TCR Volume 2 Issue No 21 by The CenSEI Report

Strategic Analysis and Research by the

cenSEI

CENTER FOR STRATEGY, ENTERPRISE & INTELLIGENCE

T H E

The only reason I would have really wanted to win is just to break that whole guy reign and have a girl win it for once. ... I believed that Phillip was going to win, not because I don’t think I’m good, but he has such a big fan base ~ American Idol runner-up Filipino-Mexican Jessica Sanchez

Report

Volume 2 - Number 21 • May 28-June 3, 2012

NATION

Let me clarify — congrats to Phillips! — [but] for the integrity of the show, to me this is a travesty. The result this year solidifies the reality of Idol no longer being a talent show but a popularity contest ~ Idol 2011 contestant Stefano Langone

4 Judging the Chief Justice

The five-month impeachment trial of Chief Justice Renato Corona reaches a high standard of accountability with his testimony and his waiver of asset confidentiality. But will it save him from conviction? • Road to impeachment: The Chief Executive vs. the Chief Justice • The Ombudsman's report: The $12-million allegation

16 Your Honor: Charges, Responses and Evidence

The eight Articles of Impeachment against Chief Justice Corona and the summary of his responses and the prosecution and defense evidence • Impeachment 101: Primer on the constitutional process • No convictions: Three score of impeachment in the Philippines

27 Legal Wrangles in the Senate

From a complaint signed but not read, to foreign currency secrecy and a High Court TRO on the Senate, the impeachment trial raised a host of legal issues

WORLD

34 The Age of Autism

BUSINESS

44 The Transformation of San Miguel Corporation

A dramatic increase in autism cases worldwide over the years has prompted the surge of research into what causes it and how to address it • Red flags: The signs and symptoms of an autistic child • Teach-nology: Digital tools are aiding people with special needs

From beer and food, San Miguel Corporation has boldly gone where it never has gone before: property, banking, power, telecoms, oil and airlines. Can it succeed? The first report in a three-part series • Roots of empire: The brewing and frothing of San Miguel POINT & CLICK • Case study: Lessons from General Electric's diversification • Oil exploration: SMC affiliate Petron moves into Malaysia

TECHNOLOGY

CONTENTS

54 Paying with Your Smartphone

Mobile money is spreading as an alternative to cash and card payments. By decade's end, it will be part of the mainstream • Cash on call: The mobile-payments methods now in use

NATION

WORLD

BUSINESS

You can access online research via the Internet by clicking phrases in blue

TECHNOLOGY

Center for Strategy, Enterprise & Intelligence provides expertise in strategy and management, enterprise development, intelligence, Internet and media. For subscriptions, research, and advisory services, please e-mail report@censeisolutions.com or call/fax +63-2-5311182. Links to online material on public websites are current as of the week prior to the publication date, but might be removed without warning. Publishers of linked content should e-mail us or contact us by fax if they do not wish their websites to be linked to our material in the future.

Chronicling the Process of Public Accountability The impeachment and trial of Chief Justice Renato Corona has filled the airwaves and front pages of media for nearly half a year, not to mention the talks and texts on smartphones, Facebook, twitter and barber shops. This week The CenSEI Report recapitulates the proceedings in our biggest package of stories this year. While many Philippine publications will no doubt devote extra pages to the same topic, our readers are fortunate that our electronic pages can run much longer and pack in more information than pulp ones. So it is that the Nation feature on the impeachment constitutes three separate stories with smaller ones in two of them. The main story recounts the May 22 and 25 testimonies of CJ Corona, with accompanying articles on the conflict between him and President Benigno Aquino III, and on the presentation of Ombudsman Conchita Carpio Morales on his alleged dollar accounts. The impeachment now turns on these three developments: Morales’s report on alleged Corona dollar transactions, his admission of $2.4 million in undeclared deposits, and the conflict between him and the President, which led to the impeachment and will govern its aftermath. Two more key articles follow. One sums up the Articles of Impeachment, Corona’s responses, and the evidence presented by Prosecution and Defense. While the Senate, the media and the public may find it convenient to focus on one fulcrum charge, in fact, there were eight accusations, any one of which could have removed the Chief Justice. Hence, The CenSEI Report makes sure to have every accusation and answer on record. And to put the Corona trial in constitutional and historical contexts, there are accompanying write-ups on the legal foundation of impeachment and its irruptions into Philippine history. This week’s special report was put together by two law graduates: new attorney John Carlo Gil Sadian and Mary Grace Pulido. While they have exercised their legal knowledge to the utmost in this undertaking, they also write as Filipinos who value immensely our constitutional democracy, the rule of law, good governance, and judicial independence. Sadian sees impeachment as “a public inquest into the conduct of our highest officials, but it has been used by some politicians to advance political ends.” As the country’s first completed impeachment reaches a decision, Sadian says: “We can only hope that the verdict on the respondent would be as fitting as history’s judgment on our leaders.” For her part, Pulido noted how the trial “stirred debate and divided the nation.” Let’s hope we can all move on as one nation after the verdict on Chief Justice Renato Corona.

cenSEI T H E

NATION

Report

Judging the Chief Justice At its climax, the trial of Renato Corona sets a high standard in public accountability and transparency By Atty. John Carlo Gil M. Sadian

ast Tuesday, Chief Justice Renato Corona appeared before the Senate impeachment tribunal to face not only his accusers and his judges, but the entire nation as well. By this act of submission to elected leaders and the citzenry, he raised the standard of public accountability for government officials to a new level. No other top official of the nation had ever presented himself in open court.

The highest-ranking official to face the nation in public trial and open his finances to scrutiny: 'We're all on trial here' GMA News

STRATEGY POINTS The Chief Justice's testimony focused the Senate on one issue: Should he be removed for not declaring $2.4 million in deposits? Corona's appearance before the nation and his waiver opening his finances to scrutiny has set a new standard for accountability The Senate verdict will have immense impact on the Judiciary, our constitutional democracy, and the political landscape

CONTENTS

NATION

WORLD

Two days later, after an apparent attempt to evade cross-examination and 48 hours in a hospital intensive care unit for hypoglycemia and a possible heart attack, Chief Justice Corona lifted the accountability and transparency bar even higher with his blanket waiver of asset secrecy and his financial disclosures opening his wealth for all to see. This dramatic climax to the Senate hearings five months and two weeks since 188 congressmen voted to impeach Corona on December 12, leaves the Senate with the unenviable, even unseemly task of judging a man who took steps in accountability and transparency that the 23 senatorjudges were challenged to match. But judge him they must. So too the nation, and this recapitulation of the impeachment

BUSINESS

TECHNOLOGY

Judging the Chief Justice

proceedings and surrounding events by The CenSEI Report provides the full background for judging the Chief Justice. For all the revelations, controversy and drama of the preceding 39 days of trial sessions, the 40th and 42nd, with Corona himself testifying, provided what was arguably the most important testimonies in the five-month litigation. Not only did he present his perspective on the events and issues of his impeachment, his final gambit of giving permission for his finances to be fully disclosed, then directly answering questions about his undeclared funds, have also presented the Senate with all the information to decide his fate. Of the eight original Articles of Impeachment,the Corona trial had boiled down to just one: the Second Article alleging culpable violation of the Constitution and breach of public trust for failing to fully declare his wealth in the required annual Statement of Assets, Liabilities and Net Worth (SALN). No evidence was presented in five of the eight major charges, while two of the remaining three are considered weak, mainly because they involve collegial decisions of the Supreme Court not subject to review by the Senate and for which the Chief Justice alone could not be held responsible (see page 16). The SALN issue seemed to be largely settled with prosecution claims of 45 properties debunked by defense evidence, and about ₧30 million in undeclared peso deposits explained by land sale proceeds held in trust for Basa-Guidote Enterprises

The

Inc. (BGEI), the family firm of Corona’s wife Cristina. Dollars on center stage. However, in the week before the CJ’s testimony, the issue of his dollar accounts took center stage when headline news of a probe by Ombudsman Conchita Carpio Morales led the defense to call her as hostile witness, bringing her allegations of some $10 million in deposits smack into the crux of the trial (see page 8). To counter those claims, the defense decided to put the Chief Justice himself on the witness stand on May 22. The Chief Justice arrived at the Senate not only with his family and his lawyers, but also with a three-hour statement to answer the three remaining charges of the eight Articles lodged against him last December, as well as the incessant media attacks on him and his family. Before the Chief Justice took the witness stand, Senate President Enrile made the rules clear to his colleagues in the Senate: treat the magistrate with respect, limit questions to two minutes, and stick to questions of fact. Corona’s lead counsel, Justice Serafin Cuevas, also reminded the Senate of the concept of political neutrality, of his client’s constitutional right against self-incrimination, and the procedural rule that a witness can only be crossexamined on matters discussed during the direct examination. Corona maintains his conscience is clear. “Sigurado ako wala akong kasalanan, wala akong ginawang katiwalian at ako ay hindi nagnakaw sa gobyerno [I am

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

6 sure I have done no wrong, I have not committed any corrupt acts, and I have not stolen anything from the government].” So declared the Chief Justice, claiming innocence and denying corruption, as he started his testimony disputing all the charges facing him. He also alleged that the administration of President Benigno Aquino III orchestrated his impeachment in retaliation for the Supreme Court’s decision ordering the distribution of Hacienda Luisita and rejecting the demand of its owners, the Cojuangco family of the President, for billions of pesos in compensation.

As the magistrate lamented about how hard the ongoing trial had been for his family, there were times when he became emotional, even pausing to hold back tears. In one of the most emotional parts of his statement, Corona asserted that all the properties his family acquired were the result of hard work for more than 40 years and not from any wrongdoing. Family feud over real estate. As a backdrop for his explanation of his bank accounts, Corona described the feud within his wife’s extended family over certain properties in Manila. He particularly

Chief Justice Corona appears before the Senate impeachment court led by Senate President Juan Ponce Enrile GMA News video

To be sure, relations between the Chief Executive and the Chief Justice have been strained even before they had assumed their respective positions (see page 12). Then-presidential candidate Aquino opposed his predecessor’s appointment of Corona, as allowed by the Supreme Court. And for his part, the Chief Justice saw in the impeachment a desire by the President to take control of the Judiciary — an alleged scheme the CJ said he aimed to thwart even at great suffering for him and his family.

CONTENTS

NATION

WORLD

mentioned his wife’s uncle, the late Jose Maria Basa III, as the reason why he and his wife became reluctant to invest in real estate. The sad experience of the Basa family has made them invest their hardearned cash in dollar accounts so it could earn interest over time. The prosecution objected to parts of Corona’s statements for being either irrelevant or hearsay, and for casting aspersions on individuals not present to defend themselves. Senate President Enrile

BUSINESS

TECHNOLOGY

Judging the Chief Justice

nonetheless allowed Corona to continue, ruling that everything would be considered part of his testimony subject to crossexamination and rebuttal. Only four dollar and three peso accounts. Corona then went on to explain that he was able to save from his lucrative law practice and his family’s simple lifestyle. He then used a slide from Ombudsman Morales’ own presentation to rebut her allegation that he had 82 dollar accounts with at least $10 million worth of “transactional balances.”According to him, most of those accounts had been closed, particularly those in BPI Acropolis and BPI Tandang Sora. He nonetheless admitted owning four dollar accounts and three peso accounts as of December 2011. Using the same data presented by Morales, Corona showed how the money in his accounts were transferred or merged from one account to another. This, as he aptly explained, was typical movement of money invested in time deposits and investment instruments. Corona explained that these dollar accounts were not reflected in his SALNs, because he believed that they are covered by the protection clause of the Foreign Currency Deposits Act (FCDA), thus exempted from the disclosure requirement under the AntiGraft and Corrupt Practices Act (RA 3019). Commingled family and corporate funds. Some accounts under Corona’s name were also not in his SALNs, because these were not exclusively his. He testified that some of the money belonged to his wife, his daughter, his mother, and BGEI. The just compensation for the expropriated company property, on which former Manila Mayor Lito Atienza testified, was among the

The

funds deposited in his one of his accounts. Also commingled in one of his accounts was the so-called “Coronado fund,” money entrusted to him by his then cancer-stricken mother, whose maiden name is Coronado. He was instructed to use the fund for her medication and eventual funeral. Consistent with their family’s investment in cash deposits, Corona also divulged that his children, all professionals with lucrative careers, contributed their own savings to his accounts: Charina has ₧15 million, Carla has ₧4 million, and Francis has ₧2 million. Corona explained that his children deposited their savings in a single account “because the bigger the deposits, the bigger Corona used his own PowerPoint presentation using the same AMLC data to refute Morales’ the interest accusation that he has 82 bank accounts. Corona it could explained, ‘Each time a time deposit would earn.” mature or be rolled over, a new account will be

created or consolidated to make a new placement

to earn higher interest. These funds would then Waiving be transferred from one account to another in bank order to earn more interest’ DZMM video secrecy — with a big if. Toward the end of his testimony, Corona maintained that not every omission or inaccuracy in the SALN constitutes a high crime or an impeachable offense warranting removal from office. He then signed a waiver authorizing the Bureau of Internal Revenue, the Anti-Money Laundering Council, the Securities and Exchange Commission, and the Land Registration Authority to disclose

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

The Ombudsman’s testimony: The whole truth or a ‘lantern of lies’? By Atty. John Carlo Gil M. Sadian

Prompted by news of a probe into Chief Justice Renato Corona’s dollar accounts, the Defense asked the Senate to subpoena Ombudsman Conchita Carpio Morales, who is conducting the investigation, and those who signed the complaint she is looking into. The result of her probe had, in fact, already been referred to the House Speaker for another possible impeachment complaint once the one-year bar expires in December. In her testimony, retired High Court magistrate Morales alleged in a PowerPoint presentation that Corona had at least $10 million in “transactional balances” through 82 dollar accounts from April 2003 to February 2012. She also

• Multiple accounts created for similar purpose • Multiple accounts spread over five banks in various branches/places • Circuitous fund movements • Deposit and withdrawal made on the same day • Significant movement on significant dates Regarding the “significant” movement of funds, the Ombudsman revealed that two separate deposits of $500,000 were made to a Bank of the Philippine Islands (BPI) Acropolis account on May 12 and May 14, 2004. On May 3, 2007, she added, five separate deposits amounting to $293,645.23 were made to a BPI San Francisco del

With Supreme Court seal between them, Corona and Morales stand behind then CJ Artemio Panganiban cjpanganiban.ph

told the impeachment court that she observed “significant withdrawals on significant events” like the 2004 and 2007 elections and the impeachment last December. The presentation, according to Morales, was based on raw data furnished to her office by the Anti-Money Laundering Council. As of last Friday, the AMLC had yet to officially authenticate those documents, although one of its three members, Insurance Commissioner Emmanuel Dooc, confirmed the report. The propriety, and even the legality of the publication of this “confidential” report, had also been questioned. Nonetheless, Morales made these significant observations in her presentation, which was produced by Commission on Audit Commissioner Heidi Mendoza:

CONTENTS

NATION

Slide from Ombudsman presentation alleging Corona dollar accounts

WORLD

BUSINESS

TECHNOLOGY

Judging the Chief Justice

Monte dollar account. Morales also said that on the week the Chief Justice was impeached, a total of almost $3.4 million were “moved” from Corona's alleged dollar accounts in BPI, Philippine Savings Bank (PSBank), and Allied Bank.

presentation to rebut Morales’ allegations when he took the witness stand.

