‘Too small to be seen, too juicy to be let go’

Last of Two Parts

IT IS now so obscure that many government officials don’t even know what it is, but there was once a time when the APO Production Unit, Inc. seemed destined for great things.

‘APO’ actually stands for ‘Asian Productivity Organization,’ which was the name of the Japan-based group that had helped start it more than three decades ago as an outfit that would serve the information and training needs of Asian countries.

Instead, through the years, the company seems to have served mostly the whims of government appointees placed at its helm, and who have insisted that the government corporation is “private” whenever such a label suits their needs.

This is even though experts from within the government, particularly the Department of Justice (DOJ) and the Commission on Audit (COA), have repeatedly affirmed APO as a state firm.  Indeed, to this day, the company’s facilities are even located in the compound of the Quezon City branch office of the National Economic and Development Authority (NEDA), which APO was once under.

And while it does not receive any funding from state coffers since it is supposed to be a self-sustaining corporation, APO nevertheless owes the government hundreds of millions of pesos in government loans. In large part, this may have been the result of mismanagement that was noted by COA in several special reports it conducted on APO from 1993 to 2000.

‘Between the cracks’

Commented economist Solita ‘Winnie’ Monsod in a recent interview with PCIJ: “The company has fallen between the cracks, where it’s too small to be noticed, but too juicy to be let go.”

According to Monsod, who was once NEDA chief, APO is just like other government corporations that have become convenient “parking places for patronage politics.” Put another way, most board members in these state firms are chosen “not because of what they know (that would be beneficial) for the company, but who they know,” she said.

Members of APO’s Board of Trustees, for instance, all have government connections. Their APO salaries range from P50,000 to P100,000, with a bonus of P30,000 for every meeting they attend.

APO’s by-laws stipulate that trustees “shall receive no compensation for their services, except reasonable per diems as may from time to time be fixed by the members of the corporation.”

But the board “activated” committees and corporate positions to entitle them to a “basic salary” in addition to their honorarium of P30,000 per board meeting. Likewise, the board members approved hefty bonuses and other incentives for themselves.

The by-laws say “any other allowances may be granted to the trustees by the vote of the members representing at least a majority of all the members of the corporation, subject to such limitations as may be prescribed by law and jurisprudence.”

In the present APO board, the chairman has always been outvoted, insiders say. It is the board’s promotions and marketing committee chairman, Roberto Brillante, who has also been calling the shots.

Birth of APO

For sure, this was not the future envisioned for APO by the Asian Productivity Organization in Japan and the Philippine government, which jointly created the production unit by virtue of a Memorandum of Agreement (MOA) on June 24, 1971.

Under the MOA, which was signed by then NEDA Director General Gerardo Sicat and the Japan-based APO Secretary General Morisaburo Seki, the Philippine government was to “assume full responsibility to operate the Unit on a self-sustaining basis effective 1^st July 1971 onwards.” Manila was also to continue granting the unit “exemption privileges on all imported printing supplies and materials, equipment and other items needed for its productions operations.”

Consequently, then President Ferdinand Marcos signed Letter of Instruction No. 197, directing NEDA to make APO a self-sustaining, non-stock, non-profit corporation. The order also enabled the unit to “solicit and accept printing jobs with other agencies of, or corporations owned or controlled by the Government.”

The move to make the unit self-sufficient was a result of funding running out from the

joint contributions of the United States Agency for International Development (USAID) and Manila. It was also aimed at sparing the organization in Japan and the Philippine government from any financial burden stemming from the firm’s operations.

In November 1972, APO Production Unit, Inc. was incorporated and registered with the Securities and Exchange Commission (SEC) as a non-stock, non-profit corporation.

NEDA’s Sicat was among the five government officials who were its original incorporators. He would also become APO president, leading him to seek the opinion of then acting justice secretary Catalino Macaraig Jr. on whether or not there was a conflict of interest in his being such while concurrently heading NEDA.

Macaraig replied that there was no such legal impediment, considering that Sicat did not receive compensation or benefits from APO. Besides, wrote Macaraig in Opinion No. 52 that was dated April 3, 1975, while APO was “organized as a private corporation,” it is “not strictly speaking, a private enterprise but a government instrumentality.”

