The Philippine Online Chronicles

By Malou Mangahas
Philippine Center for Investigative Journalism

First of Three Parts

More than a decade ago, idealistic young members of the Philippine military had formed groups like the Reform the Armed Forces Movement (RAM) and the Young Officers Union (YOU) and rushed out of the barracks to defy their commander in chief, strongman Ferdinand E. Marcos.

Not long after came the EDSA People Power revolt, a civilian-backed military uprising that led to the ouster of Marcos and the return of democracy to the Philippines.

This week, the nation marks the 25^th anniversary of that revolution, which most Filipinos had hoped would mean a fresh, clean start not only for the armed forces, but for the entire country as well.

Indeed, for the last 25 years, the Philippines has managed to hold on to democracy, however flawed its version has been. But reforming the military has proven to be an even more difficult task. In the last few weeks, in fact, the stigma of corruption has hung over the armed forces, with the highest levels of command accused as the predators, and troops of the lowest ranks and taxpayers, their prey.

Even those like retired Army Gen. Ricardo C. Morales cannot hide their disgust over what they say is a "dirty" military. Morales, who Marcos had branded on national television as one of the RAM putschists in 1986, recently told PCIJ in an interview, “The armed forces was created by society. It is owned by the citizens. It is the people who gave our soldiers their coercive weapons. But now the owners are angry.”

In an unpublished paper he wrote in 2003, Morales had also said that the Armed Forces of the Philippines (AFP) suffered from widespread corruption and incompetence. These “two evils,” he said, “are evidence of a systemic malaise, a defective culture allowed to germinate and take root over several decades and eventually adopted as an organizational value.”

Data and documents that PCIJ had gathered for half a dozen investigative reports on irregular transactions in the AFP in the last 10 years had indicated this as well. In an effort to come up with a "corruption map" in the AFP that would help inform current discussions on the issue, the PCIJ revisited these data and interviewed men and women in uniform anew. It also looked at official audit reports and other government documents.

When pieced together, the anecdotes from military insiders point to a culture of corruption within the armed forces that is so pervasive it has developed a language of its own. Unfortunately, it is a sorry tale that is borne out by official reports and other documents that go back several years.

Same, same & worse

“It used to be that the demarcation for corruption (in the military) was north of the Agno River,” says a general, referring to the country’s fifth largest river system located in Pangasinan, the corridor to the Ilocos Norte bailiwick of the late Marcos.

But now, he says, corruption seems to have inundated the entire AFP and has become “nationalized.”

The general says that another difference between the “old” and “new” systems is “two percent.”

Before the formation of Bid and Awards Committees (BACs) was required across all public agencies under the Procurement Reform Act of 2003, he says, easily about 20 percent of project costs were lost to crooks. With the BACs in existence, the figure climbed to 22 percent, including the two percent that some auditors exact from every deal.

“Two percent for regular contracts lang, ha,” the general clarifies. “With ghost deliveries, the auditor gets five percent.”

The kickbacks are bigger also because more people now have to sign on to contracts, under new laws, he adds. “Before,” he says, “there was no procurement service, the signatories were few.”

“Everybody takes some blame here,” says a colonel and former senior budget officer who like most of the military insiders interviewed by the PCIJ requests anonymity. “Everybody is guilty. The system has really been ingrained, even the families (of soldiers) should mend their ways.”

He says that the liberties taken by the "team players" with public funds are described as either kalayawan (greed) or kahalayan (vulgarity). But he also stresses: “There is no ‘Mr. Clean’ here. I am – we are all – part of the system. The system will devour you.”

It is a system that apparently has many fathers: some senior and junior officers, some lawmakers, some executive officials, and favored contractors who use the AFP as a "clearing house" or "laundromat" of funds they pilfer and steal.

Military officers themselves say that these characters, singly and together, juggle, convert, or realign funds; enroll "insertions" in the budgets of the AFP and the Department of National Defense (DND) that they encash later; conduct collusive bidding and accept ghost deliveries; award contracts to favored suppliers for fat commissions; or simply pocket the money as pabaon or personal slush fund.

