MANILA, Philippines – Health Secretary Francisco Duque III and employees of Philippine Health Insurance Corp. (PhilHealth) may be charged with corruption and misuse of public funds for entering into a “highly irregular” agreement with the Philippine Red Cross (PRC) to conduct COVID 19 tests, according to two separate legal opinions of the state insurer’s own lawyers .
In a report submitted to the board of the state insurer, PhilHealth legal advisor Alfredo Pineda II said that the Memorandum of Understanding (MOA) that former PhilHealth president and CEO Ricardo Morales signed with the PRC on May 5, had not legal basis and provided preferential treatment to the humanitarian organization headed by Senator Richard Gordon.
The nine-page executive summary dated October 13, a copy of which was obtained by the Inquirer on Sunday, echoed the contents of the September 25 review issued by Rogelio Pocallan Jr., senior manager of PhilHealth’s internal legal department.
He said PhilHealth, which was set up specifically to provide medical insurance coverage to Filipinos, was not required to pay the cost of COVID-19 tests and fund the PRC testing program.
“Considering the apparent flaws and even the irregularity or potential illegality of the MOA, the possibility of terminating the MOA must also be considered by senior management and the legal sector … as discussed and suggested by … Pocallan,” said Pineda in his report, which was also submitted to Morales’ successor, Dante Gierran.
“Temporarily suspend MOA provisions and future implementations, and suspend any and all payments and disbursements of corporate public funds related to the MOA,” added the report.
A source, who asked not to be named due to a lack of authority to speak to the media, said the Pineda report prompted Gierran to seek the Department of Justice’s (DOJ) legal opinion on the questionable contract.
Last week, Secretary of Justice Menardo Guevarra confirmed that the DOJ had already sent its own review of the agreement to PhilHealth. “But we prefer to let them disclose the DOJ’s opinion on their own, if necessary,” he said.
Pineda said that PhilHealth’s P100 million advance payment to the PRC was considered “illegal disbursement and embezzlement of public funds”, since the huge amount was released without the mandatory authorization of the council.
“[T]The MOA between PhilHealth and the PRC is highly irregular, as there was no clear legal justification within the specific provisions of PhilHealth’s bylaws to enter the MOA and grant [PRC] with advance payments, ”said Pineda.
“There is no legal justification within the specific provisions of the PhilHealth letter to … grant upfront payments, if only to guarantee the liquidity of the PRC – a private non-profit institution organized for supposed altruistic purposes,” he said.
“PhilHealth is not legally mandated by its charter to seek out and convince private entities to become involved in the provision of health services, including mass testing of Filipinos for COVID-19,” he reiterated.
In addition, Pineda said Republic Law No. 11,469, or the Bayanihan Law to Heal as One, and the subsequent memorandum issued by Executive Secretary Salvador Medialdea explicitly stated that “any commitment to the PRC will be subject to reimbursement.”
“[The law] did not allow any advance payment to be issued to the PRC … ‘Reimbursement is the act of reimbursing expenses or losses incurred … There is no other legal and / or technical definition of reimbursement that can be interpreted and distorted to justify payment in advance, ”he said.
Pineda noted that the PhilHealth board, chaired by Duque as ex-officio president, issued Council Resolution No. 2,521 late on May 14, which allowed Morales to represent the state insurer in the deal with the PRC.
“The eventual ratification / confirmation … after the release of public funds … is, at the very least, highly irregular, if not entirely ‘ultra vires’ and illegal,” said the report.
“Post facto approval by the PhilHealth board, in fact, can be considered an indirect admission of the lack of authority and illegality of the disbursement of the P100 million advance fund,” he added.
He said that although Duque did not sign the council resolution and other similar orders, that would not exempt him from any responsibility.
“Despite the fact that the chairman is a non-voting member of the PhilHealth board, it does not justify or exempt the signing of the board chairman from PhilHealth board resolutions and sharing his corresponding decisions and responsibilities,” said Pineda.
He noted that Morales, who resigned amid the Senate investigation into the growing allegations of corruption against him and other PhilHealth executives, approved the deal without first seeking a review of the contract, as required by the agency’s internal rules and procedures.
PhilHealth’s legal department also did not issue a contract certification before the agreement with the PRC was finalized, he added.
He said the PhilHealth trading panel, led by then Senior Vice President of the Legal Sector Rodolfo del Rosario Jr., tried to amend the original agreement to “rectify its defective clauses”, but the PRC “has already taken an unyielding position in maintain existing MOA ”AND demanded full payment of PhilHealth’s remaining financial obligations.
“Even assuming, for the sake of argument, that PhilHealth can legally enter the MOA questioned with the PRC, a reading of the specific provisions of the MOA would readily show that … the provisions of the MOA were designed to be highly favorable to the PRC” he said.
“Consequently, PhilHealth’s board may expose itself to an antigraft case … for entering into a highly disadvantageous contract for the government, malpractice and other criminal violations for misuse and mismanagement of public funds,” he said.
In his separate legal opinion, Pocallan said the PRC had already received P1.6 billion from the state insurer for conducting hundreds of thousands of smear tests, including those done on the return of Filipino workers abroad.
“This means that out of the supposed limit of P910 million provided in the MOA ratified by the PhilHealth board, the corporation has again issued the amount of P690 million without the prior approval of the board and therefore another act of misappropriating public funds,” said Pineda .
Before the presentation of the legal opinion, President Duterte promised last week that the P930 million owed by PhilHealth to the PRC for the swab testing services would be paid and asked the nonprofit to resume testing.
The PRC suspended testing until they were paid, leaving many Filipino workers returning from abroad in quarantined hotels and affecting the Department of Health’s monitoring of the COVID-19 situation.
Government debt now P1.1B
On Sunday, Gordon said the government’s debt to the PRC was 1.1 billion P $ 1, not P930 million.
“PhilHealth’s debt is now 1.1 billion, so [P930 million] it is not enough. That doesn’t even include interest. But we need to be paid to get new supplies, ”said Gordon in a radio interview.
He said that the PRC would accept payment of P930 million, but the balance should be paid “within three days”.
Deputy Surigao del Norte, Robert Ace Barbers, said on Sunday that the PRC should “stop blackmailing” the government because the non-profit organization “had no right to impose on the government and demand payment for alleged tests on people.
“On the one hand, it was learned that the PRC does not have a valid contract with PhilHealth [for] the supposed mass tests done on people, ”said Barbers in a statement. –WITH REPORTS BY DJ YAP AND NESTOR CORRALES INQ
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