Midnight deal at HGC?

Could outgoing officials of government agency Home Guaranty Corporation (HGC) be engaged in so-called “midnight

deals” so they can have pabaon when they leave office?

This seems to be what some lawmakers are hinting at when they questioned HGC officials for attempting to sell properties that are the subject of ongoing settlement negotiations with the owners.

One of the lawmakers who have criticized this highly questional act by HGC officials is Ako Bicol party-list Rodel Batocabe who chairs the House subcommittee on housing.

He said it is “highly disturbing, questionable and irregular” that HGC, through its executive vice president Corazon Corpus, has caused the publication of an invitation to bid for properties involved in the current settlement between the housing guarantee firm and property developer Reghis Romero and his firm, R-II Builders Inc, involving the Smokey Mountain Development and Reclamation Project (SMDRP).

The SMDRP is a project of the National Housing Authority (NHA) in Tondo, Manila sometime in 1996 involving the reclamation of 79 hectares. R-II Builders is the contractor.

R-II Builders had earlier offered to advance P2.8 billion to HGC to finally settle the dispute with the latter. The offer was rejected by HGC which asked instead for P5 billion. But Romero has reportedly said he is willing to increase his offer, although P5 billion is too much.

HGC had acted as the guarantor of the SMDRP after it was paid P500 million by the asset pool of the development to assume such role.

Due to its liquidity problems, HGC was unable to pay the project’s creditors when its obligations fell due. Up to now, HGC has yet to complete payment to all SMDRP’s creditors, including the Social Security System (SSS).

Because of HGC’s failure to pay, the principal obligations continue to incur interest of P500,000 a day for the past 15 years or more than P2.7 billion in interest expenses alone, an amount that will ultimately be shouldered by taxpayers, records show.

In a bid to determine the exact figure, the House sub-committee headed by Batocabe directed both parties to conduct meetings to settle their figures with the assistance of the COA.

According to Batocabe, either Corpus took advantage of the situation and published the invitation to bid without the knowledge and approval of management, or she was just following orders from top HGC management who are on their way out.

Either way, such act is highly brazen and in utter bad faith, he said.

News reports have revealed the appointment of HGC officials expired last June 30, and therefore, they are occupying their offices in a mere hold-over capacity until Malacanang makes new appointments.

These acts by the HGC also came under fire from Quezon City Rep. Winnie Castelo who called for an investigation.

Castelo said the action is very suspicious and blatant, especially since it happened while the House Committee on Housing was trying to find ways to resolve the mess HGC is into.

He added that ”propriety and decency dictate the old Board should let the incoming officers determine how to administer their assets.”

Apparrently, the sub-committee on housing which Batocabe chairs directed and authorized to bring the HGC and the Romero/ RII group to the negotiating table to finally settle the decades-long dispute arising from the SMDRP.

The HGC has reportedly told the sub-committee it is willing to settle the dispute and reconcile their figures with the assistance of the Commission on Audit.

Batocabe for his part said HGC is just wasting the time and resources of the House by deceiving the subcommittee, since HGC is saying one thing and doing another with the intention of disposing and conveying assets which are part of the ongoing settlement.

The party-list lawmaker said they would not tolerate such circumvention of the law and would order HGC president Manuel Sanchez to explain such irregular act. Othewise, Sanchez has no business staying in HGC, Batocabe added.

The legislator warned his committee would not hesitate to use the oversight and punitive powers of Congress to protect the interests of the government as a result of the brazen attempt by HGC management.

According to news reports, Romero last June 10 wrote a letter addressed to Finance Secretary Cesar Purisima, who is HGC chairman, and Vice-President Jejomar Binay, who was then the state home guarantor’s vice-chairman, proposing to reimburse HGC’s exposure to SMDRP and settle its P1.1 billion obligation to SSS.

Once the settlement has been agreed upon, Romero said an initial P1 billion funds would be deposited in a bank. The balance of P1.9 billion would be made available within 60 days in manager’s check upon final agreement of the parties and the court’s approval of the same.

But Romero wants HGC to first cover all Smokey Mountain Asset Pool assets (SMAP) including National NHA receivables, its land titles and other pertinent documents to R-II Builders before the delivery of the final payment.

He emphasized R-II is submitting this proposal without necessarily waiving its interest and rights, and that the proposal is a gesture of goodwill and would eventually stop the accrual of cost of interest suffered by the government and to pave the way for a final resolution to the long standing issues hounding the SMDRP.

Romero added issues with NHA would be settled separately in accordance with the decision of the Supreme Court and relevant contracts.

According to court records (HGC v. R-II Builders and NHA), in 1993, a joint venture agreement was entered into between NHA and R-II Builders for the implementation of the SMDRP. Amended and restated in 1993 and 1994, the JVA was aimed at implementing a two-phase conversion of the Smokey Mountain Dumpsite "into a habitable housing project inclusive of the reclamation of the area across Radial Road 10 (R-10)".

By the terms of the JVA, R-II Builders, as developer, was entitled to own 79 hectares of reclaimed land and the 2.3 hectare commercial area at the Smokey Mountain. As landowner/implementing agency, NHA, on the other hand, was entitled to own the 2,992 temporary housing units agreed to be built in the premises, the cleared and fenced incinerator site consisting of five hectares, 3,520 units of permanent housing to be awarded to qualified on site residents, the industrial area consisting of 3.2 hectares and the open spaces, roads and facilities within the Smokey Mountain Area. (HGC v. R-II)

In 1994, NHA and R-II Builders, alongside HGC as guarantor and the Philippine National Bank (PNB) as trustee, entered into an Asset Pool Formation Trust Agreement which provided the mechanics for the implementation of the project. To back the project, an asset pool was created composed of the following assets: the 21.2 hectare Smokey Mountain site in Tondo, Manila; the 79-hectare Manila Bay foreshore property in the name of the NHA; the Smokey Mountain Project Participation Certificates (SMPPCs) to be issued, or their money proceeds; disposable assets due to R-II Builders and/or its proceeds as defined in the JVA; the resulting values inputted by R-II Builders for pre-implementation activities and some start-up works amounting to P300 million; the 2,992 temporary housing facilities/ units to be constructed by R-II Builders; and, (g) all pertinent documents and records of the project.

Allegations of default and bad faith by one party against another has led to a number of cases between HGC and R-II.

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