Thus, between April 14, 2003 to December 22, 2011, the total inflow of cash in the accounts, according to Morales, amounted to a staggering $12.15 million. Note that the presentation itself states that the figures were “not account balances but rather they are transaction balances.” Corona quickly disputed the PowerPoint presentation, calling it a “lantern of lies.” According to the Chief Justice, “The number of accounts alone is at best ridiculous. Her PowerPoint diagram is a lantern of lies which only messed up her presentation, contrary to what some believe now as damning evidence.” He eventually used his own PowerPoint

But before he testified, Corona also issued a statement saying, “Either she does not know what she is talking about or is purposely misleading the Impeachment Court and the public. Is she even privy to how the AMLC arrived at the bloated numbers?”When asked by defense lead counsel Justice Serafin Cuevas about her certainty on the accuracy of the data, Morales herself admitted, “I would not have known that because the report was furnished to me by AMLC.” Checking out a column by Rigoberto Tiglao in the Philippine Daily Inquirer, the Inquirer reported, in a separate article, that bankers “uniformly said that an estimate of the Supreme Court chief’s bank account balances made

FUND MOVEMENTS IN THE IMPEACHMENT MONTH LABELED ‘SIGNIFICANT’ BY THE OMBUDSMAN

December 12-13 December 13 December 13 December 15 December 15

135,359.01 388,771.22 12,888.67 465,000.00 343,192.62

Transaction trust fund contribution placement investment Encashment purchase of manager's check debit memo securities sold Withdrawal

December 19 December 20

22,998.09 687,648.55

excess of deposits debit memo

December 12

Date

Amount in $ 470,978.80

December 19

487,998.09

purchase of manager's check

source: TCR compilation

by adding up all transaction values over time would be incorrect.” An AMLC official interviewed by the paper also said that Tiglao’s column was “on the correct track.” Besides citing the gross error of summing up transactions to come up with balances, the columnist had argued that many of the 82 accounts were probably created for shortterm investments like time deposits and money-market placements, each of which would require a separate bank account, to be closed once the investment matured.

Tabulation in Ombudsman report: Transactions, not balances PTV

The

cenSEI Report

In his Senate testimony, Corona disclosed that he had only four dollar accounts containing $2.4 million. With his waiver allowing banks and government agencies to reveal his assets and business connections, probers can now check who is telling the truth: the Ombudsman or the man she investigated.

• May 28-June 3, 2012

cenSEI T H E

Report

10 to the public all information on his assets, liabilities, business interests, and finances, as well as those of his wife Cristina.

Presiding SenatorJudge Enrile reprimanded Corona’s camp and ordered the defense to bring Corona back to court. Lead defense counsel Serafin Corona challenged senator Drilon and the 188 This waiver, Cuevas took congressmen who signed the impeachment complaint however, was pains to to also waive the confidentiality of their bank deposits subject to appease Enrile, GMA News video the condition explaining that Senator that there was Franklin Drilon and the 188 congressmen no intention at all to disrespect the Senate, who signed the impeachment complaint also and that Corona suffered a hypoglycemic execute the same waiver. The Chief Justice episode, which made him dizzy as he was thus challenged them: “We are all on trial testifying. After the session was adjourned, here.” Corona went to the Medical City, where he was confined in the ICU. From court to hospital. In what is arguably the most controversial moment in Before adjournment, Enrile ordered Corona the impeachment proceeding, Corona said: to return the next day, with a stern warning “And now, the Chief Justice of the Republic that failure to do so would result in striking of the Philippines wishes to be excused.” out his testimony. The next day, however, He then stood up from his seat and walked Corona’s defense team apologetically asked calmly towards the exit, followed by his wife, Enrile to give leeway to the Chief Justice, without waiting for Senate President Enrile who was then still confined in hospital. to discharge him. The Medical City requires anyone placed in the ICU to stay in hospital for at least Seeing Corona’s action as a sign of 48 hours. Cuevas nonetheless gave an disrespect for the Senate impeachment assurance that Corona would appear upon Court, an enraged Enrile ordered the discharge from the Medical City for the lockdown of the Senate Building to prevent continuation of his testimony. Corona and his entourage from leaving. Retired general Jose Balajadia Jr., the Back in trial with a waiver and no Senate Sergeant-at-Arms, barred the ifs. When Corona returned on May 25, Coronas from leaving, prompting Corona he apologized to the Senate for his sudden to ask: “Are you arresting me?” The couple departure on the previous hearing and eventually had to go back to the Senate explained that it was due to his diabetes, holding room next to the session hall, where lack of sleep, and failure to eat lunch. He Corona was seen by his lawyers. He was denied any intent to disrespect the Senate or later brought to the Senate infirmary. walk out of the trial.

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

Judging the Chief Justice

To avoid possible stress to Corona, Justice Cuevas said the defense would no longer conduct its direct examination. The Prosecution, for its part, also waived its right to cross-examine the Chief Justice as they believed that his testimony was largely inadmissible anyway. Reversing his previous position that he will only release his waiver of confidentiality if Senator Drilon and the 188 congressmensignatories do the same, Corona submitted the waiver to the Senate for opening his bank accounts and business interests to the public. The document was submitted to the Senate, which held a 45-minute impromptu caucus on what to do with the waiver. When the prosecution said they no longer intend to use the waiver signed by Corona, Senator Francis Escudero expressed dismay, pointing out that during the early part of the trial, the Senate and the Supreme Court almost had a head-on collision on the issue of whether or not Corona’s dollar accounts could be opened by the court. In their subsequent press briefing, the prosecution contended that the waiver was a ploy to extend the trial. The Senate itself decided not to subpoena more witnesses and records using the waiver. Senate President Enrile pointed out that it was not the court’s job to gather testimony and documents, but simply to ponder the information and arguments from opposing sides and render judgment: “not a producer of evidence, but only a hearer of facts.” Thus, Enrile adopted the decision of ordering prosecution and

The

defense to submit the case for resolution after their final oral arguments — and one last round of questioning of Corona by the senator-judges. How much money does the CJ have? Senator Miriam Defensor-Santiago tried to get Corona’s insight regarding the implications of the trial on the system of checks and balances in government, the independence of the judiciary, and the sub judice principle. Corona, in trying to expound on the effect of his impeachment on him and his family, recounted how his 9-year-old grandson felt anguish because of the accusations hurled against him. Santiago interrupted and repeated the question, to which Corona responded by discussing the chilling effect of his impeachment on the other justices of the Supreme Court and the entire judiciary. According to Corona, once the independence of the judiciary is compromised, dictatorship would surely follow. Senator Alan Peter Cayetano asked how much money is deposited in Corona’s dollar accounts. The magistrate disclosed around $2.4 million in four accounts. These amounts, according to him, were accumulated over more than three decades, including interest. He also admitted having around ₧80 million in three peso accounts, but reiterated his previous testimony that these include BGEI funds and Coronado funds, and his children’s savings.

cenSEI Report

Corona’s staunch critic, Senator Franklin Drilon,

• May 28-June 3, 2012

cenSEI T H E

Report

12 asked why Corona did not declare these amounts in his SALN. The Chief Justice just reiterated his previous answer: he honestly believed that they are covered by the confidentiality clause under the FCDA. Drilon countered that funds held in trust should be declared as liabilities.

Corona replied that he was not an accountant, but a lawyer, who believed that anything not belonging to him should not be declared as his. Senator Francis Pangilinan tried to remind Corona of the constitutional

Chief Executive vs. Chief Justice: Road to impeachment

By Mary Grace V. Pulido

March-June 2010: Arroyo appoints CJ Corona as Aquino protests. The Supreme Court ruled in De Castro vs. Judicial and Bar Council that then President Gloria Arroyo could appoint the next Chief Justice. Two months later CJ Renato Corona was sworn in. President-elect Benigno Aquino III disputed the appointment; on June 30 he took his oath before Associate Justice Morales, who dissented in the March 17 ruling.

Court issued a status quo ante order stopping impeachment proceedings against then Ombudsman Merceditas Gutierrez, but lifts the stay in February 2011. Less than a month later, 212 Congressmen voted to impeach the Ombudsman. On April 29, ten days before her Senate trial was to begin, Gutierrez resigned. October 14, 2010: TRO on EO 2 stirs Aquino’s first open attack on High Court. The Supreme Court issued a status quo ante order stopping implementation of Executive Order No. 2 removing Arroyo appointees who assumed office after the election ban on presidential appointments took effect. Aquino criticized the ruling as blocking his reforms and warned of chaos and paralysis in government.

July-December 2010: Aquino’s Truth Commission is ruled unconstitutional. On July 30, President Aquino issued Executive Order No. 1 creating the Truth Commission to investigate alleged corruption “in the past administration.” In August, the House opposition questioned the constitutionality of the Truth Commission. On December 7, 2010, the Supreme Court declared EO 1 unconstitutional for violating the equal protection clause, but suggested revisions to make it abide by the charter.

November 15, 2011: Aquino government disobeys TRO on Arroyo travel ban. The Supreme Court voted 8-5 to issue a temporary restraining order (TRO) on the Department of Justice (DOJ) watch list barring former President Arroyo and her husband Jose Miguel Arroyo from travel abroad.

September 2010-April 2011: High Court stops, then clears Gutierrez impeachment. The Supreme

The Chief Justice and the Chief Executive are sworn in: At odds right from the start

CONTENTS

NATION

WORLD

BUSINESS

ABS-CBN/YouTube

TECHNOLOGY

Judging the Chief Justice

provision requiring every public official to disclose all his assets in his SALN. To this, Corona pointed out to the senatorlawyer that the provision referred to had the qualification “in the manner provided by law,” and one of the laws that the charter refers to is the FCDA. Pangilinan

also asked why Corona withdrew funds from his accounts on the week he was impeached, The magistrate said he was just trying to protect the money he save for decades after getting tips from Palace friends that his accounts would be frozen.

President Aquino alleges Corona asset anomalies; CJ Corona claims Aquino-led conspiracy to oust him

RTVM

But on de Lima’s orders, airport officials did not let them board a flight to Singapore. On Nov. 18, Pasay judge Jesus Mupas orders Arroyo’s arrest for alleged electoral sabotage, an unbailable offense. November 2011-April 2012: Supreme Court orders Hacienda Luisita distributed. The Supreme Court ruled 14-0 to distribute Hacienda Luisita to its 6,296 agrarian beneficiaries. President Aquino accepts the decision on his Cojuangco family’s estate, citing two objectives: “empowerment of the farmers [and] just compensation for the landowners.” On April 24, 2012, the High Court’s final ruling affirmed the land distribution and set payment at 1989 prices, denying the clan’s ₧10-billion demand. December 4, 2011: The Chief Executive lambasts the Chief Justice to his face. President Aquino lashed out at CJ Corona at the 1st National Criminal Justice Summit. In his speech, the Chief Executive lambasted the Chief Justice as a midnight appointee, and repeated attacks on High Court rulings against his EOs. Corona’s calm response: “Just let it be. It’s almost Christmas. Let’s think of peace.”

The

cenSEI Report

Corona and Aquino at criminal justice summit ABS-CBN/YouTube

December 12, 2011: House impeaches Corona, winning kudos from Aquino. Based on a 20-minute Powerpoint presentation, 188 congressmen signed the 57-page Articles of Impeachment against Corona. On January 12, 2012, at the Liberal Party anniversary, President Aquino praises his partymates for the Corona impeachment.

• May 28-June 3, 2012

cenSEI T H E

Report

14 Upon inquiry by Senator Jinggoy Estrada as to the possible motive of Ombudsman Morales in alleging Corona had 82 dollar accounts, he cited his strained relationship with Morales and Senior Associate Justice Antonio Carpio. According to Corona, Morales allowed herself to be used by the Aquino administration in discrediting him. At a press conference soon after, Ombudsman Morales maintained: “I was never ever used by Malacañang.” The Palace defended her, pointing out that it was Corona’s defense that called Morales to the witness stand.

his SALNs. Although the Senate already ruled that it will not admit any evidence concerning accusation of ill-gotten wealth, it is expected that the prosecution would still try to impress upon the public that the properties not declared by Corona were illegally acquired.

Issues for oral arguments. As both the prosecution and defense panels prepare for the scheduled oral arguments this Monday, it is expected that both camps will slug it out to leave a convincing final impression, not only in the minds of the senators, but also in the minds of the viewing public. This proceeding is, after all, a political exercise.

In line with this, the prosecution would also most likely imply that Corona could not have legally acquired his properties, notwithstanding Senate President Enrile’s ruling that the trial should only deal with Corona’s SALNs and not with other matters such as the manner he acquired his properties. The prosecution would also probably refer to the Bureau of Internal Revenue’s list of “under-declarations” in Corona’s SALNs. Most importantly, the prosecution would certainly rely a lot on the subpoenaed bank records in PSBank and BPI notwithstanding the spurious manner by which they were procured.

For the prosecution, the only viable case that they have is the Second Article alleging that Corona “failed to disclose to the public”

To pin down Corona, the prosecution needs to use these pieces of evidence to establish substantial inconsistencies

Corona lectures Senator Pangilinan that the constitutional provision requiring disclosure of assets is qualified by the the phrase ‘provided by law.’ One such law, according to Corona, is the Foreign Currency Deposits Act GMA News video

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

Judging the Chief Justice

between the value of these properties and the value stated in his SALN. It is thus incumbent upon them to convince the senators that the Chief Justice’s failure to faithfully declare all his assets constitutes an impeachable offense that warrants his removal from office. Conversely, it is upon the defense to convince the Senate that minor omissions in the SALN do not qualify as an impeachable offense. For the prosecution to secure a conviction, they must rely on their evidence to show a willful intent on the part of Corona not to faithfully declare his assets. The defense, on the other hand would most likely highlight the testimonies of the city assessors of Taguig, Quezon City, and Makati to prove that there was no misdeclaration or underdeclaration of real properties in Corona’s SALN. The testimony of former Manila Mayor Lito Atienza would also be relied upon to prove the nature of the 34 million pesos deposited in one of the magistrate’s bank accounts.

The

Also, to support the various witnesses who testified to disprove Corona’s ownership of all 45 properties not reflected in his SALNs, the defense might also highlight the testimony of Land Registration Authority chief Eulalio Diaz to impress upon the senators the prosecution’s attempt to mislead them as to the real number of Corona’s real properties. Most significantly, the defense is expected to bank on the testimony of the Chief Justice himself, particularly the explanation he made debunking the Ombudsman’s presentation. The defense may also highlight the Prosecution’s seemingly misleading allegations of 45 real properties, 82 dollar accounts, and 31 peso accounts, when in fact it turns out that Corona only has five properties, four dollar accounts and three peso accounts, the contents of which do not belong to the Chief Justice alone. The task of weighing the evidence already presented and the arguments to be expounded by both sides now rests on the

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

shoulders of 23 politicians specifically chosen by the Constitution to decide the fate of the highest-ranking officials of our government. Far more than the evidence and legal arguments, the Senate will necessarily ponder not just Corona’s innocence or guilt, but the impact of his retention or removal on the Judiciary and the nation. The senator-judges may pay heed to Corona’s repeated warnings that his ouster would enable President Aquino to take control of the courts. How the administration could use such clout might well be seen in the way it harnessed a host of agencies, including independent constitutional bodies, in the

impeachment trial. For its part, the Palace and its allies have long maintained that Corona is blocking governance reforms by showing favor to former president Gloria Arroyo. In the end, the Chief Justice will be judged and held accountable in a process that, for the most part, sought to uncover truth, respect rights, and deliver fairness and justice. What happens next to the nation and our constitutional democracy will hinge in large part on the votes of 23 senators and how the branches of government — the executive, the legislature, the judiciary — and the major sectors of society respond to the verdict on Renato Coronado Corona.

Your Honor: Impeachment Charges, Responses, and Evidence By Atty. John Carlo Gil M. Sadian

For objective, substantial perspective on the eight Articles of Impeachment against Chief Justice Renato Corona, The CenSEI Report breaks down the allegations in each Article, the counter-arguments of the defense, and the evidence presented by both sides. Notably, the prosecution presented evidence only for Articles II, III, and VII.

