MANILA, Philippines – The Ombudsman has found probable cause to charge former energy secretary Alfonso Cusi and several other energy officials for graft, reversing a January 2024 joint resolution on the Chevron-Udenna Corporation (UC) Malampaya deal involving tycoon Dennis Uy, a campaign donor of former president Rodrigo Duterte.

In that deal, Cusi, the energy chief during the Duterte admnistration, and other energy officials approved a Share Sale and Purchase Agreement (SPA) in October 2019, which allowed Uy’s UC Malampaya to acquire Chevron’s 45% stake in the gas field even though the company lacked the technical and financial capabilities for the Malampaya Service Contract (Service Contract 38 or SC 38).

In the November 25 recommendation to indict approved by Ombudsman Samuel Martires obtained by Rappler, the office found probable cause against Cusi and 11 other energy officials for violation of Section 3 (e) of Republic Act 3019 or the Anti-Graft and Corrupt Practices Act.

This section defines as a corrupt practice granting a private party “any unwarranted benefits, advantage or preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence.” It applies to “officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions.” 

In the recommended indictment, the Ombudsman said that “…by respectively recommending and approving the transaction despite knowledge of UC Malampaya’s negative working capital, unaudited financial statements and utter lack of technical experience and expertise in the upstream oil and gas industry, respondents, without a doubt, granted UC Malampaya — and ultimately Udenna — the privilege, benefit or advantage to obtain 45% interest in SC 38, or otherwise to become a member of the Malampaya Project consortium. The privilege or benefit was undue and unwarranted as UC Malampaya is financially and technically incapable of carrying out the contractual obligation under SC 38.”

It said Cusi and the other energy officials “turned a blind eye to the obvious facts, such as negative working capital of UC Malampaya, lack of technical experience or expertise, unaudited and incomplete financial documents, which should have disqualified UC Malampaya as a transferee/assignee.”

The November 25 recommendation was signed by Leilani Tagulao-Marquez, a graft investigation and prosecution officer in the Office of the Ombudsman. It was sent to Senator Win Gatchalian’s office on December 9, with a request to acknowledge receipt of the decision.  

The Ombudsman directed the filing of charges in court against Cusi and the following energy officials involved in approving the deal: Donato D. Marcos, Robert B. Uy, Gerardo D. Erquiza Jr., Leonido J. Pulido III, Cesar G. Dela Fuente III, Guillermo H. Ansay, Aracela A. Santos-Soluta, Thelma M. Cerdaña, Demujin F. Antiporda, Arthur T. Tenazas, and Rowena Joyce A. Delos Santos. 

‘Riddled with irregularities’

In a statement on Tuesday, December 10, Gatchalian, head of the Senate energy committee which investigated the deal, said: “The decision is a clear affirmation of what we have been saying all along — that the Chevron-UC Malampaya deal was riddled with irregularities and failed to protect public interest.” 

“The move to hold these officials accountable is a step toward justice and a reminder that public servants must always act in the best interest of the Filipino people,” he added. 

Gatchalian said the Ombudsman found the respondents guilty of “acting with evident bad faith, manifest partiality, or gross inexcusable negligence,” after it conducted an evaluation of the deal with undue haste.

He earlier asked the Ombudsman to reconsider its January 2024 resolution which dismissed the complaint against Cusi and the other officials after it did not find probable cause to indict them for graft. 

The Senate, in February 2022, had adopted a resolution urging the filing of appropriate criminal and administrative charges against Cusi and other Department of Energy (DOE) officials who evaluated and recommended the approval of the deal. 

The Malampaya project is among the Philippines’ most important power assets, producing natural gas for power plants in Batangas City that account for around 20% of the country’s total electricity requirements. It began operations in 2001, and the consortium’s license for the project expired in 2024.

“This is not just about the people directly involved — it is about protecting the nation’s energy security and ensuring that the trust of the Filipino people in public institutions is upheld,” Gatchalian said. 

In July 2022, ports magnate Enrique Razon’s Prime Infrastructure Capital said that its subsidiary, Prime Exploration Pte. Ltd., signed a share purchase agreement acquiring MEXP Holding Pte. Ltd. (MEXP) from a subsidiary of Uy’s Udenna Corporation.

It acquired the 45% interest previously held by Shell, after the Philippine National Oil Corporation (PNOC) earlier withdrew its consent to the deal between Shell and Uy’s Udenna. Uy still has a 45% stake in Malampaya through shares bought from Chevron.

Uy previously held a 90% operating stake in Malampaya through separate deals with Chevron and Shell for approximately $1 billion.

Under the current setup, Razon’s MEXP now holds a 45% stake, Uy still has 45%, while PNOC has the remaining 10% in Malampaya.

What went before

In October 2021, concerned citizens filed a criminal complaint against Cusi, Uy, and several others over the deal. 

They alleged that Cusi and other energy officials “conspired to give unwarranted benefits and advantage to Uy’s Udenna Corporation and its subsidiary, UC Malampaya” for the buyout, which was called a midnight deal by the Senate energy committee.

In response to that complaint, Cusi said it had no basis and claimed the transaction was “aboveboard.” He also alleged it was politically motivated given that he was then the head of a faction of Duterte’s political party, PDP-Laban. 

Uy’s Udenna Corporation also responded by saying the “acquisition of UC Malampaya…of the shares of Chevron Philippines in Chevron Malampaya LLC is within the parameters of the law.”

In November 2021, Cusi filed separate libel complaints against Rappler and six other news organizations for simply reporting the graft complaint. He had demanded P200 million from Rappler alone for allegedly damaging his reputation. 

However, in June 2022, Cusi withdrew the separate libel and cyberlibel complaints against the media outlets. 

The life of the Malampaya natural gas field is projected to run dry by 2027, but can be extended for several more years through infrastructure investment. The DOE earlier warned that the country “will face a huge energy crisis” should the Philippines fail to produce more energy. – with reports from Ralf Rivas, Aika Rey/Rappler.com