CJ Corona’s P11M ‘cash advance’

 

My Exclusive

By Raïssa Robles

According to a Statement of Assets, Liabilities and Net Worth (SALN) he filed in 2003, Chief Justice Renato Corona got what he described as a “cash advance” of P11 million pesos from a company he identified as his “wife’s family corporation”.

What he didn’t say in his SALN was that the lender company had its registration revoked by the Securities and Exchange Commission (SEC) in 2003, the same year he got his cash advance. What this means is that the company – Basa-Guidote Enterprises, Inc. – ceased to operate legally by 2007 or three years after revocation. The law gives a three-year grace period for revoked companies to wind up their affairs.

CJ Corona’s SALNs after 2003 indicated he was paying back the “cash advance” which he listed under “LIABILITIES (Loans, Mortgages, Etc.)”

At least I assumed he was paying it off because the “cash advance” amount in his SALNs from 2004 to 2009 kept shrinking. By 2009, the amount was down to P3 million and it disappeared altogether in the 2010 SALN – the year he became Chief Justice.

CJ Corona’s SALNs were filed as evidence last week in his ongoing impeachment trial.

NOTE: I have posted the first pages of his SALNs below, after this story, so you can examine his liabilities yourself.

I would also like to disclose that my hubby Alan walked me through the construction of this highly complicated story. My heartfelt thanks to him.

The family corporation of CJ Corona’s wife was no longer registered when I went to the SEC last week, asking to see its GIS (General Information Sheet) and financial reports. Instead, I was given this print-out:

When I asked why the company registration had been revoked, the guy at the SEC counter named Joey speculated it might have been because the company did not file or did not annually disclose its financial activities to the SEC.

When I asked WHEN the license was revoked, Joey told me the SEC had resorted to a “mass revocation” of registration. The public was given due notice of this in ads placed by the SEC – for instance on April 25, 2003 in the Philippine Daily Inquirer.

Joey said that since Basa-Guidote was initially registered as a corporation in 1961, the date of revocation of its license was May 26, 2003. It was given the chance to revive its registration by paying penalties.

But Joey said that since their records today show that Basa-Guidote’s status as a company was still “REVOKED”, it means it never tried to update its records and pay the corresponding penalties. He gave me the table of penalties below:

Then Joey added that as of last year 2011, the company’s 50-year existence as a corporation had also lapsed under the law.

CJ Corona had obtained a “cash advance” from a corporation that had legally ceased to exist on the very year the transaction took place. Perhaps this transaction took place just before the corporation’s registration was revoked. But then he had liquidated the “cash advance” over a period.

With whom, when the company no longer existed?

To answer this question and others that came to mind I talked with several lawyers.

But first – on the face of it – from what I know of his background, CJ Corona knows more about financial transactions than the average Filipino. Fresh from Harvard law school, CJ Corona became special counsel at the Development Bank of the Philippines; senior vice-president and general counsel of the Commercial Bank of Manila (Combank); and then senior officer of the Tax and Corporate Counseling Group of the Tax Division of the country’s largest audit firm, Sycip Gorres and Velayo (SGV & Co).

CJ Corona is in fact mentioned in SGV’s coffee table book as one of those who made the company proud.

What CJ Corona’s defense lawyer told me

First I talked to CJ Corona’s defender, Atty Ramon Esguerra.

When I asked him how his client could have obtained a “cash advance” from a corporation that had ceased to exist in the eyes of the law, Atty. Esguerra replied:

I really do not know. I’m not in a position to answer that. We are not in that particular point. I cannot answer anymore.

But he added:

It does not mean the company (Basa-Guidote) can no longer operate even as an unregistered corporation. Puwede pang mag-business kahit walang corporation.

[Please note: I am giving you the exact quotes because I do not want my translation to get in the way of the nuances of the words.]

I asked Atty Esguerra about Basa-Guidote Enterprises. He said:

That’s a family corporation of Mrs Corona. My understanding is that this is actually 98% owned by Mrs Corona already. My recollection is that there was some sort of intra-corporate controversy among the stockholders.

I asked Atty Esguerra whether he was a corporate lawyer. He laughed and said:

I’m a lawyer.

Then I asked him – you said it’s 98% owned by Mrs Corona and the corporation is unregistered, does that mean he made utang to his own wife?

Esguerra replied:

Hindi naman to his own wife. To her corporation.

Simply analyze what is stated in the SALN. The SALNs should speak for themselves. To look beyond the SALNs is beyond me already. If you want me to interpret and speculate wala na ako doon. I’d be incompetent as a witness.

