The Supreme Court held that the Ombudsman committed grave abuse of discretion in dismissing the criminal complaint against individual respondents for lack of probable cause concerning alleged violations of Sections 3 (e) and (g) of Republic Act No. 3019. The Court emphasized that preliminary investigations do not require absolute certainty, only a well-founded belief that a crime has been committed. This decision underscores the importance of thorough investigation and accountability in government loan transactions, ensuring that public officials and private individuals involved in behest loans are held responsible and that the government’s interests are protected from undue injury and unwarranted benefits.

Loans Under Scrutiny: When Does Financial Accommodation Become a Crime?

This case revolves around a petition for certiorari filed by the Presidential Commission on Good Government (PCGG) against the Office of the Ombudsman (Ombudsman) and several individuals. The PCGG’s complaint stemmed from alleged violations of Sections 3 (e) and (g) of Republic Act No. (RA) 3019, also known as the Anti-Graft and Corrupt Practices Act. The accused individuals, including officers and directors of the Development Bank of the Philippines (DBP) and the National Galleon Shipping Corporation (Galleon), were implicated in what the PCGG deemed as anomalous behest loans. The central question is whether the Ombudsman gravely abused its discretion in finding no probable cause to indict these individuals.

The PCGG’s case hinged on the findings of the Presidential Ad Hoc Fact-Finding Committee on Behest Loans, created by then President Fidel V. Ramos. This committee, tasked with identifying irregular government loans, scrutinized the financial accommodations extended by DBP to Galleon. The committee’s investigation revealed several red flags, including Galleon’s undercapitalization, the loans being undercollateralized, and alleged connections between Galleon’s stockholders and President Marcos. Based on these findings, the PCGG filed a criminal complaint, arguing that the respondents’ actions caused undue injury to the government and provided unwarranted benefits to private parties.

The Ombudsman, however, dismissed the complaint for lack of probable cause, asserting that the evidence presented by the PCGG was insufficient. The Ombudsman criticized the PCGG’s reliance on executive summaries and technical reports, deeming them hearsay and lacking probative value. Specifically, the Ombudsman stated that the PCGG failed to present crucial documents such as the loan agreement between DBP and Galleon, board resolutions, and records of board meeting participation. This dismissal prompted the PCGG to file a motion for reconsideration, which was subsequently denied, leading to the present petition before the Supreme Court.

The Supreme Court, in its analysis, reiterated the principle of non-interference in the Ombudsman’s determination of probable cause, except in cases of grave abuse of discretion. The Court emphasized that probable cause requires only such facts as are sufficient to engender a well-founded belief that a crime has been committed and that the respondent is probably guilty. According to Fenequito v. Vergara, Jr.,

Probable cause, for the purpose of filing a criminal information, has been defined as such facts as are sufficient to engender a well-founded belief that a crime has been committed and that respondent is probably guilty thereof.

The Court clarified that probable cause does not necessitate absolute certainty or an inquiry into whether there is sufficient evidence to procure a conviction. It is sufficient if it is believed that the act or omission complained of constitutes the offense charged. This principle is crucial in understanding the scope and limitations of preliminary investigations.

Applying these principles, the Supreme Court found that the Ombudsman gravely abused its discretion. The Court highlighted several factors indicating probable cause, including DBP’s initial concerns about Galleon’s financial stability, the non-compliance with loan conditions, and the subsequent accommodations granted despite Galleon’s increasing debts. These actions, the Court suggested, raised questions about whether the respondents acted with manifest partiality, evident bad faith, or inexcusable negligence, causing undue injury to the government.

The Court referenced Section 3 (e) of RA 3019, outlining its elements:

(a) that the accused must be a public officer discharging administrative, judicial, or official functions (or a private individual acting in conspiracy with such public officers); (b) that he acted with manifest partiality, evident bad faith, or inexcusable negligence; and (c) that his action caused any undue injury to any party, including the government, or giving any private party unwarranted benefits, advantage, or preference in the discharge of his functions.

Similarly, the Court cited Section 3 (g) of the same law, which states:

(a) that the accused is a public officer; (b) that he entered into a contract or transaction on behalf of the government; and (c) that such contract or transaction is grossly and manifestly disadvantageous to the government.