CONTENTS

NATION

WORLD

ARTICLE I. Respondent betrayed the public trust through his track record marked by partiality and subservience in cases involving the Arroyo administration from the time of his appointment as Supreme Court Justice which continued to his dubious appointment as a midnight Chief Justice and up to the present. The First Article alleged subservience that was linked to his past as Arroyo’s

BUSINESS

TECHNOLOGY

Judging the Chief Justice

chief of staff, violation of the spokesman, Constitution and and acting the Anti-Graft Executive and Corrupt Secretary. Practices Act Midnight (R.A. 3019), appointment but also gross was also omission and charged, misdeclarations going by 1998 in the Statement, Opening of impeachment trial, January 16, 2012: After 44 decision In as well as assets hearings, it's decision time Allvoices.com re: Vallarta in excess of lawful barring income. The trial election-period appointment, not its ruling eventually focused on the second allegation in De Castro vs. Judicial and Bar Council of failure to list huge wealth. (JBC) that “confined the prohibition to appointments made in the Executive Prosecution Evidence: Corona’s SALNs Department,” not the Judiciary. for 1992 to 2002 (when Corona served in the Ramos and Arroyo administrations) Defense Response: In Verified and for 2003 to 2011 (when he was a High Answer, Corona countered that he Court justice). After the Senate accepted “cannot be held accountable for the outcome SALNs as evidence, the prosecution focused of cases before the Supreme on allegedly undeclared or under-declared Court which acts as a collegial tribunal” assets, mostly condominium, presenting deciding collectively. Article I also asks land titles and testimonies of registers the Senate “to review certain decisions of the of deeds of cities where condos are. Also Supreme Court,” which would be against the subpoenaed were two bank accounts “checks and balances in a republican form of currently subject of a controversial Supreme government that no other department may Court ruling. The acquisition of and failure pass upon judgments of the Supreme Court.” to declare these properties, the prosecution On Corona’s appointment, the defense cited argued, constitute culpable violation of the De Castro vs. JBC. Constitution and betrayal of public trust. No evidence was presented for Article I. ARTICLE II. Respondent committed culpable violation of the Constitution and/or betrayed the public trust when he failed to disclose to the public his Statement of Assets, Liabilities, and Net worth as required under Sec. 17, Art. XI of the 1987 Constitution. The Second Article alleged not only the failure to make the SALN public in

The

Defense Evidence: Corona SALNs presented by prosecution were adopted as defense evidence to show that the statements were, in fact, made public. Presented in March were the city assessors of Taguig, Quezon City, and Makati, and the customer relations head of The Columns to discredit prosecution evidence on properties. Former Manila Mayor Lito Atienza testified that the city bought land from the family firm of Corona’s wife Cristina for over ₧30 million,

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

18 pointing to the source of funds held in trust by him and thus not in the SALN.

Impeachment in the Philippines: A p By Mary Grace V. Pulido

Most significantly, witnesses Rep. Tobias Tiangco and Land Registration Authority chief Eulalio Diaz appear to show an attempt to either mislead the public on the CJ’s properties. The testimony of Diaz, President Aquino’s grade-school classmate and former legislative officer, was intended to prove that among the alleged 45 properties, 39 had cancelled titles or are no longer owned by Corona or his family, while one was subsumed in one of the five properties declared by Corona. Demetrio Vicente, Corona’s cousin, showed deeds of sale to prove that he had purchased seven parcels of land among the 45, from Cristina in 1990. Supreme Court chief disbursing officer Araceli Bayuga belied claims of non-payment of taxes from 2002 to 2005, made by Bureau of Internal Revenue Commissioner Kim Henares. Corona paid withholding tax as indicated by the “alpha list” of such payments filed by the Supreme Court in those years. Bayuga and House of Representatives Electoral Tribunal (HRET) secretary Girlie Salarda, and Senate Electoral Tribunal (SET) secretary Irene Guevarra also certified a total of more than ₧46 million in allowances to the CJ, affirming his capacity to purchase properties in his SALNs. The clerk of court and sheriff of Quezon City recounted that Mrs.

CONTENTS

NATION

WORLD

The President, the Vice-President, the Members of the Supreme Court, the Members of the Constitutional Commissions, and the Ombudsman may be removed from office on impeachment for, and conviction of, culpable violation of the Constitution, treason, bribery, graft and corruption, other high crimes, or betrayal of public trust. All other public officers and employees may be removed from office as provided by law, but not by impeachment. — Section 2, Article XI, 1987 Constitution Under the Philippine Constitution of 1987, impeachment is the process by which so-called impeachable officials of the government are subjected to due process for their trial and, if warranted, removal from office for impeachable offenses enumerated in the Constitution. This process, adapted from the U.S. Constitution, balances two important attributes of democratic government: the separation of powers of the three branches of government, and the principle of checks and balances. Who can be impeached? Impeachable officials number 31, including the President, the VicePresident, the 15 Justices of the Supreme Court, the members of the Constitutional Commissions — Civil Service Commission (one Chairman, two Commissioners), Commission on Elections (one Chairman, six Commissioners), Commission on Audit (one Chairman, two Commissioners) — and the Ombudsman. For what offenses? Impeachable offenses are limited to culpable violation of the Constitution, treason, bribery, graft and corruption, other high crimes, or betrayal of public trust. Upon conviction, the official shall be removed from office and shall be disqualified to hold any office. After impeachment, they can still be subjected to criminal and civil litigation for the acts that led to their impeachment. How impeachment begins. This process begins in the lower house of Congress, as provided under Section 3 (1), Article XI of the Constitution, “The House of Representatives shall have the exclusive power to initiate all cases of impeachment.” Furthermore, Section 3 (3), Article XI provides, “A vote of at least one-third of all the Members of the House shall be necessary either to affirm a favorable

BUSINESS

TECHNOLOGY

Judging the Chief Justice

primer resolution with the Articles of Impeachment of the Committee, or override its contrary resolution. The vote of each Member shall be recorded.” Initiating the impeachment was clarified by then Supreme Court Associate Justice Conchita Carpio Morales in the case of Francisco vs. House of Representatives. She wrote: “Initiation takes place by the act of filing and referral or endorsement of the impeachment complaint to the House Committee on Justice or, by the filing by at least one-third of the members of the House of Representatives with the Secretary General of the House.” Morales further explained this time-bar rule in the recent case of Gutierrez vs. House of Representatives Committee on Justice: “The filing of an impeachment complaint is like the lighting of a matchstick. Lighting the matchstick alone, however, cannot light up the candle, unless the lighted matchstick reaches or torches the candle wick. Referring the complaint to the proper committee ignites the impeachment proceeding. With a simultaneous referral of multiple complaints filed, more than one lighted matchsticks light the candle at the same time. What is important is that there should only be ONE CANDLE that is kindled in a year, such that once the candle starts burning, subsequent matchsticks can no longer rekindle the candle.” In sum, within a year, only one impeachment complaint or group of complaints against an impeachable official can be referred to the House Justice Committee. Subsequent complaints against him or her, including amendments of charges already referred to the committee, would have to wait a year. Assessing form and substance. The House Committee on Justice shall then determine whether the complaint or complaints are sufficient in form and substance. To be sufficient in form, complaints should contain the components required by the rules of the House, such as an enumeration of specific impeachable charges and the ultimate facts on which they are based. Sufficiency in substance is equivalent to the fiscal’s finding of probable cause after evaluating evidence and conducting preliminary investigation of the charges. In the case of impeachment, the House Justice Committee plays the role of fiscal.

The

cenSEI Report

Complaint against Gutierrez: Many matches, one wick News to Go/YouTube

The recommendation of the Justice Committee, whether positive or negative, shall be affirmed by the House plenary. If approved by one-third of the Members of the House, the complaint shall constitute the articles of impeachment as provided under Section 3 (4), Article XI of the Constitution, and shall be transmitted to the Senate which shall constitute itself as an impeachment court. Impeachment and trial. However, if the impeachment complaint is filed or endorsed by at least one-third of the members of the House of Representatives (95 in the current chamber), they shall be automatically transmitted to the Senate for trial. That was what happened in the impeachment of former president Joseph Estrada in 2000 and Chief Justice Renato Corona last December. Upon approval of the complaint by one-third of the House of Representatives, the official is “impeached,” though not yet removed from office. In the history of the Philippines, only three officials have been impeached by the House: Estrada, then Ombudsman Merceditas Gutierrez, and Corona. Impeached officials are tried by the Senate sitting as an impeachment court. If the President is impeached, the Chief Justice of the Supreme Court presides over the trial. In all other cases, the Senate President acts as the presiding officer. The Senate then decides the case; a vote of two-thirds of all senators (16 in the current chamber) shall convict the impeached official.

• May 28-June 3, 2012

cenSEI T H E

Report

Corona gained control of Basa-Guidote Enterprises Inc. due to the execution of the award for damages in a libel case won by Mrs. Corona against Jose Maria Basa in 2001, providing basis for her husband to hold the company’s funds in trust in bank deposits under his name. As a hostile witness, Ombudsman Conchita Carpio Morales testified with a PowerPoint presentation on 82 bank accounts allegedly owned by Corona with at least $10 million in total transactions from April 2003 to February 2012. This report, according to Morales, was put together by Commission on Audit Commissioner Heidi Mendoza based on records from the Anti-Money Laundering Council.

PowerPoint presentation to argue that of the alleged 82 dollar accounts, only four exist. He also justified non-inclusion of these dollar accounts in his SALN by invoking the "absolute" protection under the Foreign Currency Deposits Act (FCDA). Corona closed his testimony by signing a waiver allowing his banks and government agencies to disclose his assets, including dollar holdings, to take effect if and when Senator Franklin Drilon and the 188 congressmen who signed his impeachment complaint also issue waivers. Their refusal, the CJ argued, would prove that his legal position — that FCDA exempts dollar holdings from SALN disclosure — is shared by those legislators.

ARTICLE III. Respondent committed culpable violations of the Constitution and betrayed the public trust by failing to meet and observe the stringent standards under Art. VIII, section 7 (3) of the Constitution that provides that [a] member of the judiciary must be a person of proven The last witness presented by the defense competence, integrity, probity, was the Chief Justice himself, who, for and independence in allowing the three hours, Supreme read a Court to statement act on mere professing his letters filed innocence and by a counsel claiming that which the Aquino caused the administration issuance of was behind his flip-flopping impeachment. decisions He also in final and executory explained the Ombudsman Conchita Carpio Morales testifying on origins of his cases; in alleged Corona dollar accounts GMANews assets and creating an used his own excessive Former Rep. Risa Hontiveros, civil society leader Harvey Keh, and lawyer Emmanuel Santos were also presented as hostile witnesses to prove that these complainants who asked the Ombudsman to conduct her probe on Corona’s dollar accounts had no personal knowledge of their allegations.

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

Judging the Chief Justice

entanglement with Mrs. Arroyo through her appointment of his wife to office; and in discussing with litigants regarding cases pending before the Supreme Court. The Third Article alleges that Corona betrayed public trust in (1) the reversal of a labor case in favor of Philippine Airlines; (2) discussing with a litigant in the Vizconde Massacre case; and (3) the appointment of Cristina Corona in John Hay Management Corp. The Flight Attendants’ case. The root cause of this allegation lies in the Supreme Court’s en banc Resolution A.M. No. 11-101-SC recalling its earlier decision in Flight Attendants and Stewards Association of the Philippines (FASAP) vs. Philippine Airlines (PAL) finding PAL guilty of illegally dismissing 1,423 employees. According to the impeachment complaint, Corona allowed the Court to “act on mere letters filed by counsel,” referring to the letter sent by PAL lawyer Estelito Mendoza pointing out the procedural lapse of the Court when its Second Division resolved a motion for reconsideration of a Special Division. Corona’s Verified Answer noted that there was nothing amiss in acting on a litigant’s letter: “The Supreme Court uniformly treats all such letters as official communications that it must act on when warranted [and] all letters are endorsed to the proper division or the Supreme Court en banc in which their subject matters are pending. No letter to the Supreme Court

The

is treated in secret.” The CJ also explained that A.M. 11-10-1 did not reverse the ruling to favor PAL, but merely referred the original decision to the proper High Court division for it to issue a final ruling. When the prosecution started presenting evidence to prove this Article, the Senate granted the motion of the defense to disallow any material implying that Corona received benefits from PAL because they were “improper as these tend to prove bribery, a crime not alleged in Article III of the Articles of Impeachment.” The defense has yet to present evidence on this Article. Discussing the Vizconde Massacre Case with Lauro Vizconde. While the Vizconde massacre case Lejano vs. People was on appeal in the Supreme Court, Corona was visited in his chambers by Volunteers Against Crime and Corruption (VACC) head Dante Jimenez, who brought along Lauro Vizconde. The prosecution alleged that in the meeting, Corona told the visitors that Senior Justice Antonio Carpio was lobbying with the other justices for the reversal of guilty verdicts against the six accused, including Hubert Webb. Corona said in his Verified Answer that only Jimenez was cleared for a courtesy call on him as newly appointed Chief Justice. Corona was “surprised to see Lauro Vizconde come into his chambers with Jimenez,” and just allowed Vizconde to stay as “a result of etiquette and

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

22 Appointment of Corona’s Wife in John Hay Corp. The impeachment complaint said the Chief Justice “compromised his independence when his wife accepted an appointment from Mrs. Arroyo to the Board of

manners.” Corona categorically denied discussing with Vizconde any lobbying by a justice. No evidence was presented for this allegation.

Three score of impeachments with no convictions By Mary Grace V. Pulido

The process of impeachment was resorted to as early as the term of President Elpidio Quirino in 1949, on unproven allegations of nepotism and misappropriation of public funds. Attempts to impeach Presidents Diosdado Macapagal and Ferdinand Marcos were also unsuccessful during their respective terms in office. The 1987 Constitution provisions on impeachment were first tested in 1993, when an impeachment complaint was filed against several members of the Supreme Court for charges of culpable violation of the Constitution, corruption and betrayal of public trust, but was later dismissed. A compilation from GMA News Research provides a record of past impeachment complaints against various officials. The Estrada trial. In October 2000, an impeachment complaint was filed against President Estrada by Representatives Heherson Alvarez and Ernesto Herrera, and endorsed by 77 other members of the House of Representatives for immediate transmittal to the Senate. The trial was short-lived, lasting only 23 days. The early termination was triggered by the failure to open a “second envelope,” which purportedly contained evidence of Estrada’s undisclosed bank deposits. He resigned after millions of Filipinos gathered at EDSA to demand his ouster. The Davide impeachment complaints. In June 2003, it was Estrada’s turn to fire at the head judge of his impeachment trial when he filed an impeachment complaint against Chief Justice Hilario Davide (first impeachment complaint) and eight associate justices of the Supreme Court alleging that the respondents participated in partisan politics in the removal of Estrada. The House Committee on Justice dismissed it for being insufficient in substance. Four months later in October, Chief Justice Davide was again the subject of an impeachment complaint

CONTENTS

NATION

filed by representatives Gilberto Teodoro and Felix Fuentebella, with 88 congressmen. The complaint centered on the alleged misuse and improper disbursement of the Judiciary Development Fund. But the Supreme Court ruled in the case of Francisco, Jr. vs. House of Representatives that the complaint was the second in a year and was therefore prohibited. In this respect the House of Representatives voted to abide by the Supreme Court ruling and no longer transmitted the articles of impeachment to the Senate. Petitions against President Gloria Arroyo. Serving for nine and a half years, Gloria Macapagal Arroyo faced the most impeachment complaints of all Philippine officials. In 2005, the first of a series of impeachment attempts began when Atty. Oliver Lozano filed a complaint against Arroyo charging her with breach of public trust and for alleged cheating in the 2004 national elections. Other complaints were filed, but the House voted to dismiss them for being barred by the constitutional rule on one complaint per year. The Lozano complaint was later dismissed for being insufficient in substance.

Chief Justice Davide presides Estrada impeachment trial ABS-CBN/YouTube

WORLD

BUSINESS

TECHNOLOGY

Judging the Chief Justice

John Hay Management Corporation (JHMC).” Stressing that that Mrs. Corona was already part of JHMC even before her husband was appointed to the Supreme

Court, the Verified Answer also pointed out that “No law prohibits the wife of a Chief Justice from pursuing her own career in the government.” No evidence was presented for this allegation.

