Across our investigation into the infrastructure scandal, a consistent design that has emerged is corporate layering. Public officials own a company that owns a company that owns the ultimate company involved in potential wrongdoing.

Under Section 2 of our corporation code, or Republic Act No. 11232, a company is an “artificial” creation. Over the years, judicial and quasi-judicial bodies have interpreted this provision to mean that the wrongdoing of a company cannot be attributed to its owner.

In the Bong Revilla plunder case, for example, three justices of the Sandiganbayan sideswept evidence that big amounts of money matching Benhur Luy’s ledger were deposited to a company owned by his wife Lani Mercado. The majority opinion believed that Mercado’s company “is a separate juridical entity from the person who controls it.”

This reasoning appeared again when the Comelec’s political finance and affairs department (PFAD) cleared Senator Chiz Escudero of an election offense for accepting a campaign donation from Lawrence Lubiano, owner of Centerways construction firm that contracts with the government. The election code prohibits government contractors from making any political contributions to candidates.

The PFAD said Lubiano is the campaign donor, while his company is the contractor, and they are “separate and distinct legal entities.”

You will see from the story how the acquisition of the mansion in Spain was also made through companies, not individuals.

Is corporate layering an easy way out especially for public officials who may have committed wrongdoing?

The answer depends on the wording of the law that may have been violated.

For Escudero, for example, the law is Article XI, Section 95 of the election code which says “no contribution for purposes of partisan political activity shall be made directly or indirectly by…natural and juridical persons who hold contracts or sub-contracts to supply the government or any of its divisions.”

For former tax commissioner Kim Henares, “the law is very clear, any contributions made, whether directly or indirectly is prohibited.”

“Contributions made by Lubiano is an indirect contribution made by Centerways, and therefore, Centerways has violated the law. And under our law, it is the officers of Centerways that are liable for any violation. This is precisely the situation where the law wants to cover a loop hole when it used the word ‘indirectly,’” Henares told Rappler.

If, for example, the case involves a senator or a congressman owning a holding company that owns a government contracting company, Henares said there is still liability. Article VI, Section 14 prohibits them from being “directly or indirectly interested financially in any contract with” government.

“This prohibition applies regardless of the degree of interest and regardless of whether the official intervened in the contract,” said Henares.

With this Spanish mansion — investigators can look at two things: whether the beneficial owner is Romualdez, and if he declared it in his Statement of Assets, Liabilities, and Net Worth (SALN). Non-declaration of an asset in the SALN is punishable with a fine and/or imprisonment, and potential disqualification under Republic Act 6713.

Under the new procurement law or Republic Act 12009, the Securities and Exchange Commission now requires the declaration of who the beneficial owner is, or the person who “ultimately owns or dominantly influences the management or policies,” or “exercises ultimate effective control over” the company.

“Even before this, we have a lot of laws, if properly implemented, could have prevented all of these things. We keep on passing good laws, but we do not know how to enforce them. In this aspect, also our judiciary have to take some blame. They come up with decisions that basically water down these laws and create loopholes,” said Henares. – Rappler.com