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A whistleblower's tale: Auditor stops overpriced House fire extinguisher
deal
BySherrie Ann Torres, VERA Files
18 May 2009 - SHE USUALLY works from 10 a.m.
to 7 p.m., Monday to Friday. But these days, Rosario “Bea” Obsequio Riel, director of the Internal Audit Department
(IAD) of the House of Representatives, stays awake, working even at home, until three in the morning.
Riel is compiling evidence for a case she is set
to file against a supplier who sold the House last year what she discovered were overpriced and substandard fire extinguishers.
The feisty internal auditor will also file before
the Office of the Ombudsman graft charges against former Zamboanga del Norte Rep. Artemio Adasa Jr., who is now House deputy
secretary general for operations. Adasa was chair of the chamber’s Bids and Awards Committee (BAC) at the time the contract
was awarded to First Defense Enterprises (FDE) owned by Leonor Dulay.
Compared to many other government deals, the fire
extinguishers transaction, totalling P4.9 million, is considered small. But what makes it noteworthy is Riel’s success
in convincing her superiors, including Speaker Prospero Nograles, to terminate a deal overpriced by more than 150 percent—or
about P3 million—by a supplier who apparently bagged the contract because of the latter’s ties with the BAC chair.
Dulay was an incorporator of the Philippine Clean
Air Foundation (PCAF) that Adasa headed from 2005 to 2006 and where she remains an active member. The foundation, which promotes
the Clean Air Act, has been endorsing its affiliates, including FDE, to private and government offices to recover their halon-based
fire extinguishers and sell them new ones. Halons are carbon chemicals that cause the depletion of the ozone layer.
Riel’s feat also underscores the importance
of pre-audit, a function entrusted to the internal audit unit supposedly found in nearly every government agency, in aborting
irregular transactions instead of waiting for the Commission on Audit to uncover wrongdoing during post-audit, after payments
to unscrupulous suppliers and contractors have been made.
Old hand
Riel,
61 and grandmother of five, has spent a lifetime tracking down frauds and cheats, having been an auditor for the past 36 years,
most of which were spent with COA. In the 1980s, she served as external auditor of the United Nations Children’s Fund’s
regional office in India and its New York headquarters.
Her dogged pursuit of wrongdoers included friends
or family. She was her husband’s boss at COA in Leyte and refused to sign his daily time record when he reported late
for work. She also blocked his requests for overtime when she knew he did not work for it.
Riel also testified against a Philippine National
Bank teller in Leyte who happened to be her husband’s cousin. The teller was facing charges for 41 counts of technical
malversation and was eventually convicted and was sentenced to more than 300 years in jail.
Recanvass
Last
July 21, when the P4.9-million fire extinguisher contract reached her unit, the Fiscal Control Service, as part of a process
to release payment to FDE, Riel felt something was amiss and immediately sought a recanvass.
The bidding for 35 units of 10-pound and 100 units
of 20-pound fire extinguishers was held on June 30 and exempted from the regular 28-day period process.
The Legislative Security Bureau had sought the urgent
acquisition of fire extinguishers to have them in place in the chamber’s four buildings— North, South, Main and
the Ramon V. Mitra—when President Arroyo was to deliver her State of the Nation Address the following month. The House
could not afford being embarrassed again as it was when one of its buildings was bombed on Nov. 14, 2007 and security personnel
used expired fire extinguishers to put out the flames.
On July 8, without inspecting the products but relying
only on documents the bidders submitted, Adasa issued Dulay’s FDE the notice of award to supply the House with 10-pound
extinguishers at P20,720 apiece and 20-pound extinguishers at P41,400 each. The extinguishers, which FDE guaranteed were “zero
percent ozone depleting potential unexpirable,” were covered by a five-year warranty.
“Ano ’yan, tita? Ginto (What’s
that, my friend? Gold)?” Riel’s confidante at the Bureau of Fire Protection (BFP) asked when she called to check
the prices of fire extinguishers.
