cannot personally appear as
counsels before any court, electoral tribunal or quasi-judicial and
other administrative body. They cannot be directly or indirectly
interested financially in any contract, franchise or special privilege
granted by the government. They cannot intervene in any matter before
any office of the government, if it is for their pecuniary benefit.
They are also required to notify Congress of any potential conflict of
interest that may arise from laws or bills they author.

 The President, Vice President, Cabinet members,
Ombudsman, and members of Congress, the Supreme Court, constitutional
commissions cannot directly or indirectly receive any loan, guarantee,
or any other financial accommodation from a government-owned or
controlled bank or financial institution.

Anti-graft and Corrupt Practices Act (Republic Act 3019)

 Public officials cannot request or receive any
pecuniary benefit from any person who has obtained or is seeking to
obtain a government license or permit.

 A public official and his family cannot accept
employment from a private enterprise that has pending official business
with him.

 A public official cannot have a direct or indirect
interest in any transaction or act requiring the approval of a body of
which he is a member, even if he does not participate in the action of
that body.

 The spouse or any relative within the third civil
degree of the president, vice-president, Senate president, and Speaker
of House cannot intervene directly or indirectly in any business,
transaction, or contract with the government.

 Members of Congress are banned, during the term for
which they are elected, from acquiring any personal material interest
in any business enterprises that will be “directly and particularly”
benefited by any resolution or law approved by them during that
term. If they already have prior interest in said enterprises,
they are required to divest themselves within 30 days.

Code of Conduct for Public Officials and Employees (Republic Act 6713)

 Public officials and employees are banned from
having a direct or indirect financial or material interest in any
transaction requiring the approval of their office.

 They cannot own, control, manage, or accept
employment in any private enterprise regulated, supervised, or licensed
by their office.

 They cannot engage in the private practice of their
profession unless authorized by law, and only provided that such
practice will not conflict with their official functions.

 They cannot recommend any person to any position in
a private enterprise that has a regular or pending official transaction
with their office.

 When a conflict of interest arises, they shall
resign from any private business enterprise within 30 days from
assumption of office and/or divest themselves of their shareholdings or
interest within 60 days. Divestment does not apply to those who serve
in an honorary capacity nor to laborers and casual or temporary workers.

 Divestment shall be to a person or persons other
than the official’s spouse and relatives within the fourth degree.

Look for patterns

Many of the investigations that the PCIJ has done involved examining
not just a single corrupt act but a series of acts or anomalies.
Investigating wrongdoing often entails looking for a pattern in the
actions of corrupt officials or bodies. A single suspicious act can be
explained as being due to something plausible, say, carelessness,
inefficiency, or ignorance. But a pattern of suspicious actions is
harder to account for. When gathering evidence of wrongdoing by
officials, therefore, one often has to establish that a pattern of
wrongful acts has been committed and to find out who is responsible for
them.

Severino’s investigation of a Makati judge’s rulings on the German
pesticide producer Hoechst, for example, entailed examining the judge’s
actions over a two-year period. These included a ruling overturning the
government ban on Hoechst pesticides in 1992, a court order a week
later that doubled Hoechst’s import quota for one of the banned
pesticides, and a 1993 injunction stopping a new government prohibition
on the pesticides. The injunction was issued by the same judge even if
the case had been raffled off earlier to another judge. When these
actions were seen over time, a pattern of anomalous rulings designed to
counter government efforts to ban or restrict the harmful pesticide
became evident.

In other investigations, the pattern was discernible not so much in the
official’s actions related to his position but in his acquisitions. In
the PCIJ’s investigation of Estrada, for example, the pattern of
building fancy houses in de luxe subdivisions and the acquisition of
real estate through dummy firms were established only after months of
gathering documents and doing interviews with knowledgeable sources.
Because most of the real estate and the houses were not in Estrada’s or
his mistresses’ names, the PCIJ team had to find patterns in their
acquisition as part of the effort to establish ownership. The patterns
emerged only after the records of several of the houses were examined:
same contractors and designers were used; same cronies or friends
fronted for the properties; and the same law firm incorporated several
of the shell companies in whose names these properties were bought.
[See below.]

