BIR applies Al Capone model on scam

A NEW FRONT was opened in the widening investigation into the alleged diversion of P10 billion in congressional pork barrel funds intended for public works across the nation into a syndicate of fake nongovernment organizations (NGOs) and foundations when the Bureau of Internal Revenue (BIR) announced last week that it had launched a separate inquiry into the biggest corruption scandal, involving public funds, that has rocked the country over the past 10 years. The BIR inquiry is centered on whether the purported huge earnings of Janet Lim-Napoles and the JLN Group of Companies, which she heads, were reflected in their income tax re- turns filed during the past few years.

The probe comes separately from the investigations of the scandal conducted by the National Bureau of Investigation, for its criminal aspects, and the Office of the Ombudsman, an independent constitutional body with oversight functions on disbursements of public funds, thus expanding the

scope of the government’s inquiry.

The BIR inquiry embraces the 20 NGOs, which allegedly received funds transferred from the pork barrel of five senators and 23 congressmen.

According to Internal Revenue Commissioner Kim Henares, foundations, or NGOs, are registered with the BIR and issue official receipts, even though they are generally exempted from paying income tax. She said income, including those from illegal sources, are taxable under the tax code.

Nevertheless, she said, the BIR would use the net worth method, i.e., earnings which cannot be supported with documents will be considered hidden wealth subject to income and business taxes.

She added that the BIR would also use reports on the racket from various agencies in assessing the tax liabilities of Napoles and others implicated in the pork barrel diversion.

Pandora’s box

The BIR investigation followed a series of articles on the alleged diversion of pork barrel funds to ghost projects of bogus NGOs.

Henares said: “Napoles claimed she had many properties … . If you have many prop- erties there won’t be any problem if you are paying the right taxes …. If what Napoles said is true that these are legitimate income and she paid taxes for it, then there is nothing to fear.” But she did not rule out investigating Napoles’ reported properties in the Uniited States.

If Napoles and her lawyers think that she can easily get off the hook in the income tax examination, they might be deluding themselves.

Henares warned that the inquiry could open up a Pandora’s box, leading to criminal prosecution. “We can’t really tell you where we are now and what is going on in the investigation,” she said. “All I can assure you is it’s a comprehensive investigation.”

Napoles has claimed a mouthful in her public statements providing the BIR with plenty of fodder to work. She has claimed that her reported mansions, hotels, upmarket condos and bank accounts came from coal trading.

Al Capone model

The deployment of the BIR in the investigation takes the tack of US authorities who used tax evasion charges as the cutting edge of their effort to send the legendary Chicago gangster Al Capone, alias “Scarface,” to jail for criminal offenses linked to gang war murders related to bootlegged alcoholic drinks banned by the Prohibition laws in the United States during the 1920s.

The evidence on tax evasion came from ledgers detailing moneys received by Capone from his rackets seized by US Treasury agents in raids on one of his hideouts. Accountants set out to scrutinize entries of cash flows from his rackets in gambling, prostitution, liquor and extortion.

Some books on gangland rule by mobsters in Chicago write that when money made its way to Capone, it was almost all in cash. There was talk of many bags of cash in the Capone Florida mansion, most of them were at the foot of Capone’s bed.

The other sums were divided among the gangsters, and the rest were put back into running mob operations. Capone was spending a lot of money bribing officials to look the other way on his bootlegging and gambling operations, according to the accounts.

Obviously, the BIR is using the Al Capone model to pin down down Napoles on criminal offences while the NBI is plodding to make a criminal case on pork barrel diversion in transactions mostly carried out in cash.