Arroyos run a horde
of foundations

THEY HAVE always been known to be wealthy, but few are aware that the charity cup of the Arroyo clan also runneth over – at least on paper.

Even as they enjoy access to pork and public funds to dispense with charity work, members of the First Family, as well as an assortment of relatives and friends who hold positions in government, have built up quite a collection of foundations and nongovernmental organizations (NGOs) with aims ranging from promoting “punctuality” to securing loans from government institutions.

Records of the Securities and Exchange Commission (SEC) on foundations and NGOs show that the Arroyos and their friends and business associates are incorporators of at least nine NGOs and foundations.

In addition, the Arroyos are identified with five other similar entities, including several that had figured in earlier reports of alleged corruption. (See table on Arroyo NGOs and foundations)

All were established when Gloria Macapagal Arroyo became a public official. At least four – Amigo Foundation, Kagabay ni Glo, Centrist Democrat International Asia-Pacific, Inc. (CDI-Asia-Pacific) and First Gentleman Foundation Inc. – were born when she was already sitting as president of the republic. CDI-Asia-Pacific also enjoys the distinction of being one of two foundations that have the president herself as among their incorporators.

Several of the foundations were built around the name of President Arroyo, using her first name or her initials, GMA. One even spells out her entire name: Kaibigan ni Gloria Macapagal Arroyo Foundation, Inc. or KGMA.

Suspicious mix

Foundations and NGOs are supposed to promote selfless, social service and goals for the poor and needy, the displaced and threatened, the voiceless and powerless. Yet while technically, the Arroyos and their friends do not seem to have violated any law for being part of such entities, recent history shows that politics and foundations make for a suspicious mix.

Raul Gonzalez, the president’s chief legal counsel, who for five years served as justice secretary, even believes that government officials should not have foundations.

He adds, “These foundations which deal with public funds and deal with government agencies should be monitored very closely because public funds are involved and if public officials are there they have more access.”

The case of deposed President Joseph ‘Erap’ Estrada and his Erap Muslim Youth Foundation is instructive: Estrada had lodged with his foundation the excess amount of election campaign contributions that he raised in the 1998 polls. His lawyer Ed Serapio organized and ran the foundation, and through his law firm and a holding company acquired some of the pricey mansions of Estrada and his mistresses. Serapio was Estrada’s co-accused in his plunder and perjury trial before the Sandiganbayan.

Court documents show that Estrada had used the Erap MuslimYouth Foundation to launder ill-gotten wealth. In particular, he is supposed to have diverted P200 million of tobacco excise taxes in the bank account of the foundation, which was supposed to send poor Muslim children to school.

More recently, foundations were at front and center of the so-called “fertilizer fund scam” that saw millions of pesos meant to buy fertilizer for farmers released to foundations just a few weeks before the 2004 elections.

The scam reportedly involved the groups Philippine Social Development Foundation (PSDFI), People’s Organization for Progress and Development (POPDI), Molugan Foundation Inc, Assembly of Gracious Samaritans Foundation, Inc. (AGS) and National Organization for Agricultural Enhancement and Productivity, among others. Reports say at least P152.5 million of about P728 in total funds went to private foundations.

Poor monitoring

Fely Soledad, executive director of the Philippine Council for NGO Certification (PCNC), rues the lack of a mechanism to monitor if NGOs are really doing what they are supposed to be doing.

“The SEC is supposed to be regulating body for the whole non-stock, non-profit corporation universe but they don’t have the resources. So they just say they will register but they cannot monitor.”

The PCNC itself was established in 1998 as a self-regulatory mechanism to verify the legitimacy and promote accountability and transparency of NGOs, including foundations. The move to have NGOs secure PCNC accreditation was in part prompted by horror stories of organizations established solely for the vested interests of individuals or groups under the alleged purpose of social development.

If a group is not accredited by PCNC, then the entities that give it donations cannot claim tax deduction and still have to pay a donor’s tax. For a charitable group —  especially a foundation — it makes sense to have itself accredited to attract more donors.

But NGOs and foundations put up for illegal purposes may not be too concerned with tax exemptions, which come with PCNC monitoring. After all, the rewards they get come in other, more lucrative, forms.

Among PCNC’s certified NGOs are the Ayala Foundation, Benigno S. Aquino Jr. Foundation, Caritas Manila, Inc. and the Museo Pambata Foundation, Inc.

Two Arroyo foundations – Lualhati Foundation and GMA Foundation – applied for PCNC accreditation but did not complete the process.

