"The lawyer’s justification just raised more issues."
"The lawyer’s justification just raised more issues."The issue of that luxury vehicle sold by Panay Electric Company to its president and chief executive officer shortly before its franchise renewal was trashed by Congress is generating more questions as expected. This, despite the fact that PECO’s legal counsel has branded the issue as false and malicious.
More than that, the issue has put the external auditor of the former utility distributor in hot water after lawyers from Divina Law, counsel of PECO, claimed that the expenses for the purchase of the BMW car was never included in the capital expenditures of PECO but was charged as an administrative expense.
According to PECO’s lawyers, company records will show that said purchase was an administrative expense that was charged to PECO’s own account, contrary to reports published on the media. “The said expense never became part of any of the amounts billed to consumers,” in the same manner the power distributor treats all other administrative expenses.
“Therefore, it is an utter and malicious lie that the consumers were made to pay even a single centavo,” PECO’s lawyers wrote media entities in defense of their client, while at the same time confirming PECO did buy the BMW. They said however it was a second-hand vehicle, first \used by the government for the APEC Summit in 2015.
However, power consumers are saying otherwise.
Halley Alcarde, general manager of Western Visayas Transport Cooperative, and also an accountant by profession, underscored that “all administrative expenses are charged to consumers 100 percent but a luxurious car can never be an administrative expense. It should be a capital expense.”
What PECO lawyers are saying might be true with regard to how PECO treats its administrative expenses. Still, the distributor’s financial statement for 2015 shows the company only purchased P747,000 worth of transportation equipment. Alcarde said: “This cannot have included the P5 million BMW. And this strongly suggests that the initial information of recording the sale under distribution wires as reported by the media could be correct.”
In my previous column, citing sources, I wrote that sometime in 2015, PECO bought a BMW 520d sedan from Asian Carmaker Corporation. This class of BMW, according to sources, costs around P5 million.
Under PECO’s capital expenditure (CAPEX) for October 2011 to September 2015 which was approved by the Energy Regulatory Commission (ERC), the company listed to purchase transportation equipment for five years starting in 2011 with P2,133,851 allocation; 2012 with P2,231,446; 2013 with P2,337,988; 2014 with P2,447,289; and 2015 with P2,560,476.
Clearly, the P5 million worth of the luxury car is not reflected in the aforementioned entries in the company’s financial statement.
Actually, the source said the said funding was supposed to be used for the purchase of five units of utility vehicles for the use of its officials but did not materialize after Luis Miguel Cacho, PECO’s President and Chief Executive Officer, allegedly decided to buy just one BMW for himself instead, equivalent to the price of the five utility vehicles, depriving those officials their vehicles intended for use in its official function to serve its customers efficiently.
For his part, a local auditor who requested anonymity also argued that “If this is true, then the external auditor of PECO will have a big problem that might endanger his license to practice the profession for allowing an obvious capital expenditure to be recorded as an administrative expense.”
“PECO is creating more problems here because assuming we will take their statement hook, line and sinker, then the external auditor will have a very big problem for clearly violating the generally accepted accounting standards,” the same auditor noted.
“If this is so, then the financial statement submitted by PECO is no longer reliable because a capital expenditure should not be part of administrative expense,” he added.
So, where did the lawyers get the idea the purchase of the car was charged to the company’s administrative expenses? The issue just got more complicated.