In 2006, eight impeachment complaints were filed against Arroyo. One was tackled only to be junked for insufficiency of substance. Lawyer Rafael Pulido filed a new impeachment complaint in October 2007 followed by a supplemental complaint by Atty. Harry Roque and the United Opposition. These complaints suffered the same fate as those in the previous years. The year after, another impeachment complaint was filed, by individuals led by Roque and Joey de Venecia, based on different alleged irregularities including the botched NBN-ZTE deal, controversies in the North Rail project, and the aborted Memorandum of Agreement on Ancestral Domains. All of these complaints were junked. The Ombudsman Gutierrez impeachment. In March last year the House Committee on Justice found sufficient grounds in the complaint filed by Representative Risa Hontiveros Barraquel over then Ombudsman Merceditas Gutierrez’s alleged inaction in prosecuting erring officials involved in various controversies and her alleged failure to

House Justice Committee Chair Niel Tupas Jr. announces that the impeachment complaint against Justice Mariano del Castillo is sufficient in substance GMANews video

The

cenSEI Report

file criminal and civil charges against those allegedly involved in the cancelled NBN-ZTE deal, including President Arroyo, who appointed her. A few weeks after the Committee on Justice endorsed the complaint to the plenary, the House of Representatives mustered more than double the required signatures. A total of 212 congressmen voted to impeach Gutierrez and transmit the articles of impeachment to the Senate. Opposition Congressman Edcel Lagman alleged the House was pressured by a Palace threat to impound pork barrel funds of those not willing to sign. A month later after the successful impeachment and transmittal of the articles of impeachment to the Senate, Gutierrez personally tendered her resignation to President Benigno Aquino III. Plagiarism charge against Justice del Castillo. Amid the impeachment trial of Chief Justice Renato Corona, the House Committee on Justice, whose chairman and key members are among the Prosecution team, managed to find the complaint against Associate Justice Mariano del Castillo sufficient in substance, despite an earlier revelation by the comfort-women petitioners (subsequently retracted) that they did not want the magistrate to be removed from office. The charge against del Castillo included the allegations of plagiarism when he penned the decision in Vinuya vs. Executive Secretary. Petitioner Isabelita Vinuya, through counsel Atty. Harry Roque, raised the issue of plagiarism, twisting of cited materials, and gross neglect against del Castillo in an administrative case before the Supreme Court, but the same was dismissed for lack of merit. The Supreme Court did not hear the merits of the Vinuya case, which was then on motion for reconsideration.

• May 28-June 3, 2012

cenSEI T H E

Report

24 ARTICLE IV. Respondent and partiality in consistently betrayed the public trust and/or disregarding the principle of res committed culpable judicata and in violation of the deciding in favor of With no evidence Constitution when gerrymandering in it [sic] blatantly the cases involving for five Articles, disregarded the 16 newly-created and two charges the principle of cities, and the involving collegial separation of promotion of Dinagat powers by issuing Island into a province. decisions, the a status quo ante impeachment is order against The Fifth Article alleged down to Article II: the House of that Corona disregarded Representatives in the res judicata rule not not declaring all the case concerning to revise final decisions, assets in SALNs the impeachment of when the Supreme Court then Ombudsman revised rulings in League Merceditas Navarro-Gutierrez. of Cities vs. Comelec, Navarro vs. Ermita, and FASAP vs. Philippine Airlines. The first The Fourth Article accused the Chief Justice case involved the 16 new cities created by RA for the High Court’s collegial act of stopping 9009, and the second case the new Province the House of Representatives from acting of Dinagat Island created by RA 9355. The on an impeachment complaint against then last case, on the other hand, involved the Ombudsman Merceditas Gutierrez while her same case covered by Article III. petition against the complaint was pending. Corona’s Verified Answer argued that Corona’s Verified Answer cited the the Court did not flip-flop in the first landmark decision in Francisco vs. House of gerrymandering case of League of Cities Representatives, penned by Justice Conchita by citing Justice Roberto Abad’s concurring Carpio Morales, affirming the Supreme opinion in Navarro“Of 23 Justices who voted Court’s power to determine whether the in the case at any of its various stages, 20 House violated the Constitution or gravely Justices stood by their original positions. abused its discretion in impeachment They never reconsidered their views. Only proceedings. The Supreme Court eventually three did so and not on the same occasion, ruled in Gutierrez vs. House Committee on showing no wholesale change of votes at Justice that the House may validly pursue any time.” Thus, out of the 23 Justices who its case against the Ombudsman, which participated (seven had replaced retirees), eventually led to her impeachment. only three switched votes, and as Justice Abad points out, these three did not “flipNo evidence was presented for this Article. flop” because they only switched once. ARTICLE V. Respondent committed culpable violations of the constitution through wanton arbitrariness

CONTENTS

NATION

WORLD

Regarding FASAP vs. PAL, as mentioned earlier, Corona did not participate in the recall of the original decision.

BUSINESS

TECHNOLOGY

Judging the Chief Justice

Moreover, the case has not been decided but merely referred to the proper division for final ruling. No evidence was presented for Article V. ARTICLE VI. Respondent betrayed the public trust by arrogating unto himself, and to a committee he created, the authority and jurisdiction to improperly investigate an alleged erring member of the Supreme Court for the purpose of exculpating him. Such authority and jurisdiction is properly reposed by the constitution in the House of Representatives via impeachment. The Sixth Article alleges that Corona “created” the Supreme Court’s Ethics Committee that absolved Justice Mariano Del Castillo on charges that he plagiarized material for the Court’s decision in Vinuya vs. Executive Secretary. In effect, this Article questions the Supreme Court’s power to create the committee for encroaching upon the impeachment power of the House of Representatives.

non-impeachable, the Supreme Court en banc may decide the case and, if warranted, impose administrative sanctions against the offender.” Corona also traces the committee’s creation to the “power of the Supreme Court to discipline its own members as provided for in Section 6, Article VIII of the Constitution,” granting the High Court “administrative supervision over all the courts and the personnel thereof.” Moreover, it was the Supreme Court under then-Chief Justice Reynato Puno that created the ethics committee under A.M. 10-4-20-SC, even before Corona became Chief Justice and del Castillo allegedly committed plagiarism. No evidence was presented for Article VI. ARTICLE VII. Respondent betrayed the public trust through his partiality in granting a temporary restraining order (TRO) in favor of former President Gloria MacapagalArroyo and her husband Jose Miguel Arroyo in order to give them an opportunity to escape prosecution and to frustrate the ends of justice, and in distorting the Supreme Court decision on the effectivity of the TRO in view of a clear failure to comply with the conditions of the Supreme Court's own TRO.

The Verified Answer retorts:“The Committee’s power is only recommendatory. If the offense is impeachable, the Supreme Court en banc will refer the matter to the House of Representatives for investigation. On the other hand, Justice Secretary Leila de Lima on the witness if the offense is stand ABS-CBN

The

cenSEI Report

The Seventh Article involves the High Court’s November 15, 2011, temporary restraining order (TRO) against

• May 28-June 3, 2012

cenSEI T H E

Report

26 the Department of Justice Watch List Order (WLO) to provide Arroyo the “opportunity to escape prosecution.” It likewise alleges that Corona distorted the Court’s decision on the effectivity of the TRO based on Justice Lourdes Sereno’s opinion. His Verified Answer denied allegations that the Court coordinated with Arroyo in issuing the TRO: “Information that the Supreme Court en banc would be taking up those TRO applications on the morning of 15 November 2011, was widely known [since] crews of all major television stations and print reporters had been camping at the gates of the Supreme Court that very morning.” The Answer also stressed that the majority of justices ruled that the TRO was immediately executory, rebutting Sereno’s claim that Corona distorted the Court’s decision. Prosecution Evidence: Justice Secretary De Lima read and expounded on Justice Sereno’s dissenting opinion, but the Senate ruled to reject her testimony as hearsay. Senate President Enrile pointed out that De Lima’s view “on the irregularities [surrounding the TRO] did not come from personal knowledge but by reading only.” Justice Sereno herself declined to testify for the prosecution. No evidence yet from the defense on Article VII. ARTICLE VIII. Respondent betrayed the public trust and/or committed graft and corruption when he

CONTENTS

NATION

WORLD

failed and refused to account for the judiciary development fund (JDF) and special allowance for the judiciary (SAJ) collections. The last Article alleges that the Chief Justice refused to (1) report the status of the Judiciary Development Fund and the Special Allowance for the Judiciary; (2) remit SAJ collections to the Bureau of Treasury; (3) account for funds released and spent for unfilled positions in the Judiciary; (4) remit fiduciary funds in the amount of ₧5.38 Billion; and, (5) correctly state the balance of the SAJ in the amount of ₧559.5 Million. Corona’s Verified Answer cited: (1) Statement of Allotment, Obligation and Balances for 2010 submitted to the Department of Budget and Management (DBM); (2) Reports of Collections and Disbursements on the JDF and the SAJ Fund submitted to the Commission on Audit (COA), the DBM, the House of Representatives, and the Senate; (3) Report of Collections and Disbursements on the Fiduciary Fund for 2008 and 2009 submitted to the Senate; and (4) Report on the Utilization of Savings for 2008 and 2009 submitted to the Senate. Report on the JDF submitted to COA. Records of the COA showed “that all disbursement vouchers for the funds of the JDF and SAJ are submitted to the resident COA auditor.” SAJ Collections not remitted to the National Treasury. Corona invoked RA 9227 and Joint Circular No. 2004-1, issued under then-Chief Justice Hilario Davide in 2004. RA 9227 grants the Chief Justice the power to use SAJ surplus to grant

BUSINESS

TECHNOLOGY

Judging the Chief Justice

additional allowances to court personnel. Meanwhile, Circular 2004-1 states that “collection of the Judiciary from funds enumerated under items 2.1.1 and 2.1.2 above shall no longer be remitted to the National Treasury. Instead, these shall be deposited in an authorized government depository bank as may be determined by the Supreme Court.” Funds for unfilled positions in the Judiciary. Corona cited Section 25(5), Article VI of the Constitution, which empowers the Chief Justice “to augment

any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations.” The realignment of such funds, including those for unfilled positions, was evaluated in the Statement of Allotment, Obligation and Balances (SAOB) for 2010 submitted to DBM. Data on savings for 2008 and 2009, though not accumulated under Chief Justice Corona, had also been submitted to Congress in the 2011 budget hearing. No evidence was presented for Article VIII.

SALN, TRO, FCDA and other legal wrangles in the Senate By Atty. John Carlo Gil M. Sadian In every controversy brought to court, decisions are based on two things: facts and law. Questions of fact are decided on evidence from opposing sides, while legal issues hinge on the court’s interpretation of applicable statutes. The impeachment of Chief Justice Renato Corona generated several legal controversies that the Senate sitting as an impeachment court had to address. Here are some of the most contentious ones: Was the impeachment complaint properly verified? Even before the trial started, the defense questioned the validity

The

of the complaint for “failure to comply with the requirement of verification.” Section 4, Rule 7 of the Rules of Court requires that a complaint be “verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his knowledge and belief.” On the first day of the trial, the defense moved for outright dismissal, arguing that it was impossible for 188 congressmensignatories to have read the 56-page Articles of Impeachment in just a few hours. In its very first ruling, the Senate court denied this motion. Senate President Juan Ponce Enrile, presiding over the trial, said the complaint was properly verified according to House rules. The ruling, in effect, affirms that the lower chamber alone

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

28 determines how it would handle complaints, including verification.

Practices Act (R.A. 3019).

The charter states: “A public officer or The defense employee shall, disagreed. It filed upon assumption six petitions still of office and as pending before often thereafter Senate President Enrile says the Senate will the Supreme as may be ‘respect the TRO by the Supreme Court … the Court assailing required by interpreter of the Constitution and the guardian of the validity of law, submit a our basic rights’ ABS-CBN the complaint. declaration under And while Senate oath of his assets, President Enrile has repeatedly recognized liabilities, and net worth. ... In the case of the the Court’s jurisdiction on legal issues in President, the Vice-President, the Members the trial, he nonetheless expressed his view of the Cabinet, the Congress, the Supreme that the High Court can only interfere with Court, the Constitutional Commissions and the Senate “if we commit mistake and we other constitutional offices, and officers become arbitrary or tyrannical or oppressive of the armed forces with general or flag in our decision ... But while we are doing rank, the declaration shall be disclosed to the work, in our the public in opinion, no one can the manner interfere with us.” provided by law.” How should the SALN be made Since the public? Possibly Supreme the only strong Court affirms charge against the that Corona Chief Justice is submitted the Second Article SALNs, Article alleging that he II then centers “failed to disclose on the question: to the public Were the Chief his statement of Justice’s SALNs assets, liabilities, disclosed to and net worth” in the public violation of section as required 17, Article XI of by law? The the Constitution as applicable legal well as the Antiprovision is Chief Justice Corona’s SALN for 2012 Interaksyon Graft and Corrupt Section 8 of the

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

Judging the Chief Justice

Code of Conduct and Ethical Standards for Public Officials and Employees (RA 6713). It recognizes the public's right to know the SALNs of public officials, but prohibits access to or use of SALNs “for (1) any purpose contrary to morals or public policy; or (2) any commercial purpose other than by news and communications media for dissemination to the general public.” With that stipulation, government bodies, including the Supreme Court, Congress, and the Office of the Ombudsman, have set rules for public access to SALNs of their officials and staff. Now if High Court procedures limit access to the CJ’s Statements, should he be penalized? Indeed, under those guidelines, Corona reportedly needs the approval of his fellow justices before making his SALN public. Can evidence be presented for offenses not in the complaint? The Prosecution tried to use the SALNs to show unexplained wealth in violation of RA 3019. But Enrile issued a ruling barring evidence of ill-gotten wealth under Article II, because the offense it falls under — corruption — is not among those alleged in the Article: breach of public trust and culpable violation of the Constitution. Can the CJ and his family be subpoenaed? On day one of the trial, the Prosecution asked the Senate to subpoena Corona, his wife Cristina, their children, and a son-in-law. Senate President Enrile ruled that subpoenas cannot be issued because (1) Corona cannot be compelled to be a witness against himself—Section 17, Article III of the Constitution; (2) Cristina Corona enjoys the spousal privilege under the marital disqualification rule—Section 22, Rule 130 of the Rules of Court; (3)

The

Corona’s children may not be compelled to testify against their parents under the parental and filial privilege rule—Section 25, Rule 130 of the Rules of Court; and, (4) Corona’s son-in-law is also covered by parental and filial privilege by necessary implication. These are basic rules in evidence designed to allow family members to share confidences without fear of being asked to testify against one another. When Senator Alan Peter Cayetano objected to Enrile’s ruling, a vote was called, and Enrile was affirmed by his colleagues by a vote of 14-6. No fishing expeditions. When the Commissioner of Internal Revenue was to testify about income tax returns (ITRs) of Corona and his family, Senate President Enrile stressed that the relevance of the ITRs to the Second Article must first be shown. He also reminded prosecutors that their “buckshot approach” in requesting subpoenas to produce all sorts of records without knowing whether they are of value to the case, constitutes “fishing” unless such requests are made with “specificity.” This reminder was repeated by Enrile when the prosecution sought to subpoena bank information and documents from the Supreme Court. The prosecution explained that the ITRs would show that the couple cannot justify their acquisition of expensive properties, Senate President Enrile pointed out that the trial dealt with what was declared or not declared in the SALNs, and that whatever Corona did before becoming Chief Justice had no relevance to the impeachment trial. In short, the charge at the bar is undeclared assets, not unexplained or illicit wealth.

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

30 Do SALN errors constitute an impeachable offense? According to prosecutor Rep. Elpidio Barzaga, Corona’s failure to fill up the column under acquisition cost for all of his SALNs from 2002 to 2011 constitutes “false entries” which amounts to “perjury” and the “highest betrayal of public trust.” Enrile then quizzed Barzaga whether he views perjury as a high crime, to which the congressman said “no.” The legal maxim ejusdem generis [literally, of the same kind] may apply here: if the ground for impeachment is not among offenses listed in the Constitution, that ground must be a “high crime” of equal gravity and magnitude as the specified offenses of culpable violation of the Constitution, treason, bribery, or graft and corruption. One indication of severity is the punishment for the offenses. Treason, bribery, and graft and corruption are capital offenses punishable by life imprisonment. Perjury, on the other hand, merits a maximum of 2 years and 4 months in jail. Can a corporation undergoing dissolution conduct business? When the prosecution tried to connect the revocation of the articles of incorporation of Basa Guidote Enterprises Inc. to Corona’s ₧11-million loan from BGEI as declared in his 2004 SALN, lawyer senators lectured prosecutors on basic rules in corporate law related to a firm’s dissolution.