No accreditation

Interestingly, the rest of the Arroyo NGOs or foundations did not bother to acquire PCNC accreditation. At the same time, all of them have apparently failed to publicly disclose the source or sources of their funding, as well as their expenditure programs and projects.

Notably, too, despite their association with public officials, most of these entities appear to operate under the radar and have neither real phone or contact numbers or addresses.

Many of these NGOs are listed as holding office at 8/F, LTA Bldg., Perea St., Legaspi Village, Makati City. But only three have active phone numbers that answer to their respective names: First Gentleman Foundation, KGMA, and Kasangga.

In eight others, the numbers are, as of September 5, either unassigned, not in service or now belong to other entities. The phone number listed as that of Gloria’s League of Women, Inc. or GLOW, for example, now belongs to a Security Bank branch while the GMA 2010 movement’s belongs to a party-needs outfit. The phone numbers of the remaining three are not available.

Most of these entities, except for two, have also failed to comply with reporting requirements of the Securities and Exchange Commission (SEC) and other relevant agencies, including the submission of annual financial statements, among other documents.

The SEC defines a foundation as “a non-stock, nonprofit corporation established for the purpose of extending grants or endowments to support its goal of raising funds to accomplish charitable, religious, educational, athletic, cultural, literary, scientific, social welfare or other similar objectives.”

It requires a bank deposit of P1 million and statement of willingness to allow the SEC to conduct an audit. Yearly, a foundation has to submit a General Information Sheet (GIS) and audited Financial Statement. It should also report to the SEC the source and amount of its funds and its programs. In addition, it has to get a certification from the barangay captain, mayor’s office or head of either social welfare or health department, whichever has jurisdiction to prove that the project or program truly exists.

Not SEC-compliant

Based on the SEC records, however, few of the Arroyo NGOs have complied with SEC reporting requirements.

Only KGMA and Amigo Foundation have submitted their 2008 financial statements, which placed their assets at P4.75 million and P2.5 million, respectively. The First Gentleman Foundation’s latest SEC filing was in 2007, reporting assets worth P6.7 million for 2006.

The rest of the Arroyo clan foundations have not complied. There are no reports on the programs the organizations that most of them have purportedly carried out, although the First Gentleman’s Foundation does have an active website replete with photos of the president’s husband engaged in all sorts of charitable events.

Equally important, none of the documents available at the SEC reflects where the groups get their funding.

For sure, Republic Act No. 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees has no provision that explicitly prohibits government officials from being incorporators of foundations and NGOs. Neither does Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act.

Lawyer Ariel Ronquillo of the Civil Service Commission’s (CSC) Legal Department also says that being part of an NGO or foundation does not automatically translate into conflict of interest for a public official.
“What the law says is we must avoid at all times any conflict of interest,” he says. “That’s why if your membership or ownership of company will directly harm or conflict with the office you’re holding, then you have to divest. If you do not want to divest you have to resign. So you need not shy away from foundations provided your membership or ownership to that foundation will not give rise to a conflict of interest for you as government official or employee.”

The premise of NGOs and foundations, he adds, is that it is non-profit. There may be issues of impropriety in the involvement of public servants in these, says Ronquillo, but none of legality.

He also cautions that in the case of some organizations — such as the GMA 2010 Movement, Inc., led by a Samuel F. Enesando and which was set up a month after the 2004 elections — it should be verified first whether the public official supposedly connected with it really has something to do with it. He points out, “(The official) could say, it was organized by people close to me but I’m not included.”

Ronquillo says that public officials do not have to disclose it in their statements of assets, liabilities and net worth or SALN – unless the official has given contributions to the NGO or foundation as incorporator.

Not in some SALNs

Among the Arroyos and their associates in public service, only the president’s two sons, Pampanga Rep. Juan Miguel ‘Mikey’ Arroyo and  Camarines Sur Rep. Diosdado ‘Dato’ Arroyo, and brother-in-law Ignacio ‘Iggy’Arroyo Jr. have declared their interests in some foundations in SALNs they filed in previous years.

Mikey and Iggy Arroyo are among the incorporators of KGMA, along with First Gentleman Jose Miguel ‘Mike’ Arroyo, the president’s cousin Alfredo Guico, and close family friends Edgardo Manda (who was named treasurer) and Efraim Genuino.

