Senators question lotto machine lease agreement

Tuesday, July 19, 2011

THE government has been on the losing side of a lease agreement for lottery machines it could have bought at $25 million, less than 20 percent of what it has shelled out since 1995.

At a Senate hearing on the Philippine Charity Sweepstakes Office (PCSO), it was revealed that the sweepstakes office has been locked into a lease agreement that was extended twice without any public bidding.

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Senate President Juan Ponce Enrile scored the PCSO for not taking advantage of a buy-out option in 2005 when a lease deal with Philippine Gaming Management Corp.-Berjaya (PGMC-Berjaya) expired.

Under the original deal, the equipment could have been bought for $25 million.

The deal, which gave PGMC-Berjaya 4.3 percent of lotto revenues in Luzon, was instead extended and the firm's take was increased. The PCSO is now locked into a deal to give PGMC-Berjaya 10 percent of lotto revenues until 2015. To date, that cost has been estimated at around P148 million.

Dr. Fernando Carrascoso Jr., a PCSO official during the Aquino and Ramos administrations, said the deal was grossly disadvantageous to the government.

Former PCSO board member Manoling Morato, who was PCSO chairman when the deal was struck, said the rental agreement was better because by the time the buy-out option was available in 2005, the machines were already outdated.

Former PCSO general manager Rosario Uriarte, meanwhile, said the office would have needed one year to migrate its data to another system. That would have meant no lotto draws for at least a year, she said, so they had to extend the contract "so the lotto wouldn't have to stop."

"These were old machines. They began bogging down," she said.

She explained that the machines were first installed when lotto draws were only once a week. The PCSO now has draws at every day and has more than one variant of lotto.

Sergio Valencia, former chairman, added that Hewlett-Packard, PGMC-Berjaya's hardware provider, said the computers used for the lotto were already nearing their end-of-support date. That meant HP would no longer offer technical support for the machines.

But senators have also been looking at a possible conflict of interest on Morato's part. It was found that TF Ventures, a firm that had Morato as president, did business with Berjaya. TF Ventures had dealings with Berjaya-owned Perdana Land Phils, Inc. on a failed hotel project.

"Perdana is part of the group Berjaya Phils. and PGMC which are doing substantial amounts of business with PCSO. You are part of the board of PCSO. We are not saying that there was indiscretion here. We're just trying to establish certain facts," Senator Franklin Drilon said.

But Morato said Perdana only bought the debt papers of TF Ventures from Deutsche Bank. He said he borrowed "around P400 million to construct" the failed Astor Hotel but that the debt had been foreclosed.

He added that as a member of the board, there was little he could do to influence the PCSO. "If I was PCSO chair or GM, maybe," he said. (Jonathan de Santos/Sunnex)