Duds in the Senate probe

After being pilloried for weeks in media regarding his alleged scandalous P26.8 million annual compensation as administrator of the Subic Bay Metropolitan Authority, Armand Arreza was finally given the chance to correct what turned out to be inaccurate reports of his actual pay.

Arreza was able to clear up things when he finally appeared at the Senate hearing of the Finance Committee of Sen. Franklin Drilon on the compensation of executives of government-owned and -controlled corporations.

Scandal mongers must have been disappointed to find out during Arreza’s testimony that his actual compensation is not P26.8 million a year or P2.23 million a month but just a reasonable P130,888.77 a month plus a monthly representation allowance of P8,700.

The take home pay of Arreza, who was a scholar at the Ateneo and who also holds a Master’s degree at Wharton School of the University of Pennsylvania, in fact was P95,449—and this does not qualify him as the highest-paid official of a GOCC.

The confusion on the actual compensation of Arreza arose from the bundling of Arreza’s personal compensation with the operational fund of the Office of the SBMA Administrator.

Included in the P26.8 million supposed compensation of Arreza was the P15 million intelligence funds which was approved by Malacañang. Arreza explained that of the P15 million intelligence fund, P10 million went to the Presidential Anti-Smuggling Group while the remaining P5 million was divided between the Office of the Administrator and the Office of the SBMA chairman.

Arreza explained that the P2.5 million intelligence fund for his office went directly to the SBMA Law Enforcement Department and the Intelligence and Investigation Office. He said that this intelligence fund was needed by these law enforcement units of SBMA with a sprawling free port facility, which includes an airport and a sea port, to manage.

Other items included in the P26.8 million are extraordinary and miscellaneous expenses for advertising and promotions as well as other incidental expenses for the Office of the Administrator, including gasoline expenses.

The SBMA administrator stressed during the Senate hearing that the compensation he had been receiving was exactly the same as the compensation of his predecessor SBMA chairman and administrator Felicito Payumo.

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With the expose on the astronomical compensation of Arreza turning out to be a dud, focus of the probe of the Drilon committee went to the Social Security System (SSS).

People were shocked with the revelation made by Drilon during the hearing the other week that four commissioners of SSS received a combined P127.4 million “financial compensation” from Philex Mining Corp. where they sit a directors as representatives of the private sector workers’ insurance fund.

According to Drilon, outgoing SSS chairman Thelmo Cunanan received a total compensation package of P83.1 million from Philex in the past three years including a total of P66.6 million alone from the stock option granted to him by the mining firm in 2007, 2009 and 2010.

The expose against Cunanan is turning out to be another dud too based on the letter of Cunanan’s daughter Christine O. Cunanan to her friends.

Christine wrote: “The figures released by Sen. Franklin Drilon during the Senate hearing last Tuesday were not accurate. Over the past three years, former SSS Chair Thelmo Cunanan availed of the stock option by Philex to the eleven members of its Board of Directors (of which he was one, representing SSS and duly elected by Philex’s stockholders). He exercised his option to purchase over three years a total of 4.5 million shares, paying for them with his own funds, through a loan from HSBC, at market prices varying from P1.09 per stock to P3.08 per stock.”

Christine said the “confusion of the Drilon committee arose from its erroneous assumption that Cunanan sold the 4.5 million shares and then turned around and immediately sold them at the prevailing market price of P19.50 per share then.”

“This was not the case,” she said.

She said that of the 4.5 million shares her father got from the stock option, he had sold only 1.2 million in several transactions. She said that the total value of the sale of the 1.2 million shares was P17.6 million. And if the purchase price of P2.3 million for the 1.2 million shares is subtracted then her father “ended up with P15.3M earnings, NOT P66.6 million.”

The young Cunanan said that it should be made clear that her father “sold only 1.2 million shares and at a much lower prices than P19.50 per share.”

She added: “He has kept the other 3.3 million shares to bequeath to his children, but as shares come and go, their prices fluctuate. This is a gamble all stockholders make. Today Philex price per share is only P9.20”

Christine said that there was an issue that it should have been SSS and not her father who should have exercised the stock option plan offered by Philex to the members of its board of directors.

She explained Article 8 of the Philex Corp. Stock Option Plan states that these stock options are “non-transferable” and “no rights may be transferred, sold, exchanged, pledged, disposed of or otherwise hypothecated or encumbered by a Participant or any beneficiary thereof.”

“If he did not avail of them, the SSS couldn’t have availed of them either because of this non-transferable provision,” she said.

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Sen. Ralph Recto has waded in on the issue of GOCCs and focused on the Bangko Sentral ng Pilipinas which he said spent P391 million on entertainment expenses in 2008 which he said was bigger than the P108 million spent by the Office of the President and the P120 million spent by the Department of Foreign Affairs for the same year.

Recto apparently got it wrong.

The P391 million item he cited as apparent expenses of BSP for wining and dining are actually the fixed monthly allowance by about 2,300 BSP officers with the rank of Bank Officer 1 and up, who are not entitled to overtime pay.

In a statement, BSP explained that “The allowance is based on their respective salary grades and averages eight thousand four hundred pesos a month, a reasonable amount given their expertise, experience and long work hours.”

The Bangko Sentral also responded to reports that BSP officials are among the OGCCs receiving very high compensation.

BSP said: “Overall, our position is that the compensation package at the Bangko Sentral ng Pilipinas is mediate and fair relative to the banking industry and other relevant comparators as determined through organized independent compensation surveys, Further, the salaries of the Governor and other members of the Monetary Board are approved by the President. With the exception of the Cabinet representative to the Monetary Board (Finance Secretary Cesar Purisima) all six other members of the MB work on a full-time basis for BSP, including the Governor who concurrently serves as Chairman of MB.” –Alvin Capino, Manila Standard Today