These shenanigans thrive and succeed in part because, says the colonel, the military is by nature “secretive.” Soldiers are trained to follow orders and shut up, he points out.

The good gets benched

The system has also been set up to "punish" those who refuse to play along. According to military insiders, those who are "non-team players" get benched or bangko, which in the AFP means being transferred to hardship posts.

“For the team player, the benefits go beyond the monetary,” says a captain. “Even with the selection board (for promotions), the non-team player gets passed over, you will not be recommended. When there’s an order, your only choice is to answer either ‘Yes, sir’ or ‘Yes, sir’.”

Those with less than honorable mindsets are thus able to get away with practices such as one called lastiko or funds juggling.

Explains one general: “GHQ (general headquarters) will approve the fund allocation in favor of the units, and the units will convert these to cash. When the cash is ready, the unit commanders will keep a small percentage, and on orders of GHQ superiors deliver the bigger balance, in bags of peso bills, to either a higher officer or a lawmaker.”

The general says some of these funds are actually amounts that some members of Congress had inserted or tucked in the budgets of the military and the DND, while the General Appropriations Act is undergoing congressional review. In these cases, the process is more well-known as "return to sender" or RTS.

“It starts with the GAA approval (process),” says the colonel. “Once some lawmakers get wind of the money, there’s already a big-time ‘dealer’ at the top. And once the cash is ready, a call to the higher-ups will say this should go to whoever (a contractor).”

The colonel says that on the commander’s cue, the budget item is obligated and encashed by subordinates. “All the planets will align so that it will go to the caller,” he says. “It would look like it went through a bidding, so that the contractor’s name could be placed in the minutes.”

Most times, of course, the lawmakers involved leave some amount with the AFP. “If the politician is generous, only 50 percent would go back to him,” says the colonel. “If he is greedy, 80 percent.”

Inter-agency transfers

The colonel also says that even executive agencies have turned to the AFP to launder dirty money by way of inter-agency fund transfers. “We give it back to them in cold cash as ‘cleared’ money,” he says.

The colonel says he knows first-hand of one case in 1997 involving a constitutional agency, along with several other cases in which the institutions involved belonged to the executive branch. For the case with the constitutional agency, the colonel says,   “Dalawang maleta, milyon-milyong piso, binalik namin sa kanila, walang tanong-tanong (Two suitcases with millions of pesos, we returned that to them without any questions).”

It’s really as simple as dumping dirty clothes in a washer, he says. “If your unit is a washing machine, bagsakan ‘yan ng pondo (it becomes a dumping ground for funds),” says the officer. “Pag labas niyan, pera na (When it comes out, it’s clean cash).”

But it’s a trick employed by the AFP and the DND themselves, he admits, with the latter supposedly more notorious in "cleaning money" through inter-agency fund transfers. All it takes, he says, is “a little coordination” between the DND and the budget department for the transfer to another agency to go smoothly.

“For example,” says the colonel, “if the DND had P40 million for projects and… the projects used just P20 million, the (balance) is transferred to other agencies. There the money is grabbed by the big-time contractor who already has the ‘blessing.’ Once the money has been tagged for someone, those at the bottom will just align it.”

Vouchers by bulk

Certain days of the year also find personnel at major AFP units in Metro Manila busy “mass-producing” disbursement vouchers and other project documents, insiders say. One of the most “crucial” dates, says one officer, are the last working days of the year – when the military and defense establishments have to obligate funds already allocated in the closing year’s budget, and quickly. Otherwise, the funds would revert to the National Treasury.

“Assembly line ‘yan, about 10 to 20 people quickly preparing vouchers,” says the officer who witnessed the practice in December 2007. At the time, the Armed Forces had to obligate “about P100 million,” he adds. “The needed signatories are just waiting to sign them, and they’re already stamped as well. All the commander has to do is sign them once he arrives.”

He says that the names of favored contractors are listed as suppliers in the vouchers. There are usually five to 10 names that take turns as the "winner" in the contracts, he says, but “there is just one syndicate, really.”

Obviously, though, this syndicate has a counterpart within the military. According to several officers, the same military personnel are involved in the crooked deals, on account of the functions they perform and because they command control and discretion over funds.

