Small town lottery also prone to corruption – Bayan Muna

Bayan Muna Representative Neri Colmenares revealed that there is no accountability and reporting of actual sales in the current system of the STL making it highly vulnerable to corruption.


The Philippine Charity Sweepstakes Office is mandated by Republic Act No. 1169 to help various government agencies that need financial assistance; it is also the main government agency responsible for raising and providing “funds for health programs, medical assistance and services, and charities of national character.”

In the last few months, however, the same agency has come under scrutiny because its ranking officials have been named in several corruption issues. Earlier this month, even leaders of the Catholic Church were criticized after several bishops were reported to have received sports utility vehicles from PCSO and former president Gloria Macapagal-Arroyo.

Now, it’s the PCSO’ Small Town Lottery (STL) that’s under scrutiny and how it is said to be bolstering corruption in the provinces.
Bayan Muna Representative Neri Colmenares revealed that there is no accountability and reporting of actual sales in the current system of the STL making it highly vulnerable to corruption.

The issue of the STL is currently being investigated in the senate after reports have come out that there has been massive fund misuse and illegal distribution of revenues to certain congressmen and officials of the Philippine National Police (PNP). There have been calls to scrap the STL, which the PCSO plans to re-launch as the Loterya ng Bayan within the year.

Colmenares said he had discussed the issue of STL sales with a supplier of the hand held STL machines.

“Supposedly under the STL charity fund sharing scheme, revenues accruing to STL will be divided as follows: city or municipality, 10 percent; provincial government, five percent; congressional district, 2.5 percent; and the PNP, five percent. The PCSO has also executed memorandum of agreements (MOAs) with local government units on how to disburse the funds given to them via STL. The remaining 7.5 percent of the charity fund will go to the PCSO, while the rest goes to the operator,” he said.

According to reports, by the end of 2007, the PCSO was able to launch the STL in 15 approved test run areas: Quezon province, Angeles City, Bataan, Occidental Mindoro, Pampanga, Laguna, Bulacan, Negros Oriental, Iloilo City, Tarlac, Oriental Mindoro, Ilocos Norte, Albay, Olongapo City, and Batangas. During this first year, STL generated revenues supposedly totaling more than P3 billion (US$69.7 milion).

“But the problem with this is that many of the hand held machines are not being used by the STL operators and the reporting capacity of their handhelds is not utilized because the STL operators do not want to report their real gross sales to the PCSO,” Colmenares said.

In her testimony during the senate Blue Ribbon investigations, PCSO Chair Margarita Juico said during the first half of the year, the agency collected “nearly P2 billion” (US$46.5 million) from STL, up from the P1.57 billion (US$36.5 million )in the same period last year. She said the PCSO intends to “fine-tune” the ST operations to raise PCSO revenues further. She said among the improvements to the system that are being considered are stricter screening and evaluation of STL franchise applicants, social security benefits for bet collectors; and increased transparency during draws.

According to the Colmenares however, the STL’s system makes it impossible for the PCSO and the Commission on Audit (CoA) to determine the actual amount that has to be divided and remitted. He said it’s highly likely that the actual sales of the STL operators are more than what they report.

“Why the old PCSO board allowed such a disadvantageous arrangement to exist for so long is highly questionable. It seems that this is an anomaly waiting to be unearthed,” he said.

Colmenares also scored the virtual lack of control by the PCSO over the STL and the lotto machines. “The old PCSO board has practically abandoned its power to oversee the STL and lotto operations. Sen. Enrile is right. We have no control at all of the lotto machines being operated by the PGMC. Now, we are informed that we also do not have control over the STL. I would not be surprised if billions are lost in the process.”

Anomalous PCSO deal on lotto machine rentals

The Bayan Muna lawmaker has been monitoring senate and congressional investigations concerning the PCSO and has already filed plunder and corruption cases against former president Gloria Macapagal-Arroyo and former PCSO general manager Rosario Uriarte at the Office of the Ombudsman.

He said the irregularities in the PCSO include anomalous contracts, diversion of funds and overpriced machines and that these anomalies involve amounts much bigger than the $330 million national broadband network contract with Chinese firm ZTE Corp. and the P728-million fertilizer scam. He said that that he was exposing the issues in the PCSO because “the common denomination is that the victims are still the Filipino people, especially the poor who need medical and other assistance,” he said.