Investigate the public behavior of officials and lapses in codes of conduct

Investigating officials should not be limited to probing their
decisions, assets, lifestyles, and acquisitions. Journalists and other
researchers can also venture into examining their behavior both during
and after office hours. This is particularly so for officials in
positions where high standards of behavior are expected. The foremost
example of this is the judiciary. The Code of Judicial Conduct
prescribes that judges conduct themselves in a manner above suspicion.

In 1993 and 1997, the PCIJ published articles that reported that
Supreme Court justices were violating the code of conduct by being seen
in public with litigants and lawyers who had cases pending in their
courts. Such so-called ex parte communications are not illegal, but
they cast doubt on the impartiality of justices when the meetings are
held without the presence of both parties to a case.

The articles cited interviews with litigants and lawyers who had
witnessed these meetings and also revealed the existence of a network
of intermediaries that had emerged around justices who were supposed to
be impervious to outside influence. The examination of the public
behavior of justices led to an investigation of these intermediaries,
particularly law offices run by relatives of justices or retired
justices, which have been accused of peddling influence in the high
court.

Observing the public or social behavior of officials provides clues as
to who is doing the influence peddling. Among the findings of the
PCIJ’s 1997 investigation of Supreme Court Chief Justice Andres Narvasa
was that he was often in the company of a lawyer who was known in the
legal community as a conduit to the chief. The PCIJ traced immigration
records showing the lawyer and Narvasa took several foreign trips
together; they were also seen regularly playing golf and dining
together, even if the lawyer and his office had pending cases in the
high tribunal. Narvasa had also been seen in the company of litigants
who had cases in the Supreme Court, leading to doubts on whether he
conducted himself in “a manner above suspicion.”

Ethical codes are more lax for elected officials, but they should not
be exempt from an examination of their public behavior. For example,
eyebrows should be raised if a mayor is often seen in the company of a
public-works contractor who has big contracts with the city government,
more so if that contractor is listed among the mayor’s campaign
contributors. While there is nothing illegal about this, such behavior
raises issues of propriety and conflict of interest, especially if
documents show that the contractor has been unduly favored by the city
government.

The issues raised against Estrada during the early months of his
presidency also had to do with his behavior, especially in the late
evening hours when his friends and cronies joined him for drinks at
Malacañang Palace. It later came to light that major decisions of the
Estrada presidency, such as appointments to key posts and the award of
contracts to favored businesspeople, were made by the so-called
“Midnight Cabinet.” Who Estrada drank or played mah-jongg with became
an important issue, as this had a direct bearing on presidential
decision making.

Investigate friends, relatives, and cronies

Nepotism and cronyism are among the most pernicious forms of
corruption. [See Chapter I, “Defining Corruption.”] Favorable treatment
given to family and friends may include a government job, a public
works contract, subsidized housing, a loan from a state bank, even
leaked questions in a government exam. Such favors are often accepted
as the norm and officials think that rewarding family and supporters is
part of the perks that come with a government post. It is this
widespread thinking that leads to abuses of public office and of the
public trust.

Corrupt officials typically distribute the profits from, and
opportunities for, malfeasance among their kin and cronies. Marcos, who
divided control over profitable sectors of the economy among his
relatives and friends, was the foremost example of the heights to which
this practice can go. Corazon Aquino is generally acknowledged to have
been an honest president, but her relatives were not shy about using
their closeness to Malacañang to wangle official positions and get
concessions from government bodies.

Even if office-holders are themselves clean, their family and friends
can still use their connections for various forms of malfeasance. This
appeared to be the case with Environment Secretary Angel Alcala, whom
Severino investigated for the PCIJ in 1995. Severino found that Alcala
had issued anomalous permits to cut down forests because of the
lobbying of a “syndicate” within the environment department that
included the secretary’s daughter who was also his secretary and his
former students at Silliman University who served as his advisers.
Members of the syndicate acted as intermediaries for logging firms.
(See below, “Investigate intermediaries.”)

The PCIJ’s own investigations have shown that the practice of favoring
family and friends is pervasive in all branches of government. The Ties
that Bind shows that the interlocking family and business ties of
officials – many representatives, for example, belong to political
families that also run business networks – is partly responsible for
the fudging of the lines that separate the private from the public
sphere.

