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Philippine Center for Investigative Journalism

Investigating Governance and Corruption


Mandaue City, Cebu
September 2018

I. Governance and Corruption: Concepts and Consequences


(James Cafirma, Association of Certified Fraud Examiners)

Governance
— System by which companies/entities are directed and controlled.
— Set of rules that define relationships between managers and
stakeholders to a set of mechanisms to enforce these rules directly or
indirectly (ADB).
— The manner in which the State acquires and exercises its authority to
provide public goods and services (WB).

Problems
— Grand corruption/state capture: leaders plunder state assets, oligarchs
buy officials, corrupt leaders colluding with corrupt investors.
— Nepotism and patronage: political pressure, politicized transfers.
— Administrative/petty corruption and inefficiency: Bribes, diversion of
funds, ineffective service delivery.

Fraud
— defined as any intentional act or omission designed to deceive others,
resulting in the victim suffering a loss and/or the perpetrator achieving a
gain.
— primary characteristic is that it is clandestine or hidden.
— almost all fraud involves the attempted concealment of the crime.

Forms of fraud
— asset (cash or inventory) misappropriation: most common form of fraud.
— corruption: misuse of entrusted authority for personal benefit (OECD);
wrongful acts designed to cause an unfair advantage (ACFE).
• conflict of interest
• bribery
• illegal gratuities
• economic extortion
— financial statement fraud

What causes people to commit fraud?


— opportunity: the one element that needs to be thwarted to break the
triangle.
— pressure
— rationalization

II. Crime and Fraud, Graft and Corruption


Malou Mangahas, Philippine Center for Investigative Journalism

Corruption (as defined by ex-COA chair Grace Pulido-Tan)


— dishonest or unethical conduct for personal material gain
— impairment of integrity, values, moral principles
— legal corruption: no express prohibition
— political corruption: abuse of power

Barriers to corruption
— separation of powers
— checks and balances
— independent oversight
— ease of doing business initiatives
— ethics and anticorruption statutes

Where would crooks be without bad financial institutions?


— numbered accounts (Jane Ryan, William Saunders)
— blind trusts and stock deals
— insider trading
— corruption through stock markets
— currency speculation
— Ponzi schemes
— courtship of politicians’ accounts to shore up ADBs (authorized
depository banks)
— offshore havens

Detection of proceeds of crime


— Know your client
— Political exposed persons

III. Auditing Government Transactions


Assistant Commissioner Alexander Juliano

Commission on Audit
Article IX-D, Section 2(2), 1987 Constitution
— exclusive authority to define the scope of its audit and examination and
establish the techniques and methods required therefor
— promulgate accounting and auditing rules and regulations
— prevention and disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures, or uses of government funds
and properties

Types of audit
— Financial
— Compliance
— Performance
— Fraud

Regular and Special Audits


— Regular: all-year round audit by resident auditors
• financial and compliance audits
• value-for-money audits
— Special
• Special Audits Office: Government-wide and sectoral performance audit
• Fraud Audit Office: conducts fraud and forensic audits, evaluates and
monitors complaints
• Information Technology Audit Office

Audit actions
— Notice of disallowance: illegal, irregular, unnecessary, unconscionable,
excessive, extravagant expenditures.
— Notice of charge: when amount collected is less than what is due the
government.
— Notice of suspension: transactions of doubtful legality, propriety,
regularity; must be validly explained within 90 days to avoid disallowance.

Liability arises over government funds/properties


— Improper or unauthorized use
— Negligence
— Unlawful deposit, use or application

IV. The NBI Investigation Procedure on Public Corruption Cases


Special Agent Nathaniel Ramos

Powers under Republic Act No. 10867 (National Bureau of Investigation


Reorganization and Modernization Act)
— Undertake investigation and detection of crimes
— Act as national clearing house of criminal records
— Extend assistance in cases involving extradition and mutual legal
assistance
— Establish a Forensic and Scientific Research Center, a Cyber
Investigation and Assessment Center and an NBI Clearance and
Identification Center

Agents’ powers
— Undertake investigations
— Conduct searches, arrests, seizures
— Take and require sworn statements
— Administer oath in cases under investigation
— Such other functions as may be assigned by the Director

Public corruption division


— RA 10867, Sec. 5(e): cases referred by the Inter-Agency Anti-Graft
Coordinating Council
• P10 million above
• Bureau director or higher
• other significant cases
— Department Order No. 558 (Aug. 25, 2016): case buildup for graft
— Department Order No. 780 (Nov. 8, 2016): conduct investigation,
lifestyle checks, case buildup upon complaint or motu proprio on
allegations of corrupt practices

Investigative powers
— Subpoena duces tecum/ad testificandum
— Examine bank records through AMLC
— Search warrants

Investigative techniques
— Interview and elicitation
— Informants
— Undercover operations
— Surveillance and casing operations (covert inspection)
— Trash run
— Mail cover (scanning information outside the envelopes, because it’s
illegal to open them)
— Other non-invasive methods of gathering information

Investigation process
— walk-in complainant/informant
— referral by other government agency
— indorsement by OP/DOJ
— order by NBI Director
— developed cases

V. Investigative Reporting: Fast-Food or Fine-Dining Journalism?


Kipling’s Frustration
— Too much of: Where, when, who, what?
— Too little of: Why, how, so what, why care?

