THE stubborn refusal by Pharmally executives, the siblings Mohit and Twinkle Dargani, to produce basic business documents indicating the basis for their declared P7.2 billion cost of sales for face masks and shields they sold to government, indicates either overpricing or bribery or both, Senate Minority Leader Franklin M. Drilon said at the weekend.
Reminding that tax issues are also embodied in the documents senators are seeking, Drilon said in an interview with DWIZ the documents that were subjects of a subpoena duces tecum by the Senate Blue Ribbon committee will also provide clues on whether certain taxes were evaded or underpaid.
“Aba, ayaw pong sabihin kung magkano ang presyo ng kanilang binenta sa Procurement Service ng Department of Budget and Management [PS-DBM] dahilan siguro mayroong overpricing o dahilan siguro nakasaksak sa P7.2-billion yung mga lagay na ginawa nila,” said Drilon. “Ang tanong ko sa kanila: iharap n’yo sa Senado ang basehan ng sinabi ninyo na P7.2-billion na nagastos para ipambili ng face masks at shields na ibinenta ninyo ng P7.5-billion. Ganoon kasimple lang pero ayaw nilang sagutin. [They—Dargani siblings—refused to state the price at which they sold to PS-DBM; that’s maybe because there was overpricing or bribes they paid were tucked into these amounts. My question to them: Tell the Senate the basis of the P7.2 billion that you said you spent to buy face masks and shields that you sold for P7.5 billion. That was so simple, but they refused to respond to it].”
Drilon told DWIZ that this question is important as it may entail an “issue of taxation so that one can derive the net income and compute the tax” that Pharmally Pharmaceutical Corp. must pay.
Sadly, Drilon rued, “they refused to state these, so we cited them in contempt.” The Darganis have apparently gone into hiding since refusing to respond to senators’ questions at the 11th Blue Ribbon hearing. Staff of the Senate Sergeant-at-Arms deployed to their declared addresses in Bonifacio Global City on Taguig came home empty-handed.
Drilon, a former Justice Secretary, affirmed the information they sought from the Darganis constituted a legitimate exercise of the Senate’s powers of inquiring in aid of legislation, as was “the information we sought from [Lincoln] Ong,” referring to the Pharmally director who was first to be cited for contempt and remains in detention at the Senate building in Pasay City.
“Our question to Ong was simply how much financial aid did Pharmally get from Michael Yang, but he refused to state this, so he was cited in contempt,” Drilon recalled. Yang, a Davao-based businessman and former presidential economic adviser whom President Duterte has staunchly defended as an honest investor, had claimed he had minimal engagements with Pharmally and only linked up the low-capital startup with Chinese suppliers of Covid-19 pandemic supplies.
Meanwhile, Drilon reiterated that the Senate stands on solid legal ground to go after the Darganis, citing the 1950s case of Arnault vs. Nazareno.
“To us lawyers, it is an established principle that flight is evidence of guilt. If you run away, that is basis for presuming that you have committed an offense,” he added, referring to the Dargani siblings’ decision to make themselves unavailable to the Senate.
In the Arnault case, the Supreme Court held that the Senate has the authority to detain resource persons to compel them to respond to questions.
“This principle was unchanged in subsequent cases,” Drilon reminded, partly in Filipino.
“If you are being asked in a Senate inquiry, you must respond because we need that as basis for the law or policy we are trying to craft,” he added.
Moreover, Drilon clarified that detention of resource persons is “not a punishment; it’s not a jail sentence. That is meant to make people tell the truth.”
Besides the issues of overpricing, he adds that bribery, and taxation could be resolved if the Darganis submit the Pharmally documents being sought.
Senate probers said they also need to see the documents on P33 million in donations that Pharmally declared in its financial statement sent to regulators, “but without showing any basis for such.”
For instance, Drilon asked: “who received the P33 million in donations. Even the auditor [of Pharmally] admitted that she did not see a deed of donation. Pharmally deducted the P33 million in order to reduce the income tax they paid,” Drilon noted. Thus, he stressed, “we need to know if this was really donated or this was part of bribes paid. We simply asked to whom they donated this. If this was given to the private sector, there is a donor’s tax for this.”
Also on taxation issues, another Chinese supplier, Xuzhou Construction Company, which bagged over P2.2 billion from the government, is now in trouble. “We asked them how much they paid in taxes. They said they have been in the country since 2012. It turns out wala silang binayaran kahit piso [they didn’t pay a single peso,]” the senator stressed.
Blue Ribbon probers, he said, are checking whether the foreign and local suppliers paid the right taxes, noting that “this Xuzhou admitted they did not.”
Replying to a question from DWIZ, Drilon said this is a clear case of “tax evasion,” adding that PS-DBM was duty-bound to withhold taxes when paying to suppliers.
“We are talking big money here,” add Drilon, referring to the over P8.7 billion in awarded contracts given by PS-DBM under former Undersecretary Christopher Lao to Pharmally. Drilon lamented that if funds were not stolen, they could have been used “for ayuda, vaccines and our pandemic needs. In our view, the people were hoodwinked. The P42 billion that the Department of Health transferred to PS-DBM was not covered by a memorandum of agreement.” The absence of such Memorandum of Agreement was first flagged by the Commission on Audit in its 2020 report on DOH, sparking the Blue Ribbon inquiry.
Drilon, meanwhile, was asked if he was linking Duterte to the apparent anomalies. “I can only speak for myself. You won’t hear me say I am implicating President Duterte or Senator [Christopher “Bong”] Go. I’m just saying that Pharmally should reveal the documents on which it based its cost of sales so we can see if right taxes were paid and if there was overpricing.”
Meanwhile, the senator said the Bureau of Internal Revenue, “just focusing on this cost of sales, has the power—maybe they are already doing it—to conduct an audit of their income tax return. BIR has the authority to require the production of documents.”
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