CONTENTS

NATION

WORLD

Enrile explained that upon its dissolution, BGEI still has to undergo liquidation. Senator Francis Escudero added incorporators of a dissolved corporation become co-owners in an association that can still do business. Senator Alan Peter Cayetano argued that a corporation under process of dissolution can still lend money. Can bank accounts be divulged in impeachment proceedings? The very strict Bank Secrecy Law (RA 1405) protects the confidentiality of bank deposits, but lifts it for impeachment. So the prosecution asked the Senate to subpoena Corona’s deposit information. Senate President Enrile reiterated his specificity requirement, and prosecutors complied with copies of papers apparently pointing to his bank accounts. After the Senate got executives and staff of Philippine Savings Bank (PSBank) and Bank of the Philippines Islands to testify and submit deposit information, it emerged that the bank papers accompanying the Prosecution’s request for subpoenas were not properly verified and might even be fake or illegally obtained. The question then came up: Is the evidence obtained through a subpoena issued on the basis of unverified or faulty documents invalid? The Senate decided to hear and see the evidence anyway, although Senator Miriam defense Santiago gave the Prosecution a tongue-lashing for submitting papers without knowing the source or affirming their authenticity, as lawyers are required to in court. Senate President Enrile stressed that the subpoenaed records were not necessarily admitted as evidence since they are protected by RA 1405 and the Foreign Currency Deposit Act (RA 6426).

BUSINESS

TECHNOLOGY

Judging the Chief Justice

When PSBank president Pascual Garcia III testified, he only discussed peso accounts, after being told by lawyers that the exemption from the Bank Secrecy Law in impeachment cases does not cover dollar accounts. Senator Franklin Drilon wanted Garcia cited in contempt for refusing to answer, but Senate President Enrile instead ordered him to submit a written explanation for his refusal.

Senate President Enrile then declared that “in deference to the Supreme Court,” the impeachment court and the parties must “take heed” and “discuss issues other than foreign currency deposits because of the presence of the TRO from the Supreme Court,” in recognition of the High Court’s authority as “the interpreter of the Constitution and the guardian of our basic rights.”

For TRO: (L-R, top row) Associate Justices Teresita Leonardo-De Castro, Arturo Brion, Lucas Bersamin, Roberto Abad, (L-R, second row) Martin Villarama, Jose Perez, Jose Mendoza, and Bienvenido Reyes Supreme Court

Against TRO: (L-R) Senior Associate Justice Antonio Carpio and Associate Justices Diosdado Peralta, Mariano Del Castillo, Lourdes Sereno, and Estela Perlas-Bernabe Supreme Court

Should the impeachment court heed a Supreme Court TRO? The next trial day, the Supreme Court voted 8-5 to grant a temporary restraining order on disclosing Corona’s dollar accounts while the Court is considering the petition filed by PSBank against the Senate’s subpoena.

The

The Senate later voted 13-10 to “respect the temporary restraining order issued by the Supreme Court in the case filed by PSBank in so far as the foreign currency deposit accounts are concerned.” In explaining her vote to abide by the TRO, Senator Santiago argued that the “impeachment court is

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

Judging the Chief Justice

not almighty, not absolute, not illimitable, and not more supreme than the Supreme Court.” Those who voted against the TRO, on the other hand, stood by their view that the impeachment court is neither co-equal nor as high as the Supreme Court.

last Friday, he submitted the waiver to the Senate, dispensing with his condition.

While that could have been used to look into Corona’s accounts, the Senate in caucus decided that it could not gather such information, which should In line with be done by the this, Senate Prosecution President and the Enrile has Defense. “This repeatedly court is not a blocked producer of attempts evidence; it is a On TRO against disclosing dollar accounts, Senator by the hearer of facts,” Santiago asserted that ‘the impeachment court is not almighty, not absolute, not illimitable, and not more prosecution ruled Senate supreme than the Supreme Court‘ ABS-CBN and some President senators Enrile. “We can to elicit take note of the answers from witnesses involving dollar waiver, but we cannot act on it.” accounts. In one of his most notable pronouncements, the 8x-year-old former Is the impeachment a judicial or a martial-law defense minister declared political process? The significance of that while it is his “humble view that the these legal questions really depends on how Supreme Court cannot assume jurisdiction the senator-judges would relate them to the over the sole power of the Senate to try and facts as presented by both the prosecution decide this impeachment case,” it is still and the defense. Enrile has reiterated his “duty as presiding officer to respect the several times that the court should not Supreme Court’s authority to review acts judge on the basis of evidence, and not bow of the impeachment court in interlocutory to outside pressure. matters or how this court conducts trial.” The problem is that senator-judges are not Can the Senate use the Corona waiver only judges but political leaders too. That to get evidence? During his testimony means, whether people like it or not, the last Wednesday, nonetheless, Chief Justice appreciation of the truth in relation to law Corona signed a waiver allowing banks and vice versa must also be tempered by the and agencies to disclose information reality that the Constitution itself placed the about his assets. But he said it would take fate of impeachable officials in the hands of effect only after the 188 signatories of the elected leaders whose primary concern may impeachment complaint and Senator Drilon not necessarily be the truth or the law, but sign their own waivers. Two days later the satisfaction of their constituencies.

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

NEWS ON THE NET Nation

2 key Arroyo allies join Binay's camp Rep. Mitos Magsaysay and Cebu Gov. Gwen Garcia transferred to the Partido Demokratikong Pilipino-Lakas ng Bayan (PDPLaban) of Vice President Jejomar C. Binay where both are expected to be nominated by the PDPLaban as its senatorial bets in the United Nationalist Alliance (UNA). Vice President Binay said he pushed for Rep. Magsaysay describing her as a critic of President Benigno Aquino III but is not involved in the charges against former president Gloria Macapagal Arroyo. UNA is a coalition formed out of Binay’s party and former President Joseph Estrada’s Puwersa ng Masang Pilipino (PMP). Magsaysay used to be with Lakas-CMD, formerly the ruling party, which dropped Arroyo’s KAMPI party from that coalition during its recent national council meeting.

Senate to pass AMLA changes before June 6 Senators agreed to rush approval of at least two key amendments to the existing Anti-Money Laundering Law before Congress adjourns on June 6. The approval of provision allowing an ex parte inquiry into suspected accounts when there is probable cause that the funds there are related to moneylaundering or an unlawful activity or a predicate crime, as well as the provision criminalizing terrorist financing is seen by the bill's

The

primary sponsor Senator Teofisto Guingona III as a way to remove the Philippines from the blacklist of non-compliant countries of the Financial Action Task Force. Amendments to the AMLA have been considered earlier in the first quarter of the year when FATF first informed the Philippines of the possible blacklisting due to non-compliance with international standards. RA 9194 or the present Anti-Money Laundering Act requires banks to report to the AntiMoney Laundering Council every encounter of covered transactions or transactions in cash or other equivalent monetary instrument involving a total amount in excess of five hundred thousand pesos within one banking day.

Only 3 lawmakers take up Corona's dare on waivers Three of the 188 lawmakers have accepted the challenge of Chief Justice Renato Corona to sign a waiver allowing the opening of their bank accounts. Kalinga party-list Rep. Abigail Faye Ferriols, ACT party-list Rep. Antonio Tinio, and Pangasinan Rep. Kimi Cojuangco rose to the challenge of the Chief Justice for transparency and accountability with Ferriols saying that she does so in good faith to prove she that she is not hiding anything. Members of the minority bloc at the House of Representatives also said that they will allow the opening of their bank accounts only if those who voted for the impeachment of the Chief Justice would do so.

cenSEI Report

Earlier during the week, Corona finally testified and signed a waiver to look into his deposits and properties only on the condition that the congressmen who signed the impeachment complaint plus Senator Franklin Drilon would do the same. Drilon and the members of the prosecution team were quick to reject Corona’s challenge calling it a strategy to let them fall into Corona’s hands. Defense panel spokesman Tranquil Salvador III said that the challenge made by Corona was “a call to unity" at times like these when the people expect transparency in government.

NDRRMC on red alert on first week of classes The National Disaster Risk Reduction and Management Council will go on red alert at the opening of classes beginning June 4 to ensure the safety of returning students. On the part of the Philippine National Police, it will utilize mobile and foot patrols to ensure police visibility around schools nationwide. In addition to crime-busting and in coordination will local government units, the PNP will also check computer shops, billiard halls and other recreation areas to prevent students from skipping classes. The Department of Education earlier announced that classes in public schools open in June 4. Government authorities revealed that everything is set for this year's opening.

• May 28-June 3, 2012

WORLD

cenSEI T H E

Report

The Age of Autism

With an apparent rise in the number of cases, theories about the conditionâ&#x20AC;&#x2122;s causes abound, but there is no known cure By Marishka Noelle M. Cabrera

STRATEGY POINTS One in 88 American children has autism, according to a study by the United States Centers for Disease Control and Prevention Autism is the fastest growing neurobiological condition in the world Early intervention can significantly improve language and cognitive skills

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

The age of autism

n the United States, 1 in 88 children is diagnosed with Autism Spectrum Disorder (ASD), based on research done by the United States’ Centers for Disease Control and Prevention (CDC). In 2008, the CDC surveyed a total of 14 Autism and Developmental Disabilities Monitoring (ADDM) Network sites across the country by evaluating information“obtained from children’s evaluation records to determine the presence of ASD symptoms at any time from birth through the end of the year when the child reaches age 8” and found that the overall estimated prevalence of ASDs is 11.3 per 1,000 children (1 in 88). “These data confirm that the estimated prevalence of ASDs identified in the ADDM network surveillance populations continues to increase,” the report says. A Reuters report notes the 25% increase from the last estimate given by the CDC

in a study conducted in 2006, where the prevalence was 1 in 110 American children, and near-double the rate reported in 2002. A chart from advocacy group Autism Speaks shows the dramatic rise in the prevalence of autism in the U.S. over the last two decades, from 1 in 5,000 in 1975 to 1 in 500 in 1995. In the CDC report, Autism Spectrum Disorders are a group of “developmental disabilities characterized by impairments in social interaction and communication and by restricted, repetitive, and stereotyped patterns of behavior.” According to the National Institute of Child Health and Human Development, autism is a spectrum disorder, which means that some may display mild symptoms, while others may have more serious symptoms. What makes it all the more difficult to spot early on is because it is a disorder diagnosed by its symptoms and not by biological markers, such as those that can be analyzed through a blood test.

AUTISM PREVALENCE IN THE UNITED STATES

1 in 110 1 in 150 1 in 166 1 in 250 1 in 500 1 in 5000 1975

1 in 2500 1985

1995

2001

2004

2007 2009

Source: Autism Speaks

The

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

36 Is there an epidemic of autism? With the rising number of autism cases, can this recent prevalence be considered epidemic? Mark Roithmayr, president of Autism Speaks, is quoted in a March article from NPR (National Public Radio) as saying, “This is a national emergency in need of a national plan.” In the same report, however, CDC head Dr. Thomas Frieden was quick to explain, “There is the possibility that the increase in cases is entirely the result of better detection.”

A opinion article in December from ScienceAlert, a website focusing on research done in Australia and New Zealand, tells readers that the reasons for the increase in autism numbers are many and varied. “One of the most important discoveries in autism research over the past two decades has been that the syndrome varies along a spectrum of severity,” the article notes. Hence, the understanding that children can exhibit “less severe autistic symptoms” has led to the development of new diagnostic categories, such as Asperger Syndrome and Pervasive Developmental Disorder-Not Otherwise Specified Mark Roithmayr, (PDD-NOS).

‘There is a great unknown. Something is going on here that we don’t know’

One study that may ~ support this claim is a Autism Speaks 2008 paper “Diagnostic change and the In addition, socio-cultural increased prevalence influences play a role in the of autism,” published in the International increasing likelihood of an individual to Journal of Epidemiology in 2009. Authors be diagnosed with autism now. The article Marissa King and Peter Bearman of the mentions the following factors: increased Institute of Social and Economic Research awareness and understanding of autism and Policy at Columbia University among parents and health professionals, conclude, “Changes in practices for the formation of specific autism diagnostic diagnosing autism have had a substantial teams, a lessening in the stigma associated effect on autism caseloads, accounting with a diagnosis, and the availability of for one-quarter of the observed increase governmental assistance specific to children in prevalence in California between 1992 with an autism diagnosis. and 2005.” Autism cases in different countries. One thing is for certain—the cause as to Based on data gathered by the Monarch the rapid rise of autism diagnoses has Center for Autism, ASD is the “fastest been “a major point of contention between growing neurobiological condition in the advocates and scientists,” according to the world.” In a 2007 estimate of the number NPR report. of individuals with autism in selected nations, the Monarch Center for Autism With respect to Dr. Frieden’s qualification, presents the following data: Action for “only part of the increase is better Autism India reports 2,000,000 cases diagnoses,” Roithmayr says, maintaining in India, Peking Health Center estimates that, “There is a great unknown. Something around 1,100,000 cases in China, the is going on here that we don’t know.” United Kingdom has an estimated 650,000

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

The age of autism

cases, the Autism Society of the Philippines estimates 500,000 local cases, Thailand has around 180,000 cases, and Mexico’s Ministry of Health estimates that Mexico has 150,000 cases.

A 2011 study conducted by Young-Shin Kim of the Yale Child Study Center and colleagues in the U.S., Korea, and Canada reveals ASD affects an estimated 2.64% of the school-age population in South

Red flags: How to tell if a child is autistic According to Autism Speaks, diagnosing autism requires “specially trained physicians and psychologists to administer autism-specific evaluations” in order to determine if the child has some form of Autism Spectrum Disorder (ASD). Diagnosing autism involves “a multi-disciplinary team of doctors,” which includes a pediatrician, psychologist, speech and language pathologist, and an occupational therapist. Parents, too, should be mindful of “developmental milestones” from birth to at least 36 months of age, as the disorder has much to do with the areas of communication (both verbal and non-verbal), social interaction, and routines or repetitive behaviors. In addition, three groups that have higher-than-normal risk for ASD are boys, siblings of those with ASD, and people with other developmental disorders like Fragile X syndrome, mental retardation, and tuberous sclerosis. Below is a list of common symptoms, or red flags, of ASD, based on data from PubMed Health, National Institute of Neurological Disorders and Stroke, and the National Institute of Child Health and Human Development, which can be mild, moderate, or severe: • • • • • • • • • • • • • • • • • • •

The child does not respond to his/her name Cannot explain what he/she wants Has heightened or low senses of sight, hearing, smell, taste, or touch Cannot follow directions Has short attention span Throws violent or intense tantrums Shows aggression towards others or the self Is overly active, uncooperative, or resistant Has poor eye contact and does not smile when smiled at Seems to tune people out at times Has impaired ability to initiate or sustain a conversation with others Prefers to play alone and is not interested in other children Has an odd preoccupation with certain objects or subjects Spends a lot of time lining things up or arranging things in a particular order Has difficulty in pretend or imaginative play, doesn’t imitate the actions of others, and prefers solitary or ritualistic play Has difficulty interpreting what others are thinking or feeling because he/she cannot understand social cues, such as facial expressions or tone of voice, and shows lack of empathy Exhibits unusual attachments to objects, schedules, or rituals Does not refer to self correctly Misses communication and language milestones, such as: babbling or cooing by 12 months, gesturing (pointing, showing, reaching, waving “bye-bye”) by 12 months, saying single words by 16 months, saying two-word spontaneous phrases by 24 months, or any language or social skills at any age

The

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

38 Korea, or 1 in 38 children, according to a news release from Yale. “While this study does not suggest that Koreans have more autism than any other population in the world, it does suggest that autism may be more common than previously thought,” colleage researcher and cultural anthropologist Roy Richard Grinker of George Washington University says. An April 2011 article on attempts to track down autism prevalence rates around the world, as published on the website of the Simons Foundation Autism Research Initiative, adds that few autism prevalence studies occur outside the U.S., U.K., and Canada because of stigma, lack of awareness about mental health, and poor medical infrastructure. In addition, cultural, language, and methodological factors may explain differences in autism prevalence studies. However, genetic differences among populations are not ruled out, as well. A combination of genetic susceptibilities and environmental factors. Even with today’s advances in technology and medicine, this developmental disorder has no known cause, though experts believe it may be a combination of environmental factors and genetic susceptibilities.

