JUNE 7, 2006 (STAR) HIDDEN AGENDA By Mary Ann Ll. Reyes - Whoever orchestrated the smear campaign against Bureau of Internal Revenue (BIR) Commissioner Jose Mario Buñag must be scratching his head right now. Instead of making a villain out of the BIR chief, this black propaganda guru appears to have merely triggered a tsunami of public sympathy for the commissioner.

Worse, the perpetrators of the smear campaign succeeded in putting Narciso "Jun" Santiago, husband of Senator Miriam Defensor-Santiago, in a bad light. And whoever this smear master is owes both Buñag and Santiago an apology.

Since about two weeks ago, coffee shops were already abuzz with speculations that someone has masterminded a hatchet job on Buñag. The indicators that such an operation was in progress were quite clear. The well-played out drama focused on a single-month BIR collection deficit, drumming up the setback as if it were the first time this happened in the country.

Then the smear master brought in personalities into the well-scripted public drama: congressmen calling for Buñag’s resignation, echoes of the same call from other corners of the corridors of power, then public statements from other officials nixing any adjustment on the apparently unreasonably high revenue targets.

Okay, so the BIR did not meet the April target. But the performance still bested the collection over the same period last year. Further, the alleged shortfall can be explained, and explained rather well: big taxpayers advancing their payments in the first quarter, companies availing of tax credits, general business slowdown. Worse, we learned that the Bureau of Customs is collecting revenues and getting the credit for them while the BIR had to carry these figures in its collection target.

This is why Metro Manila’s coffee shop habitués were wondering aloud why Buñag seemed to have been set up for a "kill". Nobody however could explain why the smear master had to go through the process. There was no need to "spill blood" because if somebody wanted the position badly, Buñag would have graciously stepped aside and handed over the reins, everybody opined.

Unfortunately, the "blood" spilled in the bungled smear job was not Buñag’s. On the contrary, there was an instant wave of support for the man they were setting up for the kill. Solons, business leaders, and even the most respected members of the clergy have rallied to Buñag’s side.

The person "bloodied" by the bungled PR job was Jun Santiago, our coffee shop analysts point out. Now, most people think he is the person after Buñag’s post. And the smear master’s flawed methods simply underscored the gnawing public suspicion that the famous sabungero is, indeed, the supposed beneficiary of the smear job.

The smear master also attempted to drive a wedge between Buñag and Finance Secretary Gary Teves. The ploy was to position the two as being at loggerheads over revenue collection targets. The hatchet brigade also wanted to create the impression that Teves would do an axe job on his Ateneo high school classmate over the collection figures issue.

Bungled again. Buñag just recently underscored that he is solidly behind his boss’ revenue collection target. More, Teves also appears supportive of the BIR chief in the latter’s proposal to have the allocation of revenue targets and collection credits reviewed. It seems all is well after all in the Finance department family. The smear guru failed to drive a wedge.

This black propaganda guru should learn a lot of lessons from this smear job faux pas. Lesson number one: hatchet jobs work only on people who cling desperately to the power and perks attendant to their position. Buñag needed neither. He was already made – a big name in the legal circle before he accepted the invitation to help out at the BIR.

Second lesson: the public knows who is a crook and who is incompetent. Buñag is neither. Our in-the-know coffee shop pals say he is perhaps the only known tax lawyer who ever became BIR commissioner. He was a founding pillar of the elite Tax Management Association of the Philippines, they pointed out.

The speculation in many circles these days is that somebody, probably upon the advice of the smear master, told the Palace that the only way to justify an unpalatable appointment of a Buñag replacement is to vilify the current commissioner. The theory was if they succeeded in making Buñag look bad, the public would think that "any replacement would do".

Dead wrong. I do not believe the rumor but as far as most Filipinos are concerned, it is Jun Santiago whom they believe is after Buñag’s job. I have high respect for the Senator’s husband but let’s admit it, he would be a very controversial replacement. The smear master failed to do his job.

The coffee shop gang suggested in jest that the smear master should now focus on image repair jobs for those who were damaged by the bungled black propaganda. And here is an advice to black propaganda crews from the coffee shop gang: leave good men alone.