He also said:

We also adopted as our exhibits the copies of the SALNs that were produced by the witness (Supreme Court Clerk of Court Enriqueta Vidal) whom the prosecution called with a subpoena issued by the Senate.

Those copies of the SALN of the CJ on file with the official custodian who is the clerk of court is our evidence to show that the chief justice, the respondent, actually filed in compliance with the law.

By the way, I also asked Atty Esguerra why CJ Corona did not indicate in his SALN from 2003 to 2006 that his wife Cristina was employed as a board director of John Hay Management Corporation.

Atty Esguerra replied:

Hindi naman obligasyon yon. Joint SALN ito (na) finile ng mag-asawa.

I asked him why Mrs Corona did not affix her signature on the space provided for in the SALN. He said:

It doesn’t have to be signed by both. There is no requirement there.

I pointed out to him that there was a line that specifically required the spouse’ signature. Atty Esguerra replied:

No, no. I don’t know where you got that. Very limited ang knowledge ko dyan. I don’t recall anything in the law that requires that.

What other lawyers told me

The next lawyer I talked to was Prof. Rowena E.V. Daroy-Morales of the University of the Philippines College of Law, a former Law Associate in Sycip Salazar Gatmaitan Law Firm and currentluy director of the Institute of Judicial Administration. I asked her what she could make out of CJ Corona’s financial transaction with his wife’s company.

She raised the following points:

It’s true there can be a corporation that exists unofficially. But that will also mean it’s not subject to the regulatory processes of government and it raises the question whether they’re paying taxes. They’re outside the radar.

She said the fact that the corporation might no longer have existed legally around the time CJ Corona took out the “cash advance” and then paid it back in varying amounts over several years raised other questions:

Kanino ba talaga umutang si CJ? Whether to the wife or the corporation?

Can a wife lend to a husband that amount? Sure, why not. Pero kailan ang bayaran noon? Does he owe it to Mrs Corona or to the corporation?

Hindi lang yon. Paano siya nagbabayad? Is it payable to Mrs Corona or to the corporation?

Prof. Morales noted that the impeachment for now was focusing on the assets and acquisitions of CJ Corona, not on his liabilities.

Tingnan din natin ang validity ng declaration of liability. Look at the veracity of the entry of the liabilities. Whether there is indeed an obligation. Are they real liabilities? Was his cash advance really a loan from a corporation?

When we look at the SALN, we don’t just look at the assets but also the liabilities, whether or not these are fictitious.

At end of the day I don’t care whether he owns a P14 million condo pero zero pala ang net worth.

I could follow her explanation because of a short course that the Asian Institute of Management (AIM) had given foreign correspondents like me to enable us to understand financial statements. Among the things we had been taught was the formula of the balance sheet, which is what the SALN basically is:

Assets –  Liabilities  =  Net Worth 

Using this formula, we can see that in 2003, while CJ Corona had P18.3 million in Assets, his Net Worth was dramatically reduced to P7 million because of his P11 million “cash advance” from his wife’s company.

Prof. Morales told me:

At end of the day, the SALN has to be seen from the point of view of the Net. At end of the day, we are looking at the Net.

CJ Corona’s Net Worth grew more than threefold in eight years – from P7 million in 2003 to P22.9 million by the time he became Chief Justice in 2010.

The next lawyer I talked to was UP law Professor Victoria Avena who teaches Evidence and is a former Commissioner of the Presidential Commission on Good Government. I asked her the following question: Under the law, may a corporation still transact business even if its registration has been revoked?

Prof. Avena replied:

When the SEC revokes the charter of a corporation (in your words, cancels its registration as a corporation), it may no longer continue the business for which it was created and registered. After SEC revocation, its only power is to wind up its affairs (i.e., liquidate its assets for payment and distribution to its creditors and stockholders, including bringing to collect and defending suits). If this winding up will take more than 3 years, the corporation should appoint an assignee or receiver, who will be the one to continue (collection, distribution, etc.) in behalf of the stockholders, because at the end of 3 years, the corporation absolutely ceases to exist and therefore cannot do any act or enter into any transaction even for the purpose of winding up.

I then asked her that if the corporation had ceased existing by 2006, to whom did CJ Corona pay back the rest of his “cash advance” from 2007 to 2009?

