The Department of Agrarian Reform (DAR), through the Office of the Solicitor General, filed Tuesday afternoon, May 28, a motion with the Supreme Court to clarify various issues arising from the special purpose audit ordered by the latter of the pertinent financial records of Hacienda Luisita, Inc. (HLI) and Centennary Holdings, Inc. (CHI).
This move was prompted by the recent impasse in the process to select a reputable accounting firm to conduct the said special audit, and the disagreement among the parties in the Hacienda Luisita case on which firm should be selected, after a vote on 17 May 2013 was conducted on a motion to disqualify two of the three interested accounting firms.
DAR Secretary Virgilio G. De Los Reyes maintained that the special audit on HLI and CHI, with respect to the gross proceeds arising from the conversion of two lots with an area of 500 hectares and the expropriation of a portion for SCTEX, cannot proceed unless all the parties involved in the case have agreed on the accounting firm that will undertake this task.
“We wish to put on record that it is the disagreement among parties concerned, and not the DAR, that is the cause of the delay in the audit process,” De Los Reyes said.
He noted that the Supreme Court, in its Order, had stated that: “The DAR is ordered to engage the services of a reputable accounting firm approved by the parties to audit the books of HLI and Centennary Holdings, Inc. to determine if the P1,330,511,500 proceeds of the sale of the three aforementioned lots were actually used or spent for legitimate corporate expenses. Any unspent or unused balance and any disallowed expenditures, as determined by the audit, shall be distributed to the 6,296 original FWBs (farmworker-beneficiaries).”
Based on the High Court’s ruling, Anthony N. Paruñgao, DAR Undersecretary for Legal Affairs explained that DAR’s role in the audit process is limited to facilitating the process that will lead to the engagement of the services of an accounting firm acceptable to and approved by all the parties involved in the Hacienda Luisita case.
The parties concerned, he pointed out, include Hacienda Luisita, Inc. and the various farmers’ organizations representing the farmworkers of the country’s biggest sugar estate.
He also said that the plain meaning of the language of the Supreme Court’s directive is that all of the parties to the cases should agree on the accounting firm to be selected. Going to the Supreme Court, therefore, was the DAR’s effort to move the process forward, he added.
In particular, the DAR sought clarification on whether the phrase “approved by the parties” meant unanimity or a mere majority vote, whether HLI can be excluded from the process, whether the DAR’s role is limited to facilitating the process of selection on account of which it has no authority to decide or act on “motions” submitted by any of the parties, as well as on the nature and extent of the audit activity and period.
The DAR also requested that the prescribed arrangement for the special purpose audit be revisited and modified, to ensure an expeditious and effective process of selecting the accounting firm.
Paruñgao recalled that DAR officials had previously published two (2) invitations to participate in newspapers of national circulation last year, during which only one firm (Reyes, Tacandong and Co.) formally expressed its interest to undertake the special audit.
Subsequently, the DAR facilitated five (5) meetings between the parties to comply with the Supreme Court’s decision. These meetings were held on 24 October 2012, 03 December 2012, 25 January 2013, 28 February 2013, and 22 March 2013, in order to elicit submissions of other firms from the parties, arrive at the mechanics for selection, draft terms of reference and timelines, and agree on the selection criteria.
In the course of these meetings, it was learned that three (3) audit firms signified their intention to perform the special purpose audit. Aside from Reyes, Tacandong & Co., Ocampo, these include Mendoza, Leung, Lim (OMLL) and San Agustin & Co. (MS & Co.)
During the 22 March 2013 meeting, the parties fully discussed the proposed selection criteria divided into two (2) parts: eligibility and selection. The first referred to the overall capabilities of the team and the professional team assigned, while the latter covered the proposed methodology, understanding of the assignment, and costs.
The three (3) stages in the selection of an audit firm were identified, as follows: (1) expression of interest; (2) eligibility check; and (3) selection process. The group would then decide on the criteria, but a separate group would be formed to evaluate the audit proposals. If none of the firms are eligible, then the parties would meet again to continue the search and selection of an audit firm. A tentative schedule of activities, starting with the finalization of the eligibility criteria on 12 April 2013, submission of eligibility documents on 26 April 2013, eligibility checks thereafter, submission of audit proposals, and culminating in the awarding on 31 May 2013, was also discussed.
Also during this March 22, 2012 meeting, AMBALA presented its motion to disqualify the Reyes-Tacandong accounting firm on the ground that it is allegedly associated with the Cojuangco family. The same was noted, as not all the parties were present during the meeting, and it was commented that in determining and qualifying the reputable accounting firm, independence and conflict of interest should be included in the eligibility criteria.
Finally, on 12 April 2013, all the parties agreed to the process of and mechanics for the selection of the accounting firm, along with a timeline or schedule of activities which, if followed, would have resulted in the awarding by 31 May 2013. The submission of eligibility documents was set for 26 April 2013, which was then extended to 03 May 2013.
However, AMBALA reiterated its motions to disqualify not just Reyes, Tacandong & Co. but also MS & Co., requested the deferment of the submission of the eligibility documents because of the pendency of these motions, and indorsed (along with other farmer groups) OMLL as the firm of their choice. This was embodied in its letter to the DAR which was received just three (3) days after the 12 April 2013 meeting. Meanwhile, both MS & Co. and Reyes, Tacandong & Co. submitted their respective documents, while OMLL did not.
The parties subsequently acted on these motions during the next meeting held on 17 May 2013, but unfortunately failed to agree on these matters. No consensus could be reached, with one party insisting that the process previously agreed upon should be followed. Most of the parties were present or represented at this meeting, including HLI.
Secretary De Los Reyes lamented that despite the series of meetings and consultations, the parties concerned could not agree on what accounting firm the DAR should engage to audit the pertinent financial records of HLI and CHI.