The Philippine Online Chronicles

By Malou Mangahas
Philippine Center for Investigative Journalism

Second of Three Parts

Eight years ago in 2003, the PCIJ had exposed how the soldiers themselves were arming the enemy, by selling bullets and guns at fat discounts to rebels. To make matters worse, the transactions transpired at the very heart of the Armed Forces of the Philippines (AFP) command: the General Headquarters at Camp Aguinaldo.

That early, a New People’s Army (NPA) cadre code-named Ricky visited Aguinaldo on and off to purchase wares of war from soldiers. The bullets went for P5 a pop, even though the government at the time spent P14 to make or purchase each one.

The sale of guns and bullets by some soldiers to rebel groups and warlords is an old cottage industry, according to contacts from the NPA and the Moro Islamic Liberation Front (MILF). Then and now, government arsenals have become a dipping pond for rebel groups, thanks to soldiers given to making quick money.

More stories on anomalies in the military would follow, by the PCIJ and other media outfits. Talks about reforming the AFP would inevitably spring up after every story. Yet as the recent hearings on corruption in the AFP at the Senate have shown, such talk has resulted in little action.

Clearly, people and paper combine to affirm with certitude that corruption – petty, big, and bureaucratic – unfolds with impunity, and has become massive and routine in the AFP. The stories that officers and men tell are validated in audit reports and official documents filed from years ago. More than ample testimonial and documentary proof of corruption in the AFP exists. Yet it seems like officials investigating the issue simply do not know where to look, or just do not want to know.

For instance, the reports of the Commission on Audit (COA) on the AFP and the Department of National Defense (DND) from 2007 to 2009 alone speak of more tragic tales of corruption, with more real victims and bigger costs on the treasury. Among these:

• The AFP paid 184 “pensioners” aged 95 to 110 years old a total of P2.3 million in September 2009. This apparent case of ghost beneficiaries actually cost more, or P27.6 million, if the pension benefits were computed for the 12 months of 2009. The average lifespan in the Philippines as of March 2010 is 71.6 years for women, and 66.1 for men.

• Aside from these centenarians, a random audit in 2009 of pension payments totaling P243.2 million showed that the entire amount went to 18,051 pensioners and their heirs without birth dates, and 4,220 other pensioners without addresses indicated on the AFP master list of retired personnel.

• From 2007 to 2009, the AFP signed 22 “perfected contracts” for supplies (binoculars, squad automatic weapons, hand-held radio, basic trainer aircraft, light support watercraft, patrol killer medium, 76mm ammunition, explosive ordinance disposal bomb suit, etc.) under the AFP Modernization Program. As of December 2009, copies of these “perfected contracts” had yet to be submitted to the Office of the Auditor, the COA said.

• Nine supplies contracts worth a total of P1.96 billion funded under the AFP Modernization Act Trust Fund and awarded from 2003 to 2006 had been marked by delayed deliveries ranging from nine to 181 days. But as of December 2009, the COA said the AFP had not submitted the delivery receipts for seven of the nine contracts, and in all cases, had not shared information on contract amendments and extension of delivery dates.

• From 2002 to 2009, the DND had not collected or could not explain a total of P918.2 million in “accounts due from National Government Agencies,” including:

• Multimillion pesos for such items as “construction of PGMA SONA school buildings (DPWH)” that apparently refer to projects that then President Gloria Macapagal Arroyo had promised in her State of the Nation addresses and entrusted to the Department of Public Works and Highways to implement, using funds tucked in the DND budget.

• On Apr. 19, 2007, or three weeks to the May 2007 congressional and local elections, the DND released P549.7 million “to fund Foreign Military Sales P1-B under the RP-US Defense Assessment” that officers say need not be funded by the Philippine government at all.

• In the last three months of 2008, the DND made several multimillion-peso fund releases for such opaque reasons as “for intelligence reform projects,” P11.3 million; “to support program of expenditures,” P20 million; “to support program of expenditures,” P51.5 million; “reclassification of other prepaid expenses for procurement service account,” P5.9 million, among others.

• Cash advances worth P4.2 million for local and foreign trips made by officers and employees of the DND from 12 years ago remain unliquidated as of December 2009, including P1.5 million of the P3.6 million issued to then Secretary Gilberto Teodoro for three foreign travel schedules. Also listed with unliquidated cash advance of P346,490 is former Defense undersecretary Salvador Mison, and another P342,058, for a general reportedly in the running for the position of AFP chief of staff.

