In bombshell testimony in a packed Senate hall today, the impeachment trial of Philippine Chief Justice Renato C. Corona took a dramatic turn. Citing a 21-page confidential report issued by the Anti-Money Laundering Council (AMLC), Ombudsman Conchita Carpio-Morales Morales -- an appointee of President Benigno Aquino III -- testified that the Chief Justice had 82 dollar-denominated bank accounts between 2003 and 2011 (coinciding with the reign of former President Gloria Arroyo) with total "inflow" of $28 million and "outflow," at $30 million. At least $12 million of this was described as "fresh deposits" that were untouched. Not bad pay for a public servant in a poor country.
The irony of the Ombudsman's revelation, however, lies in the fact that she appeared before the Senate because of a subpoena issued at the behest of the defense, and not the prosecution nor the Senate Impeachment Court itself. Corona was impeached by the House of Representatives on Dec. 12, 2011 on grounds pertaining to betrayal of public trust, violation of the Constitution, and graft and corruption, among other charges set forth under the articles of impeachment. In particular, Article 2 of the impeachment complaint alleges that Corona failed to disclose to the public his statement of assets, liabilities, and net worth as required under the Philippine Constitution and anti-graft laws.
With just weeks remaining before her nine-year tenure was to end, Arroyo bypassed seniority and appointed Corona, then a senior justice, to the office of Chief Justice. Corona was branded a "midnight appointee" of an outgoing president and was then accused of evident partiality unbecoming of a chief justice by favoring Arroyo in a number of high-profile Supreme Court cases. What triggered the defense panel to hail the Ombudsman before the impeachment court was her April letter to Corona requesting him to explain "at least" $10 million in assets -- an amount disproportionate to a supreme court justice of any developing or middle-income country, but particularly so in the Philippines, where per capita GDP is $4,100 per year and public sector employees are notoriously underpaid.
The Ombudsman cited in her letter certain "reports" and data which were both submitted to her by individual (private) complainants and gathered through her constitutionally re-posted power to request any government agency for assistance and information, and to examine, if necessary, pertinent records and documents. In particular, Morales testified that she had requested the AMLC to provide her with records of financial transactions pertaining to Corona's accounts which it deemed irregular. Tagged as "significant observations", the findings of the AMLC, as summarized by Morales, pointed to:
a. Multiple accounts created for similar purpose,
b. Multiple accounts spread over five bank branches in various branches/places,
c. Circuitous fund movements,
d. Deposits and withdrawals made on the same day, and
e. Significant movements on significant dates.
In a power point presentation lasting more than two hours -- and unfinished when the Senate adjourned today -- Morales waded through the AMLC report item-by-item. As with the defense, neither did the House prosecution panel know beforehand the content of the AMLC report, much less the fact that she had prepared a power point presentation to help explain 705 transactions, all of which -- save for two or three by a bank agent - had been executed under personal instructions and in the name of Corona over an eight-year period. Morales was also quick to point out that significant withdrawals were made during the 2004 and 2007 elections, as well as on the very day Corona was impeached and the days that followed. Lead public prosecutor Representative Niel Tupas Jr., speaking in the vernacular, himself did not imagine that Corona's undeclared and unexplained wealth amounted to this much, if one were to go by the Ombudsman's account. "It seems," said Tupas "that this is a professional money laundering pattern."
The Ombudsman's testimony was seen today as the most damaging blow yet to the defense and a big win for the prosecution. But we think it is also a big step forward in reforming the Philippines' antiquated bank secrecy laws. A useful gauge of the Philippines' comparative rankings and competitiveness comes from the Financial Secrecy Index (FSI), designed to help economists better understand global financial secrecy, corruption and illicit financial flows. The FSI compares 73 secrecy jurisdictions that have established laws and systems which provide legal and financial secrecy to others. In the 2011 FSI rankings, the Philippines ranked 33rd, sandwiched between Mauritius and Liechtenstein in terms of overall weight in importance and perceived secrecy. A primary difference, however, is that the Philippines is not generally considered to be a preferred legal tax haven.
It is reasonable to conclude then, given that the Philippines is known neither for its rule of law nor transparency, that many of the individuals and businesses who may select the Philippines do so simply to hide money from prying eyes. This cannot be to the country's advantage if it wishes to change some of the widely held perceptions about its level of corruption, lack of transparency, and integrity. If the Philippines were on a par with, say, Singapore or Switzerland in that regard, such an argument could not be legitimately made. But given the company that the Philippines keeps in all of the measures referenced herein, its current reputation as a destination for bank secrecy is more likely to be connoted with drug cartels and money launderers, than multinational corporations looking for a legitimate tax haven. On this basis, it would clearly be in the Philippines' interest to relax its bank secrecy laws in an effort to increase its perceived transparency and willingness to overtly join the global fight against money laundering and criminal syndicated financing.
In our prior articles on this subject ("Of Circuses And Sanity In The Philippines", "Of Politics and the Rule of Law in the Philippines"), we argued that President Aquino and his allies in Congress might be getting things right, but we remained skeptical, given the circus-like (if not surreal) atmosphere of Philippine politics. But the fact that former President Arroyo and her husband are under arrest and being tried on corruption charges -- accused of diverting state funds and electoral sabotage in 2004 and 2007 -- and given today's court proceedings against Mr. Corona, Aquino's anti-corruption drive is clearly yielding consistent and tangible positive outcomes.
President Aquino and his administration are certainly to be applauded for this substantial achievement, in a country which is not accustomed to toppling the high and mighty from their centuries-old privileged perches. That includes the president and his family, given the recent court ruling requiring them to distribute their 25,000 acre Hacienda Luisita estate to more than 6,000 people in Luzon. These actions say a great deal about the direction the Philippines is heading -- and it is all good. No wonder its sovereign ratings are being upgraded and investors are warming up to the idea of investing in the country after a long hiatus. The proof will be in the pudding however; for the justice system to truly be able to say that it has turned a corner, Mr. Corona and Ms. Arroyo need to be sent to prison, and stay there, rather than being able to buy their way out.
By Daniel Wagner and Edsel Tupaz
Edsel Tupaz is a private prosecutor of the House prosecution panel in the impeachment trial of Philippine Chief Justice Renato Corona. He is a graduate of Harvard Law School and Ateneo Law School, founder of Tupaz and Associates, and a professor of international and comparative law, based in Manila.
Daniel Wagner is CEO of Country Risk Solutions, a cross-border risk management consultancy based in Connecticut (USA), and author of the new book Managing Country Risk (www.managingcountryrisk.com).
Follow Edsel Tupaz on Twitter: www.twitter.com/edseltupaz.