The Supreme Court, in this case, clarified that while the State’s right to recover ill-gotten wealth is imprescriptible in civil cases, the prosecution of criminal offenses related to such wealth is subject to prescription. This means that while the government can always file a civil suit to recover unlawfully acquired assets, it must initiate criminal proceedings within the period prescribed by law. This decision underscores the importance of timely action in prosecuting graft and corruption cases to ensure accountability and prevent the erosion of public trust, balancing the need to recover ill-gotten wealth with the constitutional rights of the accused to a fair and timely trial.

Behest Loans and the Ticking Clock: Can Time Erase Corruption?

This case revolves around complaints filed by the Presidential Ad Hoc Fact-Finding Committee on Behest Loans, represented by the Presidential Commission on Good Government (PCGG), against several individuals and corporations for alleged violations of the Anti-Graft and Corrupt Practices Act. The complaints stemmed from loans granted by government financial institutions, specifically the Development Bank of the Philippines (DBP) and the National Investment Development Corporation (NIDC), which the Committee deemed to be “behest loans.” These loans, allegedly characterized by insufficient collateral and undercapitalized borrowers, raised concerns about potential irregularities and abuse of power. The central legal question before the Supreme Court was whether the Ombudsman erred in dismissing the complaints based on the ground of prescription, and whether the nature of the loans as “ill-gotten wealth” rendered the offenses imprescriptible.

The Ombudsman dismissed the complaints primarily on the ground that the offenses had already prescribed under Section 11 of Republic Act (R.A.) No. 3019, as amended. The Ombudsman argued that the prescriptive period for offenses under the Anti-Graft and Corrupt Practices Act was ten years before it was amended by Batas Pambansa (B.P.) Blg. 195, which increased the period to fifteen years effective March 16, 1982. Applying this to the loan transactions in question, the Ombudsman concluded that, except for two loan transactions of Golden River Mining Corporation in 1982, all other alleged offenses had already prescribed. However, the Supreme Court disagreed with the Ombudsman’s interpretation of the law on prescription, particularly concerning the discovery of the offenses.

The Court emphasized that Section 2 of Act No. 3326, as amended, which governs the prescription of offenses penalized by special laws like R.A. No. 3019, provides that prescription begins to run from the day of the commission of the violation, or, if the same is not known at the time, from the discovery thereof. Citing its previous rulings in Presidential Ad Hoc Committee vs. Hon. Desierto and Salvador v. Desierto, the Court reiterated that in cases involving violations of R.A. No. 3019 committed prior to the February 1986 EDSA Revolution, the government, as the aggrieved party, could not have known of the violations at the time the questioned transactions were made. This is because the public officials involved allegedly conspired with the beneficiaries of the loans. Therefore, the counting of the prescriptive period should commence from the date of discovery of the offense. This principle is essential for ensuring that those who abuse their power for personal gain are not shielded by the passage of time, especially when the illegal activities are concealed.

To further clarify, it is important to understand the concept of “behest loans”. Memorandum Order No. 61, issued by President Ramos, outlines the criteria for determining whether a loan is considered a behest loan. These criteria include whether the loan is under-collateralized, the borrower corporation is undercapitalized, there is direct or indirect endorsement by high government officials, stockholders or officers of the borrower corporation are identified as cronies, there is a deviation of use of loan proceeds from the purpose intended, there is use of corporate layering, the project for which financing is being sought is non-feasible, and there is extraordinary speed with which the loan release was made.

In this case, the complaints filed by the Committee alleged that the loans granted to P.R. Garcia and Sons Development and Investment Corporation (PRGS) and Filipinas Carbon and Mining Corporation (Filcarbon) were under-collateralized and that the borrower corporations were undercapitalized. These allegations aligned with the criteria for behest loans. Despite the Ombudsman’s conclusion that the complaints lacked any allegation that the questioned loans were behest, the Supreme Court found that the complaints contained allegations consistent with the criteria laid down in Memorandum Order No. 61. Therefore, the Supreme Court found that the Ombudsman erred in dismissing the complaints against PRGS and Filcarbon. In essence, the complaints did not need to explicitly state the words “behest loans” if the elements and criteria of such loans were present in the factual allegations.