Prof. Avena declined to answer my question. She instead gave this general reply:

It is a valid question on your part to ask to whom the corporation is paying after its charter has been revoked. As I said, after revocation of its charter, the corporation has no right to operate its business anymore so it has no right to transact business, but for the three year-period after its dissolution due to revocation of charter, it may receive payments because that is part of liquidation of assets and liabilities which is the essence of winding up. However, after the 3-year period, it ceases to exist absolutely so the act of anyone supposedly receiving payment in its behalf is null and void. Payment after the 3-year period should be made to its assignee or receiver.

I also talked to two lawyers who offered to tell me more provided I did not name them

Lawyer  X – a veteran corporate lawyer – told me that “technically” it’s true a firm with a revoked license can continue doing business:

There are instance na nakasuhan sila, o napabayaan, narerevoke yan. Unless the corporation is wound up, they can continue doing business. Except that they no longer have any legal personality to continue the business.

Technically, it’s true they can continue but it’s so unusual.

What’s so unusual, I asked him.

He said –

It’s so unusual. Corporations have a life of 50 years. There’s something really unusual here: Why a corporation can continue even after its own registration is revoked (by SEC).

He said the continuation of its business activities was indicated by the fact that CJ Corona seemed to be paying back the cash advance.

That could mean may bank account yan.

I asked Lawyer  X how it could do business. Could it continue issuing official receipts?

He said:

You see, if you go to the BIR (Bureau of Internal Revenue), it doesn’t know if the (company) registration is revoked or not. You can get OR.

He also said:

From a common sense point of view, it (CJ Corona’s transaction) raises some issues, like tax issues. If there’s money that was loaned out, there’s the interest component. If this is an arms length transaction (between CJ Corona and Basa-Guidote company), that means it (the cash advance) is being charged interest, if there’s a loan.

Dapat nagbabayad siya (CJ Corona) ng interest (for the cash advance). And the company should be reporting the interest income and paying taxes on this income to the BIR (Bureau of Internal Revenue).

If no interest is being paid (by CJ Corona for the cash advance) then it’s an accommodation to the wife. Because she’s the controlling shareholder, it creates a fringe benefit tax issue indirectly for the wife.

I asked him to explain some more this fringe benefit tax. He said:

It’s the corporation that would be subject to a fringe benefit tax. If the wife is the president (of the firm) clearly, she derived a benefit because a loan was made to her husband without interest being paid (by CJ Corona).

He advised me to check the BIR regulations. He said the tax was normally paid by companies which gave expatriates and senior executives fringe benefits such as housing. He said the tax was often 32% of the value of the fringe benefit.

I found this website maintained by a young CPA which explains the fringe benefit tax. Click on this link.

He added:

If he (CJ Corona) was repaying (the cash advance), where did he repay by way of check?

It (the repayment) must have gone into the account of the corporation. The corporation could still be maintaining a bank account.

Here’s something interesting

The impeachment court could actually subpoena the bank accounts of the family corporation of CJ Corona’s wife.

According to a former senior official of President Gloria Macapagal-Arroyo’s administration whom I’ll call Lawyer Y, this has become a “valid inquiry” for the impeachment court because CJ Corona stated in the SALN, submitted as evidence, that he obtained an P11 million “cash advance” from his wife’s company.

Lawyer Y said:

It’s a valid inquiry also. They can inquire into bank accounts of Basa-Guidote. Kung nagbabayad si CJ, pumasok dapat yung amount sa Basa-Guidote. It’s a big amount. More than one million (pesos) a year on the average. And when you pay the corporation, the corporation has to issue receipts. Asan yung resibo?

If the corporation earned (from giving out the cash advance), where is the corporate income tax? How can it escape paying tax on that? Don’t tell me nagpautang ng P11 milion loan, walang interest. Yung interest tinatax ng gobyerno. Kailangan meron dapat binayad na tax on the percentage of the interest.

That’s why the inquiries into the affairs of Basa-Guidote, that’s very possible. Through subpoenas to the bank and the BIR.

But would the bank comply without a court order and what about the bank secrecy law, I asked.

Lawyer Y replied:

Impeachment case is an exact exception to the Bank Secrecy Law under Republic Act No 1405.

I looked up RA 1405 and it said in:

Sec. 2. 1 All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.

 

I’m posting below the first pages of CJ Corona’s SALNs so you can see how he liquidated his “cash advance” of P11 million by 2009.

Here is Page 1 of his SALN for 2003

Here is page 1 of his SALN for 2004

Here is page 1 of his SALN for 2005

Here is page 1 of his SALN for 2006

Here is page 1 of his SALN for 2007

Here is page 1 of his SALN for 2008

Here is page 1 of his SALN for 2009

 

And here is page 1 of his SALN for 2010

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