• Cash advances worth P7.06 million remain unliquidated as of December 2008 in the AFP, including over one million pesos each issued to three captains who are special disbursing officers from the military’s Maintenance and Other Operating Expenses (MOOE) funds, and about a total of P1.8 million issued to seven officers from the Personal Services (PS) fund that should pay for the salaries of soldiers.

These and other adverse findings that COA has enrolled in its reports on the AFP and DND paint a sorry picture of a military and defense establishment too cavalier or negligent in how it handles public funds. Or as retired Commodore Rex Robles puts it, some officers and men in the AFP take “a very casual attitude about money… they think every problem could be solved by simply throwing money at it.”

Big-ticket deals

To be sure, all Philippine presidents after the EDSA People Power Revolt of 1986 had failed to rein in the AFP as it entered into various big-ticket procurement deals that were marred by kickbacks, collusive or negotiated bidding, conflict of interest, or sheer inefficiency and waste.

The return of democracy after EDSA had also democratized access to military contracts and turned money-making into a free-for-all process in the AFP. This was in contrast to the nearly absolute control that strongman Ferdinand E. Marcos and his cronies wielded over public funds and state resources.

The Philippines’ post-1986 presidents not only tolerated the corruption in the AFP, but friends and associates of some of them are also said to have even pushed some big, questionable contracts onto the military.

Beginning 1986, vested political interests started cornering AFP projects particularly in the acquisition of aircraft, boats, munitions, vehicles, and communications equipment. Soldiers then talked about the purchase of S-211 trainer jets from Italy's Agusta company in the late 1980s by people close to then President Corazon "Cory" Aquino. After the delivery of 12 trainer jets, six more were ordered.

Together with two retired generals, Cory Aquino’s associates later formed a company that was the local partner of the firm British GKN for the supply of Simba armored vehicles. The company chose to be located at the former U.S. naval base in Subic after Fidel V. Ramos had already been elected president.

Under Ramos, a former chief of staff and defense secretary, the Armed Forces launched a Modernization Program in the mid-'90s with an initial budget forecast of P50 billion. It was not funded by Congress all at once, prompting a Ramos government proposal to support the program from the proceeds of the bases conversion contracts, along with the sale of Fort Bonifacio.

When Ramos bowed out of Malacanang in 1998, the government still had no money for the AFP Modernization Program. The billions of pesos raised from the sale of Fort Bonifacio are still not fully accounted for to this day.

‘Emergency’ purchases

Ramos’s immediate successor, Joseph "Erap" Estrada, stayed at the Palace from June 1998 to January 2001, or only 31 months. He set aside funds for the AFP Modernization Program. Yet, soldiers and officers say that under Estrada, the munitions and supplies used in the “all-out war” against the MILF became the biggest source of corruption.

In recent weeks at the Senate, former AFP budget officer George Rabusa testified that back then, the military purchased apparently overpriced munitions from Thailand without bidding. But since there was an emergency at the time in Mindanao, the military justified it as an “emergency purchase.”

The conflict in Mindanao and the intermittent offensives that the AFP mounts there have become the usual, useful handles of the AFP top brass to justify so-called “emergency” deals that need not be submitted to competitive bidding.

Crystal balls?

In April 2008, for instance, the supposed “emergency” triggered by the violence that followed talks on the proposed memorandum of agreement on the Bangsamoro Juridical Entity (BJE) was invoked by Estrada’s successor, Gloria Macapagal Arroyo, to justify the P1-billion “emergency” purchase of howitzer and mortar rounds.

Perhaps the generals had crystal balls. Hostilities in Mindanao would not break out anew until August 2008, or four months after the AFP top brass recommended the “emergency” purchase.

But that was not the end of it. The conflict had already subsided yet the contract had dragged on for two more years as a political and legal issue. Many officers had favored the Israeli company Talon to win the contract owing to its track record in delivering supplies on time. But accounts from military insiders indicate that another contractor with links to a retired general stopped Talon. The general, the insiders say, promised to award the deal to a company with connections to one of his former Philippine Military Academy (PMA) classmates.

The insiders say the general, who was later appointed Cabinet undersecretary, convinced then Defense Secretary Gilbert Teodoro to stop the deal; Talon went to court. When he succeeded Teodoro as defense chief, Norberto Gonzales gave the contract back to Talon to resolve the case. As of 2010, the howitzers and mortar rounds had yet to be delivered.

