Pagcor terminates Fort Ilocandia casino deal a year after Jack Lam fled PH
Philippine Amusement and Gaming Corp. revealed that its has terminated the lease contract of Casino Filipino with Macau casino mogul Jack Lam’s Fort Ilocandia in Laoag, Ilocos Norte.
This was revealed by Pagcor in its 2017 annual audit report published by the Commission on Audit.
COA had advised Pagcor to terminate the lease contract “to prevent wastage of government funds otherwise continued incurrence of the same shall be dealt with audit disallowance.”
Lam left the country in haste in December 2016 after President Rodrigo Duterte ordered his arrest for economic sabotage. Lam’s Fontana Resort casino in Clark ecozone in Pampanga was shut down for hiring hundreds of illegal aliens for its online gaming. His Fort Ilocandia business was also shut down for the same violation of immigration laws.
Despite Lam’s escape and Fort Ilocandia’s shutdown, Pagcor continued the lease contract and spent P3.104 million for janitorial and security services for the shuttered casino for the whole of 2017.
“These expenses had burdened the cost of branch’s operations causing further net loss. Had Management opted to terminate the lease contract with the lessor on December 2016 along with security and janitorial services on the closed casino, a total amount of P3.104 million could have been saved thus lowering net loss to P7.453 million (instead of P10.556 million it reported in 2017),” said COA.
Pagcor explained that it deferred the termination of the lease with Lam because it was anticipating favorable results from negotiations to resume operations.
Casino Filipino-Laoag incurred unnecessary expenses amounting to P3.104 million relative to the continued lease contract with a lessor, along with utilities, janitorial and security services on the closed casino premises, resulting in Branch’s further net loss.
19.1 Casino Filipino – Ilocos Norte reported a negative result of operation at the end of the year with Net Loss of P10.556 million. Its performance has significantly declined by 122 per cent from its last year’s Net Income of P47.055 million due to the closure of casino operations at the leased premises effective December 4, 2016. Notwithstanding financial and operational constraints, Management sustained the lease contract with the lessor along with janitorial and security services on the premises of the closed casino even if these are no longer needed in the operations of the branch pending resolution of the Board on termination of existing contracts. As a result, unnecessary expenses totaling P3.104 million was incurred as presented herein:
analysis is shown below:
Income from Gaming Operations
Income from Other Related Services
Gaming Taxes and Mandated Contributions
Net Loss (Inclusive of Fort Ilocandia Expenses)
Fort Ilocandia Expenses
Net Loss (Excluding Fort Ilocandia Expenses)
19.3 The foregoing observation demonstrates unwise utilization of government funds. It defies the mandate of law under Section 2 of PD No. 1445 which provides that government funds shall be managed or expended efficiently, effectively and economically to prevent wastage thereof.
19.4 Management explained that PAGCOR Corporate Office made an instruction to defer the termination of lease contract in view of ongoing negotiations for possible resumption of the operations. But since no resolution has yet been reached on the issue, the Branch Manager wrote a memorandum on May 22, 2017 requesting approval of the Board on the implementation of termination of existing contracts pertaining to the operations of the closed casino.
19.5 While they acknowledged that there was an instruction from Corporate Office deferring termination of lease contract with the lessor, Management could have responded them the need for financial subsidy to sustain the expenses of the closed casino since income of the branch is not stable at the moment and it is not prudent to incur losses.
19.6 We recommended that Management cause the immediate termination of lease contract with the lessor, along with security and janitorial services on the premises of the closed casino, to prevent wastage of government funds otherwise continued incurrence of the same shall be dealt with audit disallowance.
19.7 Management commented that as of the current date, the subject lease contracts were already terminated.