CONTENTS

NATION

WORLD

An October 2010 article on the official blog site of Autism Speaks discusses new studies that may shed light on the causes of autism prevalence and states that “approximately 53% percent of the increase in autism prevalence over time may be explained by changes in diagnosis (26%), greater awareness (16%), and an increase in parental age (11%).” Yet, “half of the increase is still unexplained and not due to better diagnosis, greater awareness, and social factors alone.” Research by scientists from the University of California, San Diego, as reported in the Journal of the American Medical Association, reveals that autistic children have 67% more nerve cells in their

BUSINESS

TECHNOLOGY

The age of autism

prefrontal cortex compared to children without the disorder. The prefrontal cortex is the part of the brain that is “involved in processing social skills, communication, cognitive functions and language — all areas in which autistic children often show abnormal development.” In a November article in Time magazine about the report, lead researcher Eric Courchesne studied the brains of seven autistic boys ages of 2-16 after their death and compared his analysis to that of six unaffected boys who died at similar ages. “[T]he autistic children may have been suffering from a dearth of proper nerve connections since the overabundance of neurons may have led to difficulty in their ability to connect and communicate with each other,” the article states. Hence, Courchesne explains, the situation can “lead to pathways that slow down or prevent normal active interaction between different regions of the brain.” The report also notes that the excess of neurons in the prefrontal cortex are formed during early development— in the womb and not after birth—which means that “changes responsible for autism are occurring much earlier than scientists had thought.”

The

In one autism study by Yale School of Medicine researchers reported in Science Daily in November 2010, brain scans using functional magnetic resonance imaging (fMRI) show a “pattern of activity that may characterize the genetic vulnerability to developing” ASD. In analyzing scans of 62 children from age 4 to 17, the team identified three neural signatures, namely: “trait markers -- brain regions with reduced activity in children with ASD and their unaffected siblings; state markers -- brain areas with reduced activity found only in children with autism; and compensatory activity -- enhanced activity seen only in unaffected siblings.” The report says the enhanced activity may signify a “developmental process by which these children overcome a genetic predisposition to develop ASD.” Further, researcher Martha Kaiser says the study may contribute to a fuller understanding of the “brain basis of ASD, and the genetic and molecular origin of the disorder.” Another study by researchers from Yale University, in cooperation with researchers from Carnegie Mellon University, the University of Pittsburgh, and University of California, Los Angeles, revealed about 15% of autism cases in families with an

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

40 autistic child are related to “spontaneous mutations that occur in sex cells,” as reported in an April news release from the university. More importantly, with the discovery of more “spontaneous sequence variations,” medical science may discover ways to intervene in the disorder.

Exposure to chemicals in the environment. In terms of environmental factors, a January 2009 report in Scientific American on a study from the University of California, Davis, links autism incidence to fetal or infant exposures to pesticides, viruses, and chemical household products, among others. “Dozens of chemicals in the environment are neurodevelopmental toxins, which means they alter how the brain grows,” the article notes. And then there’s the controversy about vaccines and autism. As reported by CNN, in an infamous study that was discredited and subsequently retracted, author Dr. Andrew Wakefield said autism is linked to the measles-mumpsrubella (MMR) vaccine. This caused a sharp drop in the number of children getting the vaccine. In the CNN report, British medical journal BMJ concludes Wakefield “misrepresented or altered the

CONTENTS

NATION

WORLD

medical histories of all 12 of the patients whose cases formed the basis of the 1998 study.” Still, the stigma remains. An NPRThomson Reuters poll conducted August last year, 21% of the respondents believe autism is linked to vaccines. This despite the fact, the NPR report says, that evidence does not support the said view. Living with autism. Grim as it may sound, there is no known cure for autism. What’s more, the load that comes with caring for a child with autism does not get better over time, as portrayed in a Newsweek article in April that was based on interviews with parents whose children have special needs. “[T]hat golden day when one’s child is more or less selfsufficient never arrives,” the article notes, “In fact, many parents report that the school years are by far the easiest.” However, while there is no silver-bullet treatment for autism, especially since the exact causes have yet to be pinned down, a range of therapies and interventions are available to improve the lives of people living with the disorder by helping them learn crucial skills, such as making eye contact or having a conversation. In “6 Facts you need to know” (originally published in Parents magazine in July 2004 but reviewed and updated this year), early treatment is considered vital because it can bring about “remarkable progress.” For instance, “though past research suggests that most autistic children have below-average cognitive abilities, a recent study found that early treatment raised children’s IQ scores by about 20 points, to almost normal levels.”

BUSINESS

TECHNOLOGY

The age of autism

For its part, the National Institute of Mental Health says research has shown that “intensive behavioral therapy during the toddler or preschool years” can significantly improve their language and cognitive skills.

Early intervention programs also include: providing challenging learning activities for child’s developmental level at least 25 hours a week; having special training for the family; encouraging activities that help

Teach-nology: Digital aids for special needs Findings from a research project reported in PsychCentral show that virtual worlds can aid in the development of social skills in autistic children. Scientists involved in what is called the Echoes Project developed an “interactive environment that uses multi-touch screen technology to project scenarios to children,” which allows them to practice with different social scenarios without real-world consequences. Early findings reveal that this “has improved the quality of the interaction for some of the children.” The success of the iPad apps, for example,is not limited to the entertainment and access to information they bring; some apps have also helped autistic children develop skills as well. A New York Times article features a couple of websites that review special-needs apps, such as BridgingApps, Apps for Children with Special Needs, and iAutism. “iPad programs have provided a means of communicating for some children with autism who cannot speak or have language delays,” the article says. In the Philippines, two public schools with a special education (SPED) program are reported by FutureGov Asia Pacific to be pilot-testing software that provides visual learning for children with autism. The web-based interactive application, VizZle, is developed by Monarch Teaching Technologies, and is designed to allow teachers to create visual lessons with audio and video to “to create a multi-sensorial learning experience.” Some consumer technology turns out to have novel uses in this regard. Kinect, Microsoft’s motion-sensing input device for videogame consoles and PCs, was used by researchers from the University of Minnesota’s Institute of Child Development in Minneapolis to be able to equip a nursery to can detect unusual behavior. An article from Technology Review explains, “[T]heKinects feed their data to a series of PCs with software that can track the kids’ activity levels, comparing them against an average. If a given child is either more or less active than average, he or she might have autism.” However, researcher Guillermo Sapiro clarifies, “The idea is not that we are going to replace the diagnosis, but we are going to bring diagnosis to everybody…The same way a good teacher flags a problem child, the system will do automatic flagging and say, ‘Hey, this kid needs to see an expert’.”

The

cenSEI Report

My Keepon is a dancing robot that can be used to socialize with autistic children. Video from Technology Review

• May 28-June 3, 2012

cenSEI T H E

Report

The age of autism

achieve a specific learning goal; measuring and recording the child’s progress and adjusting accordingly; providing a high degree of structure, routine, and visual cues; and guiding the child to adapt learned skills to new situations and maintain these skills, among others. As for trying to lower the risk of autism in a child, Dr. David Berger, who specializes in holistic pediatric primary care, reviews in his 2012 article, “From Preconception to Infancy: Environmental and Nutritional Strategies for Lowering the Risk of Autism,” possible strategies to try and prevent autism. He cites proper B-vitamin supplementation, avoiding or minimizing toxic exposures, enhancing maternal nutrition (including supplementation with vitamin D, folate, iron, calcium, and omega-3 fatty acids), assessing maternal food allergies, and breastfeeding newborns, among others. Berger says further study is warranted to examine these findings and determine if the prevalence of autism can be reduced by “correcting imbalances” during preconception, pregnancy, and early childhood.

CONTENTS

NATION

WORLD

For instance, a study from the University of Pennsylvania School of Nursing found that low birth-weight babies, or infants weighing from one to five pounds, are more at risk for long-term health and developmental issues, including autism. As reported in a November news release from the university, the team found that the smaller the baby, the higher the risk. The autism risk for babies weighing about three pounds is 11%. Researcher and director of the Center for Autism and Developmental Disabilities Research and Epidemiology Jennifer Pinto-Martin says in the report that “a mother’s risk of having a low birth weight baby is much greater if she does not care for herself or receive adequate prenatal care.” Ultimately, Autism Speaks encourages parents to “trust their instincts” when it comes to observing unusual behavior in their toddlers, and to find a doctor who will listen to their concerns and refer them to specialists for proper diagnosis and treatment.

BUSINESS

TECHNOLOGY

NEWS ON THE NET World

North Korea says it will 'expand' nuclear program in face of U.S. 'hostility'

with hunger-stricken North Korea if the latter refrains from being provocative and confrontational.

Egypt to pick Islamist or military man as president

In response to what North Korea perceived as reactionary hostility from the United States – after satellite images clearly indicated increased activity around the Asian country's nuclear test site – an unidentified spokesman from the North Korean Foreign Ministry has said that the regime will continue with its nuclear program. The official also insinuated that nuclear testing had not originally been part of North Korea's plans, but remained vague about current preparations. Special Representative for North Korea Policy Glyn Davies reacted to North Korea's statement and talked about the issue in general at an evening press event at China's Westin Chaoyang Hotel last May 22.

The two-day Egyptian presidential election's initial voting process ended last Thursday night, with a top official confirming that about half of the country's registered voters had come out to cast ballots. Based on numbers from 90% of the polling stations, a senior judge confirmed the identities of the two candidates in the lead – the American-educated Islamist and Freedom and Justice Party Leader Mohamed Mursi; and military veteran and former Civil Aviation Minister Ahmed Shafiq. Additionally, Shafiq briefly served as Mubarak's Prime Minister during the last days of his 30year regime.

U.S.-North Korea relations have been tension-filled ever since a pre-arranged food aid deal fell through last April, when North Korea insisted on launching a rocket on April 13. The U.S. saw the launch as a breach of the food aid delivery-nuclear testing suspension exchange the two countries had worked out, and ultimately laid out an ultimatum that North Korea ignored. The rocket broke apart and failed in less than two minutes. However the U.S., through White House official Ben Rhodes, has stated that it may reconsider a food aid deal

The partial results reflect the Egyptian people's main conflict – there are those who oppose an return to the way things were during the Mubarak era, and there are those who fear an Islamist monopoly of the ruling institutions. Meanwhile, murmurs from the country's revolutionaries – mostly youths who participated in the preliminary protests against Mubarak's autocratic rule – seem to indicate a lack of support for either candidate. The deciding run-off, which will conclude the election process, will be held on June 16 and 17.

The

cenSEI Report

Russian spam mastermind jailed for creating botnet Botnet criminal mastermind Georgiy Avanesov was found guilty last week of computer sabotage and sentenced to four years in jail by an Armenian court. 27-year-old Avanesov, whose online operation hijacked the computers of more than 30 million people across the world, was apprehended in Armenia's Yerevan airport in 2010. Authorities made the arrest after taking and dismantling Avanesov's network of PCs. His Bredolab botnet operation started in 2009; at the height of its power, it was producing revenue of around 100,000 euros a month. The trial is a legal turning point for Armenia, as the case is reportedly the first time the country has convicted a computer criminal. Internet spam flooding has been a persistent online problem, especially with the advent of botnets. However, due to recent shutdowns of these illegal crime rings, Symantec’s research concludes that daily spam message volumes in 2011 dropped dramatically – back to levels not seen in more than five years. Prominent junk e-mail operations aside from Bredolab include the massive Rustock botnet, which at its peak sent ten times the largest amount of spam Bredolab ever handled daily; and the recent Flashback botnet, which has affected Mac users worldwide.

• May 28-June 3, 2012

BUSINESS

cenSEI T H E

Report

Not Another Round of Beer: Will San Miguel’s Ambitious Diversification Plan Work? The nation’s largest industrial conglomerate charts a course from beer and food to power, petroleum, property, airlines — and more By Mary Grace V. Pulido and Bill Huang

STRATEGY POINTS San Miguel Corporation has been generating plenty of talk, with its sizeable stake in Meralco, acquisition of Petron, and buy-in into Philippine Airlines, but it’s actually been talking of diversifying widely since 2007 The diversification plan has had its skeptics, but the latest business news would appear to justify the company’s moves San Miguel isn’t quite done with its diversification plan yet, as it looks to continue investing in industries “with scale” and growth potential

CONTENTS

NATION

WORLD

Through its history of over 120 years, the brand name San Miguel has stood for one main product: beer. To be sure, San Miguel Brewery has grown into a huge and diversified conglomerate, becoming the country’s largest publicly listed food, beverage and packaging concern, with over a hundred facilities in the Philippines, Southeast Asia and China. But it wasn’t until 1963 that San Miguel Brewery became San Miguel Corporation, and to this day, beer – eight different local San Miguel brands – remains the company’s most recognizable product.

BUSINESS

TECHNOLOGY

Not another round of beer: Will san miguel’s ambitious diversification plan work?

In October 2008, however, San Miguel Corp. took a major step outside its core specializations in beer and food, when it acquired a 27% stake in Meralco, the country’s largest power distributor, from the Government Service Insurance Corp. Then two months later, it entered an option agreement with SEA Refinery Holdings to buy out the latter’s ownership interest in SEA Refinery Corp., who had just picked up the Philippine National Oil Corp.’s 40% stake in Petron Corp., the country’s largest oil refining and marketing company, which produces 180,000 barrels of petroleum products a day.

And apart from these major steps – plus a couple of initial steps in residential real estate and telecommunications in 2010 – San Miguel has now entered the tight competition in the Philippine airline industry, buying 49% of both Philippine Airlines (PAL) and PAL subsidiary Air Philippines in April. In a joint statement of San Miguel and the group of PAL’s Lucio Tan, the two groups said the new partnership “will allow the two airlines to strengthen operations and stay competitive with the implementation of PAL and Air Phil’s fleet modernization program.”

TIMELINE OF SAN MIGUEL CORPORATION’S ACQUISITIONS AND RELATED MANEUVERS 1987

Acquired La Tondeña Distillers, Inc.

1997

Merged with Coca-Cola Amatil Ltd., buying 24% of the Australian company’s shares in exchange for San Miguel’s 70% stake in the Coca-Cola Bottlers, Phil. Magnolia Nestlé merged with Nestlé Philippines, Inc., Acquired Metro Bottled Water Corporation (producers of Wilkins Distilled Bottled Water) Purchased J. Boag & Son Limited Acquired Sugarland Multi-Food Corporation jointly with La Tondeña Distillers. Reacquired Coca-Cola Bottlers Philippines, Inc, Acquired Pure Foods Corporation (now called the San Miguel Pure Foods Company, Inc.) Acquired Cosmos Bottling Corporation (later sold in 2007 to the Coca-Cola Company) Kirin Brewery Company, Ltd. bought an initial 15.5% of San Miguel's equity

1998 1999 2000 2001

2002 2008

2012

SMC bought the 27% stake of the Government Service Insurance Corporation in Meralco Acquired Petron Oil & Gas International Sdn Bhd Petron acquired 65% of Esso Malaysia Berhard, 100% of Exxon Mobil Malaysia and 100% Exxon Mobil Borneo Bought 40% of PAL Holdings’ stock Sold its 58% stake on Bank of Commerce to Malaysia bank CIMB Source: TCR compilation of information from various corporate and news sources

The

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

In May, SMC and PAL president Ramon Ang was saying, in remarks that were reported in several news outlets, that PAL would return to profitability

in a year from the time SMC invested in it. He figured this could be done by a combination of steps, including improving margins by finding a

A quick history of San Miguel San Miguel’s rich history began with a Spanish Royal Grant to brew beer in the Philippines awarded to Don Enrique Ma Barretto de Ycaza y Esteban, who opened the first brewery in Southeast Asia - La Fabrica de Cerveza de San Miguel in 1890.

first non-U.S. bottling and distribution franchise of Coca-Cola products in the Philippines as part of that expansion strategy. The business name was changed to San Miguel Corporation in 1963.