Oftentimes, smear jobs work only on those already soiled and dirtied.

The real deal

Someone needs to remind Winston Garcia, president and general manager of Government Service Insurance System (GSIS), about the real story behind the 10.84-percent shares of Equitable PCI Bank (EPCIB) that are currently owned by its subsidiary EBC Investments, Inc. (EBCII).

Not too long ago, in November 2005, Winston actually "convinced" the EPCIB board to approve the retirement of these EBCII shares in EPCIB. It is therefore puzzling that he now says that the same retirement of shares he earlier insisted on is a violation of the law and smacks of Enron fraud.

In January 2006, the GSIS chief announced that the state pension fund wanted to dispose of its 12.7-percent interest in EPCIB. Soon after, he claimed that there were interested buyers who wanted to acquire the shares together with the EPCIB shares held by its subsidiary, EBCII.

When the issue of retiring the shares held by EBCII was again discussed by the EPCIB board in Feb. of this year, Garcia had a change of heart and rejected the plan to retire the shares. He presently declares that he will be the first to oppose any move to retire the bank shares held by EBCII and has even gone to the extent of publicly threatening to file cases against anyone who dares execute the retirement of these shares. It seems the "Enron-like manipulation" was really his idea in the first place.

In a complete turnaround from his original proposal, Garcia now wants to sell the EBCII-owned shares with those of the GSIS in an auction where he claims that there are foreign investors interested at a price of P95 per share. His announcement sends the price of EPCIB shares from about P52 per share to a high of P82, such that the Securities and Exchange Commission (SEC) thought it prudent to question Garcia on the identity of the mysterious interested buyers.

However, rather than acquiesce to transparency and disclosure objectives of the SEC, and allay market fears over possible price manipulation issues, Garcia responds by threatening to file cases against the SEC officials.

Understandably, the other EPCIB shareholders resisted the plan as it will only benefit GSIS and no one else. The premise is that since EBCII is 100 percent owned by EPCIB, the EPCIB shares held by EBCII are proportionately owned by the EPCIB shareholders. It then follows that all the owners of EPCIB, and not just some, should actually benefit from the sale or disposition of the 10.84-percent shares with EBCII. In addition, it is unlikely that the other EPCIB shareholders will ever agree to sell to buyers in a scheme that the SEC has already began to question.

It will also be worthwhile analyzing some other statements made by the fiery Garcia.

Start with the retirement of the EPCIB shares held by EBCII. Garcia claims that one cannot retire treasury shares unless one has unrestricted retained earnings. Section IIIb of the Rules Governing Redeemable and Treasury Shares state that no corporation shall redeem, repurchase or reacquire its own shares, of whatever class or nature, unless it has an adequate amount of unrestricted retained earnings to support the cost of the shares, except "when the shares are reacquired to effect a decrease in the capital stock of the corporation as approved by the Securities and Exchange Commission (SEC)."

This means that the law actually allows corporations to retire its stock, or treasury shares, and in the process reduce its capital stock, even if it does not have sufficient unrestricted retained earnings, for as long as the company first gets the approval of the SEC. The GSIS boss probably just "forgot" to mention the exception provided by the law.

What about the other option allowed by the Bangko Sentral ng Pilipinas (BSP), the so-called "reversal" that would result in EPCIB booking real treasury shares in its financial statements?

At first glance, it would seem that Garcia is right. The SEC actually will not allow the reacquisition of shares as treasury stock, unless EPCIB has surplus profits with which to buy the shares so that the transaction will not cause an impairment of capital.

However, a review of the 2005 EPCIB audited financial statements show that the bank’s capital is already impaired! It seems that EPCIB has already been reporting the value of the EBCII shares as a deduction to the bank’s capital since the merger in 1999. So, even if the bank were to acquire its shares as treasury stock, it would not result in an impairment of capital (as the SEC would like to prevent). The bank’s capital accounts would actually remain exactly the same. The only change, would be to replace the title "Parent Company Shares Held by a Subsidiary", with "Treasury Stock". Something that the SEC would probably consider approving, given that no capital impairment would take place.

Chief News Editor: Sol Jose Vanzi

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