Investigators of corruption should therefore be adept at unraveling
“the ties that bind.” One of the strongest ties is family. One way to
investigate family ties is to examine genealogies and family histories.
In their statements of assets, officials are also required to list
family members holding government posts [see Chapter IV, “The People
and Paper Trail”]. It is important to know how officials are related to
each other or to businesspeople who will benefit from, or be harmed by,
legislation or government regulation. This information could
provide the missing link in an investigation.

Other ties are those formed in schools, fraternities, civic clubs, and
professional associations. Religious and ethnic or linguistic- group
affiliation are also strong ties. These often give clues as to why an
official is favoring a particular businessperson or firm. For example,
it is well known in the legal community that the University of the
Philippines-based Sigma Rho fraternity wields strong influence in
appointments to the judiciary. Many lawyers and litigants use the Sigma
Rho connection to get favorable rulings from judges.

Real-estate developer Roberto Sobrepeña was believed to have wangled
big contracts during the Ramos presidency because he and the President
belonged to the same church. It was this connection that made Sobrepeña
one of the big contributors to the Ramos campaign. Another contributor
was musician and bistro operator Ramon ‘RJ’ Jacinto, who used his
closeness to the President to get billions in loans from government
banks.

The campaign expenditure records that candidates are required to submit
to the Commission on Elections within 30 days after the vote are a good
source of the identities of a politician’s closest friends and
supporters. Although these listings are by no means complete, they are
a good place from which to start. Estrada’s campaign expenditure
record, for example, showed tobacco tycoon Lucio Tan’s brother Harry
among the contributors. Lucio Tan himself was believed to be the
biggest contributor to the campaign, although he was not listed as a
donor. He reaped his investments during the Estrada presidency, when he
got preferential treatment for Philippine Airlines and the
investigation of his tax evasion cases. Estrada later appointed other
campaign contributors to high government posts.

Unlike Estrada, the cronies of Ramos, a former general, tended to be
from his “old boys network” in the military. When Chay
Florentino-Hofileña investigated the Mount Pinatubo Commission during
the Ramos presidency, she found it to be full of retired officers, some
of whom used their office to enter into anomalous and overpriced
contracts. It was the same case for the Centennial Exposition, which
Hofileña probed years later. Some of the key Ramos-appointed officials
who took part in the construction of that white elephant in 1997 and
1998 were former military officers, who appeared to have condoned the
massive expenditures and the diversion of funds intended for the
exposition to the ruling party’s election coffers.

To unravel such ties, investigators can seek interviews with the
associates, friends, and long-time staff of these officials. Other
sources are published reports, directories published by fraternities
and professional groups, alumni associations, rosters of civic clubs.
Many of these lists are now online and many organizations, even family
or clan associations, have e-groups for their members. Many e-group
postings are in Web archives. Reading through the correspondence
mounted on these online discussion groups can provide clues of what
ties bind. Investigators can also post queries in nonexclusive e-groups
or listservs.

Investigate intermediaries

In the course of its many investigations, the PCIJ has come across the
role played by intermediaries – either middlemen or brokers – in
corrupt transactions. A company or individual that does business with
the government or is subject to official regulation inevitably searches
for connections to the powerful. For this reason, a network of
intermediaries or intercessors sooner or later forms around a wielder
of power or an interpreter of government rules, be he or she a mayor,
police chief, district highways supervisor, or even a Supreme Court
justice.

Such intermediaries may, in the case of Supreme Court justices, be law
offices that have relatives of justices as partners. As this writer’s
1997 investigation of the Supreme Court found, the law offices are
hired by litigants or subcontracted by other law firms expressly for
backroom deals with justices. For this reason, that investigation
focused largely on the role of intermediaries in corrupting the court.

Similarly, the PCIJ’s 1995 investigation of presidential mistress
Rosemarie ‘Baby’ Arenas was essentially an examination of her role as
intermediary to President Ramos. The article, based on interviews with
government officials and businesspeople, probed whether Arenas was
indeed lobbying for government appointments and contracts.

Very often private individuals do not transact directly with officials.
Litigants and lawyers, for example, may go through the clerk of court
or other members of the judicial staff. Public works contractors rarely
meet with congressmen themselves when they try to negotiate a slice of
pork barrel funds; they deal with congressional staff. Demands for
payoffs, commissions, or grease money are sometimes coursed through
trusted relatives, who are also sometimes employed as secretaries,
chiefs of staff, or consultants of officials. Following the trail of
corruption, therefore, entails unraveling the network of intermediaries
and brokers that surround a corrupt official.

