Cusi, Dennis Uy, others face graft charges over ‘anomalous’ Malampaya takeover

A criminal complaint has been lodged against Energy Secretary Alfonso Cusi, Davao-based businessman Dennis Uy, former and current officials of state-run Philippine National Oil Co.-Exploration Corp. (PNOC-EC), and officials of Chevron Philippines over the alleged anomalous sale of the latter’s stakes in the Malampaya gas-to-power project to Uy’s enterprise.

The complaint was filed by Balgamel de Belen Domingo, Rodel Rodis, and Loida Nicolas Lewis before the Office of the Ombudsman in Iloilo City on Monday, their counsel Rico Domingo said during the virtual Liga ng mga Brodkaster sa Pilipinas’ forum on Tuesday.

In their 44-page complaint, the complainants said they are “concerned citizens who advocate for the Filipino people’s right to energy security, which includes the Malampaya Deep Water Gas-to-Power Project, a major energy source which delivers a fifth of the country’s rapidly growing electricity needs.”

The three individuals alleged that the respondents violated Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act.

They alleged that Cusi and other respondents conspired to give “unwarranted benefits and advantage” to Uy’s Udenna Corp. and its subsidiary, UC Malampaya, in the sale of Chevron’s share and transfer of rights in the Malampaya project, “thereby causing undue injury to the Government.”

To recall, Uy’s Malampaya Philippines Pte. Ltd. last year completed the buyout of the Chevron Philippines stake in the offshore gas field in Palawan. It has since been renamed UC MPPL.

But, Cusi, in DOE’s defense, said the Uy-Chevron transaction was not a “midnight deal” as “it’s beyond our [DOE’s] purview.” 

In an emailed statement, Udenna said, “We have learned the same reports from media only and we have yet to receive a copy of the alleged complaint. Once we get a copy, We will answer the allegations with all legal bases at the proper time.”

“At the proper time and venue, we will address all allegations raised against the company to prove that everything is done aboveboard,” Udenna said.

“At this juncture, we maintain that the acquisition of UC Malampaya Phils. Pte.,Ltd. (UCMP) of the shares of Chevron Philippines in Chevron Malampaya LLC is within the parameters of the law,” the company added.

'Politically motivated'

In a statement, the DOE said it would answer all the allegations at the the proper venue after formal receipt of the complaint.

The Energy department also said that political motivation could be behind the complaint since Cusi is also the president of a faction of the PDP-Laban party headed by President Rodrigo Duterte.

“It should be noted that two of the alleged complainants are Filipino-Americans who were reportedly identified with the ‘Oust Duterte’ movement in the United States,” the DOE said.

"Coincidence or not,” the timing of the filing of the complaint was “curiously close to the onset of the political season” with the recent filing of the certificates of candidacy of national and local candidates for elective office, it added.

The DOE said the complaint was speculative, without basis, and malicious as it reiterated that the questioned transaction was above board.

“Clearly, this is harassment, but it comes with the territory, so we will just address it at the proper forum where it was filed. I have no doubt the truth will vindicate me and the innocent people dragged into this purported action obviously filed for the singular purpose of political propaganda,” Cusi said.

“Those who reportedly filed this unwarranted action want to present themselves as patriots when the truth is they are not even residing in the country. They would want to dictate government policy while living comfortably abroad. I say let them come here, so they can be within reach of our justice system when we get to establish that they are guilty of perjury," he added.

Aside from Cusi—who is also the ex-officio chairman of the Board of Directors of the PNOC-EC—and Uy, respondents in the graft complaint include:

• retired Gen. Rozzano Briguez, PNOC-EC president and CEO;
• Lourdes Gelacio, PNOC-EC former OIC and CEO;
• PNOC-EC directors Carlo Magno Aldevera, Farah Cañezal, Alejandro Cobol, Oscar Rabena, Johnny Tuason, Karl Ignatius Young, Avelino Tayag, Albert Dela Cruz; and
• Udenna directors Cherylyn Uy, Henry Albert Fadullon, Chryss Alfonsus Damuy, Ignacia Braga IV, Leandro Abarquez, Ma. Concepcion de Claro, Wilfredo Placino, Raymundo Martin Escalona.

Also named respondents were Chevron Philippines Inc. chairman and president Billy Liu, vice president Modesto Vergel de Dios, and treasurer Maria Emma Ruiz; Chevron Malampaya president Melinda Racela; Shell Philippines Exploration managing directors Rolando Paulino Jr. and Paul Michael Nugent; Raouf Kizilbash, managing director and owner of UC Malampaya Philippines Ltd.; and several John and Jane Does.

“We received reports that a complaint was filed against certain company officers, purportedly in relation to the share sale between Chevron and Udenna involving Chevron Malampaya LLC.  We have yet to receive the official document to be able to properly comment on this matter,” Shell Philippines Exploration (SPEX) said in a statement.