For government audit

This view would be shared years later by officials from the justice department and COA. For instance, in his 4^th Indorsement on July 29, 1981, former COA Chairman Francisco S. Tantuico Jr. said that “APO is not a private entity but a government instrumentality” and “is of equal footing with the government printing office insofar as its printing jobs with the government are concerned.”

A letter written by the commission to NEDA dated June 23, 1987 affirmed that APO is a government corporation, since the unit’s funding came from joint contributions from USAID and the Philippine government.  The same document, which was signed by then Corporate Audit Office Director Sofronio B. Ursal, also pointed out that the production unit “enjoys a privilege not inherent in private enterprises.”

The state auditing agency would also say that APO is “subject to government audit,”  in response to an inquiry from then APO General Manager Francisco Aseniero, Jr. on whether COA’s audit jurisdiction applies to the production unit.

Just last April 16, COA’s Office of the General Counsel of COA released Opinion No.  2010-026, reaffirming earlier decisions and rulings that APO Production Unit, Inc.  is a government entity. The internal opinion was responding to questions from COA’s own Corporate Government Sector regarding APO’s legal personality.

Decades earlier, then NEDA Director General Monsod herself had apparently become confused over APO’s corporate character. In response to her queries, then Justice Secretary Sedfrey Ordonez had issued Opinion No. 101 on October 1, 1987, stating that APO production unit is a government-owned corporation attached to NEDA.

According to Ordonez, APO “satisfies the definition of a government-owned and controlled corporation” as provided in Section 2 of Presidential Decree Number 2029.  In particular,” he said, APO meets the definition of a corporation “if organized under the general corporation law is owned or controlled by the government directly or indirectly.”

The ruling, however, made a distinction between the character of the company’s board of trustees and its personnel. While the firm is a government-owned corporation by reason of its funding and the composition of its governing board, its employees and workers are governed by the Labor Code based on the 1971 MOA.

Exempt from bidding?

Yet although it has been based within the NEDA compound for decades now, APO has been bounced from one government agency to another for supervision. Aside from NEDA, it has also been under the Philippine Information Agency (PIA) and the Office of the Press Secretary. Just last March, it was returned, along with the National Printing Office (NPO, the government’s primary printer of government forms and other publications including ballots and election returns), to the PIA for supervision.

Based on COA reports, APO has made full use of its being a government firm. For example, APO as a state instrumentality acquired loans with ease from the Philippine National Bank (PNB) and other government financial institutions. It imported printing materials tax-free.  And unlike private printing firms, APO has been exempted from public biddings for government projects. Instead, it gets these through negotiated bids.

After all, Executive Order No. 301 under the Decentralization of Negotiated Contracts says, “(Any) provision of law, decree, executive order or other issuances to the contrary notwithstanding, no contract for public services or for furnishing supplies, materials and equipment to the government or any of its branches, agencies or instrumentalities shall be renewed or entered into without public bidding, except…whenever the purchase is made from an agency of the government.”

And yet APO dons a private corporate hat whenever it decides to farm out government printing orders to private firms. In cases uncovered by COA in 1996, 1997, and 1998, APO subcontracted government projects to private printers without bidding, citing an opinion from the Office of the Government Corporate Counsel (OGCC) that said it is a private non-stock, non-profit corporation, and therefore “the conduct of its business is that of private firms.”

Private – when convenient

This continued practice, according to COA, not only “deprives the government of lower cost of printing, but also of better income.” The OGCC opinion cited by the former management of APO was meanwhile dismissed by the Commission Proper through COA decision No. 98-173, which reiterated that APO is a government instrumentality that is subject to public bidding requirements.

Yet in February 2009, APO would even subcontract a Hong Kong-based printer to do the order of the Maritime Industry Authority or (MARINA) for seafarers’ identification and record books. Normally done by the Bangko Sentral ng Pilipinas, the seafarers’ book order somehow wound up with APO, which was then swamped with other projects, according to APO board member Brillante. APO thus looked for a subcontractor, but that move later became even more controversial when it was reported that the deal had been overpriced by P7 million.