Sometimes corrupt deals are transacted through or by mistresses, as in
Arenas’ case, fraternity mates, classmates (as in the case of President
Estrada, whose classmates were said to have wangled juicy deals from
government). In this case, the trail of accountability becomes fuzzy,
as these are private individuals who influence government decision
making; if at all, it is the officials they influence, rather than the
brokers themselves, who are held to account.

For sure, these intermediaries often take a cut for themselves. In the
case of the Amari scandal that hounded the Ramos presidency, the PCIJ
found that the intermediaries were two ethnic Chinese businesspersons
who received commissions from Amari in exchange for ensuring that the
Thai company got the contract to purchase and develop reclaimed land
off Manila Bay. These two businesspersons in turn bribed other
officials to get that contract. Amari was a huge and complex deal that
involved other brokers as well, including George Triviño, a convicted
gold smuggler who was Amari’s conduit to House Speaker Jose de Venecia.
Triviño, who fled the country at the height of the Senate investigation
of the scandal, was the “smoking gun” in that he was the link between
Amari’s corrupt deals and de Venecia’s possible complicity in them.

Sidebar:
Checklist for Backgrounding Officials

The following is a list of documents that can provide essential
information on officials. Chapter IV, “The Paper and Human Trail,”
discusses some of these records in more detail.

Official biodata
Newspapers, magazines, and newsletters
Biographies, family histories, genealogies, and Who’s Whos
Directories and yearbooks
Listings of trade and professional organizations
Statements of assets
Land records
Corporate records
Vehicle registration records
Licenses and permits (for firearms, business, etc.)
School records
Civil registry records (birth, marriage, etc.)
Voter registration records
Record of campaign expenditures
Speeches and papers
Immigration (arrival and departure) records

Sidebar
Investigating a President

The PCIJ’s award-winning investigation of the unexplained wealth of President Estrada
employed many of the techniques described in this chapter. The findings
of the investigation were published as news reports in major newspapers
and aired as 10- to 15- minute segments on public-affairs programs in
two major networks from July to December 2001. These reports also
became the bases for the impeachment charges filed against the
President.

Estrada’s two-and-a-half-year presidency provides a classic case study
of political corruption in the Philippine context and of the vast
amounts that can be amassed by a president who misuses the powers of
his office. These included the powers to appoint over 3,500 officials,
including the boards of government banks, corporations, and pension
funds. The President also has the power to approve contracts above P50
million. He can veto laws, order the release of amounts from the
national budget, and exercise influence on nearly every office in the
bureaucracy.

By the time Estrada was ousted in January 2001, it had become apparent
that he combined the vintage methods of presidential plunder that
Marcos had perfected – behest loans, commissions from contracts, and
the ownership of companies through nominees – with newer types of
machinations such as stockmarket speculation and corporate mergers and
takeovers using state pension funds. The estimate is that Estrada
accumulated as much as P20 billion in cash and real estate while in
Malacañang.

When the PCIJ began its investigation in January 2000, there was
already coffee-shop talk about the deals made by the President and the
huge amounts of money that were changing hands. It was, however,
difficult to substantiate these rumors, especially when Estrada was at
the height of his popularity and had succeeded in muzzling critical
segments of the press. It was difficult at that point to get firsthand
sources to be interviewed on the subject or to find documentation to
support the allegations.

Such is often the case when one is investigating corrupt officials.
This does not mean that one should stop probing. It only means that one
should change the focus of the probe and the techniques used. The PCIJ
investigation of Estrada took nearly a year and was done by a team of
five journalists, several researchers, and interns.

The following is a simplified-step-by-step account of how the PCIJ investigated a president:

Aim for what can be documented

The challenge in investigating political corruption is to find a paper
trail and to get sources to reveal information, especially when the
targets of the investigation are powerful. The PCIJ knew that it had to
find documents to back up its reports. Its investigation, therefore,
was determined by what could be documented. It was difficult to
document deal making and payoffs. It was easier at that time to
document the fruits of the dealmaking. This was the reason the PCIJ
decided to find out how Estrada spent his money, rather than how he got
it.