Stellar performer

In truth, it is Gloria Arroyo who emerges as the stellar performer among the four post-EDSA presidents on two counts: under her, the AFP clinched more sweetheart deals with contractors, and also got a parade of 12 chiefs of staff, a number given to sprucing up edifices in the camps.

Military officers say that under Arroyo – who spent a record nine years as the country’s chief executive and the military’s commander in chief – numerous big contracts worth billions of pesos were awarded, mostly without bidding, for, among others, the repair of Jacinto-class Corvettes, as well as the purchase of night-capable attack helicopters, smaller multi-purpose attack craft for the Navy, radio sets, Kevlar helmets, and even assault rifles.

In the Air Force, officers refer to Peter Rodriguez of Asian Aerospace Corp. as one of the most favored contractors because of his closeness to Arroyo and her husband, Jose Miguel "Mike" Arroyo, as well as to retired Gen. Eduardo Ermita, who had also served as Arroyo’s defense secretary and executive secretary.

By the accounts of many officers, Asian Aerospace had lent Arroyo its Learjets on several occasions for her travels in country, and sometimes overseas.

As Arroyo’s chief of staff starting July 2007, Gen. Hermogenes C. Esperon Jr. also signed a supplemental contract worth nearly P800 million for the repair of three Jacinto-class patrol boats, which were former British Royal Navy boats stationed in Hong Kong and acquired before the territory’s handover to China in 1998. The signing happened days before he stepped down from his post in March 2008.

The thing was that even before Esperon came in as chief of staff, his predecessor had signed a P1-billion contract for the repair of the same boats. In other words, for the repair of three second-hand patrol boats, the military was now committed to two contracts worth a total of nearly P1.8 billion.

Esperon, one of the generals implicated in the “Hello, Garci” wiretapping scandal, was supposed to retire in February 2008 but Arroyo extended his tour of duty so he stepped down the next month.

Sweetheart deals

According to AFP sources, contractors eyeing sweetheart deals usually start the courtship by offering all-expense paid travels to officers assigned to do platform studies, sign contracts, and disburse funds. The same officers typically take more trips later, also expenses paid often by their hosts, during post-qualification tests or before a notice of award of contract is finally signed.

Hence, before even earning commissions from these contracts, overseas trips to the manufacturing yards or headquarters of these contractors have come to be expected by these officers as part of their “privileges.” Retired Commodore Robles says that many trips have meant staying abroad for weeks; sometimes, the more fortunate guests get to stay for one to three months abroad, all his expenses billed on the contractor.

In the pattern of some contractors from the United States, Israel, and the United Kingdom, South Korea’s government and some contractors from there have in recent years hosted some generals in Seoul. The Koreans have been angling for contracts ranging from the repair to supply of brand new and second-hand boats, trucks, and even the copper that the Philippine arsenal needs to manufacture bullets.

In the past, Seoul had given Manila old and obsolete F-5A/Bs and PKM (patrol killer medium) boats. These days, Korean-made KIA and Hyundai cars, and trucks often roll out of Army and Marines headquarters in Fort Bonifacio.

It seems like Seoul now wants Manila to return the favor. Seoul has been eyeing supply contracts that would be funded under the AFP’s Capability Upgrade Program that was launched in 2003 by then Arroyo Defense Secretary Avelino Cruz. For a while as defense chief until June 30, 2010, Norberto Gonzales was also negotiating for a P5-billion Multi-Role Vessel for the Navy from Seoul. A seacraft similar to the Death Star mother ship in George Lucas’s epic “Star Wars” movies, the purchase would purportedly enhance the Navy's sealift capability.

10577 Northrop F-5A pole-mounted in the city at the Ekthesiako Kentro Lamias in Gennimata, Greece. (Credits at bottom of page)

Edifice complex

Aside from forging big-ticket contracts, though, a number of Arroyo’s chiefs of staff had also shown a propensity for building or refurbishing edifices and infrastructure facilities, at significant costs on the AFP’s budget.

The late Angelo Reyes, who led the military out of the barracks in the EDSA People Power 2 revolt of 2001, had the defense department painted and then spruced it up with first-class toilets. Reyes had served as Arroyo’s first chief of staff and later, first defense secretary, from 2001 to 2003.