The crown of Don Andres was later passed after The success of his brewery led Don Enrique Ma his death in 1964 to his son Don Andres Jr. The Barretto to form a partnership with Don Pedro P. younger Soriano not only continued his father’s Roxas and other work in the members of the management of the Filipino-Spanish company’s growing elite in the early business portfolio. But 1900s. It was in the Sorianos’ reign 1913, after the was shaken when death of Don the younger Andres’ Pedro Roxas, cousin Enrique Zobel that the brewery tried to take over the was formally company. Zobel failed incorporated. The in his attempt, and he business name sold his stake in the was changed company to Eduardo to San Miguel “Danding” Cojuangco, Corporation in Jr., a known ally of 1963. then-President and dictator Ferdinand La Fabrica de Cerveza de San Miguel in the early days San Miguel Economist and Marcos. At that time, Brewery, Inc. Corporate Profile writer Hilarion coco levy funds, Henares wrote administered that the elder Andres Soriano entered the brewery principally by Cojuangco, were allegedly used to buy at age 22 when he applied as an accountant. Later additional shares in San Miguel to increase his stake on he would be directing the expansion affairs of in the company. the business. This grandson of Don Pedro Roxas began initiating new strategies to expand the brewery Soriano Jr.’s death in 1984 paved the way for the business of San Miguel as he put up the Royal-Tru rise of Danding Cojuangco to the chairmanship, Orange Plant in 1922, which started the company’s which would last only two years because of the fall of non-alcoholic beverage business and the Magnolia Marcos in 1986. Cojuangco fled to the United States Ice Cream Plant in 1925. Later on he managed together with Ferdinand Marcos leaving the post of to secure the rights for San Miguel to operate the SMC’s chairmanship.

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

Not another round of beer: Will san miguel’s ambitious diversification plan work?

better way to sell tickets, lowering costs by increasing utilization per aircraft to 16 hours per day, and improving its image.

Impetus for diversification: Beer reaches its limit. In “Reinventing the San Miguel Corporation,” a 2009 study by Roberto Galang and Andrew

Cojuangco’s cousin, then-President Corazon Aquino ordered the sequestration of all companies registered under the Coconut Industry Investment Fund that were suspected to have been acquired illegally using the proceeds of taxes levied on coconut farmers, one of which was San Miguel Corporation.

Meanwhile, Cojuangco focused on building a political base, with the establishment of the Nationalist Peoples’ Coalition in 1990 to prepare for a run for the presidency in 1992. Fidel Ramos would win that presidential election, but Cojuangco’s running mate, Joseph Estrada would become vice-president.

The Sorianos’ reign did not end with Andres Jr.’s death, because after the sequestration, President Aquino allowed Andres Soriano III to manage San Miguel Corporation, even as the government effectively took over the company in 1987.

When Estrada became president of the Philippines, Andres Soriano III resigned his position as San Miguel chairman, paving the way for the election of Cojuangco as SMC’s chairman and chief executive officer.

HISTORICAL TIMELINE OF SAN MIGUEL CORPORATION 1889 1890 1900 1913 1922 1925 1927 1931 1963 1964 1983 1984 1986 1987 1998 1999

A Royal Grant to operate a brewery business in the Philippines was granted to Don Enrique Ma Barretto de Ycaza y Esteban Don Enrique Ma barretto opened La Fabrica de Cerveza de San Miguel Don Enrique Ma Barretto formed a partnership with Don Pedro P. Roxas and other Filipino-Spanish elite The brewery was incorporated Don Andres Soriano put up the Royal Tru-Orange Plant The Magnolia Ice Cream Plant was opened Don Andres Soriano secured the rights for to operate the first non-US bottling and distribution franchise of Coca-Cola products in the Philippines Don Andres Soriano became President of the corporation The business name was changed into San Miguel Corporation Don Andres Soriano died and his son Don Andres Jr. succeeded in the management of the corporation Enrique Zobel tried to take over the company but he failed prompting him to sell his shares to Eduardo Cojuangco. Don Andres Jr. died, Cojuangco assumes the chairmanship Corazon Aquino ordered the sequestration of SMC on the suspicion that some of its share were bought by Cojuangco using the coconut levy funds The government took over SMC and Don Andres Soriano III was allowed to manage the corporation Soriano III resigned. Eduardo Cojuangco was elected Chairman of the Board Ramon Ang was appointed Vice Chairman of the corporation Source: TCR compilation of information from various linked sources

The

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

Delios, the authors trace San Miguel’s diversification push to 2007, when CEO Eduardo Cojuangco Jr. told the annual stockholders’ meeting that the company’s leadership wanted to be in “industries that have scale and will grow,” and “to build leadership positions in key areas where important trends are driving future growth.” According to the study, what this meant, effectively, was that San Miguel would reverse its international expansion plans and plan on diversifying into non-allied businesses in the Philippines, e.g., energy, mining, infrastructure, and other utilities. The problem driving San Miguel’s diversification push– or the opportunity, depending on how one wishes to look at it – was that its near-monopoly share of the local beer market, placed just under 90% in 2004, was gradually eroding after that, to just under 88% by 2007 (Exhibit 4). While the market share remained high, the local market for beer was nearing saturation point, as the authors put it, with little potential for expansion outside hoping for high population growth. In addition, the company’s forays into foreign territory provided less than stellar results, with foreign beer markets, especially in China,

CONTENTS

NATION

General Electric: The mergers-and The light bulb of Thomas Alva Edison has gone a long way from being the symbol of a simple electrical innovation to becoming the symbol of a wide, innovative conglomerate of allied businesses. General Electric says on its website that the early business offerings of Edison still form part of the modern day GE, including lighting, transportation, industrial products, power transmission, and medical equipment. Now, GE is engaged in manufacturing appliances, consumer electronics aviation services, services to the oil and gas industries, railroad locomotive and management, energy, finance and credit, and even health care. This transformation from being a giant manufacturing company to a diverse service conglomerate was the work of GE’s talented pool of workers and the leadership of former CEO Jack Welch. Quotations from Welch’s book “Winning” revealed that for him, “mergers and acquisitions give you a faster way to profitable growth.” He adds, “They quickly add geographical and technological scope, and bring on board new products and customers.” This explains the hundreds of mergers and acquisitions made by Welch for GE which already totalled to 600 as early as 1998, based on information in the BusinessWeek article “How Jack Welch Runs GE.” Now, this conglomerate is in the hands of Jeff Immelt who took over management in 2001 ending the two-decade transformation of GE in the hands of Jack Welch. In a Harvard Business Review interview in 2006, Immelts revealed that at the time he took over, he invested a lot in research and development saying, “I put a stake in the ground about products, innovation, and technology, because there we could lean into an existing infrastructure that was decent but needed to go out of the basement.” In 2003, GE made further acquisitions in homeland security, biotechnology and water, which Immelts

WORLD

BUSINESS

TECHNOLOGY

Not another round of beer: Will san miguel’s ambitious diversification plan work?

-acquisitions way to profitable growth noted to be businesses that gave the company a stronger foundation lacking in the company’s then existing business portfolio. He also said that the decisions in shutting down businesses were made when those businesses did not yield a good return or when those businesses did not produce product excellence as in the case of GE’s motor and privateequity investment business. At some point, any expansion has to come to a halt, if only to allow the expanding company to digest its

Growth Traits Growth Leaders Inspire and develop people who know how to help customers and GE grow

Emerging Markets

acquisitions. Such was the case in GE’s decision to stop its acquisition spree. According to the news article, General Electric Says No More Big Deals in 2011, some investors thought that the conglomerate was “extending itself too much with acquisitions” and that GE’s capital spending was worrisome. CEO Immelts addressed these worries as he said that there will no longer be any acquisitions after the completion of the transactions GE closed in 2011, including energy investments.

Customers Use process excellence to satisfy customers and drive growth

Lean Six Sigma Net-Promoter Score Innovation Generate new ideas, and develop capabilities to make them a reality

Execute for Growth: A Six-Part Process General Electric's leaders use this diagram internally to explain how specific initiatives fit into a larger organic growth process

Globalization Create opportunities everywhere, and expand in developing global markets

Imagination Breakthroughs CECOR Framework

Great Technology Have the best products, content, and services

One GE: Enterprise Selling and Brand

Commercial Excellence Develop world-class sales and marketing talent, and demonstrate the value of "one GE"

New Product Introduction Ecomagination

Source: Growth as a Process, Harvard Business Review interview with Jeffrey R. Immelt, June 2006

The

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

becoming more aggressive about defending their local brands from foreign competition.

(One long-term project The acquisitions that San Miguel hopes to break ground on this year, are part of according to the abovethe avowed mentioned Inquirer story, direction that is a planned 4,000-hectare In a word, while San Miguel’s acquisitions development that will San Miguel's since 2008 have been leadership has include an international generating plenty of buzz, airport and terminal, along had in mind no one should be entirely with a business district, since 2007 surprised, since the commercial and retail space, acquisitions are part of and an ecozone, intended as the avowed direction that an alternative to the Ninoy San Miguel’s leadership have has in Aquino International Airport.) mind since 2007. Apart from those areas of interest, More diversified acquisitions and San Miguel has also been investing in buy-ins on tap. And the company’s not infrastructure, buying an initial 46% quite done yet, as the company told the stake in the operator of Metro Manila’s Inquirer in May that it was still looking to 15-kilometer Skyway toll road in do eight more acquisitions before it was December, with an option to buy up to all done, primarily in the energy, mining, 51%, as reported in the Inquirer. The and telecommunications areas, of which it buy-in is said to be the first step in a expected up to two of those acquisitions to partnership with Citra Metro Manila be completed before year-end. Tollways Corp., whose holding company

Petron expands into Malaysia In April, Petron Corp. disclosed that its Petron Oil & Gas International Sdn Berhad in Malaysia completed the acquisition of 65% of Esso Malaysia Berhad, 100% of Exxon Mobil Malaysia and 100% Exxon Mobil Borneo. As early as last year, Petron president Eric Recto talked of the benefits the San Miguel subsidiary could obtain from the acquisition. He said, “When we’re buying crude to feed two refineries, we are going to be a bigger purchaser of crude, and obviously that will mean stronger purchasing power.” The strength of Petron has translated into ₧8.5 billion in consolidated net income for 2011, higher than the ₧7.9 billion consolidated net income for 2010. Petron Chairman and CEO Ramon Ang said in a press statement, “We have been able to sustain our growth momentum despite a year wherein we saw contraction in local sales due to higher product prices.”

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

Not another round of beer: Will san miguel’s ambitious diversification plan work?

San Miguel bought into, and Star Tollways, who operates the 19-kilometer LipaBatangas City toll road. Can it work? The questions in people’s minds regarding the buying/investing spree of San Miguel tend to revolve around how these investments will affect the conglomerate’s bottom line, and whether the company has the expertise to manage these new ventures that it has bought into. To be sure, there were initial misgivings about San Miguel straying so far from its core competencies – Moody’s Investor Service downgraded San Miguel’s localcurrency credit rating from stable to negative in December 2008, and Standard & Poor’s downgraded its foreign-currency credit rating in March 2009 – but the latest news from the corporate front seems to be coming up roses for San Miguel. The company recently reported that on the strength of its recent corporate acquisitions, it feels it can achieve its grosssales target of ₧20 billion by 2012, a full three years ahead of schedule, as reported in the Philippine Daily Inquirer on May 24.

The

About two weeks earlier, San Miguel had reported a 2012 first-quarter net profit of ₧8.5 billion, 19% over its 2011 first-quarter net profit, due to “solid contributions from all its business units.” In June 2011, as reported in the Inquirer, Goldman Sachs and Credit Suisse were arrangers of a recent public offering of secondary shares designed to boost San Miguel’s public float to 14%, in compliance with Philippine Stock Exchange listing requirements. In its “AsiaPacific Morning Summary” of May 31, 2001, Goldman Sachs said that San Miguel “offers a unique Philippines asset mix— leveraged to high-growth industries such as oil refining/power and backed by a stable F&B [food-&-beverage] business” after its three-year transformation from a pure F&B company to a conglomerate, and felt that its trading at a NAV (net asset value) discount of 43%, reflecting the market’s assessment of its risk profile, was unwarranted, believing that the NAV discount should be around 35%. It identified the company’s key risks as follows: changes in alcohol tax system, rise

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

Not another round of beer: Will san miguel’s ambitious diversification plan work?

in raw material prices/cost inflation, lower than expected power demand, and weak refining margins. For its part, Credit Suisse said, in a June 2001 report, that stable cash flows from San Miguel’s traditional businesses consisting of iconic, market-leading food and beverage brands have allowed the company to take advantage of privatization opportunities in the energy, power generation and infrastructure sectors. It said it expects the company’s expansion and diversification to provide it with a 2009-2013 EBITDA (earnings before interest, taxes, depreciation, and amortization) compounded annual growth rate of 35%, far greater than the

CONTENTS

NATION

WORLD

estimated market figure of 14% for the same period. From early indications, San Miguel’s far-reaching and ambitious diversification away from food and beverages and into power, energy, airlines, and infrastructure seems to be working. But while its need to grow beyond the local beer and processed food industry is quite justified, its diversification has brought risks quite apart from shifting brand loyalties and even the company’s transition from steady, cyclical industries into highly capital-intensive industries. In subsequent instalments, The CenSEI Report will look examine San Miguel’s ambitious foray into the growing airline market, as well as its diversification into the strategic if risky power and energy sectors.

BUSINESS

TECHNOLOGY

NEWS ON THE NET Business

Arrest warrants issued vs. accused in Globe Asiatique loan scam San Fernando, Pampanga Regional Trial Court Branch 42 Judge Amifaith Fider-Reyes has officially ordered the arrest of Globe Asiatique (GA)’s owner and several of its officials, in connection with the controversial ₧6.5-billion loan that its supposed "ghost" buyers availed of from the Home Development Mutual Fund (Pag-IBIG). In his capacity as Chairman of the Housing and Urban Development Coordinating Council (HUDCC) and the Pag-IBIG Board of Trustees, Vice President Jejomar Binay revealed the above information regarding the GA case last Wednesday. He added that the judge found probable cause for the syndicated estafa charges against GA owner Delfin Lee and his co-accused; and upon issuing the arrest warrants, recommended no bail. Earlier, the Department of Justice (DOJ) had recommended the filing of the said charges. A HUDCC investigation ordered by Binay years ago exposed that GA used "ghost borrowers" and false documents to obtain over ₧6.5 billion in loans from PagIBIG. In October 2010, a Senate inquiry regarding the controversy was conducted; and in the same month, Binay directed Pag-IBIG to file charges of syndicated estafa against Lee and other GA officials, along with an officer of the agency, before the DOJ.

The

Property surge takes shape in the Philippines

Mindanao leader blames Aquino for banana woes

The competition between the major real-estate players in the Philippines is heating up; fueled by a rising confidence in the local property market. The growing expat population in the country is partly the reason for an increased demand for luxury residential condominiums; while OFWs, with their continuing remittances, aid in economic growth and are also part of the property-buying market. The Social Security System has also further boosted the industry by cutting interest rates and raising the maximum amount of its housing loans.

Vicente Lao, chairman of the Mindanao Business Council (MinBC), blamed President Benigno Aquino 3rd for the banana export industry’s problems in China, Inquirer.net reports. Lao saw China’s rejection of Philippine shipments of the fruit as a direct result of Scarborough Shoal tensions.

In line with the accelerating growth of the property sector, 2012 firstquarter profits soared for most of the local major real-estate players; among them the Alliance Global Group (parent company of Megaworld, Empire East, Suntrust Properties and Global-Estate Resorts), Ayala Land, Century Properties, DMCI, and Filinvest Land. The positive trend has spurred more developments and more mergers. Last April, Ayala Land announced 67 new projects worth P90 billion; the SM Group, on the other hand, is finalizing plans to purchase a controlling stake in Ortigas Holdings in an attempt to gain control of the well-placed Ortigas properties. However, the deal is still in the works, and is said to have been delayed by internal opposition from the Ortigas side.

cenSEI Report

“Usually, when political decisions are made, it’s the business sector that becomes the collateral damage,” said the Davao businessman. Stephen Antig, president of the Pilipino Banana Growers and Exporters Association (PBGEA), estimated losses from rejected exports at P1 billion or P174 million a week. Among those hit are 41 exporters in Mindanao. Malacañang insisted over the weekend, however, that Philippine bananas are getting into China. Deputy Presidential Spokesperson Abigail Valte quoted Agriculture Secretary Proceso Alcala contending that properly screened bananas are being bought. Valte said 190 containers had been allowed into China as of last Saturday. Some 1,500 were reported to be held up in ports. For his part, when more than a hundred containers with rejected bananas had piled up in Chinese ports in mid-May, President Aquino had urged growers to look for other markets.