Earlier in June, Colmenares commended the PCSO for canceling what he said was the anomalous P42 billion (US$ 976,744,186) deal it forged with Australian firm TMA for thermal paper supplies. In a privileged speech, Colmenares said the thermal paper contract where the former PCSO board committed to purchase thermal paper for 50 years was termed as a “joint venture” with TMA Australia.

“ This joint venture is actually a contract requiring the PCSO to purchase its thermal paper from TMA for half a century! The estimated cost of thermal paper which PCSO will buy in the next 50 years is at least 42 billion pesos(US$ 976,744,186). PCSO must now trace whether TMA actually gave four billion pesos (US$93 million) to PCSO as its ‘contribution’ to the joint venture,” he said.

After the PCSO cancelled the contract soon after Colmenares brought up the issue and called for investigations, Colmenares insisted that Congress continue investigations.

“We must know how much of these amount have been given and where, as well how, this type of contract came to be,” he said.
Colmenares is now heading calls for the PCSO to cancel the Philippine Gaming and Management Corporation (PGMC)-Bergaya contract which cost PCSO billions of pesos in the lease of the lotto machines used in various lotto outlets. He said the PCSO must work for the revocation of this overpriced contract.

In 1995, instead of buying lotto machines, the PCSO executed a lease agreement with the PGMC for the lease of its lotto machines for eight years. It was said the PGMC will be paid an amount equivalent to 4.3 percent of the total gross sales of the lotto machines. The PCSO was also given the option to purchase the machines at the end of the eight-year contract in 2003 for P25 million (US$ 581,395)

“One would expect the PCSO to purchase these machines in 2003 and either take over the lotto operations considering that the PCSO should have developed the capacity to do so during the eight years of lotto operations. This, or at least open the operations for bidding to look for a better deal considering that 4.3 percent of the gross sales is not only steep, but is in violation of the PCSO charter which requires that operational expenses should be deducted from the net receipts and not the gross sale,” Colmenares said.

The PCSO, however, extended the lease contract with PGMC in 2004 for another eight years, without any bidding in the guise of “upgrading” the lotto machines.

Worse, Colmenares said, there was an increase in the rental rates to 6.85 percent of the gross sales of lotto tickets. PCSO also obligated itself to pay PGMC-Berjaya 0.15 percent of the gross sales of lotto tickets to maintain and repair the machines being owned and operated by PGMC-Berjaya.

The PCSO further gave PGMC another three percent for telecommunication services, practically giving PGMC a total of 10 percent of the gross sales of lotto tickets in its territory.

According to Colmenares, the PCSO has virtually wiped out its 15 percent share of the net receipts for its operations by giving PGMC 10 percent of the gross sales of lotto.

In 2009 the gross sales of Lotto amounted to 27 billion (currently US$627,906,976) and 10 percent of this is a staggering P2.7 billion (currently US$ 62,790,680) PGMC in one year alone.

“This amount could have helped at least 157,000 PCSO beneficiaries suffering from tuberculosis, diabetes, heart, lung and kidney diseases as well as other diseases. These could have bought 2,700 units of ambulances, or could have been used to fund 2,700 organ transplants,” he said.

The gross sales of lotto during the eight year agreement in 1995-2003 in Luzon was P56.4 billion (currently US$1.3 billion). This means that the PGMC was paid almost three billion ($69 million) for its 4.3 percent share.

The gross sale of lotto from 2004 to 2010 was is P82.7 billion or an equivalent of P8.2 billion for PGMC’s 10 percent share, giving it a total of P10.62 billion in rentals since 1995.

Through another amendment of the lease agreement, which is unclear as of now, the lease contract will end in 2015 instead of 2012.

“These lotto machines cost at most US$ 6,000 in 1995 which means that the 3,225 machines that the PCSO contracted would have cost P507, 937,560 at the exchange rate of P26.25 to one US dollar. The central computer system and software would have upped the expense to merely 1 billion pesos but would not have reached the P10.62 billion ( $246 million) that it cost the PCSO now.

Congress should immediately start its investigation on the PCSO so that the institution will no longer be used as a milking cow of unscrupulous officials and the billions can be used for the upliftment of the poor,” he said. (

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