The late chief of staff Arturo Enrile, meanwhile, built the AFP a theater cum museum. Soldiers later saw the rise of the “Great Wall of General Abu,” referring to the walls of Camp Aguinaldo that were repainted and rebuilt under then Chief of Staff Efren Abu, as well as the enormous canopy that rolled out under Chief of Staff Benjamin Defensor.

The officers interviewed by the PCIJ agree on one thing: some contractors themselves trigger fund conversions in the AFP just so they could sell their wares. Among the tactics of these suki contractors, they say, is to advance payment for still non-existent or to be negotiated contracts by covering the expenses of some generals on local and overseas travel.

More graft lairs

At the Senate, former Colonel Rabusa has so far identified three AFP staff units as the most prone to corruption: J2 (intelligence), J3 (operations), and J7 (civil-military operations).

Wittingly or unwittingly, he has skipped mention of what officers tell the PCIJ are also the virtual wallets of crooks from inside and outside the AFP and the Defense department: the AFP hospitals and medical services, the engineering brigades, and huge lump sums under the control of the most senior officers.

The latter includes items like office supplies expenses; food supplies expenses; travelling expenses (local and foreign); gasoline, oil and lubricants expenses; consultancy services; and several similarly opaque but separately funded items like representation expenses, confidential expenses, extraordinary expenses, and miscellaneous expenses.

These expense items – the easiest to snitch from and thus among the most abused by crooks – are the sources of what could be called bureaucratic graft in the AFP and DND, say some officers.

This is why the rank and file talk about how medicine bottles are filled or diluted with water at military hospitals. And while on paper, too much money has supposedly gone to buying hospital supplies and equipment, in practice these are often in short supply when soldiers are injured or fall ill.

Barter deals

Such an environment may thus help explain why some frontline troops have also taken to bartering their AFP-issued equipage for a quick buck.

At the lowest level, an ordinary corporal can sell his bullet to a sari-sari store in the remotest villages. Troops say that a soldier can exchange one live .45-caliber bullet or one round of an M-16 rifle for a bottle of GSM (Ginebra San Miguel) or two cans of sardines. With the blessing of the supply sergeant, a unit could sell sacks full of bullets to a local warlord or businessman or the unfriendly rebel units nearby, say some soldiers.

The records of the AFP abound with tell-tale signs of these barter-trade deals. To explain the loss of their guns and ammo, all that the traders have to do is file after-operation reports saying they have used up 100 rounds during one encounter with a band of rebels. The battle may even be invented, the number of bullets fired in a five-minute skirmish, bloated many times over. After all, whatever it is the troops say, fiction and all, would the generals at headquarters find out, or even care to find out?

Big, gray middle

Marines Col. Alexander Balutan, commander of the 1^st Marine Brigade based in Cotabato, says that at core, it seems like corruption goes unchecked because of the gray areas in the AFP procurement and budget processes.

“Sabi ko sa mga PMA graduates, since I graduated in 1983, I see to it my gray area is very narrow,” Balutan told the PCIJ in a phone interview recently. “Kung very narrow ang gray area, you can easily discern black and white, right or left. You must maintain na klaro ‘yan or narrow.”

Corruption has unfolded, he conceded, because to some officers, the gray domain is a big, broad middle.

“There are officers after graduation who choose to make wrongs seem right, so the gray area becomes really wide,” said Balutan. “That’s when the decision becomes confused… Once a problem comes… they can no longer discern in a system that is unclear.”

He said the grayness of the situation has often been invoked to rationalize many crooked deals. “That’s the argument,” he said. “The gray area has become way too wide. If it’s very narrow, it would be easy to decide – there would be no room for argument, because you know it’s wrong.”

Being decisive about what is right and what is wrong is what troops in life-and-death situations at the frontlines deserve at the very least from higher officers, said Balutan.

“Because if you’re a soldier in battlefield, your decision needs to be exact because you’re talking about people’s lives,” he said. “You can’t say, wait a minute or that you’re not sure. That’s how (clear) it also should be in managing the AFP’s funds and resources.” – With reporting by Ed Lingao and Jaemark Tordecilla, PCIJ, February 2011

Photos: Corazon Aquino visits IRRI in 1986, Some rights reserved by IRRI Images. | Gloria Macapagal Arroyo inauguration from Wikipilipinas.org | Camp Aguinaldo released under Public Domain to Wikipilipinas.org by the owner. | F-5A image

Some rights reserved by Jerry Gunner.