In an interview with PCIJ, Brillante described Marina’s order as a “rush job” that extracted additional cost from Marina because of its “lack of foresight.” Exonerating APO of any fault in the matter, he said Marina would not have had to spend that much if it had scheduled the project ahead of time.

In truth, government printing projects have kept APO’s presses humming through the years, although the company has also accepted orders from private entities such as the Philippine Bible Society. Staple government clients include the Bureau of Internal Revenue (BIR), the Department of Budget and Management (DBM), the Department of Tourism (DOT), the Department of Education (DepEd), and the Philippine Postal Corporation (Philpost).

The company currently employs some 250 regular workers. To accommodate a major job order from the National Statistics Office (NSO), APO recently hired some 100 contractual employees.

Yet far from its lofty beginnings, APO’s buildings are now old and unkempt. Its cramped facilities house several departments and include a composition area, press room, a security printing sector where sensitive forms are printed, a bindery department, and an engineering and maintenance section.  It also has a warehouse, stock room, and offices for its managers, plus a conference room with mismatched furniture.

One veteran APO employee says its printing equipment had its last upgrade in the mid-1990s, although its latest gadget acquisition supposedly shortens the pre-press plate preparation.

Unpaid loans

In 1989, APO’s inability to repay multimillion-peso loans from government banks landed it under the Asset Privatization Trust (APT).  But it had no takers. By 2000, based on state audit reports, the firm owed the government P604 million, representing loans from the Philippine National Bank, insurance and security services expenses of the APT, and accrued interest and penalty.

In the COA reports, state auditors noted their difficulty in obtaining company data, much less cooperation from APO officials, for their inquiry. In the 1996 to 1998 audit of APO,  for example, the COA team supervisor said that they were unable to offer an opinion on the firm’s financial statements “because of the materiality of the amounts involved and the refusal or reluctance of the close relatives, neighbor, and friends of APO officers…to confirm or deny having received uncrossed checks or proceeds thereof…from APO.”

Among the team’s findings was the issuance of uncrossed checks amounting to P16.6 million to close relatives of APO’s then internal auditor as commission fees.  This payment to two non-APO employees, said COA, “cast doubts as to the propriety of the transactions.”

Interestingly, in its 1999-2000 audit report, COA said that among its previous recommendations that remained unimplemented were to “stop granting commissions to close relatives/friends of APO officials, especially for those arising from sales to government agencies” and to “stop granting cash advances to non-APO personnel.”

Some APO employees have since asserted that officials have made a milking cow of the printing firm. Just last March, a number of APO employees wrote Executive Secretary Leandro Mendoza regarding alleged abuses of members of the Board of Trustees and some senior management executives, who had supposedly bloated salaries and allowances.

Little kingdoms

In 2008, then Press Secretary Jesus Dureza himself had written the APO Board of Trustees, indicating his desire for them to subject the company to regular COA audit.  Dureza’s letter was apparently part of his attempt to align the trustees’ compensation with other executives from other GOCCs — to no avail.

PIA Director General Conrado A. Limcaoco Jr., who began supervising APO only this March, said that while he has sat in just one APO board meeting so far, he is already convinced that there needs to be “some structural and policy imperatives” at the firm.

“The personality dynamics is complicated beyond belief,” he said. “The board doesn’t get along, the employees don’t get along, and even the management and employees don’t get along.”

He said, however, that taking priority in his to-do list is to settle with finality questions regarding APO’s corporate nature of the corporation by getting a legal opinion from the Office of the President and the DOJ.  He also said that he is requesting the Presidential Anti-Graft Commission to investigate APO’s printing of campaign materials for company officers and their relatives “to determine if there’s cause to send it to the Ombudsman.”

Monsod, for her part, told PCIJ that as with other GOCCs, it has been difficult to put APO in order because “everybody has his little kingdom and everybody is busy protecting his own little turf.” Asked if she thought there was a chance things may change at APO once a new government comes in, she remarked that any overhaul “has to be along a general policy issuance… and this is all in connection with not just professionalizing the civil service but the boards of directors of all  government corporations.”

Said Monsod: “APO by itself is merely a symptom that really should be examined by government.”