Where there’s smoke, there’s fire

In a column published on Oct. 13, 2012 in the Philippine Daily Inquirer, entitled “Support sin tax to beat suspicions of being on the take, says Palace exec,” Presidential Legislative Liaison Office Chief Manuel Mamba was cited as saying that “big lobby money” was the main reason past administrations did not approve sin tax reform. ‘There’s big money in it,” he said in a telephone interview. The news item was published a few days after Senator Ralph Recto released his watered-down version of the sin tax bill, which civil society advocates dubbed as “Recto Morris,” for being a bill that reflects the Philip Morris position.

In the same vein, quoting a reliable source, Solita Collas-Monsod reported in her Inquirer column titled “Sold down the river” (Oct. 20, 2012), that Senator Recto “called a secret meeting” with the tobacco companies. A month before that, anotherInquirer columnist, Conrado Banal, reported that Recto held a “closed-door session” with the tobacco industry (the same meeting that Ms. Monsod was referring to), wherein he “chastised” the top executive of British American Tobacco (BAT), the rival of Philip Morris, for objecting to his compromise.

Whether Recto received any consideration for the committee report he released, we do not know. But we believe that all the recent reports should be a cause for investigation of the Senator and his dealings with the tobacco industry. Especially the Senator’s dealing with Philip Morris Fortune Tobacco Co., Inc. (PMFTC), given Recto’s sponsorship of a report that allegedly mirrors that of PMFTC’s proposal.

It is interesting to note that in a recent column written again by Ms. Monsod (Inquirer, Nov. 16, 2012), she mentioned that lawyers of PMFTC allegedly backed the interpellation of another Senator with the same stand on sin taxes as Senator Recto: Senator Ferdinand Marcos, Jr.

If indeed there was consideration given to Senator Recto (or Senator Marcos, Jr.), what then is the applicability of the Foreign Corrupt Practices Act (FCPA) of the United States?

According to an article (Lowell Brown 1994) published in the Berkeley Journal of International Law, the FCPA is designed to prevent American-based corporations from essentially bribing foreign officials to facilitate acts that would otherwise not occur. The FCPA made bribery of foreign officials a felony in the United States.

An FCPA Handbook (O’Melveny and Myers LLP, 2009) lists the following as the elements of an anti-bribery violation of the FCPA:

1. An act by a covered person (including US and foreign issuers of US securities, non-public US companies and U.S. residents, and some foreign non-residents);

2. In furtherance of an offer, payment, promise to pay, or authorization of payment of anything of value;

3. Directly or indirectly, to a foreign official, corruptly;

4. For the purpose of influencing official action or decision, inducing an unlawful act, inducing official influence over government action, or securing any improper advantage, and

5. In order to obtain or retain or redirect business.

The first question to be answered is whether or not PMFTC can be held liable under the FCPA. The answer is yes. Philip Morris Philippines Manufacturing Inc. (PMPMI) is an affiliate of Philip Morris International (PMI), which is listed in the New York Stock Exchange. Its state of incorporation is Virginia, USA, and its headquarters is in New York. Even though PMPMI and Fortune Tobacco hold equal economic interests in PMFTC, PMI manages the day-to-day operations of PMFTC and has a majority of its Board of Directors (Philip Morris International 2011).

Even though PMFTC is not an American-based corporation, PMI is, and as the parent corporation, it can still be covered by the FCPA. PMPMI could also be subject to prosecution as an aider and abettor, conspirator or agent of its U.S. parent, PMI.

The second, fourth and fifth elements are closely related. The second element dictates that the act must be in furtherance of an offer, payment, promise to pay, or authorization of payment of anything of value. However, it must be emphasized that the provisions of the FCPA do not merely cover the payment of cash, but anything of value. It also does not require that a payment or transfer be made. Merely offering or authorizing a bribe already triggers liability.

This bribe must be given corruptly to achieve the desired purpose provided under the fourth element, which if applied to the present case would be to influence the official action or decision (submission of committee report) with the end goal of obtaining, retaining, or redirecting business, per the last element.

Brown explains that the word “corruptly” is used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his official position in order to wrongfully direct business to the payer or his client, or to obtain preferential legislation or a favorable regulation. It is not required that the act be fully consummated, or succeed in producing the desired outcome.

The obvious result of a preferential legislation for PMFTC is that it will assure PMFTC of its customer base and the protection of its dominant market share.

Lastly, under the third element of the FCPA, the illicit payment must be made not just to anyone but to a foreign official which is defined as any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization. Clearly, any Philippine Senator is a foreign official for purposes of the FCPA.

Concrete evidence is indeed necessary for a violation of the FCPA to arise. But with the overwhelming reports about alleged bribery and secret meetings, an investigation must ensue in line with the President’s daang matuwid.

Mr. Castro is a lawyer for New Vois Association and Ms. Zuñiga is a legal researcher for Action for Economic Reforms.

 

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