Devise a research strategy

It is essential at the onset to conceptualize a strategy for the
research. The strategy should include a list of the information needed
and the documents and sources that can provide such information.
Investigators should know what they are looking for. For the PCIJ, this
requirement also entailed rereading the law on assets and conflicts of
interest.

The main strategy at the initial stage of the investigation was to find
out whether the President’s assets exceeded what he had declared in his
statement of assets, making him liable for accumulating unexplained or
ill-gotten wealth. As shown in the previous chapter, an asset check is
often one of the simplest ways to document corruption. To do this, we
needed to retrieve Estrada’s statements of assets since 1987. Then we
would have to do a systematic search of his assets and see whether his
statements contained major omissions.

Be patient with documents

The search for statements of assets was easy. The PCIJ had several of
these already on file. Those when Estrada was a senator were still on
file at the Senate, and those he filed as president were obtained from
the Office of the Executive Secretary in Malacañang. The search for the
other assets was more tedious. The PCIJ began with corporate records
and did a systematic search of companies in which Estrada and various
family members were registered as board members or incorporators.

The search began at a computer terminal at the Securities and Exchange
Commission (SEC), where members of the public can key in a name and
find out what companies list it as an incorporator or a board member.
PCIJ researchers keyed in Estrada’s name and those of his wife, various
mistresses, and children. More than 100 companies were found, but the
list was trimmed down to take out companies that listed people who had
the same name but were not Estrada family members.

The next step was to retrieve the registration records of the companies
in the trimmed down list. This entailed queueing at the SEC for five to
six hours to get a maximum of three records a day. The process took
about three months. By the end of that period, the PCIJ had a list of
66 companies in which Estrada or his family held shares. The search had
paid off as Estrada declared less than a dozen companies in his
statement of assets.

Organize and analyze data

The crucial information from the corporate records (date of
incorporation, board members, incorporators, areas of business, amount
of assets) were inputted in Microsoft Excel, a basic spreadsheet
program which sorts data, categorizes information, and alphabetizes.
This allows the user to view the data in any number of ways and to
discern patterns. The data were categorized according to which
wife/mistress or child held the corporations, at what stage of
Estrada’s political career the corporations were formed, and how much
they were worth. The assets of 14 companies alone totaled more than
P600 million, but in 1999 Estrada declared a net worth of only P35.8
million. Thus, the PCIJ’s first story, released in July 2000, basically
said that Estrada had accumulated more assets than could be explained
by what he had declared in public records.

Investigate further

Further trips to the SEC later showed that Estrada either did not
divest himself from companies where his name was listed or that he
divested only after the 60-day deadline set by the law. Moreover, the
divestments were made to his wife, Luisa Ejercito, again a violation of
the law that says there can be no divestments to relatives within the
fourth degree. In effect, there were no real divestments, meaning t
that Estrada could have violated the Constitution, which bans the
President from engaging in business.

This violation became abundantly clear in the PCIJ’s investigation of
34 townhouses being constructed by JELP, a real estate company owned by
Estrada, his wife, and their three children. The PCIJ team
visited the project site in Antipolo and talked to neighbors who
complained that the construction caused flooding in their area and
tipped off the journalists that the project did not have the required
permits.

The PCIJ team then did a research of the permits required for building
housing projects and found that JELP had violated every rule in the
book: it had none of the eight permits needed for such a project.
Moreover, residents had seen Estrada himself inspecting the property,
further proof that he had violated the constitutional ban on engaging
in business. Because he had named himself housing czar overseeing his
administration’s housing projects, the President was clearly in a
conflict-of-interest situation. The PCIJ’s report released in August
2000 exposed the problematic housing project.

Continue the search

In the beginning, the PCIJ’s documentation of Estrada’s assets focused
on those that were registered in his name or those of his family
members. The PCIJ, however, suspected that he had more. For example,
talk of fabulous mansions being built for various presidential
mistresses was rife. If the rumors were true, then it was scandal on a
grand scale. An initial search, including tips from various contacts,
showed that the mansions were not in the names of either the President
or those of his mistresses. This was going to be a far bigger challenge
than the corporate search.