Genuino to this day serves as chairman of the cash-rich Philippine Amusements and Gaming Corp. (Pagcor), while Manda for a while served as general manager of the Ninoy Aquino International Airport.

Formed in 1999, the KGMA Foundation lists its main objective as: “(Determining) the factors that would contribute to the social and economic upliftment of certain communities in the Philippines, and to identify and make available the appropriate technology, technical expertise, and resources necessary and advisable to address the desired development.”

It said it would “intensify regional, provincial, municipal and barangay socio-economic development particularly in the provinces of Pampanga through the full mobilization and maximum development of available resources that it may tap or generate.”

Dato Arroyo and his wife Maria Victoria are among the incorporators of the Amigo Foundation, which seeks “to engage in any activity that may empower and/or serve the weak of the youth, farmers, fisherfolk, women, senior citizens and underprivileged or marginalized sectors of our society.”

Among others, it said it would “accept and administer any gift, contribution, bequest, endowment, donation, grant or devise of real or personal property, and to sell, convey, lease, invest or dispose of the same for the furtherance of the aims and objectives of the foundation.”

Dato and Maria Victoria Arroyo contributed P350,000 and P100,000 respectively to Amigo.

Rule for relatives

In the meantime, despite the silence of R.A. 6713 on the matter, there are some laws that elicit some important questions regarding the involvement of public officials and their relatives in groups that solicit donations.

Signed on November 9, 2000, Executive Order 317 is intended to avoid public perception that relatives and close personal relations of the president, vice president, and Cabinet officials are or may be taking undue advantage of the relationship to obtain unwarranted advantage and benefits form government.

It also seeks to “ensure that existing laws cannot and will not be circumvented and that undue influence will not be exerted nor undue advantage taken.”

Under the section on prohibited acts and transactions, the first provision refers to “Solicitation and acceptance, directly or indirectly, of any funds, gift, gratuity, favor, entertainment, loan or anything of monetary value for any purpose from any person or corp.”

One question that now arises is whether solicitations done by an NGO or foundation set up by the president or any of her family members constitutes “indirect solicitation or acceptance” as defined in the order. And if an NGO is deliberately named after the president to attract more donations, does this constitute conflict of interest?

Another law, Presidential Decree No. 46, makes it punishable for public officials and employees to receive, directly or indirectly, and for private persons to give gifts on any occasion and seeks to “wipe out all conceivable forms of graft and corruption in the public service”.

It was signed on November 10, 1972, providing for one year to five years imprisonment and perpetual disqualification from public office.

In the Revised Penal Code, under “Crimes Committed by Public Officers”, two types of bribery are identified: direct and indirect bribery. In indirect bribery, the penalty of medium to maximum prison correccional is imposed as well as public censure.

Suspicious signals

PCNC’s Soledad, for her part, says that if three out of five members of an NGO’s board are from a politician’s family, then there is reason to be suspicious. She says there have been instances when foundations identified with politicians have asked to be certified by PCNC but were denied because of the dubious nature of their operations. These politicians, she reveals, include past and present high government officials.

Indeed, foundations allegedly connected with the Arroyo family have had brushes with scandal in the past, among them the Ginintuan at Makabayang Alay Foundation (GMA Foundation); the Lualhati (Glory) Foundation; Bigkis Pinoy, which includes Pagcor chairman Ephraim Genuino; and Glory for the Streetchildren Foundation, reportedly set up by private banker and socialite Ernest Escaler.

Arroyo’s ex-communications secretary and former Assumption Convent classmate Veronica  ‘Bing’ Rodrigo was reported to be president of the GMA Foundation. She figured in the news when she accused Arroyo’s husband of receiving a P40-million bribe to help recall a presidential veto on two congressional bills. She later admitted during a Senate Blue Ribbon committee hearing that she had no direct knowledge of the bribery. She was replaced as secretary by another of the president’s former classmates. (Curiously, an online search of SEC records yielded no record of the GMA Foundation.)

The Lualhati Foundation, now defunct, was reportedly the Arroyos’ favorite foundation. It became the center of controversy in 2003 when it denied receiving an P8-million check businessman Mark Jimenez had given President Arroyo. It was Arroyo herself who had said the check went to the foundation. Lualhati’s president was Edgar Manda, Arroyo’s chief of staff during her vice presidency, and who Newsbreak magazine later reported as  spearheading “the parallel group that marshaled (Arroyo’s) grassroots-level support…in Cebu province, where the President obtained her biggest margin in the elections.” – PCIJ, September 2009