Earlier, a colleague of Riel also told IAD Executive
Director Lilia Consul that the fire extinguishers were “parang ginto (like gold).”
Riel said she then asked Rafaelina Valencia, an audit
inspector from IAD, to copy the specifications of the fire extinguishers for use in a recanvass that her team was to conduct
the following day.
Word of the order to recanvass apparently spread
quickly. At 6 p.m. that same day, Riel said she got a phone call from Adasa who subtly ordered her to sign the inspection
and acceptance report that was needed to authorize payment to FDE. Riel said Adasa told her in Bisaya: “You have to
sign it, Bea. It was bidded out.”
“I was shocked that he (Adasa) called. He’s
the BAC chair. Why would he follow up an inspection (and acceptance) report?” Riel said. “I told him, ‘I’m
not comfortable, sir. I will recanvass it.’”
Adasa gave his side of the story, but he refused
to allow publication saying that he had agreed to go on record only for an article to be submitted for a school project, which
is what this report started out as.
Despite Adasa’s call, House Secretary General
Marilyn Yap gave Riel the go signal to conduct the recanvass.
Numerous violations
Along
with two IAD staffmembers, Riel visited the three addresses listed by FDE—two on Timog Avenue and one on West Avenue,
all in Quezon City. The Timog offices no longer exist.
The IAD team was initially barred from entering the
West Avenue building. But a female staffmember of Deputy Secretary General Cecilia David managed to get in days later when
she posed as a buyer. “She described it like a beerhouse,” Riel said.
Riel’s team also found that the bidding for
the fire extinguishers violated the Government Procurement Reform Act, or Republic Act 9184, because a notice of bidding was
not published, among other requirements.
She was also bothered by the “prequalification”
rule the BAC and the House’s technical working group had applied to FDE and another bidder, Ozone Care. The bids and
documents they presented were all accepted at face value. Like FDE, Ozone CARE is an affiliate of Adasa’s foundation.
But the overpricing was the most disturbing, Riel
said.
Of the four bidders, two—Palmer and Excelta—quoted
prices 78 to 160 percent lower than FDE’s. The prices of the fourth bidder, Ozone Care, were higher.
An independent check with fire extinguishers dealers
done for this report showed that a 10-pound foam-emitting, ozone-friendly fire extinguisher can be bought for P6,500 and a
20-pound unit for P10,500. The price of a 10-pound dry chemical fire extinguisher, meanwhile, starts at P2,500.
Inspector Rico Odad, chief of BFP’s Fire Safety
Enforcement Division, also said in an interview that prices of fire extinguishers range from P6,000 to P12,000 per unit.
Palmer and Excelta lost because they reportedly failed
to give a five-year warranty and their products were noncorrosive and not ozone-friendly as stipulated in the Clean Air Act.
A check, however, showed that Excelta is the only entity recognized by the government, through the Department of Environment
and Natural Resources, to conduct halon recovery.
Odad also said there is no assurance that a fire
extinguisher is “unexpirable” as FDE claims its products are. Even the BFP has no capability to tell that a fire
extinguisher has expired unless it uses it. “Once we see that it’s already urine-like and not foamy, it’s
already expired,” Odad said.
During the recanvass, Riel team’s also came
across a January 2007 test report of the Philippine Institute of Pure and Applied Chemistry (PIPAC) which had tested FDE’s
fire extinguishers for the Department of Trade and Industry’s Bureau of Product Standards.
The report said the purity of the FDE product content
was only 0.05 percent instead of 99 percent. In answer, Dulay filed a case of unfair competition against PIPAC before the
Quezon City prosecutor’s office.
Termination of contract
In September,
after winding up the recanvass, Riel and her team recommended that the deal with FDE be terminated. Upon getting wind of the
recommendation, Dulay sued IAD personnel for graft, again before the Quezon City prosecutor’s office.
But days after she filed the case, Dulay showed up
at Riel’s office to negotiate with the IAD. She was escorted by Nilo Basijan, a member of Adasa’s staff.