Conversely, the Court upheld the Ombudsman’s dismissal of the complaint against Golden River Mining Corporation with respect to its loan transactions obtained on March 13, 1982, and December 1, 1982. The Ombudsman found that these loans had sufficient collateral, and the Supreme Court found no reason to deviate from this finding. However, the Court noted that the Ombudsman had failed to discuss the refinancing loan obtained by Golden River in 1980 for the amount of P14,724,430.00. Thus, the Court directed the Ombudsman to evaluate the merits of the complaint against Golden River with respect to this particular loan. It is vital that all aspects of a complaint are reviewed to ensure a comprehensive understanding of the issues.

The Court also addressed the issue of whether the Ombudsman erred in dismissing the complaints without requiring the respondents to file their counter-affidavits and the petitioner to file its reply, or to further require the petitioner to clarify its evidence or adduce additional evidence. The Court clarified that under Section 2(a), Rule II of the Rules of Procedure of the Office of the Ombudsman, the Ombudsman may dismiss a complaint outright for want of palpable merit. At that point, the Ombudsman does not have to conduct a preliminary investigation upon receipt of a complaint. Therefore, the Ombudsman has the discretion to determine whether a preliminary investigation is proper.

Finally, the Court addressed the issue of whether the Ombudsman erred in consolidating the three complaints and issuing a single order for their dismissal. The Court found nothing erroneous in this act, considering that, with the exception of the complaint regarding the two 1982 loan accounts of Golden River, the dismissal of all the other complaints was based on a common ground: prescription. However, the Court cautioned that, in the remand of the complaints, the Ombudsman should not consolidate the three complaints, as the respective respondents therein would inevitably raise different defenses that would require separate presentation of evidence by the parties involved. This highlights the importance of tailored legal processes to ensure fairness and accuracy.

FAQs

What was the key issue in this case?	The key issue was whether the Ombudsman erred in dismissing complaints related to behest loans based on prescription, and whether the State’s right to recover ill-gotten wealth rendered the offenses imprescriptible. The Court had to clarify the application of prescription in criminal cases involving ill-gotten wealth.
What are behest loans?	Behest loans are loans granted under irregular circumstances, often characterized by insufficient collateral, undercapitalized borrowers, and undue influence from government officials. Memorandum Order No. 61 outlines the criteria for determining whether a loan is a behest loan.
Does the State’s right to recover ill-gotten wealth prescribe?	No, the State’s right to recover properties unlawfully acquired by public officials is imprescriptible in civil cases, as provided by Section 15, Article XI of the 1987 Constitution. However, this does not apply to criminal cases related to ill-gotten wealth, which are subject to prescription.
When does the prescriptive period for offenses under R.A. No. 3019 begin to run?	According to Section 2 of Act No. 3326, as amended, prescription begins to run from the day of the commission of the violation, or, if the same is not known at the time, from the discovery thereof. In cases of concealed corruption, the prescriptive period commences upon discovery.
Can the Ombudsman dismiss a complaint outright?	Yes, under Section 2(a), Rule II of the Rules of Procedure of the Office of the Ombudsman, the Ombudsman may dismiss a complaint outright for want of palpable merit. The Ombudsman has the discretion to determine whether a preliminary investigation is warranted.
What was the Court’s ruling on the complaints against PRGS and Filcarbon?	The Court found that the Ombudsman erred in dismissing the complaints against PRGS and Filcarbon because the complaints contained allegations consistent with the criteria for behest loans, even if they did not explicitly use the term “behest loan.” The cases were remanded for further evaluation.
What was the Court’s ruling on the complaint against Golden River?	The Court upheld the Ombudsman’s dismissal of the complaint against Golden River with respect to its 1982 loan transactions, finding that these loans had sufficient collateral. However, the Court directed the Ombudsman to evaluate the merits of the complaint with respect to the 1980 refinancing loan.
Why did the Court remand the complaints to the Ombudsman?	The Court remanded the complaints to the Ombudsman for a proper evaluation of their merits, particularly with respect to the allegations that the loans were under-collateralized and the borrower corporations were undercapitalized. The Court emphasized that the complaints should be evaluated based on the criteria for behest loans.

In conclusion, the Supreme Court’s decision clarifies the interplay between the State’s right to recover ill-gotten wealth and the prescriptive periods for criminal offenses. While the right to recover unlawfully acquired assets remains imprescriptible in civil cases, the prosecution of criminal offenses related to such wealth is subject to prescription. This ruling underscores the importance of timely action in prosecuting graft and corruption cases. The case was remanded to the Ombudsman for further evaluation, highlighting the necessity of thorough investigation and adherence to due process in addressing allegations of behest loans and corruption.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Presidential Ad Hoc Fact-Finding Committee on Behest Loans, G.R. NO. 135687, July 24, 2007