The officers say the major and bit players typically include:

• Budget officers of the various units, service commands, and the GHQ, who are known as the “special disbursing officers” (SDOs) and “military finance officers” (MFOs) in military circles;
• Assistants or deputies of the SDOs and MFOs;
• Personnel who prepare and encode the covering documents for the transactions of the budget officers;
• Personnel of the procurement offices;
• “Money bags” or persons who actually deliver the cash to their recipients;
• Personnel of the accounting offices;
• Internal auditors of the units/commands;
• The Commission on Audit’s resident auditor/s and his/her deputies;
• Members of the “Acceptance Committee,” or the group assigned to inspect and receive the deliveries by contractors of supplies and services purchased by various units and commands;
• Officers assigned to the accounts of the AFP and DND from the Department of Budget and Management;
• Personnel in parallel/similar agencies from the DND; and
• Officers and commanders authorized to sign for their units/commands as heads of agencies, including the chief of staff and his J-staff and deputies.

The entourage

The colonel also notes that nearly all senior officers share one habit: wherever they go, they bring along their finance or disbursing officer as part of their entourage. When the senior officer moves up in the AFP ladder, his comptroller is sure to rise with him as well, says the colonel.

Other insiders say there is even a charmed circle of budget and finance officers who have been groomed early on to rise to the most lucrative posts at the GHQ and the major service commands. Members of this "Comptrollers Family" of course need to be good in finance work, but as the colonel points out, “before you get accepted, may patronage na agad ‘yan.”

The amounts that can be authorized for release actually have varying caps or ceilings, according to rank or designation of the commander or signing authority. The lawful caps on the signing authority of commanders are:

• Chief of staff, up to P50 million;
• Commanders of major services (Army, Air Force, Navy), up to P25 million;
• Area commanders, up to P10 million;  and
• Battalion and brigade commanders, up to P1 million.

Contracts and expenses of the AFP involving more than P50 million meanwhile require the signature of the defense secretary.

To get around the caps, however, some commanders have resorted to “chop-chop” deals or cutting up a project into multiple contracts that enable them to release bigger amounts than they would have been allowed.

These “chop-chop” projects are also sometimes rationalized as “emergency” purchases that are supposedly needed by the men in the battlefield.

For sure, the AFP’s fighting men and women have many real emergency needs. And, says the general who has commanded a brigade, “in the field, the military’s tendency is to address the problem immediately. What you need tomorrow, you have to have now. As a commander, whether you beg, steal, or borrow, (getting it) is a matter of survival. If I need things, I will not wait for GHQ to tell me, ‘Let’s plan first.’ The GHQ’s culture is simply different.”

The GHQ led by the chief of staff oversees the operation of seven Unified Commands across the nation, as well as 13 AFP-wide support and separate units assigned to intelligence, training, logistics, civil-military operations, and health services. The latest official count puts the AFP’s troop strength at 127,000 men and women, of which 70 percent belong to the Army.

Conversion good, bad

“I buy my own electric wires, I dig my own well,” he says. “If you wait for the request to go through, it will be put on the program only in the next year, so you wait two years before you get the pump or generator you need.”

Because it can address urgent needs that could spell life or death for frontline troops, the so-called "conversion" of funds from one legally enrolled purpose to another not recognized as an expense in the approved budget has become a notorious "gray area" for the military.

The general himself says the practice can serve a good purpose. But he says its bad side surfaces whenever it is used to rationalize less urgent supply contracts from which some officers and lawmakers would be getting fat commissions.

He recalls one such case of conversion by the GHQ in which he says he was asked if he needed anything. He says he replied that he needed radio transceiver sets.

“I was then told, ‘No, you need helmets’,” recounts the general. “And they delivered helmets, saying, ‘This is what you need.’ Even if you don’t want to receive it, the attitude was, that’s your problem now.”

Stuck with the helmets, the general and his troops decided to test them out for ballistics. The bullets, he says, “went through and through.”

The helmets were so bad, says the general, that the GHQ seemed to have wanted to send its own troops to their death. – With reporting by Ed Lingao and Jaemark Tordecilla, PCIJ, February 2011