The Complex Case Against Duque and Lao: Analyzing the P41-Billion COVID-19 Procurement Controversy

By Louis ‘Barok’ C Biraogo — August 30, 2024

CAN billions of pesos meant for pandemic relief disappear without a trace? That’s the question at the heart of the graft charges against former Health Secretary Francisco Duque III and former Procurement Service-Department of Budget and Management (PS-DBM) Undersecretary Lloyd Christopher Lao. This case, arising from the transfer of P41.464 billion of the Department of Health’s (DOH) funds to the PS-DBM during the height of the COVID-19 pandemic, presents a litmus test for the country’s legal and ethical standards in handling emergency procurement and public funds management.

The Backstory: A Look at the Circumstances

During the early months of the COVID-19 pandemic, then-President Rodrigo Duterte was granted emergency powers under the Bayanihan to Heal as One Act (RA 11469), authorizing the executive branch to reallocate funds, procure essential supplies, and streamline government operations to address the crisis. The pandemic required swift and decisive action, and in this context, the DOH transferred P41.464 billion to the PS-DBM to procure medical supplies, including ventilators, personal protective equipment (PPE), and testing kits.

However, the process was marred by controversies, particularly surrounding the PS-DBM’s role in procuring supplies that were outside its mandate of handling common-use supplies (CSE). The Ombudsman’s investigation revealed that the PS-DBM, under Lao’s leadership, charged a 4% service fee for these transactions, amounting to P1.659 billion—a move deemed illegal and injurious to the government.

The Case Against Lloyd Christopher Lao

Lloyd Christopher Lao faces charges for his role in accepting the P41 billion fund transfer without ensuring that the PS-DBM was equipped or authorized to procure the needed supplies. The crux of the case against Lao hinges on several key points:

Violation of the Anti-Graft and Corrupt Practices Act (RA 3019): Lao is accused of causing undue injury to the government by accepting the fund transfer and charging an unwarranted service fee. Under RA 3019, it is unlawful for public officials to give any private party unwarranted benefits or to cause undue injury to the government.
Lack of Legal Authority: The PS-DBM’s mandate was limited to procuring common-use supplies. The COVID-19 supplies, such as nucleic acid extraction machines and ventilators, did not fall under this category. Accepting the funds and charging a service fee for non-CSE procurement could be construed as overstepping legal boundaries.
Absence of a Memorandum of Agreement (MOA): The fund transfer and subsequent procurement lacked a formal MOA, which would have outlined the terms, responsibilities, and legal obligations of both the DOH and the PS-DBM. This absence is a critical procedural flaw that could undermine the legality of the entire transaction.
Precedents and Ethical Considerations: The Supreme Court of the Philippines has consistently emphasized the importance of transparency and adherence to procedural rules in government procurement. The lack of proper documentation and the imposition of a service fee without clear legal backing raise serious ethical and legal questions.

Arguments in Lao’s Defense:

Emergency Circumstances: Lao could argue that the pandemic created unprecedented challenges, necessitating flexibility in procurement processes. The urgency of securing medical supplies may have justified deviations from standard procedures.
Presidential Directives: Lao might contend that his actions were in line with directives from higher authorities, including President Duterte, who had broad powers under the Bayanihan Act to ensure the rapid procurement of supplies.

The Case Against Francisco Duque III

Former Health Secretary Francisco Duque III is similarly accused of violating RA 3019, particularly in his approval of the fund transfer to the PS-DBM. The case against Duque is rooted in the following points:

Bad Faith or Gross Negligence: Prosecutors allege that Duque either acted in bad faith or was grossly negligent in approving the transfer, knowing that the PS-DBM was not authorized to procure the required supplies. This decision, they argue, caused undue injury to the government by incurring an unnecessary service fee.
Lack of Legal Justification: The Ombudsman found that the DOH had no compelling reason or legal obligation to transfer the funds to the PS-DBM, especially since emergency procurement could have been handled directly with suppliers.
Procedural Violations: As the head of the DOH, Duque was responsible for ensuring that all procurement activities adhered to legal and procedural requirements. The absence of proper documentation and the transfer of funds without a MOA further complicate his defense.

Arguments in Duque’s Defense:

Necessity and Legality: Duque has argued that the transfer was both necessary and legal, given the context of the pandemic and the need to leverage the PS-DBM’s procurement capabilities. He may assert that his actions were in line with the executive’s broader strategy to combat COVID-19.
Presidential Influence: Like Lao, Duque could argue that his decisions were made under the directives of President Duterte, who had the authority to coordinate and expedite the government’s pandemic response.

The Road Ahead: Legal Challenges and Potential Outcomes

The legal battle ahead for Duque and Lao will be arduous, with several hurdles at each step:

Preliminary Investigation: Both parties will have to undergo a preliminary investigation where the Ombudsman will determine if there is probable cause to pursue the charges in court.
Sandiganbayan Trial: If the case proceeds, it will be heard by the Sandiganbayan, the Philippines’ anti-graft court. Here, the prosecution must prove beyond reasonable doubt that Duque and Lao violated RA 3019 and other relevant laws.
Possible Appeals: Should they be convicted, Duque and Lao have the right to appeal the decision, potentially all the way to the Supreme Court.
Public and Political Pressure: The case will be conducted under the intense scrutiny of the public and media, which could influence proceedings. Moreover, political dynamics might affect the case, given the high-profile nature of the accused and the context of the charges.

Best Options for Duque and Lao

Given the complexity and stakes of this case, Duque and Lao’s best options include:

Asserting Presidential Directives: Emphasizing that their actions were based on directives from higher authorities, particularly during an unprecedented crisis, might garner some sympathy and legal leniency.
Highlighting Procedural Flaws: If any procedural errors were made by the prosecution or during the investigation, these could be grounds for dismissal or at least weakening the case.
Negotiating a Settlement: Depending on the strength of the evidence, both parties might consider negotiating a plea deal or settlement that could mitigate potential penalties.

Assessment and Recommendations

Strength of the Case Against Lao and Duque:

The case against both Lao and Duque appears to be strong, particularly given the clear procedural violations and the significant financial impact of the service fee. However, the emergency context of the pandemic and the involvement of presidential directives could complicate the prosecution’s efforts to establish bad faith or gross negligence beyond a reasonable doubt.

Recommendations

For Lao and Duque: They should focus on building a robust defense centered on the extraordinary circumstances of the pandemic and their compliance with executive directives. Additionally, exploring procedural defenses and potential settlements might be wise.
For the Government: The government should ensure that the trial proceeds with full transparency and adherence to legal standards, regardless of the political implications. This case offers an opportunity to reinforce accountability in public service, particularly in crisis situations.
For the Public: Vigilance is crucial. The public must continue to demand transparency and accountability, not only in this case but in all government transactions, to prevent the misuse of public funds.

The Duque and Lao cases are more than just legal battles—they are a test of the country’s commitment to ethical governance and the rule of law. The outcomes will set important precedents for how similar cases are handled in the future, particularly in times of crisis.