“I immediately confronted her (Dulay). I shouted
at her and asked her pointblank, ‘Aren’t you the one who sued us?’” Riel said. “She immediately
left our office.”
The next day, it was Adasa’s turn to visit
the IAD and negotiate for FDE. Recalled Riel: “He talked as if he owned FDE because he said he would withdraw the complaint
of FDE against IAD personnel if I would sign the (inspection and acceptance report).”
But, Riel said, Adasa could not commit to the IAD’s
proposal to let it choose three fire extinguishers supplied by Dulay at random and submit them to PIPAC for testing.
Apparently to get back at her, Riel said, Adasa erased
his signature on a check intended to reimburse Riel’s office expenses. He signed it later only when his act was questioned
by Yap, the House secretary general.
FDE-PCAF link
While doing her research,
Riel also discovered the ties between the PCAF and FDE, as well as with Ozone Care.
Records at the Securities and Exchange Commission
showed that PCAF was registered on April 6, 2001 “to lead in the promotion and implementation of the Philippine Clean
Air Act of 1999.” Dulay was a major incorporator. She donated P96,000 while other incorporators each put in P1,000.
In 2001, the DENR authorized the PCAF to lead in
the cleaning up of halon-based fire extinguishers. The DENR recognition also meant the foundation got a share from the $30-billion
Montreal Protocol Multilateral Fund to help clean up the air and the environment.
The foundation endorsed its four affiliates—Dulay’s
FDE, Ozone Care, Lead Marketing and Earth Care International Co.— for the halon recovery. The firms were supposed to
deposit the halon they retrieved to PCAF’s Philippine Halon Bank in Clark Field, Pampanga.
In 2005, however, the DENR rescinded its agreement
with PCAF in favor of Excelta after it found the Clark facility to be nonexistent.
In February 2006, Adasa, by then president of the
foundation, wrote Environment Secretary Angelo Reyes identifying PCAF as the DENR’s partner in implementing the Clean
Air Act. As in the past, he endorsed FDE and three other firms as its affiliates to recover halon.
Adasa’s letter used the “Office of the
Deputy Secretary General for Legislative Operations, House of Representatives, Batasan Quezon City 1126” as the foundation’s
“care of” address.
In September that year, the DENR-Environment Management
Bureau issued a memo stating that “PCAF (had) abused the use of the Announcement to the Public issued by then DENR Secretary
Alvarez by visiting different establishments to convince them to surrender their halons or HCFC (hydrofluorocarbons) and buy
new products from their affiliates.” It also ran a newspaper notice reiterating that the government only recognizes
Excelta as the entity in charge of halon recovery.
Late last year, after taking into account the findings
of Riel’s team, Speaker Prospero Nograles ordered the junking of the fire extinguisher deal with FDE. Adasa was also
sacked as BAC chair and replaced by Deputy Secretary General Gaudencio Mendoza, who is assigned to the Office of the Speaker.
Sincerity
in question
Some old-timers in Congress, however, doubt Riel’s sincerity. A senior staff member at Nograles’
office said Riel could just be voicing out the losing bidders’ gripes.
Another House employee familiar with Riel’s
superiors feels that “she might just be following orders from higher-ups,” or that she might just be trying to
please them.
No matter what Riel’s detractors say, donations
are finding their way to the IAD to help the auditors fight the case FDE has filed against them as well as to support the
filing of cases against Adasa and Dulay. On her own, Riel has taken out a P100,000 loan for the cases she has decided to file.
She has also received additional documents to boost the cases.
“I’m going to prove that there’s
wrongdoing here,” Riel said. “This is for my grandchildren. I want this done before I retire at age 63.”
(The author is a television reporter who submitted
a longer version of this article to her Investigative Journalism Class at the Ateneo Center for Journalism where she is pursuing
a master’s degree. The class is taught by VERA Files trustee Luz Rimban.) | 