The Court also noted that even private individuals can be charged under Section 3 (g) if they conspired with public officers. Given the roles of the respondents—high-ranking officers and directors of both Galleon and DBP—the Court found sufficient grounds to believe they may have committed acts constituting the crimes charged.

Furthermore, the Supreme Court addressed the Ombudsman’s dismissal of the TWG’s findings as hearsay. Citing Estrada v. Ombudsman, the Court affirmed that hearsay evidence is admissible in determining probable cause during preliminary investigations. The Court in Estrada v. Ombudsman, declared that

Hearsay evidence is admissible in determining probable cause in preliminary investigations because such investigation is merely preliminary, and does not finally adjudicate rights and obligations of parties.

The Court reasoned that the TWG’s findings were based on official documents prepared by DBP, lending credibility to the information. The Court emphasized that preliminary investigations require only a prima facie case, not absolute certainty.

In essence, the Supreme Court’s decision reinforces the importance of accountability in government loan transactions. By directing the Ombudsman to indict the respondents, the Court signaled that public officials and private individuals cannot act with impunity when handling public funds. The decision serves as a reminder that the government must protect its interests and ensure that loan transactions are conducted with transparency and integrity.

FAQs

What was the key issue in this case?	The key issue was whether the Ombudsman committed grave abuse of discretion in dismissing the criminal complaint against the respondents for lack of probable cause concerning alleged violations of Sections 3 (e) and (g) of RA 3019. The PCGG argued that the Ombudsman should have found probable cause based on the findings of the Ad Hoc Committee on Behest Loans.
What are behest loans?	Behest loans are loans granted under irregular circumstances, often characterized by factors such as undercapitalization of the borrower, undercollateralization of the loan, and endorsements by high government officials. These loans are considered anomalous because they often result in financial losses for the government.
What is the role of the Presidential Commission on Good Government (PCGG)?	The PCGG is responsible for investigating and prosecuting cases of corruption and ill-gotten wealth accumulated during the Marcos regime. It plays a crucial role in recovering public funds and ensuring accountability for those who misused their positions of power.
What is probable cause in the context of a preliminary investigation?	Probable cause refers to facts sufficient to create a reasonable belief that a crime has been committed and that the accused is likely guilty. It does not require absolute certainty or conclusive evidence, but rather a well-founded suspicion based on available information.
What is the significance of hearsay evidence in preliminary investigations?	Hearsay evidence, while generally inadmissible in trials, can be considered in preliminary investigations to establish probable cause. The Supreme Court has clarified that hearsay is admissible if there is a substantial basis for crediting it, especially when it is based on official documents.
What are Sections 3(e) and 3(g) of RA 3019?	Section 3(e) prohibits public officials from causing undue injury to any party, including the government, or giving any private party unwarranted benefits through manifest partiality, evident bad faith, or gross inexcusable negligence. Section 3(g) prohibits public officials from entering into contracts or transactions on behalf of the government that are grossly and manifestly disadvantageous to the government.
Why did the Supreme Court find grave abuse of discretion on the part of the Ombudsman?	The Supreme Court found that the Ombudsman failed to properly consider the evidence presented by the PCGG, including the red flags raised by DBP itself regarding Galleon’s financial situation. The Court believed that these factors, along with the failure of some respondents to file counter-affidavits, established probable cause.
What is the effect of the Supreme Court’s decision?	The Supreme Court’s decision directs the Ombudsman to issue a resolution indicting the respondents for violating Sections 3(e) and 3(g) of RA 3019. This means that the case will proceed to trial, where the respondents will have the opportunity to present their defenses.

The Supreme Court’s decision underscores the importance of due diligence and accountability in government loan transactions. By setting aside the Ombudsman’s resolution, the Court affirmed the need for thorough investigations and prosecutions in cases involving potential graft and corruption. This ruling serves as a crucial reminder to public officials and private individuals involved in government financial dealings of their responsibility to act with integrity and transparency, protecting the interests of the government and the Filipino people.

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 COMMISSION ON GOOD GOVERNMENT VS. MA. MERCEDITAS NAVARRO-GUTIERREZ, G.R. No. 194159, October 21, 2015