Atty. Julius Gregory Delgado
PEOPLE VS. DANILO R. CRISOLOGO AND ROBERTO L. MANLAVI, G.R. NO. 253327 (JUNE 27, 2022):
GOCC OFFICIALS FOUND LIABLE FOR SELLING UNDERPRICED AIRCRAFT SPARE PARTS ON INVENTORY
Petitioners Danilo R. Crisologo and Roberto L. Manlavi used to be the President and Senior Vice President, respectively, of the Philippine Aerospace Development Corporation (“PADC”), a government-owned and controlled corporation created under Presidential Decree No. 696. PADC is primarily engaged in aircraft repairs but it also sells aircraft spare parts. On September 4, 2006, the PADC’s Pricing Policy Committee issued a Revised Pricing Policy for a 30% mark-up to be added to the cost of parts purchased from local sources.
On November 12, 2007, petitioner Crisologo, in his capacity as PADC President, appointed petitioner Manlavi as temporary Senior Vice-President. On November 16, 2007, petitioner Manlavi issued a Memorandum regarding the pricing of PADC spare parts, where he noted that PADC spare parts should be made attractive to buyers “with the end view of optimizing its remaining value before eventually becoming scrap value due to obsolescence.” With petitioner Crisologo’s signature affixed below his, Manlavi proposed various formula in the pricing of spare parts depending if it has documents, in manufacturers’ parts/catalogue lists or not, and for foreign and local values.
From February to July 2008, PADC and Wingtips Parts Corporation (“Wingtips”) entered into seven (7) transactions for the sale of various spare parts. On June 15, 2009, the Commission on Audit (“COA”) Chairperson Reynaldo A. Villar ordered an investigation on the alleged irregularities in the sale of aircraft parts between PADC and Wingtips.
Following the Fraud Investigation Audit, State Auditor IV Lourdes C. Borromeo submitted Fraud Audit Report No. 2010-008 which bore the following findings, among others: (a) the aircraft spare parts were sold below PADC’s pricing policy, without expert appraisal as to the market value of the spare parts; (b) the prices were unilaterally set by Manlavi based on his own proposed guidelines and without the approval of the Board of Directors and expert study and appraisal as to the actual value and condition of the inventories to be sold; (c) items sold could not be considered scrap, obsolete, or of no value, because these items were considered as brand new as they were still stored in PADC’s stock room and remained in the inventories before the sale; (d) it is a general principle in accounting that items which remain in inventories are not subject to depreciation; (e) instead of bonded organic personnel manning the stockroom which housed millions worth of aircraft parts and accessories, Crisologo personally hired consultants to do this task; and (f) Crisologo ordered the use of computer-printed receipts to replace serially pre-numbered receipts.
Resident State Auditor, Arsenio S. Rayos, Jr. also testified that he previously conducted audit on Wingtips transactions which led to the issuance of Audit Observation Notice of Charge No. 2009-001 (2008) due to the sale of aircraft spare parts at a loss. Rayos testified that he issued Memorandum No. 2008-10 wherein he recommended PADC to stop its disposal of aircraft parts and accessories at a loss but to no avail. PADC did not submit its basis for selling the spare parts at a loss and failed to submit the Net Realizable Value (NRV) of these items.
Petitioners (accused therein) Crisologo and Manlavi filed a Motion for Leave to File Demurrer to Evidence which the Sandiganbayan denied. Yet they still manifested that they will pursue their Demurrer to Evidence sans leave of court. The Sandiganbayan convicted petitioners Crisologo and Manlavi for violation of Section 3 (e) of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, and sentenced them to suffer the indeterminate penalty of six (6) years and one (1) month, as minimum, to ten (10) years, a maximum, and to suffer the penalty of perpetual disqualification from holding public office.
On appeal before the Supreme Court, the elements for violation of Section 3 (e) of RA 3019 were restated: (1) the accused must be a public officer discharging administrative, judicial, or official functions or a private individual acting in conspiracy with such public officers; (2) the accused acted with manifest partiality, evident bad faith, or inexcusable negligence; and (3) the action caused any undue injury to any party, including the government, or gave any private party unwarranted benefits, advantage, or preference in the discharge of his or her functions.
As the first element is clearly present, the Supreme Court delved on the next two (2) elements. On the second element, the Court first discussed whether the subject transactions of PADC with Wingtips were in violation of COA Circular No. 89-296, otherwise known as the “Audit Guidelines on the Divestment or Disposal of Property and Other Assets of National Government, Agencies and Instrumentalities, Local Government Units and Government-Owned or Controlled Corporations and their Subsidiaries” which generally mandates the disposal of government through public auction or sale through negotiation. The Court, however, held that the subject transactions fall under the exception to COA Circular No. 89-296 where the items are classified as merchandise or inventory held for sale in the regular course of business.
Nonetheless, the Court held that petitioners Crisologo and Manlavi are still guilty and liable. First, petitioner Crisologo is guilty for peremptorily approving the new set of guidelines without even verifying from petitioner Manlavi how he ended up with the extremely low pricing of spare parts. Petitioners Crisologo and Manlavi kept things secret between themselves, to the exclusion of both the PADC Pricing Committee and the PADC Board of Directors. Second, they completely disregarded the 30% mark-up prescribed by the PADC Pricing Policy Committee for spare parts purchased from local sources. As observed, PADC could have earned Php7,489,868.50 from the sale, but because of the extremely low pricing fixed by the petitioners, the PADC only earned Php849,510.22 as sale proceeds, resulting in a loss of Php6,640,358.28. Third, the claim of petitioner Crisologo that these spare parts were obsolete is unsubstantiated. As testified by expert opinion State Auditor IV Borromeo, these items could not be considered scrap, obsolete, or of no value since at the time of sale, these were still stored in the stock room of PADC and remained in the inventories. Being still in the inventory, these items are not subject to depreciation. Fourth, Crisologo also failed to justify why instead of bonded organic personnel manning the warehouse housing millions worth of aircraft parts and accessories, he personally hired consultant to do the task; and instead of using serially pre-numbered receipts, he ordered the use of unofficial computer-printed receipts. Fifth, petitioners Crisologo and Manlavi negotiated with Wingtips only and did not communicate with other offerors or potential buyers.
As to the third element, the Supreme Court held that the Government could have earned Php7,498,868.50 but because of their low pricing, it only earned Php848,510.22. The Court held that while it may be true that the resale value of these brand new items may no longer be the same as the original purchase value, petitioners Crisologo and Manlavi failed to clearly establish that they took into account market decline or depreciation when they determined the selling price of aircraft spare parts. The petitioners failed to show that they properly applied the measures for market decline of inventory provided in Section 391 of GAAM or the Government Accounting and Auditing Manual.
Hence, with all the elements for violation of Section 3 (e) of RA 3019 being present, the Supreme Court affirmed the conviction of petitioners Crisologo and Manlavi.