Pharmally case: CA upholds admin raps vs DBM execs
The Court of Appeals (CA) has dismissed the petition filed by former Budget Undersecretary Christopher Lao and three other former officials who sought a reversal of the Ombudsman’s findings holding them administratively liable for the alleged irregular contract entered into by the government with Pharmally Pharmaceutical Corp. for P4.2 billion worth of COVID-19 supplies.
In a decision promulgated on March 31, the CA’s 15th Division said it found no sufficient basis to overturn the Ombudsman’s findings against Lao and former Department of Budget and Management (DBM) Directors Rex Liong and Christine Suntay, and former acting inspection division chief Augusto Ylagan.
It affirmed the findings that Lao and Liong committed grave misconduct, serious dishonesty, gross neglect of duty and conduct prejudicial to the best interest of the service; while Suntay and Ylagan committed gross neglect of duty and conduct prejudicial to the best interest of the service.
The administrative complaints were over the procurement of RT-PCR (reverse transcription-polymerase chain reaction) test kits during the coronavirus pandemic. The Ombudsman’s findings led to their dismissal from service.
The CA, however, cleared former DBM procurement division chief Webster Laureñana, saying the records were “bereft of substantial evidence” to hold her liable for grave misconduct and other offenses. All the administrative charges against Laureñana were dismissed.
The CA agreed with the Ombudsman’s conclusion that Pharmally could not be classified as “a legally, technically, and financially capable supplier” because its paid-up capital reached only P625,000 at the time of bidding.
‘Unqualified’
Incorporated only less than a year before it offered price bids, Pharmally had no track record and was therefore “unqualified” to enter into a multibillion-peso government contract, the court said.
“There is evident force in the Ombudsman’s observation that the award of multibillion-peso contracts to a corporation with a relatively meager paid-up capitalization was, at the very least, deeply inconsistent with ordinary notions of financial capacity,” read the ruling.
“To assert that an entity with less than a million pesos in capital possesses the inherent financial capability to independently execute and sustain billions of peso worth of government supply contracts is a mathematical absurdity and a subversion of fiscal responsibility,” it added.
The ruling was written by Associate Justice Marietta Brawner-Cualing, with the concurrence of Associate Justices Gabriel Robeniol and Maximo De Leon. It resolved the separate petitions for review lodged by the former DBM officials against former Sen. Richard Gordon, Sen. Risa Hontiveros and the Office of the Ombudsman.
Gordon, the then Senate blue ribbon committee chair who led the investigation into the Pharmally contracts, along with Hontiveros, endorsed the panel’s findings to the Ombudsman after failing to secure enough signatures that would have elevated its report to the plenary.
The Senate panel found that Pharmally was given preferential treatment in the procurement of Covid-19 test kits in 2020.
Invoking Bayanihan 1
The petitioners invoked the Bayanihan to Heal as One Act (Bayanihan 1), an emergency measure to fast-track procurement, saying the bidding for pandemic supplies were exempted from the usual procurement rules.
But the CA noted that while Lao challenged the procurement law, he invoked the same when he created the Special COVID-19 Response Team within the DBM to directly negotiate with suppliers and consultants during the crisis.
“Petitioners mistake the temporary relaxation of certain documentary and procedural requirements for the complete abandonment of the substantive standard of capability. Neither Bayanihan 1 nor the emergency procurement guidelines authorized the government to contract indiscriminately with any entity that simply managed to submit an offer,” it stressed.
“Even under the emergency framework, the governing standard remained the same. The supplier must be legally, technically, and financially capable of undertaking the procurement at hand,” it added.
The court said the actions of Lao was “indefensible” for allowing the awarding of the multibillion-peso contract to proceed with a supplier that was “grossly incapable.”
“In allowing Pharmally to remain in the procurement process and ultimately benefit from it, Lao displayed a manifest disregard of the rules governing the procurement and, correspondingly, extended to Pharmally an undue and unwarranted advantage,” the CA said.
The actions of the former DBM officials “reduced the safeguards of the procurement process into hollow forms,” leading to “institutional failure,” it noted.