Land records are public, but researchers have to know exactly what they
are looking for. The process of searching for Estrada’s properties
involved a lot of trial and error. At the start, the PCIJ had only
sketchy information, from rumors and numerous contacts, of the
various real-estate acquisitions: in some cases, the
journalists knew only who the previous owner of the property was;
in others, only the address or the subdivision.

Use flow charts

To put some logic into its investigation, the PCIJ journalists made
flow charts. One chart illustrated the process of building a house, who
would be involved, and what papers were needed at every step of the
way. First would be the owner of the property, the lawyer of the owner,
the architect, the contractor. Soon the neighbors would sense that
construction was going on, the village association where the building
was taking place would have to be informed, permits would have to be
obtained, and so on down the line. It is impossible to build a house
without an entire army of people knowing about it and a boxful of
documents being produced in connection with the construction.

Tap human sources

When the documents – land titles, building permits, etc. – did not show
the names of Estrada or any of his family members, the focus of the
investigation shifted to human sources. These included architects,
lawyers, builders, suppliers, and other contractors as well as
neighbors and residents of villages. These human sources had
encountered either Estrada, one of his mistresses, or one of his
cronies who had fronted for the sale. Some exclusive residential
associations cooperated with the investigation by supplying information
as well as giving access to documents such as barangay permits and
building plans. Some neighbors saw Estrada inspecting his properties.
One neighbor said one of Estrada’s intermediaries had offered to buy
her property, which was next to one of the mistresses’ homes.

Look for patterns

From the beginning, it was clear to the PCIJ that proving the real
ownership of the mansions would be problematic. But if there was a
pattern that could be established, then it would be possible to link
the houses to Estrada. As the investigation progressed, the patterns
began to emerge in:

 the mode of acquisition,
 the law firm/s used to form companies or to front for the acquisitions,
 the individuals or companies who acted as nominees,
 the contractors and interior designers of the houses, amd
 the design of the houses.

From interviews, buildings plans, and photographs, the PCIJ found a
pattern in the use of contractors, project managers, architects, and
design firms, as well as a uniformity in the style of the mansions. A
routine search of building plans – some obtained from village
associations, others from City Hall, or from contractors – showed the
grandeur of the constructions. Not only that, they revealed new
information, such as the names of the President’s children in the
blueprint of bedrooms being planned for them – additional proof that
the houses were indeed being built for Estrada. While searching for
documents, the PCIJ also found Forbes Park property that Estrada had
bought without paying taxes.

Unmask front men and shell companies

The breakthrough in the investigation of the mansions came when the
ownership of the ownership of the “Boracay” mansion in New Manila,
Quezon City was uncovered. The property was purchased in 1999
from the wealthy Madrigal family. Estrada had both the house and the
grounds redone. He also ordered the construction of a heated swimming
pool surrounded by white sand. The pool came with wave- and mist-making
machines.

From a tip in the address, the PCIJ located the land title for the
property and discovered that its new owner was a company called St.
Peter Holdings. The real-estate trail thus led back to the corporate
trail at the SEC. From the corporate registration files, the PCIJ found
St Peter’s incorporators. The journalists had no idea who they were.
But around that time, the PCIJ was told by various sources, including
Estrada’s press secretary, that the person to talk to about the
President’s assets was his counsel, Eduardo Serapio, who had been
appointed presidential assistant for political affairs.

A search on the Web showed that Serapio was part of the De Borja
Medialdea Bello Guevarra Serapio & Gerodias law firm. The law
firm’s Website also revealed the names of all the partners and
associates working for it. It was here that the PCIJ found that all the
names listed as incorporators of St. Peter Holdings were partners and
associates of the firm. The link to Estrada had been established.
Later, the PCIJ found that the law firm was linked to other
acquisitions as well, including shares in a gambling casino.

In October and November 2000, the PCIJ released a series of stories on
Estrada’s mansions. A total of 17 properties worth over P2 billion in
Metro Manila, Baguio, and Tagaytay were uncovered. In December 2000,
the PCIJ exposed how Estrada, through his crony Lucio Co, may have used
shell companies to acquire the Fontana casino in Clark.

(For a more detailed explanation of how the PCIJ investigated Estrada,
see Lars Moller and Jack Jackson, “Journalistic Legwork that Tumbled a
President,” published by the World Bank Institute. That paper is
available online at http://www.worldbank.org/wbi/governance/cases.htm.)