“SPEX continues to focus on the safe operations of Malampaya to provide electricity to one of every 5 homes in the country; particularly the successful completion of the ongoing Scheduled Maintenance Shutdown,” it said.

Chevron Philippines is yet to respond to request for comment on the issue.

The complainants alleged that the government’s monetary losses from the Chevron sale to Udenna is estimated at P21 billion, based on the average 45% gross share of Chevron, as member of the Malampaya consortium, for the years 2018, 2019, and 2020.

The gross monetary losses could double to P42 billion a year if combined with the Shell Philippines Exploration B.V. (SPEX), which also holds 45% in the Malampaya project, deal with Udenna.

Uy’s planned takeover of SPEX’s interest in Malampaya is undergoing reevaluation by the DOE.

‘Biggest gift to a crony’

Former Supreme Court Associate Justice Antonio Carpio, who was also present during the forum, said that the Uy-Malampaya takeover was “the biggest presidential gift to a crony.”

On the Udenna’s takeover of Chevron’s Malampaya stake, the complaints alleged that Cusi “acted with gross inexcusable negligence and for personal gain” when he “facilitated the effective transfer of Chevron’s rights and obligations, as well as its 45% participating share, to Udenna despite knowledge that the transaction had no prior approval from the DOE, and without ascertaining Udenna and UC Malampaya’s legal, technical and financial qualifications to perform Chevron Malampaya’s obligations.”

The complainants said the sale ensued despite an admission in a Senate committee hearing last July that “Udenna has no experience in the exploration, extraction and production of any oil or gas reservoir in the Philippines or outside of the Philippines, and holds no service contract in or outside of the Philippines.”

They also cited the finding of the Senate Energy Committee that Udenna “did not shell out a single centavo” in its questionable purchase of Chevron’s Malampaya shares amounting to $565 million.

In explaining that not a single centavo was dished out by Udenna, they said Udenna’s transaction could not have been consummated with Chevron “without: (a) external financing amounting to $375 million from the NZB Group (New Zealand Banking Group in Australia) and the ING Bank (of Singapore); its net entitlement of US$157 million [in] the proceeds of Chevron’s 45% interest from the Malampaya Project as partial payment of the purchase price; and (c) increase of Udenna’s capital stock amounting to $33 million, which was not yet issued and subscribed.”

The transaction, the complainants said, violates Malampaya’s service contract executed pursuant to PD No. 87 which requires prior approval of the Department of Energy in the transfer and assignment of contractual rights and obligations.

“From the time Chevron and UC Malampaya executed the sale on 30 April 2019 until its closing on 11 March 2020, no approval from the DOE was secured or obtained. In fact, UC Malampaya was incorporated only on 1 September 2019, and yet it already ‘entered into the subject transaction’ on 30 April 2019,” the complaint read.

“On this score alone, the transaction is considered as illegal, and thus, null and void,” the complaint said.

The complainants said Cusi had acknowledged that purchasing Chevron’s share is an opportunity for government to invest and “the return will be good” especially because the proceeds of the 45% gross share of Chevron, amounting to $157 million, form part of the payment of the purchase price.

But despite anticipated good returns on investment in Chevron’s Malampaya shares, the complainants stressed that the government did not exercise its right to match Udenna’s offer “for reasons only known to Sec. Cusi... and other respondent public officers.”

“The Government, through the PNOC-EC, should have matched the same and accessed the required equity and debt by leveraging on either or both the Government’s 60% share of the operating revenues and/or the PNOC-EC's 10% share out of the 40% of the overall operating revenue... No cash outflow would have been required from the PNOC-EC given that its superior balance sheet, including the concession’s existing fixed assets, such as platform, production wells, pipeline, valued at an acquisition cost of over $4.5 billion, carries more than enough equity value to comply with the creditors’ debt-to- equity requirements,” they said.

“This very profitable opportunity was squandered due to NOT properly exercising the right of first refusal prior to the closing of the sale transaction,” they added.

“This certainly is a lost opportunity of PNOC-EC and/or the Bureau of Treasury that currently struggles with raising revenues in the past months to address the country's widening budget deficit to fund the unpaid frontline healthcare manpower, additional hospital facilities and supplies, and much delayed vaccine deliveries due to the ravaging pandemic.”

The complainants said Cusi reneged on his duty and committed gross inexcusable negligence when he failed to intervene in the transaction of Chevron and Udenna which was done without DOE’s prior approval, and when he failed to exercise the government’s right to purchase Chevron’s Malampaya shares.

On the liability of SPEX, the complainants said a Senate testimony which revealed it plans to leave the Philippines and was negotiating a deal with Udenna “is proof that SPEX, as the designated operator of the contractor consortium in the service contract, knew or ought to have known and was notified of Respondent Chevron’s transfer and assignment of its rights and obligation to Respondent Udenna.” —KG/VBL/RSJ/BM, GMA News