Transactions are not balances!

THE diabolical accounting trick that unjustly tainted Chief Justice Renato Corona’s reputation 14 years ago, which was used as the smokescreen for the Senate impeachment court to convict him in 2012, is shamelessly being used again in the trial of Vice President Sara Duterte.

It is breathtaking that the same deception can be attempted twice before the same institution, the Senate sitting as an impeachment court. Dress up billions of pesos of movements through bank accounts as if these represented billions accumulated by the accused. Repeat the gigantic figure endlessly. Put it in headlines. Contrast it with the much smaller figure in the official’s statement of assets, liabilities and net worth.

Then leave ordinary Filipinos with the impression that the difference represents hidden wealth.

It worked against Corona. The prosecutors obviously hope it will work against Sara.

The Anti-Money Laundering Council’s executive director Ronel Buenaventura testified Monday that AMLC records showed P4.4 billion in “covered” and “suspicious” transactions involving Sara and her husband, lawyer Manases Carpio, from 2007 to 2025.

But P4.4 billion in transactions is not P4.4 billion in wealth, nor inflows. It is a deliberate misinterpretation of the modern technique of double-entry accounting, which had been invented among other thing things as a built-in error detection: Inflows are recorded as credits, outflows debits. The “bottom” line is net assets, what you would own after all the pluses and minuses cancel out. Yet the prosecution has made it appear that Sara and her husband had actual inflows of P4.4 billion. Even an intelligent, experienced media practitioner like Karen Davila in her interview yesterday with the defense spokesman believed that, and asked the spokesman if this amount came from financial contributions.

Of course, the two broadsheets that have been in the vanguard of the anti-Sara propaganda to convict her bannered the prosecution and the AMLC’s lies: “AMLC exec bares P4.4 billion VP, spouse transactions,” and “Impeachment court opens VP’s P4.4-B transaction docs.”

According to Buenaventura’s testimony, the P4.4 billion consisted of P1.6 billion classified as “inflows,” P1.3 billion classified as “outflows,” and another P1.5 billion that AMLC could not even determine to be either inflows or outflows. That is a fantastic claim: How can AMLC not be able to determine whether this amount are inflows or outflows? Amounts in bank reports do not just appear from out of the blue: they are either inflows or outflows. If AMLC couldn’t determine whether these were inflows or inflows, why did Buenaventura claim there was P4.4 billion flowing into Sara’s accounts, when the inflows and outflows his office could count totaled only P2.9 billion.

P1.4 million

But even at that level of analysis, P1.6 billion in inflows less P1.3 billion in outflows is P300 million in net inflows from 2017 to 2025, the years of these bank transactions of P17 million per year, of P1.4 million per month. Do you think the Duterte couple — both lawyers — couldn’t have generated that much income?

I don’t think Buenaventura understands AMLC reports, explainable since he is solely a lawyer, not an accountant, which means he doesn’t understand double-entry accounting. We should be suspicious of Buenaventura; he was appointed AMLC executive director only last April 18, with the AMLC claiming the previous director asked for a different position in the BSP. National Bureau of Investigation director Melvin Matibag was appointed to the post Feb. 19, with his predecessor Jaime Santiago serving only 16 months. Matibag’s marching orders were allegedly to pursue charges against senator-judges to terrify them into voting to convict Sara. Does Buenaventura have similar marching orders?

To illustrate how Buenaventura made it appear that billions flowed into Sara’s accounts, a bank book might appear as follows:

This means that actual money that entered from outside amounted to only P10,000. Ending balance was P10,000. Aggregated “inflows” would be counted P39,000 — the same cash counted every time it was booked as a credit. What the AMLC executive director reported as P1.6 billion total, is the P39,000 in the above table, when the actual inflows from the outside would have been much smaller.

To illustrate further, imagine a businessman who keeps P10 million in a bank account. He transfers the P10 million to another account to place it in a time deposit. When the deposit matures, the P10 million plus interest goes back into his regular account. He later transfers the same money to another bank to buy securities. His wealth might still be roughly P10 million. But add every movement of that same P10 million and his “transactions” can easily become P30 million, P40 million or P50 million.

18 years

Keep doing that for 18 years — from 2007 to 2025, the coverage of the AMLC report — and the cumulative transaction figure becomes enormous, falsely exaggerating the Duterte-Carpio couple’s actual bank inflows.

In the Corona impeachment, then-ombudsman Conchita Carpio Morales claimed that the AMLC data showed $28.7 million of dollar inflows in 82 accounts, an amount that was beyond the chief justice’s income. But those are sums of entries, not the balance. Careful scrutiny of the AMLC report showed only $2 million balance, an amount the former chief justice could have raised as a corporate lawyer and includes the funds of his wife. (See https://ift.tt/yJrq5uz)

The AMLC executive director hasn’t made public the actual transactions in Sara and her husband’s account, so we are unable to scrutinize it to determine the actual balance of their accounts.

That official though should be charged with perjury for reporting that P4.4 billion entered the Duterte-Carpio couple’s accounts, when these are likely the result of double, triple, quadruple and likely even more counting when amounts are withdrawn and then re-deposited many times.

I had already discussed in a May 6 column (“Impeachment claims concocted through classic propaganda tricks”) these points when the House justice committee and its media cheering squad were trumpeting an even more fantastic figure: P6.8 billion supposedly involving Sara and Carpio. The supposed P6.8-billion financial bombshell therefore became P4.4 billion before it even reached the crucial stage of the Senate trial.

But the more fundamental problem remains. Neither P6.7 billion nor P4.4 billion measures Sara Duterte’s wealth. These are transactions, not what has remained in her bank account.

This isn’t theoretical. Among the transactions presented last Monday were inter-account transfers. Seven transactions in one day in March 2014 were aggregated into P173.7 million. Buenaventura himself explained that the code “CTRIA” meant an inter-account transfer — a movement of funds from one account to another within the same bank.

Trick

Senate presiding officer Francis Escudero himself saw through the trick, and asked whether these movements might involve money leaving one account and entering another. Buenaventura maintained that the entries had separate transaction-reference numbers but, significantly, when asked whether aggregating such transactions was proper, he replied that he could not say.

There lies the enormous accounting problem with the prosecution’s presentation.

Before anybody can compare these billions in gross movements with Sara’s SALN, one has to determine what each transaction actually represents. Was it income? A transfer between accounts? A withdrawal followed by another deposit? A time-deposit placement and its later redemption? Loan proceeds? Sale proceeds? Business receipts? Money belonging to a corporation? Money belonging to her husband? Money in a joint account?

Until those questions are answered, piling the transactions on top of one another proves nothing about how much money entered Sara’s bank accounts in 18 years. Corona was destroyed politically through precisely this confusion. Fourteen years later, the same trick is being attempted against Sara Duterte.

History isn’t merely rhyming. The prosecutors are recycling the same accounting deception.

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Transactions are not balances!
Source: Breaking News PH