• May 28-June 3, 2012

TECHNOLOGY

cenSEI T H E

Report

Swipe That Smartphone: One More Way to Pay The smartphone starts to join cash and credit cards as a mode of payment By Tanya L. Mariano

STRATEGY POINTS Experts surveyed by the Pew Research Center say mobile payments will be mainstream by 2020 Security and privacy concerns are main impediments to widespread adoption Younger people are more likely to adopt mobile payments than older people

magine shopping for groceries or dining out and, instead of reaching for your wallet, you just swipe your phone to pay for everything. Or, you owe a friend some money but forgot to bring cash with you. No problem. Just tap your credit card on his smartphone and youâ&#x20AC;&#x2122;re clear. Sounds outlandish? You can actually already do all these things today, but experts surveyed by the Pew Research Center think mobile payments will be mainstream by 2020.

CONTENTS

NATION

WORLD

In a survey of 1,021 Internet experts and other Internet users, they found that 65% believe that eight years from now, consumers will have embraced the method of paying for items with a swipe of a smartdevice, significantly decreasing the usage of cash and credit cards in advanced countries. Three years from now, the mobile-payments market is expected to be worth $670 billion, an almost threefold jump from $240 billion in 2011, according to Juniper Research.

BUSINESS

TECHNOLOGY

Swipe that smartphone: One more way to pay

The past two years also saw a number of big names such as Google, Visa, MasterCard, Verizon, AT&T, T-Mobile, and PayPal, and promising startups getting into the mobilepayments game. Are we witnessing the beginning of the end of paper and plastic money? Many don’t think it likely that cash and credit cards will become obsolete in the future, but with a lot underway in the area of mobile payments, we should expect mobile devices to rise to further prominence as tools of financial transaction. Mobile payment will be important but still in its infancy. A July 2011 KPMG study entitled “Mobile Payments Outlook,” which surveyed nearly 1,000 executives from the financial, technology, telecommunications, and retail sectors, echoes the Pew findings, finding that while over 70% of the companies surveyed say mobile payments are important, 54% believe the field is still in its infancy.

infrastructure, and mobile-commerce clusters – considers a score of 60 to be the inflection point, something yet unattained by even the most advanced market in the Index, Singapore, with a score of 45.6. The Index covered mobile payments at the point of sale, person-to-person transactions, and mobile commerce. Still, mobile payment has been picking up steam in recent years and has become quite the hot topic in the tech world. In the “2012 Mobile Industry Predictions Survey” of consultancy firm Chetan Sharma, mobile payments and mobile commerce emerged as the breakthrough categories in mobile for the second year in a row. Respondents also predict that mobile apps for mobile payments and commerce will be the most popular apps in developed countries, and the second most popular app (after messaging apps) in the developing world.

In this interview, David Sayer, Global Head of Retail Banking, and Tudor Aw, a Media and Communications Partner, both of KPMG, talk about the report’s major findings and the future of the mobile payments industry. MasterCard’s Mobile Payments Readiness Index also reveals that most of the 34 countries they surveyed are far from the “inflection point,” which is “the stage at which mobile devices account for an appreciable share of the payments mix.” The Index, which looks at global markets’ readiness to shift from credit-card payments to mobile by scoring them on six categories – consumer readiness, environment, financial services,

The

In this video on the KPMG website, two KPMG partners discuss the major findings of the “Mobile Payments Outlook” report and its implications on the industry’s future

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

PREDICTED BREAKTHROUGH CATEGORY IN MOBILE IN 2012, PER SURVEY OF MOBILE COMPANIES 70% 60% 50% 40% 30% 20% 10% 0%

e bil

s ty IP on ali Vo p e u e dR bil Co nte ile Mo e b gm Mo Au

ing

is ert

2011

e bil

ise

pr ter

bil

alt

e eH

e bil

rce

e mm

e bil

nts

e ym

2012

Experts surveyed by Chetan Sharma Consulting think mobile payments and commerce will be the breakthrough categories in the mobile world in 2012 Source: “2012 Mobile Industry Predictions Survey,” Chetan Sharma Consulting, page 9

PREDICTED MOST POPULAR CONSUMER APPLICATIONS IN 2012, FOR DEVELOPED AND DEVELOPING COUNTRIES 70% 60% 50% 40% 30% 20% 10% 0%

Location Based Services

Mobile Health Monitoring

NFC based services

Mobile Music

Messaging

Developing

Mobile Mobile Mobile Deals Advertising Augmented Payments and Reality and Coupons Commerce

Developed

Consumer applications for mobile payments and commerce will be among the most popular apps in both the developed and the developing world, say experts surveyed by Chetan Sharma Consulting. Source: “2012 Mobile Industry Predictions Survey,” Chetan Sharma Consulting, page 10

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

Swipe that smartphone: One more way to pay

Security and privacy concerns impede adoption. However, consumer surveys show that many are hesitant to transact via their mobile devices because of security concerns. In a 2012 survey conducted by the U.S. Board of Governors 0f the Federal Reserve System entitled, “Consumers and Mobile Financial Services,” only 12% of respondents made a mobile payment – including online bills payment, m-commerce, and donations and money transfers via mobile – in the past year. Concern over security was the top reason cited for not having used mobilepayment services. A 2012 study by the University of California, Berkeley, also found a low likelihood of adoption, with 74% of Americans saying

they are “not at all likely” or “not too likely” to adopt mobile-payment systems. Widespread adoption in areas outside the U.S. Still, while these surveys reveal that Americans’ reservations, widespread adoption in other parts of the world such as Japan, Canada, Kenya, and Europe may mean that the trend is here to stay. Japan has been using mobile phones fitted with NFC chips developed by FeliCa Networks and which use a mobile wallet service created by NTT DoCoMo since 2004, enabling use of the phone as a transit pass, and a debit or credit card, among other applications, as reported in a press release on the NTT DoCoMo website.

MAIN REASONS WHY AMERICAN CONSUMERS HAVE NOT USED MOBILE PAYMENTS I’m concerned about the security of mobile payments I don’t see any benefit from using mobile payments It’s easier to pay with another method like cash or a credit card I don’t have the necessary feature on my phone I don’t trust the technology to properly process my payments The cost of data access on my wireless plan is too high Other It is difficult or time consuming to set up mobile payments I don’t know of any stores that let you pay with your mobile phone It is not offered by my bank or credit union My bank charges a fee for using mobile payments Refused to answer Source: “Consumers and Mobile Financial Services,” 2012, U.S. Board of Governors 0f the Federal Reserve System, page 13.

The

cenSEI Report

• May 28-June 3, 2012

cenSEI T H E

Report

58 In Kenya, the mobile electronic payment and store-of-value system called M-PESA, which enables users to transfer funds electronically, purchase mobile airtime credit, and pay the bills, has been adopted by some nine million people as of 2009, according to a news report on the World Bank website. This number represents 40% of Kenya’s adult population, and the amount of money transmitted per month average $320 million, or almost 10% of the country’s GDP. The service was developed by Vodafone and launched by its Kenyan affiliate, Safaricom, in 2007.

In terms of consumer readiness, Asia Pacific, Middle East, and Africa seem the most ready to adopt, with Kenya standing out as the leader, according to the MasterCard Index. The Philippines ranks 12th out of the 34 countries surveyed, with a score of 34.7. For further details on how Asian countries are utilizing mobile, see the 2007 KPMG report entitled “Mobile Payments in Asia Pacific.” The report also reviews how different sectors are utilizing such payment systems.

Mobile payment comes in many forms The mobile payments market is currently very diverse and fragmented. The following infographic

from Mobile Payments Today provides a neat overview of the major types of mobile payments.

CURRENT MAJOR TYPES OF MOBILE PAYMENTS MOBILE AT THE POINT OF SALE The Mobile Wallet

This is the first most over-hyped type of mobile payment. It’s paying for things at a store with a mobile device using NFC or “Tap and Go” or some other yet-to-be-hyped method.

MOBILE AS THE POINT OF SALE

THE MOBILE PAYMENT

Every Smartphone is a Cash Register

The Everything Else Mobile Payment

DIRECT CARRIER BILLING

This is “everything else.” Think of it as The second most a catch-all category over-hyped type of for products that let mobile payment. This consumers send is merchants using a money to merchants, device to process credit or even each other (sometimes called cards payments. Do P2P), using mobile not confuse this with devices. It might be mobile wallets, they are at the point of sale. not the same thing. It might be online. It might use text messages or NFC someday.

CLOSED LOOP MOBILE PAYMENTS

Telling Digital The Return of the store Merchants to ‘Put it on credit card: this time, my bill’ it’s mobile This is consumers buying ringtones or games or digital content by putting the charges on their cellphone bills. (You may hear it called “in app biling” too.) Unsexy? Sure, but it’s also the only one that’s actually working in the here-and-now. (People want their angry birds!)

If a company doesn’t want to wait for someone else to build a wallet or a platform, it can always build its own. Starbucks did it. Is it expensive? You bet. Is it worth it? Ask starbucks. They did 3 million transactions in their first two months.

Source: Mobile Payments Today

CONTENTS

NATION

WORLD

BUSINESS

TECHNOLOGY

Swipe that smartphone: One more way to pay

For a global view, this 2004 report by the Committee on Payment and Settlement Systems of the Bank for International Settlements provides detailed information on the state of mobile payments and electronic money, including statistical data and policy responses, in 95 countries and territories around the world. Youth may be biggest adopters. Experts surveyed by the Pew Research Center also noted a kind of digital divide, predicting that younger people will be more welcoming of mobile payment services.

For instance, author Morley Winograd and several other respondents expect older adults to continue using cash and credit cards, even as younger people will have almost entirely shifted to mobile. The Federal Reserve System study also found that adoption is significantly higher among young consumers: the 18-29 age bracket accounts for 37% of mobile payment users, compared to 22% of all mobile phone users, while those aged 30-44 make up another 36% of users, compared to 27% of all mobile phone users.

Of all the different types of mobile payments, the “mobile wallet” has probably gotten the most attention, and this is where a lot of tech and financial giants are flocking. This form of contactless payment usually makes use of near-field communication (NFC) technology, which allows for data transmission between devices that are a short distance away from each other, to be triggered by a tap or a wave. Users can simply tap or wave their smartphone onto a sensor at the point of sale to purchase items. In 2010, Google launched its virtual wallet service called Google Wallet, which initially was only available on Sprint’s Samsung Nexus S 4G phone, but is now also supported on the Galaxy Nexus, and, by the end of May 2012, LG’s Optimus Elite phone and HTC’s Evo 4G LTE, as reported by web magazine Wired. In the U.S. this year, a big carrier-led consortium made up of Verizon, T-Mobile, and AT&T, in partnership with American Express, Discover, Visa, and MasterCard, will launch ISIS, another mobile wallet system. According to a press release on their official website, ISIS will be accepted by hundreds of merchants across Austin, Texas, and Salt Lake City,

The

cenSEI Report

Utah, including national merchants such as The CocaCola Company, Dillard’s, and Aeropostale. At the same time, Visa and MasterCard have also launched their own digital wallets, according to TechCrunch,with Visa’s V.me and MasterCard’s PayPass Wallet Service. In the Philippines, network service provider Smart Communications has also launched Tap2Pay, the first NFC-based mobile payment system in the country. It lets Nokia C7 mobile phone users pay for items at a store by tapping a “Tap2Pay” icon, from funds in their existing Smart Money accounts. Mobile payments also encompass systems that enable mobile devices to read credit cards.For instance, Square manufactures a device that plugs into an iPhone, iPad, or Android phone, and turns it into a virtual cash register. This system affords the convenience of person-to-person mobile payments, allowing anyone using the device to accept credit card payments. Companies that offer similar solutions include Verifone and Europe-based iZettle.

• May 28-June 3, 2012

cenSEI T H E

Report

Swipe that smartphone: One more way to pay

In the University of California, Berkeley survey, individuals aged 35-44 were revealed to be the most enthusiastic about mobile payments, while those who are 55 years old and above were both less likely to adopt and more likely to reject the technology. Financial institutions should lead the way. “Consumers cannot implement mobile payments unilaterally, so their adoption and usage will depend on the willingness of incumbent players (banks, retailers, etc) to build out the infrastructure to accept those payments,” according to the Pew survey. tThis means that it is basically up to those who control transaction systems to set the agenda. If consumers are to feel comfortable with mobile-payment systems, however, the best players to lead the initiative should be financial institutions. According to the KPMG study, “A Converged Lifestyle,” a survey of 9,600

CONTENTS

NATION

WORLD

consumers across 31 countries, 56% of respondents trust their financial institutions the most when it comes to their online data, 30% trust secure payment sites such as PayPal, and 7% trust their retailers. Thus, efforts led and/or backed by stalwarts such as American Express, Visa, and MasterCard are steps in the right direction. A cashless future? Don’t bank on it just yet. While transacting money via mobile devices will be very popular in the coming years, the future may not be entirely cashless. Concerns over security and privacy are expected to impede adoption. According to the Pew Research Centers survey respondents, the need for anonymity will also ensure that cash will still be used in many transactions. The side-by-side existence of mobile payment systems and traditional cash and card transactions in a number of countries may be what the future of money will look like: a mix of the old and the new, a combination of paper, plastic, and smart-devices.

BUSINESS

TECHNOLOGY

NEWS ON THE NET Technology

Liquid Robotics launches swarm of ocean-patrolling robots Ocean data services provider Liquid Robotics has embarked on the final stage of a scientific expedition that is the first of its kind in the world – a Pacific crossing of what the company calls Wave Gliders, which are autonomous and wave-powered marine robots designed to collect and transmit ocean surface data. The expedition's purpose is to drum up interest for the company, and also to foster a new brand of scientific exploration. Dr. Edward Lu, PhD., astronaut and Liquid Robotics Chief of Innovative Applications, explains the entire process in a riveting TED talk. The story of the Wave Glider began a decade ago with Joe Rizzi, a venture capitalist who heard the songs of humpback whales while scuba diving near Hawaii. His unwavering quest to capture and record the songs in order to play the music in his home started with his own simplistic contraptions and experiments, and continues with Liquid Robotics – a California-based company worth $22 million. The potential for ocean research has attracted numerous customers; including oil and gas companies, fisheries, meteorological research outfits, and maritime defense and security firms. Though the fruits of Rizzi's dedication have fallen far

from his original goal, the semiretired Liquid Robotics Chairman can now successfully listen to whales singing from his living room. The singing sea mammals are even broadcast online at JupiterFoundation.org for the public to hear.

search activities. The head-tohead competition was apparent even before the So.cl rollout; earlier this May Microsoft added social features to its search engine, Bing, in response to the January debut of Google’s Search Plus Your World.

Microsoft opens up Google seals So.cl search result $12.5-billion sharing network Motorola buy Microsoft has joined the online social networking world with its own service called So.cl – a play on the word "social." The new online establishment allows users to share and comment on interesting search results, and in the process facilitations user connections with similarminded people. Similar to Facebook's humble beginnings, access to So.cl was initially through invite, and only available to students of schools and universities in the United States. Microsoft quietly opened up the social networking service to the general public while people were focused on the Facebook IPO. Marketed as an "experiment" rather than a rival, So.cl is actually designed to integrate with Facebook. In fact, one can sign up for So.cl just by connecting his or her Facebook account. However, it seems that Microsoft is taking a swing at Google+ – Google’s moderately successful social-networking venture – in that it combines social activities with

The

cenSEI Report

First made public last August 2011, Google's $12.5-billion acquisition of Motorola Mobility was officially completed last Tuesday, after careful regulatory scrutiny from both U.S. and European antitrust commissions. Chinese authorities have also given the deal their approval, but only under the condition that the Android OS remain available to everyone for free for at least the next five years. The takeover marks a watershed moment for the Internet giant – signaling a possible transition from a concentration on software to an interest in joining the hardware market – even as it is only the latest in a long list of Google's strategic buyouts since it went public in 2004. More than 17,000 patents are now under Google's name by virtue of the deal, and the company has said that it plans to utilize those newly acquired patents to navigate through several lawsuits, particularly those from Microsoft and Apple.

• May 28-June 3, 2012