Monthly Archives: June 2015

Summertime Snowstorm: Thawing Out the Court of Appeals’ Freeze Order on VP Binay’s Alleged Assets

“When I finally do what frozen things do in summer.” — Olaf

One of the hottest issues during the recent summer months is the 60-day Freeze Order issued by the Court of Appeals on May 11, 2015 in CA-GR AMLA No. 00134 (Republic v. Binay, et al.), an ex parte petition for issuance of freeze order filed by the Anti-Money Laundering Council (AMLC) on the various bank accounts of, investments made by, and insurance policies allegedly owned by Vice President Binay and his family members/associates.

The Court of Appeals highlighted the circumstances that tend to support the allegations in the petition that the above-mentioned assets are related to unlawful activities as alleged in complaints filed before the Office of the Ombudsman. The Court also took into consideration the advanced state or technology of the electronic banking system which allows for closure of bank accounts or transfer of funds in a matter of seconds, the AMLC’s averment that there is an imminent danger that the funds in the said assets will be withdrawn, transferred, concealed, or otherwise disposed of, as well as the results of the AMLC’s initial investigation indicating the pre-termination of investments or withdrawals and transfers of large amounts of funds from the bank accounts sought to be frozen.

“We highlight the circumstances, as summarized by the AMLC, that tend to support the allegation that the transactions made under the bank accounts, investments and insurance policies, subject of this Ex Parte Petition for the Issuance of a Freeze Order, are related to unlawful activities as alleged in the complaints filed before the Office of the Ombudsman:
1. Citing the findings of the National Statistics Office, Enciso and Bondal stated that the construction of the New Makati City Parking Building was overpriced by more than 1.3 billion pesos;
2. Former Vice Mayor Ernesto Mercado’s testimony before the Senate’s Blue Ribbon Subcommittee is replete with details on the deliveries of cash he made to Limlingan, Mayor Junjun Binay and Baloloy; on the persons and entities acting as dummies of VP Binay and their businesses.
3. The SALNs of VP Binay and his wife Elenita, Mayor Junjun Binay, Eduviges Baloloy and Ernesto Mercado show their respective net worth from 2007-2013 to be disproportionate to the values, frequency and complexity of their banking and other transactions.
4. Records from the SEC showed probable links of entities, their directors and officers to VP Binay and/or his immediate family members.
5. Financial investigations into the bank accounts of VP Binay, his immediate family members, associates, friends and purported dummy entities showed multiple large transactions in cash during the construction of the New Makati City Parking Building from 2007-2014, and the Makati Science High School Building.
6. Mercado’s testimony is corroborated on material points by the records of the SEC and the financial investigations conducted by the AMLC.
7. Limlingan, Baloloy and other persons associated with VP Binay made large and frequent transactions soon after the Senate Blue Ribbon Subcommittee conducted hearings pursuant to Senate Resolution No. 826.
8. Massive withdrawals of funds and pre-termination of investments, among others, after the Senate began conducting hearings on the alleged anomalies in the construction of the subject buildings, and after the exposure of the subject JVA.
Taking into consideration that the advanced state of technology of the electronic banking system allows for closure of bank accounts or transfer of funds in a matter of seconds, the averment of the AMLC that there is an imminent danger that the funds in the subject bank accounts, investment and insurance policies will be withdrawn, transferred, concealed or otherwise disposed of, is well-taken. The results of the initial investigation conducted by the AMLC already indicate pre-termination of subject investments as well as withdrawals and transfers of large amounts of funds from bank accounts sought to be frozen. In the light of the foregoing, coupled with the sheer number of monetary instruments involved and the AMLC’s declaration that it still needs to conduct further financial investigation for the possible filing of a criminal case for money laundering and other appropriate legal actions against respondents, We find the issuance of a Freeze Order, effective for a period of six (6) months, against the aforementioned bank accounts, insurance policies and investments to be warranted.
WHEREFORE, the Ex Parte Petition for the Issuance of a Freeze Order is GRANTED. A Freeze Order is hereby issued, valid and effective immediately for a period of six (6) months. Respondent banks, insurance and securities companies are ORDERED to FREEZE the following accounts, including all related accounts wherever they may be found:”

Commentaries on and criticisms against the Freeze Order spread like wildfire. Questions were raised about (1) the nature of freeze orders and the VP allegedly having already been pre-judged despite lack evidence that he is guilty of any offense, (2) the propriety of the newspaper reports concerning the freeze order vis-à-vis the confidentiality investigations under the Anti-Money Laundering Act (AMLA), (3) the VP’s immunity from suit, and (4) that the AMLA is being used for political harassment. I submit my (unlaundered) two cents’ worth of opinion to defrost the foregoing.

Nature of, and rationale for freeze orders
The nature of freeze orders under the AMLA was explained by the Supreme Court in its March 6, 2013 Decision in Gen. Ligot v. Republic, which involved the propriety of freeze orders issued by the CA against the against the properties of the petitioner, his immediate family, and his brother-in-law.

“A freeze order is an extraordinary and interim relief issued by the CA to prevent the dissipation, removal, or disposal of properties that are suspected to be the proceeds of, or related to, unlawful activities as defined in Section 3(i) of RA No. 9160, as amended. The primary objective of a freeze order is to temporarily preserve monetary instruments or property that are in any way related to an unlawful activity or money laundering, by preventing the owner from utilizing them during the duration of the freeze order. The relief is pre-emptive in character, meant to prevent the owner from disposing his property and thwarting the State’s effort in building its case and eventually filing civil forfeiture proceedings and/or prosecuting the offender.”