Investigative Process
— First lead or tip
— Initial investigation: Worth pursuing? Can we prove it?
— Hypothesis: What is the story about?
— Paper trail, people trail, electronic trail, legal trail, do the math, follow the
money

When denied a public record…


— Assert your right to information. (When laws
guarantee access) The right to information is guaranteed by the
Constitution, a specific law (RA No. 6713), EO No. 2, various Supreme
Court
decisions
— Follow-up. Follow-up. Follow-up.
— Write a demand letter to the agency and quote the law.
— If there are disciplining agencies, let the instance known to them. In the
Philippines, these include the Ombudsman, DILG, PAGC
— Another person or office could have a copy. Remember that these
documents often have more than one copy.

Pitfalls of documents
— Avoid jumping to conclusions
— Information may already be passé
— Information needs verification
— Documents, like people, can lie

Who’s who?
— Locate the person
— Check public records
— Mine the web, stretch source networks
— Check for lawsuits
— Study person’s criminal activity
— Check person’s employment history
— Check person’s credentials
— Check political ties (SOCE)

Goals for interviewing


— Gather facts
— Solicit expert opinion
— Put a human face
— Get quotes or official statements
— Confirm what you know

Testing sources
— Credibility
— Reliability
— Accountability
— Familiarity
— Proximity
— Accessibility

Be careful with…
— Formers and currents
— Friends and enemies
— Whistleblowers
— People who have something to lose or gain

VI. The Law and Investigative Reporting


Dean Chel Diokno

Legal rights as an investigative journalist


— Right to information on matters of public
concern (Sec. 7, Art. III, 1987 Constitution);
— Right to be free from prior restraint
(Constitution, jurisprudence);
— Right to report on any legislative, judicial or other official proceedings
and the statements made in those proceedings, or any other acts
of public officers in the exercise of their functions (Art. 354, Revised Penal
Code);
— Right to report on matters of public concern including the conduct of
public officials and public figures (Lopez v. CA, G.R. L-26549, 31
July 1970);

Right to information
— Access to information, official records and documents, and government
research data used as basis for policy development,
— On matters of public concern,
— Subject to “such limitations as may be
provided by law.”
— Valmonte v. Belmonte (list of Batasan members who acquired “clean
loans” from GSIS through Imelda Marcos’s intercession)

• an “essential premise of a meaningful right to speech and expression...”
• goes hand in hand with the constitutional policies of full public disclosure
and honesty in the public service.
• meant “to enhance the widening role of the citizenry in governmental
decision-making as well [as in] checking abuse in government.”

Matters of public concern


— “a broad spectrum of subjects which the public
may want to know,” either because they
• directly affect their lives, or
• naturally arouse the interest of an ordinary citizen.

Recognized exceptions (Chavez v PCGG obiter):


— National security matters and intelligence information
— trade and industrial secrets
— classified law enforcement matters
— other confidential or classified” information which public officers and
employees are prohibited from disclosing under R.A. 6713
— closed-door Cabinet meetings
— executive sessions of Congress
— internal deliberations of the Supreme Court

Right to be free from prior restraint:

Government censorship BEFORE publication as opposed to government


prosecution AFTER publication.
— Direct: closure, non-issuance of permit, TRO, injunction
— Indirect: threats, warnings, other acts to cause chilling effect on the
press

Reyes v. Bagatsing
— Not allowed except when there’s a “clear and present danger” that
publication will bring about a substantive evil that Congress has a right to
prevent.

Dangerous tendency test:


— If the speech creates a dangerous tendency that
the state has a right to prevent, it is actionable.
— Not necessary that definite or immediate acts of
force, violence or unlawfulness are advocated...
— Sufficient if natural tendency and probable effect
of utterance is to bring about the substantive
evil that Congress seeks to prevent.

Balancing of interests test (Zaldivar v Sandiganbayan)


— Another criterion for permissible limitation on freedom of speech and of
the press...is the balancing of interests test.
— The principle requires a court to take conscious and detailed
consideration of the interplay of interests observable in a given situation or
type of situation.

Right to report on official proceedings and acts


— A fair and true report,
— made in good faith,
— without any comments or remarks,
— of any judicial, legislative or other official proceedings,
— not confidential in nature,
— or any statement, report or speech delivered in those proceedings,
— or any other act performed by public officers in the exercise of their
functions.

Right to report on matters of public concern and the conduct of public


officials and public figures
— Freedom of the press: widest latitude of choice (Lopez v. CA)

Right to express opinions on legal questions


— Done in good faith

Right to protect sources


— Shield Law: but, other forms of mass media not covered

Sub judice rule


— Limits comment and disclosure relating to judicial proceedings that tend
to prejudge the issue, influence the court, or obstruct the administration of
justice.