Ombudsman intervenes at Supreme Court for plunder raps vs. MWSS, Maynilad & Manila Water

Water for All Refund Movement, or WARM, received last Thursday a notice from the Supreme Court en banc granting the letter-request of the Office of the Assistant Ombudsman to procure certified copies of case records otherwise strictly confidential. In the en banc Order, the Court allowed the Assistant Ombudsman, here represented by Atty. Joselito P. Fangon, to obtain certified copies of WARM’s case records such as the petition, voluminous annexes, and various MWSS documents and board resolutions which had been kept from the public during then President Gloria Macapagal-Arroyo’s administration.

In August last year, WARM, through its President and spokesperson Rodolfo Javellana Jr, petitioned the Supreme Court to order a complete refund and accounting of all mothballed projects, including the controversial pass-on of corporate income taxes to water consumers in the East and West Service Zones.

More recently, or on March 6, WARM and Gloria L. Dalida filed plunder raps against executives of MWSS, Maynilad, and Manila Water.

According to WARM spokesperson Javellana, “Bagama’t maaring matagalan pa ang prosesong legal para mapanagot ang mga may kasalanan sa panlilinlang at pandarambong ng mga water consumers ay tinitingnan ng WARM ang pagkilos na ito ng Office of the Ombudsman na isang positibong hakbang tungo sa pagkamit ng hustisya ng taumbayan laban sa mga `di makatarungan at makataong pagsasamantala sa kanila ng mga higanteng korporasyon kasabwat ang mga opisyales ng MWSS na dapat sana’y siyang pangunahing nagbabantay at nagbibigay ng proteksyon sa interes ng sambayanang Pilipino.”

Atty. Edsel Tupaz, lawyer for WaterWatch Coalition, also a petitioner in the cases against MWSS and its two concessionaires at the Supreme Court, welcomes the Ombudsman’s latest investigative action at the Supreme Court level.  “The en banc Order means that the Ombudsman will now have full access to all the documents – including payrolls and plaintilla papers showing interlocking directors and officials holding conflicting interests among MWSS and its concessionaires,” says Tupaz.  “There you will see excessive entanglement and executive bonuses and perks at abominable amounts, including a ‘rate rebasing bonus’ given to MWSS employees for having approved previous water rate hikes sought by the two concessionaires.  The Ombudsman can use this for WARM’s plunder case because this would prove illegal, direct self-dealing.” Tupaz adds, “the Ombudsman can also use these documents to show that over 43 billion pesos have been plundered, to date.”

Aside from complete refund and accounting of over 43 billion pesos, WARM’s petition at the Supreme Court includes a refund of the controversial pass-on of corporate income taxes to water consumers in the East and West Service Zones despite Maynilad and Manila Water enjoying tax holidays.  According to Atty. Andre de Jesus, lawyer for WARM at the Supreme Court, “the concessionaires’ passing-on of taxes to the consuming public, tax holiday or not, cannot be properly characterized as an ‘expenditure’ that may be passed on by a water company such as Maynilad and Manila Water, companies no doubt impressed with public interest.”  WARM is seeking oral arguments at the Supreme Court to properly ventilate the issues.

Maynilad and Manila Water maintain that they are not ‘public utilities’ regulated by public service laws and by the 12% profit cap, but are “mere agents” only of MWSS.  Recently, MWSS chief regulator, Atty. Emmanuel Caparas, resigned.  His resignation came after a Commission on Audit ruling that Caparas was holding conflicting positions, serving as both chief regulator and member of the board of trustees of MWSS.  Caparas says that his resignation has nothing to do with the pending arbitration cases filed by Maynilad and Manila Water following MWSS’s decision to deny their water rate hike petitions last September.  Last September, instead of approving a rate hike, the MWSS rulings ordered a rate reduction for the rate rebasing period of 2013 to 2017.  This rate reduction, however, was preempted by arbitration.

“MWSS’s order to reduce water rates is an empty command,” says Atty. de Jesus, who is also lawyer for WARM in a recent string of libel cases filed by Maynilad and Maynilad CFO Randolph Estrellado against WARM last May.  “To date, we are not aware whether the September 2013 MWSS rate reduction orders have been implemented.  Maynilad and Manila Water are using arbitration – pending at 9 months now – as reason-giving for refusing to reduce our NCR-wide water rates. If we go by MWSS’s unprecedented turn-around decision, any status quo would allow Maynilad and Manila Water to keep to sky-high profit margins, profits so large and well beyond any legal cap on profits for water companies, this despite big ticket projects mothballed and their corporate taxes passed onto the public in the past 15 years.”

In making a case for a refund, Atty. de Jesus, cited the Meralco ruling of 2003 where the Court ordered that income tax should be borne by the tax payer alone and not the public at large.  Because no benefit is derived by the customers of a public utility for its corporate income taxes, the Court then ruled that the burden of paying income tax should not be shifted to the consumers by including the same in the computation of its operating expenses.  “Even if Maynilad and Manila Water would say that they are “mere agents and contractors” of MWSS under their concession agreements, still every “agent” is bound to render a complete and fair accounting,” says de Jesus.  “Both concessionaires had separately applied for, and were granted, income tax holidays.  So, if Maynilad and Manila Water are ‘mere agents’ of MWSS, why did they keep collecting income taxes from us water consumers, and then directly benefit from those sums – booked under their corporate financial statements – despite enjoying income tax holidays? Our computation shows that those sums are now at least 8 billion pesos.”

In a formal statement, Javellana underscores regulatory capture: “Kung noong araw ay mga bayaning Katipunero ang nagbuwis ng buhay para sa bayan, nakakalungkot naman ang nangyayari ngayon na mga pulitiko at mga bilyonaryong monopolista ang nabubuhay sa buwis ng bayan. Kagaya ng income tax ng mga konsesyunaryong Maynilad at Manila Water at pork barrel ng mga pulitiko sa anyo ng Priority Development Assistance Fund (PDAF) at Disbursement Acceleration Program (DAP). Mabuti na lamang at mayroon tayong Ombudsman at Korte Suprema na maaari nating maasahan at masandalan bilang mga Katipunero ng bagong kinabukasan ng bayan.

Last May, Maynilad and Maynilad CFO Randolph Estrallado filed libel raps against WARM and WARM’s president, Rodolfo Javellana, and the Manila Times.  The two libel complaints are pending before two prosecutors, one at Quezon City and another at Makati City, based on the same allegedly libelous article published by the Manila Times.

SC 3 June 2014 Order – See Item (a) by

QC Complaint for Libel by

Plunder Received by Ombudsman by

Annex B – Makati Complaint for Libel by