‘Caesar’s wife test’ casts shadow on lotto deal

New Presidential Communications Office (PCO) Secretary Jay Ruiz still has loose ends to tie and questions to answer regarding the P178-million government contract he signed last year for a private company, Digital 8 Inc., despite its low capitalization of P130,000.

Applying the so-called “Caesar’s wife test,” the same may hold true for Philippine Charity Sweepstakes Office (PCSO) general manager Mel Robles and International Broadcasting Corp. (IBC-13) president Jimmy Policarpio as government functionaries.

The Caesar’s wife test mandates that all public officials and their associates must be beyond reproach, not just in their actions but also when it comes to the public perception.

In October last year, PCSO contracted the joint venture of IBC-13 and Digital 8, with Ruiz signing as the latter’s representative as a media personality, to air PCSO’s lotto draws for 2025 after PTV-4’s contract with PCSO was not renewed.

Robles claimed in an interview that they bid out the broadcast contract with a ceiling of P180 million after PTV-4 asked for P600 million to continue broadcasting lotto draws in 2025.

According to corporate law professor Edward Chico, there was nothing wrong — from a legal standpoint — if Ruiz signed the contract for and on behalf of Digital 8 for “as long as he was lawfully authorized by the board.”

“Technically, he represents the corporation as an agent by virtue of such authority given to him,” Chico, a lawyer, explained. “If it raises questions though, it is because it’s unusual for someone who is neither an officer nor a member of the Digital 8 board to sign any agreement on behalf of a juridical body.”

Suspicious

On Tuesday, Ruiz slammed the online website Politiko for claiming that he co-founded Digital 8, denying he had earned millions of pesos from the deal that was consummated before his appointment as PCO chief.

Digital 8’s amended incorporation papers showed it was established in 2012 with a subscribed capital of P125,000, while its 2024 General Information Sheet (GIS) showed its paid-up capital barely rose to P130,000.

The documents secured by DAILY TRIBUNE from the Securities and Exchange Commission (SEC) confirmed Ruiz’s claim that he was not an incorporator, officer or investor of the company.

Still, Chico said that if Ruiz was tapped solely by Digital 8 to sign the deal as a joint-venture partner of IBC-13 to provide PCSO broadcast services, that “understandably would invite suspicion one way or another because he should have no business doing it.”

“But if that’s the decision of the board, then that is legal and valid,” he added. But then, what’s legal, according to Chico, may not always pass muster when it comes to the perception of government dealings being absolutely above suspicion.

‘Too small’

Digital 8 is headed by Rommel Miranda, its president who, according to Politiko, co-founded the company along with former PTV general manager Ana Puod, said to be a close associate of Ruiz.

“With regard to the paid-up capital which is seen to be too small given the magnitude of the subject contract entered into, there is also nothing wrong with it legally since it is not unusual for a corporation to start small but get big in the process,” Chico explained.

Besides, the lawyer said a corporation obtains capital from issued shares as well as loans, thus it may have a small paid-up capital but it may have obtained loans, for example, to finance its activities or probably had made profits subsequently.

“However, if a corporation gets big, it normally increases its authorized capital stock as well as its paid-up capital stock because not doing that may have legal and tax implications,” he added. As seen from Digital 8’s incorporation papers and 2024 GIS, its paid-up capital hardly moved and stayed below 15 percent of its authorized capital of P1 million.

A ranking official of Digital 8, speaking on condition of anonymity, claimed the company had other business-to-business contracts (with a telco and a TV station), although the 2024 GIS did not show dividends were paid for what may be presumed to be lucrative contracts. As such, Chico said, it would be of public interest that Digital 8’s business track record is scrutinized considering its JVA with IBC-13 and the deal the joint venture secured from PCSO.

“If a company, despite having made huge money, decides to stick to its small paid-up capital, it raises some concerns because a truly functioning corporation would act accordingly,” the law professor said. He pointed out that it is still technically possible for a corporation that has a small paid-up capital to enter into huge contracts for as long as it can get capital from other sources.

“You see, a company secures capital from issued shares or loans. So, if a company is able to pool together resources from both, then it is still possible to finance big projects it has entered into. But this is highly unusual,” Chico averred.

Policarpio and Robles, too, may have some explaining to do, the lawyer said considering the right of the public to know every detail of any government undertaking that entails the use of taxpayer money.

Shared profit

“I find it interesting that IBC would partner with a private company through a joint-venture agreement. The income that should have gone to IBC would now be shared with another entity,” he said, referring to Digital 8, which Ruiz represented.

“I am not privy to the details of the partnership but certainly that could understandably be an issue, unless they can show that the participation of Digital 8 is significant and indispensable,” he said.

In answering reporters’ questions regarding Digital 8’s low capitalization, Robles said the nature of joint ventures is that the partners provide what the others lack. Still, IBC-13, like PTV-4 from whom it wrested the lotto broadcast contract, are both government broadcast stations whose expertise in airing lotto draws had been proven for years without any need for the participation of a private company like Digital 8.

DAILY TRIBUNE was trying to get Policarpio’s reaction at press time.

A full scrutiny of Digital 8 may be required, Chico said, because “if you’re a small company, how can you get loans to begin with? Which bank would trust you in the absence of sufficient collateral?”

“Now if it did not get loans but just relied on its paid-up capital, which is relatively small, how is the company able to sustain the requirements of its business?”

“Unless the project, though big, does not really require too much capitalization, then it is utterly impossible how a small company can undertake a contract of that magnitude,” he added.

Digital 8 has a principal office on the 10th floor of One Global Place, 5th Avenue and 25th Street, BGC, Taguig City, the SEC document showed.

Office space at the 26-story building costs more than P250,000 per month, according to the fortbonifaciorent.com website.

Baffling

Digital 8’s entry into the PCSO lotto draw picture has baffled many at PTV-4.

PCSO’s lotto draws started airing on PTV-4 in March 1995. Before that, the draws were initially televised on IBC-13 when the lottery was relaunched in the Philippines in 1995.

Later that same year, the airing was transferred to PTV-4, which was the official broadcaster of PCSO draws ever since. The contract between PTV-4 and PCSO for airing the lotto draws has not been a simple year-to-year renewal since 1995. Instead, it has undergone periodic reviews, renewals, and renegotiations based on agreements between the two government agencies.

While PTV-4 has consistently been the official broadcaster since 1995, there have been instances when the contract was renewed through new agreements, sometimes with adjustments to terms, costs, or coverage.

However, details of these renewals were not always made public.