The legal basis for the issuance of a freeze order is Section 10 of the AMLA. In Ligot, the Supreme Court underscored that there are only two requisites for the issuance of a freeze order: (1) the application ex parte by the AMLC and (2) the determination of probable cause by the CA, and distinguished between the probable cause requirement for issuance of a freeze order, and that required for the filing of criminal cases:

“… The probable cause required for the issuance of a freeze order differs from the probable cause required for the institution of a criminal action….
As defined in the law, the probable cause required for the issuance of a freeze order refers ‘to such facts and circumstances which would lead a reasonably discreet, prudent or cautious man to believe that an unlawful activity and/or money laundering offense is about to be, is being or has been committed and that the account or any monetary instrument or property subject thereof sought to be frozen is in any way related to said unlawful activity and/or money laundering offense.
In other words, in resolving the issue of whether probable cause exists the CA’s statutorily guided determination’s focus is not on the probable commission of an unlawful activity (or money laundering) that the Office of the Ombudsman has already determined to exist, but on whether the bank accounts, assets or other monetary instruments sought to be frozen are in any way related to any of the illegal activities enumerated under RA No. 9160, as amended. Otherwise stated, probable cause refers to the sufficiency of the relation between an unlawful activity and the property or monetary instrument which is the focal point of Section 10 of RA No. 9160, as amended…”

Given the differences in the probable cause requirements, the issuance of a freeze order does not foreclose the possibility that the owner of the frozen assets is innocent.

The Court of Appeals has been given sole authority and discretion to issue a freeze order as well as to extend its effectivity (Republic v. First Pacific Network [November 19, 2014]). But aside from applying for a freeze order with the Court of Appeals, and a criminal case for money laundering in the proper court, the AMLC as a matter of course also files a Petition for Civil Forfeiture in the appropriate Regional Trial Court. In said Petition, it applies ex parte for the issuance of a Provisional Asset Preservation Order and, after due hearing, an Asset Preservation Order. Pursuant to Ligot, the lifting of a freeze order issued by the Court of Appeals is without prejudice to, and shall not affect the said preservation orders issued by the Regional Trial Court.

Confidentiality

Section 14 of the AMLA requires that the reports to and the investigations conducted by the AMLC must be confidential and sanctions “breach of confidentiality”. The law however does not prohibit the disclosure of court decisions and other issuances which are a matter of public record. In fact, there have been instances when media reported on freeze orders issued against the assets of the Ampatuans, Janet Napoles, and Senators Estrada and Revilla.

Immunity from Suit
It is beyond question that the VP is one of those officials who, under Article XI Section 2 of the Constitution, can be removed from office only by impeachment. Does this automatically render him immune from suit? There is nothing in the Constitution that specifically states so. While there is also nothing in the 1987 Constitution that states that the President enjoys immunity from suit, the very nature and functions of his office (Article VII, Sections 16-18, for example) necessitate the same – but with a caveat that courts should look with disfavor upon the presidential privilege of immunity, especially when it impedes the search for truth or impairs the vindication of a right  (Estrada v. Desierto [March 2, 2001]).

If the VP is indeed immune from suit, the same should apply only to those that, if successful, will result in him being removed from office without having been impeached (but subject to the admonition of Estrada v. Desierto). But not all suits will result in the VP being removed from office. One such suit is a petition for civil forfeiture; as its name underscores, its purpose is to forfeit the questioned assets irrespective of the pendency (or not) of any criminal prosecution.

“A criminal conviction for an unlawful activity is not a prerequisite for the institution of a civil forfeiture proceeding. Stated otherwise, a finding of guilt for an unlawful activity is not an essential element of civil forfeiture. x-x-x Thus, regardless of the absence, pendency or outcome of a criminal prosecution for the unlawful activity or for money laundering, an action for civil forfeiture may be separately and independently prosecuted and resolved.” (Republic v. Glasgow Credit [January 18, 2008])

Political Harassment
It is argued that the Freeze Order was issued to harass the VP who is the frontrunner in the 2016 Presidential elections. The AMLC has understandably issued a statement that it will not allow itself to be used for political harassment, perhaps because its Executive Director Julia C. Bacay-Abad is the namesake of Julia Andrea R. Abad of the Presidential Management Staff, who is the daughter of Budget Secretary Florencio Abad.

Section 16 of the AMLA specifically states that it cannot be used for political persecution or harassment:

“Prohibitions Against Political Harassment – This Act shall not be used for political persecution or harassment or as an instrument to hamper competition in trade and commerce.
No case for money laundering may be filed against and no assets shall be frozen, attached or forfeited to the prejudice of a candidate for an electoral office during an election period.”

Some have raised their reservations about Section 16, since it is effectively a “seasonal repeal” of the AMLA during election periods which, in the case of presidential elections, usually starts 6 months before the elections and ends one month thereafter. Thus at present the VP cannot legally complain that the AMLA is being used to persecute him. But he can, once the election period starts, invoke Section 16 and test whether it can reverse and/or restrain court proceedings that were commenced and/or have concluded before the start of the election period.

But while Section 16 may provide the VP with legal remedies in a court of law, it is highly unlikely that it can provide him with political relief in the court of public opinion.

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