The Philippine Amusement and Gaming Corporation (PAGCOR) has filed before the Office of the Ombudsman plunder and graft charges against three former executives and a casino coffee concessionaire in relation to the excessively priced coffee products that were sold in at least five Casino Filipino branches during the term of the previous administration.

Slapped with plunder and graft raps were former PAGCOR Chairman Efraim Genuino, former PAGCOR President Rafael Francisco, former PAGCOR Senior Vice President and Senior Managing Head of Research Development Department Rene Figueroa, and Promolabels owner Carlota Cristi Manalo-Tan.

The 25-page complaint filed by PAGCOR was initiated by the current PAGCOR Board. The agency’s Board authorized incumbent Directors Jose Tanjuatco and Enriquito Nuguid to sign and file the complaint.

The complaint stated that from 2001 to 2010, Genuino, Francisco and Figueroa, in their capacities as officials and/or employees of PAGCOR, directed Casino Filipino branches “to enter into concession agreements with Promolabels with a view towards enriching themselves and coffee concessionaire Manalo-Tan through the sale and purchase of overpriced Figaro coffee products, to the damage and prejudice of the Filipino people.”

Documents obtained by the present PAGCOR management revealed that the previous PAGCOR Board headed by Genuino approved a resolution on May 16, 2001 granting the proposal of Figaro Coffee Company to set up coffee kiosks in its Casino Filipino branches wherein the prices of beverages “will be similar to the prices in the malls.”

Pursuant to the said resolution, the previous PAGCOR Board gave Figaro franchisee Promolabels concession agreements in seven Casino Filipino branches. Manalo-Tan signed the agreements on behalf of Promolabels while Genuino and Francisco signed/co-signed most of these contracts on behalf of the casino branches.

Manalo-Tan is the wife of Johnny Tan – a known ally of Genuino. Johnny Tan was in fact the second nominee of the BIDA party-list, a political group identified with Genuino, during the 2010 national elections.

All seven contracts – which gave Promolabels a virtual monopoly as coffee supplier in PAGCOR’s casinos – were awarded to Manalo-Tan without public bidding which is prescribed by law. Promolabels was initially given three- to five-year contracts which were renewed and/or extended following the expiration of their original terms, likewise without the benefit of public bidding.

In the original contracts with PAGCOR, it was stated that Promolabels was a duly registered corporation. However, PAGCOR found out upon verification that it was not registered with the Securities and Exchange Commission (SEC).

The current PAGCOR management called for an exhaustive audit following the discovery of the billion peso coffee expenses incurred by the previous administration, the bulk of which went to Manalo-Tan’s Promolabels. PAGCOR’s audit team discovered that from 2005 to 2008 alone, five Casino Filipino branches paid at least P258 million to Promolabels for coffee products.

The prices charged by Promolabels for its Figaro coffee products were much higher than the prices at which the exact same products were sold by Figaro coffee shops operating outside the Casino Filipino branches during this four-year period. This contradicted the original resolution issued by the Genuino-led PAGCOR Board on May 16, 2001 that the selling price of Figaro coffee beverages will be similar to the prices of these products inside the malls.

“For the years 2005 to 2008 alone, PAGCOR could have saved at least P78 million if only the prices of Promolabels’ Figaro coffee products were the same as those of other Figaro franchisees,” the state-owned gaming firm cited in its complaint.

The PAGCOR complaint also cited that Genuino, Francisco and Figueroa were “repeatedly informed of the losses being suffered or incurred by the Casino Filipino branches as a result of their transactions with Promolabels, and they refused or otherwise failed to act to stem or prevent further losses.”

Several Audit Observation Memoranda (AOM) prepared by COA Auditors assigned to the Casino Filipino branches and/or the PAGCOR Head Office revealed that sometime in 2006, the Auditors already raised several concerns regarding the validity and implementation of the concession agreements with Promolabels. They stated that PAGCOR should have conducted a public or competitive bidding as required by government procurement laws prior to awarding of the said agreements to Promolabels.

THE AOMs ALSO NOTED THE MATERIAL DISPARITIES BETWEEN THE PRICES OF PROMOLABELS’ FIGARO COFFEE PRODUCTS AND THOSE OF OTHER FIGARO FRANCHISEES OPERATING OUTSIDE, THE CASINOS THAT WENT AS HIGH AS 74%. THE AOMs STATED THAT PAGCOR COULD HAVE SAVED CONSIDERABLE AMOUNTS OF MONEY IF ONLY PROMOLABELS SOLD THE PRODUCTS AT THE SAME PREVAILING PRICES OF FIGARO FRANCHISEES OUTSIDE CASINO FILIPINO AT THAT TIME.

PAGCOR FURTHER STATED IN ITS COMPLAINT THAT DESPITE KNOWING THE AUDIT OBSERVATIONS, “THE RESPONDENTS REFUSED OR FAILED TO DEMAND PRICE REDUCTIONS FROM PROMOLABELS, AND EVEN WENT OUT OF THEIR WAY TO GIVE SEVERAL JUSTIFICATIONS FOR PROMOLABELS’ HIGHER PRICES.” MOREOVER, THE JUSTIFICATIONS WERE PREPARED IN A MATTER OF DAYS FROM THE RESPONDENTS’ RECEIPT OF THE AOMS “WHICH LEADS TO A CONCLUSION THAT THE RESPONDENTS DID NOT EVEN BOTHER TO CONDUCT A FULL AND EXHAUSTIVE REVIEW OF PROMOLABELS’ JUSTIFICATIONS FOR ITS EXCESSIVELY-PRICED COFFEE PRODUCTS.”

What made matters worse was when respondent Figueroa still allowed Promolabels to increase further the prices of its coffee products a year after despite COA’s issuance of the AOMs.

“The respondents’ acts of procuring coffee from, and “leasing” spaces to Promolabels without observing government procurement laws and their refusal to demand price reductions from Promolabels despite notices of irregularities affecting the concession agreement and the losses being suffered by the Casino Filipino branches under these contracts caused undue injury to the government and gave Manalo-Tan unwarranted benefits, advantages and preferences,” the PAGCOR complaint pointed out.

In filing the complaint, the current PAGCOR management had to work back on all the documents pertaining to Promolabels transactions. The agency’s Auditors had to validate and verify every invoice and receipt of Promolabels, particularly for the period covering 2005 to 2008.

From the time this billion coffee issue was exposed during the State of the Nation Address (SONA) of President Aquino last July 2011, the new PAGCOR management no longer entered into any coffee concessionaire contract in any of its casinos.

Before, the coffee was given for “free” by the concessionaire to casino customers but PAGCOR in turn had to pay the coffee concessionaire at an average of over a hundred pesos per serving. Moreover, the business given by the previous PAGCOR administration to the coffee concessionaire – Promolabels in particular – did not comply with the requirements of government procurement laws.

Today, the different PAGCOR casinos serve free coffee to all its customers at prices ranging from P9.36 for a cup of brewed coffee to P14.99 for a cup of premium flavored coffee. It resulted in a dramatic cost reduction of casino coffee expenses by about half. This despite an increase in the number of customers enjoying a complimentary cup of coffee at the casinos.

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